Thread by @eajene, 1/ @WarnerMusic, one of the few pure music companies, is going public [...]

1/ @WarnerMusic, one of the few pure music companies, is going public next week

(Others like @sonymusic/ @BMG/ @UMG are parts of conglomerates)

If you believe the future involves many more people paying for music streaming services, the WMG IPO is for you

Here's some more info

2/ WMG ( @warnermusic) plans to raise as much as $1.8B next week, in what could be the biggest IPO of 2020

WMG is owned by Ukraine-born billionaire Len Blavatnik, one of the world's top 100 wealthiest people ( https://forbes.com/profile/len-blavatnik/#7f16143a56f3), via his diversified holdco, Access Industries

3/ Access ( http://accessindustries.com ) purchased WMG for $3.3B in a 2011 auction that saw Blavatnik beat out @TomGores & his brother Alec, and @SonyATVMusicPub

The deal took then NYSE-listed WMG private, and most analysts thought Blavatnik def. overpaid https://dealbook.nytimes.com/2011/05/06/warner-music-to-sell-itself-to-access-for-3-3-billion/

Warner Music Is Sold, Ending a Long Auction

The Russian-born billionaire Len Blavatnik is buying Warner Music and he may eventually seek to merge the record label with the EMI Group.

http://accessindustries.com

4/ WMG will sell just 14% of its common stock in the IPO (set for June 3) & Blavatnik/Access will continue to own 86%

Post-IPO, WMG is expected to be worth $12B-$13B

So, it's a ~4x deal for Blavatnik ($3B ⇒ $12B) w/ upside & this visual needs an update: https://www.bloomberg.com/news/features/2019-04-26/the-meteoric-rise-of-billionaire-len-blavatnik

5/ And that doesn’t include the $1.35B in dividends WMG has paid out since 2011

6/ Music, a $20B industry, is likely now the largest chunk of Blavatnik’s wealth

- It's growing at 9% CAGR

- Streaming now generates 56% of industry revenues, up from just 19% in 2015

- Streaming is taking share from physical (i.e. CD sales) & digital (i.e. downloads)

7/ A key argument for WMG is that global adoption & penetration of streaming is inevitable, so there's lots of room to grow

Today's challenges are tomorrow's opportunities:

- Only 11% of smartphone users pay for music streaming

- Emerging market smartphone penetration is low

8/ There's also a tech angle: New devices, wearables, digital dashboards, games, AR/VR, smart speakers, etc. need music.

See, for example, how music has contributed & is contributing to TikTok's growth

9/ In '19 WMG generated $4.5B and, despite COVID, revenues are up slightly in '20

In fact, WMG says COVID-19 "may accelerate growth of other revenue streams such as fitness & interactive gaming (incl. augmented reality & virtual reality)"

Music opportunities are expanding

10/ WMG is "the vital connective tissue between artists, music services, & fans," according to CEO Stephen Cooper

The WMG structure:

• Warner Music Group (the corporate arm)

• Warner Recorded Music (the label business)

• Warner Chappell Music (the publishing arm)

11/ By the way, WMG is home to your favorite artists’ favorite artists

Recorded Music:

• @iamcardib
• @prince
• @lizzo
• @pinkfloyd
• @ArtistHBTL

Publishing:
• @katyperry
• @GreenDay
• @ToveLo
• @manuelmedrano
• @drdrew

Just to name a few.

12/ @WMG’s Recorded Music unit is the cash cow, generating 85% of rev. in '19: $3.8B (16% mkt share)

It's run by @MaxLousada who, in a bit of hip-hop trivia, was a Rawkus Records MD from '00-'02 (Shout out to the mighty @MosDefOfficial, @TalibKweli, @JarretMyer & @BrianBrater)

13/ WMG’s Recorded Music is structured into 3 pillars:

• A bunch of labels, driven by Atlantic & Warner Records

• Ops in 60+ countries, &

• Complementary assets such as @ada_music, @WarnerMusicAS, @songkick, & @UPROXX

"We drive culture to drive consumption" - @MaxLousada

14/ WMG Recorded Music has enjoyed success, w/ its labels receiving the most gold & platinum certifications for debut albums since '17

It also tells a compelling story to independent artists: "40K new songs are added to Spotify every day, go major, we'll help you punch through"

15/ Guy Moot ( @GMootster) runs the publishing arm, @WarnerChappell

It's a ~$650M business for WMG

Globally, publishing revenues come from four main royalty sources: mechanical, performance, synchronization and digital

For WMG, the ~$650M publishing revenue is still only 15%

16/ In keeping with recent trends, Africa's music scene (particularly Nigeria & SA) is important to WMG

• They signed a 2019 strategic partnership with @Audu's record label @choccitymusic

• And just in April '20, ahead of the IPO, they invested in music distributor @Africori

17/ There's also an Asia angle here

• WMG has a minority stake in @Tencent_Music, China's leading online music entertainment platform

• Now, Tencent wants to return the favor & purchase $200M worth of WMG shares ahead of the IPO (roughly 1.5% of WMG) https://www.wsj.com/articles/tencent-in-talks-to-buy-warner-music-stake-11590774885

WSJ News Exclusive | Tencent in Talks to Buy Warner Music Stake

Tencent Holdings is in discussions to buy a stake in Warner Music Group as part of the record company’s initial public offering, a key test for a new-issue market that has been hobbled by the...

https://www.wsj.com/articles/tencent-in-talks-to-buy-warner-music-stake-11590774885

18/ Recommended reading for more info:

• the S1: https://investors.wmg.com/node/12361/html

• this article: https://www.rollingstone.com/pro/features/warner-music-group-ipo-ar-costs-952821/

• this article: https://www.billboard.com/articles/business/9390895/warner-music-ipo-analysis-investors-business-wall-street

19/ Be sure to read this article as well:

‘Is Len Blavatnik about to complete the shrewdest deal in the history of the record business?’

Spoiler: The answer is yes

#billionairemoves https://www.musicbusinessworldwide.com/is-len-blavatnik-about-to-complete-the-shrewdest-deal-in-the-history-of-the-record-business/

Is Len Blavatnik about to complete the shrewdest deal in the history of the record business?

The case for Len Blavatnik having made the smartest acquisitive move in record industry history

https://www.musicbusinessworldwide.com/is-len-blavatnik-about-to-complete-the-shrewdest-deal-in-the-history-of-the-record-business/

20/ The end

If you liked this thread, like it and retweet — it’s the best way to train me to do more like it

In the meantime, I’ll be getting ready to buy Warner Music Group shares

20/ The endIf you liked this thread, like it and retweet — it’s the best way to train me to do more like it In the meantime, I’ll be getting ready to buy Warner Music Group shares

Latest Threads Unrolled: