Universal Music Growth Shows Industry Dominance Before Spinoff

(Bloomberg) -- Strong profit growth at Universal Music Group underscored its dominance of the music industry ahead of a planned spinoff from parent company Vivendi SA.

• French media group Vivendi’s earnings before interest, tax and amortization rose 49% to 1.07 billion euros ($1.26 billion) in the first half of the year, above the average analyst forecast of 911 billion euros.
• UMG’s Ebita surged 38% on a like-for-like basis to 753 million euros, above a consensus forecast of 690 million euros.

Key Insights

• UMG’s performance shows the strength of music streaming’s recovery from the pandemic and could help to smooth its path to the Amsterdam stock market in September. Some investors had challenged the structure of the spinoff, saying it would lumber them with a heavy tax bill.
• While UMG is thriving in the emerging digital economy, Vivendi’s other big investments face a growing challenge from Silicon Valley tech giants.
• Pay-TV arm Canal+’s French viewers are a target for U.S. streaming platforms, a threat that’s grown since Amazon.com Inc. won prized French soccer broadcast rights last month. Canal+’s Ebita grew 10% in the quarter.
• Advertising unit Havas saw Ebita rebound by 92% from the pandemic that’s slashed corporate marketing budgets. Its longer-term prospects hinge on its ability to stop Google andFacebook Inc. increasing their share of a booming digital ad industry.

Market Context

• Vivendi shares have risen 27% in the past 12 months as UMG’s surging profits offset the pandemic’s impact on its other businesses.

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