3 Comments
Jun 15, 2021Liked by Andrew Walker

Thanks for the write up. I looked at this space from a PE perspective a few years ago. A few points: First, one additional positive is that actually the long tail is very significant. Especially for publishing, but also for Recorded Music. Only a very small % or revenue is any one artist or album in any given year. Also, the % or new music in any give year is also quite small. As such, as the streaming % increases, this will be both recurring and highly diversified. Second, the give and take between artist and label is not really a new thing and I don't think it has changed all that much, despite the headlines. Established artists will always cut a better deal, can always threaten to go indie, and keeping more of their revenue and retaining more IP vs newer artists. The labels just make a much smaller cut on a bigger pie for established artists and always have. Again, the market is mostly the long tail of many artists in many niches, and thankfully for the labels, most actually don't have negotiating leverage like Taylor Swift.

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great write up! Taking a step back, if UMG asset is attractive, one can simply buy WMG, the valuation and growth profiles are very similar and with WMG get ready liquidity and US listed stock. If the SPARC is the real juice here for the deal, then I think there are too many uncertainties.

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The PTSH/PSH premium/discount disconnect is interesting and very strange. Any thoughts on whether that could be linked to the time frame and deal certainty?

In other words, remainco as a permanent capital vehicle could be viewed as another PSH once transaction is completed and go to a discount. If Bill Ackman uses remainco to reduce discount in PSH, market probably won't like it? Understand this is a recursive argument though but just trying to make sense of the scenario of same manager, 2 (similar-ish) vehicles yet premium/discount

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