Sony Corporation has now become the world’s largest music publisher after gaining control of EMI as per a $2.3-billion acquisition deal. This puts Sony in the top spot in an industry that has now found renewed life through streaming services. The new deal is also perhaps the most strategic of the moves Sony has done so far, given what EMI allows Sony to leverage on.
Sony’s acquisition of EMI grants it access to more than 2-million artists from artists such as Sia, Sam Smith, and Kanye West. CEO Kenichiro Yoshida added the acquisition is part of his mission to make Sony’s revenue streams much more stable but at the same time have rights to entertainment content. This is a switch and a shift of focus away from the usual Sony lineup of electronics and other products.
Yoshida added this is part of the company’s push to invest more in intellectual property. It can be remembered that since the arrival of the internet, the music market has shrunk from 1999 to 2014. Streaming services with fixed-price systems have helped revitalize the industry, but a bit of a push is still needed to make the venture work.
He added the growth of digital streaming also expanded options for songwriting royalty revenues, especially now that Sony has captured value as a manager of the copyrights backed by deals with services such as YouTube, SoundCloud, Google Play, Apple Music, and Spotify.
After the Sony-EMI deal, EMI Music Publishing will be valued at around $4.75-billion, inclusive of debt. This is more than twice its $2.2-billion valuation back in 2011, when a Sony-led consortium had won the bidding rights for the company. Sony, which ran EMI since then, has brought the 60-percent stake previously owned by the Mubadala Investment Company. This has put Sony’s ownership at around 90-percent from the previous 30-percent.
EMI Music Publishing currently controls 15-percent of the music publishing industry. If this is combined with the ATV business of Sony, this makes the latter possess 26-percent market share for the entire industry. This might spark the interest of rivals such as Warner Music Group and Universal Music Group.
Yoshida, who took Sony’s helm last April, appears to have more plans than just investing in the music industry. He also increased content offerings of Sony courtesy of a $185-million deal with Peanut Holdings, making the electronics giant have a 39-percent stake in the company that holds the rights to property such as Charlie Brown and Snoopy.
All of this appear to be part of a three-year business plan, which involves prioritizing cash flow while at the same time minimizing the hard impact of sales cycles of electronic gadgets and game consoles. Part of the strategy is to generate as much as $18-billion in terms of cash flow, with gaming and image sensors being part of its biggest contributors to profit.
Its semiconductor business is also expected to balloon to as much as 200-billion yen in 2021, compared to its 100-billion valuation this 2018. Part of Sony’s push in this department is to make sure its image sensors be applied to areas such as automotive as well, beyond smartphones.
Meanwhile, given the PlayStation 4 is almost nearing the end of a console’s life cycle, gaming for Sony might not be as secure as a revenue stream. It’s projected to fall from its 190-billion yen forecast into the 130-billion and 170-billion yen range.
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