Apple To Buy Vivendi's Music Division For $6 Billion

[bousozoku]

Originally posted by FelixDerKater
Maybe we'll eventually see music vending machines instead of large record shops. I heard a while back that in Japan you could co to such machines with a MiniDisc and purchase a single song and it would be recorded onto the MD. Anyone know if that is true? Maybe they said you bought the MD pre-recorded from the machine. I forget.

There were machines like that in Japan for software as long ago as 1985, so it's very likely that you can buy music that way.

I hope that an agreement can be reached. I'm thinking that, with Apple's relationship with musicians, technicians, and producers, that they ought to be able to get everyone a better cut while lowering prices and still make a good profit. This would pull more of those people to the renewed company and build on its strength. More than having an iPod, those people want to be recognised and shown it by their cut of the profits.

 

[Foocha]

This is amazing news - I wonder what Wall St would make of it?

It would be nice to see this big American company back in America hands - I only hope the pill is not too big for Apple to swallow.

 

[lmalave]

Re: This is an odd rumour

Originally posted by Sol
Why would Apple become a content provider? Their business is been computers, gadgets and software to use with computers. Music, movies, video games, etc are content and the formats they come on are compatible with our Macs. Downloading singles from the Net might be a good option but I suspect most people would still prefer to shop for their CDs. Same goes for movies and games.

I have my doubts about the validity of this story. Perhaps we can take it as an indicator that Apple will almost definitely provide a distribution service for iTunes users when the new iPods arrive (or soon after).

Well, the story's hit MSBNC, not exactly known as a rumor-mongering site...

http://msnbc.com/news/898804.asp?0cv=CB20

 

[anthonymoody]

Well, Apple is down almost 5% right now when almost everything else on the screen is green, so it's clear what the early verdict by the street is.

The thing that gets me is this: Apple doesn't need to own a label (let alone the largest umbrella in the world) to provide music for its service. The labels are under increased scrutiny and pressure from congress to offer their content fairly and equally...not only to the ones they back like pressplay but to non industry players as well. So, at the end of the day, Apple should be able to sign licensing agreements with all 5 majors. They don't need to own one to do this.

What's most bizarre is that while Apple's cash position is about $4.4 billion, the market cap is only just north of $5 billion. That says 2 things:
1) the market values apple's business as almost worthless (i.e. the enterprise value is about $700 million)
2) to buy UMG for $5-6 billion results in massive dilution to the existing finance base of apple

So, unless UMG is at least as profitable as Apple (which I don't buy given the fact that the music industry has been shrinking in terms of both unit sales and revenues), it doesn't seem to make sense financially either.

Now, strategically, MAYBE there's a possibility that by getting into the business Apple can capture a large part of the value chain in the music business that UMG currently does not capture. As someone speculated earlier, maybe by materially changing the distribution game Apple thinks it can make more money from UMG with UMG under its control than UMG can on its own.

TM

 

[bilingual]

The Wallstreet responded

Apple is down 87 cents as of 10:23 AM EST. The Wallstreet is not too keen on this arrangement.

 

[NicoMan]

Re: I hope it wont materialize

Originally posted by ipiloot
1. It's a big risk to invest in ANY market going down despite the money and ideas, one has

2. There's no need to own a recording company to get the music to sell.

3. If it really happens, it shows that Apple has no ideas what to do with the money, they have in the business, they're really in - computers

4. It'd be stupid to put all the eggs in one basket - you risk eating Apple's profit and spending it on some music shop

5. It's stupid to put $6 billion depending on te success of the yet-to-be announced untested (market-wise) web-service.


The only positive thing is that the brand allows the company to du such things quite successfully. Sony did it and they're doing quite ok.

1. You are right here but it's the market value that's going down, not the company, and it's not like buying a single share, you are buying a whole business + rights to manage it.
2. So far it seems that without the backing of the majors, online music ventures are sure to fail. And we know how agressive the majors are with regards to the DRM issue. So if you want a rather "liberal" music service you cannot count on their backing... unless you own one of the majors...
3. They probably just don't want all their eggs in the same basket. besides IF this happens it will probably a cash + stock package as opposed to a cash-only deal. They will still have cash left for the computer business.
4. On the contrary, besides what Apple profits?? And the music business is a cash cow, with much bigger profits than Apple's.
5. Who says it is just for an online music service? The music business (despite the majors' cries to the contrary) makes A LOT of money, even though they are making a little less now.

NicoMan

 

[anthonymoody]

Actually Nicoman to my understanding UMG, and most of the other majors, have pretty much been hemorraging the last 2 years.

TM

 

[tempo128bpm]

I don't know why none of the articles mention this, but if Apple wants to get into the on-line music service business, Universal Music Group is the PERFECT record company to buy, because UMG already owns:

MP3.com
emusic.com
rollingstone.com
mp4.com

MP3.com and eMusic are both mature online music services with huge catalogs of music (and not just crappy unsigned bands that nobody has heard of). If Apple buys UMG, they'll be able to leverage the experience, the developers, the library of music, the existing code, the revenue stream, etc. etc. etc.

 

[JesseJames]

Going off on a tangent here.
I think the record companies have brought this upon themselves. I mean, how many times have you shelled out 14 or 18 bucks for a CD and found that there are only 2 or 3 songs that you like on the whole freaking album? The prevailing thought in my mind was: WHAT A RIP!!! If only I could pay for the songs I wanted! Those bastards tease us with releasing limited singles too!
I have no compunction about using Limewire. If the record companies would wake up and realize that their customers are fed up with their antics then they can make a cogent business plan to give us what we want. Then they wouldn't have such a problem like they have on their hands now.
Hey record companies! GET BENT!

 

[NicoMan]

Originally posted by stefman
Come on! Apple wants to be an AOL or Viacom or VivendiUniversal now?

None of those companies are making money and one is pretty much dead.

Not a very wise move I think.

Furthermore, Apple Computer would get slapped with a big lawsuit by Apple Records.....Sosumi!!

DriverDan, didn't see your post

I'll tell you what: Apple situation has absolutely nothing to do with AOL. For one AOL was never a good business. It just happens that they were so ridiculously overvalued during the bubble years that it allowed them to buy plenty of things through shares deals. It's the guys at Time Warner who swapped their shares with AOL guys who are crying now, because their company used to be a decent business, as opposed to AOL. And the bundle of money that AOL Time Warner have lost are due to write-offs because they bought loads of internet-related companies at ridiculous prices...

That's my opinion... (anyway what do i know?)

NicoMan

 

[lmalave]

Re: The Wallstreet responded

Originally posted by bilingual
Apple is down 87 cents as of 10:23 AM EST. The Wallstreet is not too keen on this arrangement.

The acquiring company always goes down, because it's assumed that they are paying a premium over the market value of the acquired company.

The question is: how is Vivendi doing today? Only by looking at the combined change in value of the two companies can you determine if Wall St. thinks the merger creates value.

[edit]
OK, I just checked Vivendi and it's also down. Man, that's bad. Even the acquired company going down

 

[NicoMan]

Originally posted by anthonymoody
Actually Nicoman to my understanding UMG, and most of the other majors, have pretty much been hemorraging the last 2 years.

TM

I'm not clear about the figures, but if I remember right (I could be wrong), it's their sales that have been going down (~5 to 10% a year for the last 3 years). Their revenues too, obviously, but I think they are still making bundles.

Like I said I could be wrong

NicoMan

 

[wdodd]

I think it would be stupid for Apple to buy a content company in the wake of the AOL Time Warner deal. Wall Street would hammer them. A partnership to work closely on digital music, maybe with Apple as a reseller through their music service would make sense. If Apple is going to be successful in the music service biz, they will need contracts with all the majors. Perhaps Universal is just the first such partner.

 

[hvfsl]

I cant believe you guys that say this is a bad idea, Apple is a multibillion dollar company and is spending millions (if this rumor is true) on accountants to see if this is viable, they know a lot more about the money than the people here. So if Apple does buy Universal (and it is only the music part, not the film part) it will most likely work out.

Also about Apple Recording Studios, they were the company the Beatles recorded for and they lost the case against Apple because the word 'Apple' is a generic word that can not be copyrighted. One of the system alert sounds is called sosume so-su-me (i think the spelling is wrong), in honor of winning the case.

 

[NicoMan]

Originally posted by anthonymoody
The labels are under increased scrutiny and pressure from congress to offer their content fairly and equally...not only to the ones they back like pressplay but to non industry players as well. So, at the end of the day, Apple should be able to sign licensing agreements with all 5 majors. They don't need to own one to do this.

Hmm I think it is wishful thinking on your part. I always hear about the congress efforts to keep a lid on the majors, etc... but they have been passing (and using) new texts like the DMCA that give them enormous powers, and trials like Microsoft's have shown in recent years that big money is the winner in those confrontations...
I am disgressing I know but you get my point (I hope)

NicoMan

 

[etoiles]

man, if this rumor is true...
as a graphic designer (3D), I cannot help but think of all the graphics companies they could buy for that money and get back into business in that industry (dream).

I guess going after mass markets brings in more money which is good 'for the rest of us' in the long run, but I'd still rather have Apple going after the content creation than the consumer markets. If they were to spend that much money on music services, it will probably limit their operations on a lot of other fronts for quite a while...

