Did Warner Overpay for Parlophone?

WMG owner Len Blavatnik shows off the jewelry that the Vivendi board gave him at the closing of the Parlophone deal.

WMG owner Len Blavatnik shows off the jewelry that the Vivendi board gave him at the closing of the Parlophone deal.

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 for sure (although some reports hint at Simon Fuller and Chris Blackwell as the possible spoilers; both are friends of UMG CEO Lucian Grainge), 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.

 

 

© 2013, Wayne Rosso. All rights reserved.

11 comments for “Did Warner Overpay for Parlophone?

  1. al mair
    February 18, 2013 at 3:46 PM

    The fact that Coldplay received a big advance from the previous owners is good for the new owners. They won’t have to pay out any royalties until Coldplay is recouped.

  2. February 18, 2013 at 3:44 PM

    Not that it’s anything to be dismissed quickly, but how much longer does EMI have on their license from Apple? Or do I misunderstand the relationship.

    • February 18, 2013 at 3:49 PM

      Good question, but I’m sure that it will continue for many years to come now that they’re with Universal and are technically still part of the EMI family, so to speak.

      • February 19, 2013 at 7:39 AM

        The Beatles will stay safely with EMI -> Universal -> Vivendi. Their early albums (can’t remember up to when but must be at least the first three) were completely EMI. Later ones, while Apple Corps, are tied solely to EMI possibly in perpetuity.

        • david hilton
          February 19, 2013 at 12:35 PM

          Unfortunately, the Beatles will not “stay safely” with anyone, they will belong to the world. This is because their first few singles are already out of copyright in most of the world, and within 4 years all of their greatest hits will also be in the public domain in all of Asia, Africa, South America, and the rest of the world apart from the US and perhaps some EU countries (depending on how or whether they implement the recent extension of copyright in the EU).

          It would have improved the usefulness of this article to acknowledge as well that a high proportion of the recording artists mentioned, such as Frank Sinatra, Piaf, Maria Callas are almost totally out of copyright in most of the world.

  3. Anonymous
    February 18, 2013 at 3:38 PM

    You are wrong in that Universal does not have Bowie’s catalog. Do your homework on that part of the deal. The more interesting story here, by the way, is not if Warner overpaid. It’s not like Blavatnik is dumb or emotional about this business. The real question is, “Why did he pay what he did?” and what does it mean that he’s put almost $4 billion into recorded music in the last few years? Could it be possible he is in this for a longer haul then anyone else currently in the game at any other label group? That is the only context in which this makes sense, isn’t it?

    • February 18, 2013 at 3:44 PM

      I did do my homework. EMI does, in fact, own several Bowie catalog albums, including “Let’s Dance”. He’s even listed as an artist on the Capitol Records web site, though his new record is coming out on Columbia.

      As far as the second point in your comment, perhaps Blavatnik has contracted the deadly Guy Hands Syndrome.

      • Anonymous
        February 18, 2013 at 4:07 PM

        wrong on both counts. you’ll see.

        • david hilton
          February 19, 2013 at 12:36 PM

          Yes, wrong too for the additional reason that in just a few years no one will own Bowie’s albums, they will be in the public domain in most of the world.

      • DieterK
        February 18, 2013 at 4:46 PM

        As far as I know Bowie owns the albums he recorded between 1969 and 1990 (and most / all of the later ones). Remember the Bowie Bonds? Bowie used the money from these bonds to get complete control over his early albums. In 1997 he licensed these albums to EMI – for 15 years.

        Could it be that Blavatnik is in for a longer haul than the other owners of the big three? Yes. But that doesn’t mean much: Sony and Vivendi would sell their records company tomorrow (if they could find a buyer).

        • david hilton
          February 19, 2013 at 12:37 PM

          Yes, but it does not help Bowie much to ‘own’ his albums in countries (most of the world) which only recognise copyright ownership for 50 years. His time is almost up already.

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