Digital Gabe
Cutting Edge Commentary On All Things Media

Google The Record Label?

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Consider these two facts.  First, in 2016 Google made an offer to buy 50% of Sony Music for $500M.  They were eventually outbid by Sony’s parent company, so the deal never went through.  Second, right now Vivendi is willing to sell 50% of the even larger Universal Music Group.  So what would happen if Google decided to buy controlling interest in UMG?

The biggest implications would be Google’s ability to lever UMG’s licensing rates both up and down.  They could conceivably keep royalty rates low for their YouTube property – thanks to YouTube’s “safe harbor” licensing arrangement for streamed music they only pay about one-seventh in royalties compared to other streamers like Spotify.

In reverse, Google could raise the licensing rates (or decide not to do label-direct deals at all) with other streaming competitors.  Since UMG is the largest label in the world, this could have devastating effects on other streamers’ products.  To give you a sense of the depth of UMG’s catalog here’s the link.

Right now Apple, Liberty Media and Tencent remain the most likely buyers of UMG, but Google is a dark horse to keep an eye on.

 

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