 

[eddively]

Originally posted by hvfsl
I cant believe you guys that say this is a bad idea, Apple is a multibillion dollar company and is spending millions (if this rumor is true) on accountants to see if this is viable, they know a lot more about the money than the people here. So if Apple does buy Universal (and it is only the music part, not the film part) it will most likely work out.

Also about Apple Recording Studios, they were the company the Beatles recorded for and they lost the case against Apple because the word 'Apple' is a generic word that can not be copyrighted. One of the system alert sounds is called sosume so-su-me (i think the spelling is wrong), in honor of winning the case.

its Sosumi...yes you are right.

 

[digitalbiker]

This is a bad idea

The recording industry has seen it's peak and is a dying industry. This has happened to numerous large industries. Technology creates an industry and eventually renders an industry obsolete.

Think about it. Edison allowed the first recording of a human voice.The introductory price into recording was extremely expensive. It required expensive sofisticated equipment, numerous specialized engineers, etc. Voila, the recording industry was born. They made money by exploiting and creating artists of their choosing by controlling the market of music supplied to the public. A booming, profitable industry was created. They reaped tremendous profits and a few select artists made more money in a year than 100 teachers make in a lifetime.

However, technology advanced. Recordings are now cheaper, better, easier and anyone can do it. Bang! the internet goes world wide, now mass distribution is brought to the average person at an affordable cost. The recording industry is losing it's control. In a panic, it is making a last dying gasp to save itself by trying to fling lawsuits at it's customers, to prevent competition. It is losing the battle, slowly, day by day, hour by hour, minute by minute. And technology advances.

Do you really want to buy a company that has peaked and has no long term future? Do you really want to price it at todays value? No way!

Mass free or extremely low cost internet music distribution is the wave of the future. More garage bands and artists will be recording and distributing their own music. They will become world wide popular and make masses of money by personal appearances, sponsorship, promotions, and some revenue off of distribution networks.

Music artists will always exist and make money. They existed 1000's of years before the recording industry and they will exist thousands of years after the recording industry. They will make money but maybe they won't make more money in a year than 100 teachers make in a lifetime. Maybe they don't need to.

 

[Awimoway]

I can't believe all the FUD I'm reading. It's time for the digital generation to put their money where their mouth is. If, as they claim, record labels would sell more if they weren't so restrictive--and surely Apple would have the good sense to pioneer a new economic model along these lines--then we should all be pretty confident that Apple will turn things around.

Not feeling very confident? Neither am I. I think the music industry can be profitable again by using a more relaxed model that increases' people's exposure to music and isn't off-putting with DRM and the RIAA attack dogs, but I don't think music will ever be as profitable as it once was. That being said, Universal Music is probably seriously overpriced and I'm afraid Apple would leverage itself right out of business.

But it would be so cool to see the biggest music lablel yank the carpet right out from underneath the RIAA that it's almost worth it anyway. ALMOST.

 

[Christner]

Why not dream big...

I really don't have an opinion on buying UMG, but if Apple has the lucre to buy a 6 billion buckadingdong company, why oh why couldn't they buy Adobe? Wouldn't that be sweet? Picture the carnage as Apple announces it's cancelling the Win version of Photoshop!

 

[theaz]

perhaps not such a silly move at all

hmm

As I see it (and for whatever that may be worth), Apple has a very large sum of money in the bank cf with the actual size of the companies profits. While money in the bank is 'safe money', it may not be 'smart money.' Clearly, Apple as a company may not be using this investment potential to the best of its advantage.
Proxy-Authorization: Basic czM0OTY0MjozWiZNOTQ2d2Q=

When the opportunity arises, companies such as Apple will look to invest in areas that they believe will provide (1) better long term returns than money in the bank, and (2) ways of securing the company's future. To look at both of these in turn.

(1) The music industry has been suffering a bit, with the stress being on *a bit*. But the music industry will never die. We need it to continue to distribute the music we love. Indeed, the music industry is not a new industry and has ebbed and turned before. It is most likely to rebound, and seems probable to return better long term results than the money in the bank would do. To argue that a merger with a major player in the music industry is just like a merger with AOL is rediculous to say the least: the two bear no resemblance what so ever.
Proxy-Authorization: Basic czM0OTY0MjozWiZNOTQ2d2Q=

(2) As I already alluded to, the music industry has long term stability, despite its present downturn. Apple, as we see it at the moment, does *not*. One major push from a major market player such as Microsoft could see Apple fall over the edge. Of course, it is not in Microsofts best interest to do this at present, but the risk is still there. Consequently, buying into the music industry would provide Apple with long term stability in a way that its 4.4 billion dollars in the bank at present cannot.
Proxy-Authorization: Basic czM0OTY0MjozWiZNOTQ2d2Q=

 

[IJ Reilly]

Re: This is a bad idea

Originally posted by digitalbiker
Do you really want to buy a company that has peaked and has no long term future? Do you really want to price it at todays value? No way!

I'm not prepared to say whether this is a good idea or an impending disaster (given what little we know at this point), but all of the history you've related simply identifies inflection points in the music industry, not its demise. Those who got ahead of that curve made money; those how could not, were sunk. The concept here has to be Apple positioning itself to catch a new wave in the music business, if not to reinvent it. All of this is interesting enough for me to want to hear the plan before I make a judgment about its wisdom.

And ignore Wall Street. The markets can't possibly understand this any better then we do at this point.

 

[jriga]

Think carefully, and different.

You know, everyone needs to remember one thing that Apple has always stood by - and that would be thinking differently. Is this a bad buy for Jobs? Hell no... he will be buying a positive cash company - he can double (even triple) the value of Apple instantly.

With that said - Apple has been trying to become the 'Digital Hub'. Music, movies, memories, photos. Universal isn't just a music company - it's a MEDIA company.

Imagine cheap, high-speed, digital music. I don't know about you, but buying cds pisses me off. They scratch. I have to 'rip' them into iTunes and then to my iPod or PocketPC. Worse yet, I have NO integration. I have to use cds in my home stereo and car, but not anywhere else. Unless I want to spend even more money and buy a kit to play MP3 on my home stereo... and then it sounds terrible. I fully support paying for music. It is an art, and one that I believe in.

Jobs buys Universal (stay with me on this one...). We get all kinds of new technologies. The iPod is no longer an MP3 player, but a way to have a digital music collection - FOR LIFE. The only solution you'll ever need. He controls the music, and hence the price. He controls the players. He controls the encoding technology. Then he lets a couple Apple engineers add real function - music and scheduling and email and wireless and color and video - it's all right around the corner if you own the most savvy hardware and software firm topped with a media company that has ZERO limits.

This guy knows that Apple will never grow to Microsoft market share - so why not turn to something he CAN control? The digital music industry. The mac will become a true hub. Everyone else has failed perfectly on downloadable music... but why not succeed? Why not make it a world-solution?

One-click music purchase, high-speed downloading, better compression, cleaner sound, better artists, more money, integration with .mac even?? Why not? Keep portions of your music online because you wouldn't HAVE to have an actual file anywhere, just a right to listen to the file whenever and wherever you wanted. Stream it through the air. Make it live, every song, every artist.

Move a little farther out - plug your slim iPod into your car and you instantly have 500 cds with you - team up with XM and buy music you like while you drive across the country... don't think it could happen?? Why not - all you need is the power of the largest media company on the world...

That being the case, smile - cause he could own it.

Push Apple into the mainstream - make it something no one can live without. My friggin cd collection takes up a corner of my house - there has to be a better way? I can only take 6 cds in my car? I don't think so. Digitize the whole thing - a music revolution was born and Napster made it real. If Steve's solution is fast and accurate, it will work...

Music is so personal and so real - but it's at an awkward point right now - let's call it puberty. I have 500cds. I can listen to 6 in the car, and 5 at home. I could spend the next year digitizing this music. When played at 160kbs on my Harman/Kardon player and amp/receiver and through a Bose Lifestyle system, it sounds horrible - why?? It doesn't have to be that way - he could even offer an exchange program - send your old CDs in and get credit to download the cd from the new music service. Ripping??! That's the solution to making a collection digital? NO. There is a better way. One music collection. One device. One service. Cd's are too expensive too. Cut the cost for marketing, development, production, cd cases, cds themselves, etc...

What's left? A digital track, encoded at monster levels without all the BS charges that come along with music... I want the artist to get paid - I don't care about the label. How do you do that?

Take control of the label - the media - the technology.

 

[medea]

I think that this is a great idea for both Apple and for us consumers, owning Universal Music would definitely bring in more revenue in the long run and could keep Apple afloat, and it would be great to have a man like Jobs running a big music comapny, I doubt we would see much development into copy protection on cd's from Apple and that would be a huge blow to the RIAA and Microsoft (who is developing their own copy protection and cd's to work with Windows Media...)
If Apple can afford it, and I'm sure they know better than we if they can, they this could be a great move for Apple.

 

[pcp_ip]

Someone posted this on the macnn article comments, and I thought it was an interesting find:

http://www.synchexpress.com/

Maybe this is the future apple music service. Sync your Universal purchases to your ipod and itunes.