Did Warner Overpay for Parlophone?
Less than 2 weeks ago the Warner Music Group purchased Parlophone Records from Vivendi for $765 million in cash, however sources familiar with the Vivendi end of the deal say that the French conglomerate was prepared to take much less. According to a source “Vivendi would have been very happy with a sale price somewhere in the $500 million range. That’s what they were expecting.”
So what happened? Investment firm MacAndrews & Forbes and Sony fell out of the bidding when it went well over the $500 million mark. They reportedly were the last “real” bidders against Warner Music, which begs the question “how did the price get from the $500 million to $765 million?” Speculation leads to a spoiler who artificially drove the price up with no intention of making the deal. Who that could be, no one knows, but you can bet that Lucian Grainge and the Vivendi board are satisfied with the outcome.
As a condition for the EU’s approval of the Vivendi purchase of EMI, the French were required to divest some of their music assets, and it had to be an operating company, not just some bogus catalog deal. From the outside Parlophone looked like a sweet deal for somebody who needed to pick up some market share. According to Billboard Magazine, “The Parlophone Label Group is comprised of the historic Parlophone label and Chrysalis and Ensign labels as well as EMI’s recorded music operations in Belgium, Czech Republic, Denmark, France, Norway, Portugal, Spain, Slovakia and Sweden. Its artist roster and catalog of recordings include, among many others, Air, Coldplay, Daft Punk, Danger Mouse, David Guetta, Deep Purple, Duran Duran, Edith Piaf, Gorillaz, Iron Maiden, Itzhak Perlman, Jethro Tull, Kate Bush, Kylie Minogue, Maria Callas, Pet Shop Boys, Pink Floyd, Radiohead, Shirley Bassey, Tina Turner and Tinie Tempah.” The problem is that most of these artists may be known quantities but don’t sell huge numbers globally or whose catalogs are dead. As one source told me, “Acts like Kylie Minogue may sell well in a few territories, but nowhere near enough to pay for a deal this size.”
The two properties that garner the most attention from the Parlophone roster are Coldplay and Pink Floyd. As another source said, “Pink Floyd’s catalog doesn’t sell like it used to and they got such a big advance for the last deal they did with EMI that they’ll be underwater for a long time. (Two years ago Roger Faxson re-signed the band to a 5 year deal). And who knows what’s going to happen with Coldplay? They might not make another record for 3 years.”
Besides getting a couple of hundred million more than they had expected for Parlophone, how did Vivendi make out on the overall deal? They bought EMI for $1.9 billion. They sold Parlophone for $765 million. That makes their total purchase price for the balance of EMI a little over $1.1 billion. For that price they got the Beatles, Beach Boys, Sinatra, Nat King Cole, The Band, Katy Perry, Bob Seger, solo Beatle projects, and David Bowie, among others. Plus they did not lose and significant market share; they’re still firmly in the Number One position worldwide. And, of course, they got the EU’s okay for the acquisition of EMI.
What did Warner get? We’ll have to wait and see how that turns out.
Tell us what you think The Beatles catalog is worth in the comments section below. Keep in mind that EMI has sold over a billion copies of Beatles albums.