Universal Music Group N.v. · EURONEXT:UMG
Universal Music — Investor Presentation (November 2011)
34 slides from Universal Music's investor presentation, November 2011
Slide 1: Investor Meeting November 2011
Universal Music Group INVESTOR MEETING NOVEMBER 2011
Slide 2: Lucian Grainge, CBE and Boyd Muir
Lucian Grainge, CBE Chairman and CEO Boyd Muir Executive Vice President and CFO 2
Slide 3: World's Leading Music Entertainment Company
World’s Leading Music Entertainment Company Recorded Music Finding, developing and retaining recording artists and marketing and promoting their recorded music in all formats and platforms Operating Results 2010 Music Publishing Revenue €4.4 billion Finding, developing and Merchandising retaining so
Slide 4: Market Dynamics: Recorded Music
Market Dynamics: Recorded Music Global music market of $15.9 billion has declined 32% versus 2003 Global Recorded Music Sales UMG Recorded Music US$ Million – Trade Value • Physical sales have declined 55% Global Market Share • Digital sales were $4.6 billion in 2010 25,000 28.0% $23.3bn 27.2% 26.5%
Slide 5: Market Dynamics: Music Publishing
Market Dynamics: Music Publishing Global music publishing market of $6.1 billion has fallen 8% from its peak in 2008 reflecting the decline in the recorded Global music sector and tightening advertising spend during the Universal Music Music Publishing Income global recession Publishing Group US$ Mi
Slide 6: Market Dynamics: Competitive Landscape
Market Dynamics: Competitive Landscape UMG is the leading music content company in the world with market leading positions in both Recorded Music and Music Publishing Recorded Music Music Publishing 31.4% 28.5% 26.5% 23.0% 22.6% 19.7% 12.3% 13.9% 12.5% 9.7% Other Other Source: Recorded Music - IFPI
Slide 7: Market Dynamics: UMG's Roster Strength
Market Dynamics: UMG’s Roster Strength Global Top 10 Albums 2010 Artist Album 1) Eminem Recovery 2) Lady Gaga The Fame Monster 3) Susan Boyle The Gift 4) Taylor Swift Speak Now 5) Lady Antebellum Need You Now 6) Michael Jackson Michael 7) Rihanna Loud 8) Justin Bieber My World 9) Justin Bieber My Wo
Slide 8: What concerns the financial community about the music industry
What concerns the financial community about the music industry UMG wants to change the financial markets outlook on music and UMG 8
Slide 9: Key Concerns: Declining Physical Sales
Key Concerns: Declining Physical Sales Rate of decline decelerating US$ billions • Physical sales continue to decline but at a slower rate. 2010 -14% 2011 1H -7% • Physical sales are proving resilient in several markets. Japan: 73% of sales are physical Germany: 81% of sales are physical • C
Slide 10: Key Concerns: Piracy
Key Concerns: Piracy Piracy continues to negatively impact the industry, but there is a growing recognition amongst policymakers that legislation is required to ensure that intellectual property rights are protected. • A growing number of countries are adopting LimeWire new laws or programs aimed at
Slide 11: Key Concerns: Unbundling of Albums
Key Concerns: Unbundling of Albums Cherry picking of tracks for $0.99/$1.29 was seen as a key trend of the physical to digital transition reducing the need to purchase full albums for $9.99 but there are now signs that digital albums will have an important role in the market • As more music is consu
Slide 12: Key Concerns: Ownership to Access
Key Concerns: Ownership to Access Challenge is to get subscription services more widely adopted by the consumer • Ad-supported digital music services have proven to be unsustainable but a useful tool to migrate consumers away from pirates. • Free music (e.g. YouTube, Facebook) is an impediment to th
Slide 13: Key Concerns: Challenging Retail Landscape
Key Concerns: Challenging Retail Landscape Physical retail faces numerous challenges while digital retail continues to be dominated by Apple’s iTunes store • A key driver behind the decline in CD sales has been the loss of retail outlets and the reduction in shelf space dedicated to music. • Enterta
Slide 14: Key Concerns: Music Publishing
Key Concerns: Music Publishing • The Music publishing sector has declined since its peak in 2008, caused by falling revenues from record sales and licensing disputes that have limited growth from digital. • According to Enders Analysis, music publishing could return to growth in 2012. 2012 2013 2014
Slide 15: Business Transformation
Business Transformation Create a global music entertainment company, focused on industry leadership, maximizing our revenues from our investment in creativity and fully leveraging all our strengths and assets. • Aligning our cost base to reflect the reality of the market place. • Accelerate the deve
Slide 16: Business Transformation
Business Transformation We have undertaken a comprehensive restructuring of our operations which will result in savings of €100 million per annum. All the steps necessary to deliver these savings have been taken and will be fully implemented in 2012. • US label reorganization • Corporate centers • C
Slide 17: New Growth Opportunities: Music
New Growth Opportunities: Music A&R success and talent discovery are at the heart of everything that we do. • #1 destination for artists • Fresh executive talent in A&R • Adult contemporary • Revitalize Motown • Country music • Global exploitation of English language repertoire • TV platforms 17
Slide 18: New Growth Opportunities: Diversification
New Growth Opportunities: Diversification UMG is at the centre of artist activity and not just on the periphery of the business as an audio distributor. VEVO: #1 Music Video Site for original artist content Strategic Marketing Partnerships (SMPs): Qatar Telecom (MENA) HP (Brazil) AMEX (US) Reliance
Slide 19: New Growth Opportunities: Emerging Markets
New Growth Opportunities: Emerging Markets New business models enable us to establish a presence in emerging markets • Previous hurdles of vast geographies making physical distribution untenable and a lack of respect for intellectual copyright made monetization a major challenge. • We will increase
Slide 20: New Growth Opportunities: Consumer Focus
New Growth Opportunities: Consumer Focus The creation of brands remains at the heart of our creative process but we are now putting consumers at the heart of our commercial process. • Leverage our CRM and develop a closer relationship with the consumer. • Use music to assist global brands to access
Slide 21: New Growth Opportunities: Subscription
New Growth Opportunities: Subscription While subscription services still only represent a small portion of the global digital music market, Sweden provides an illustration of the potential. • In Sweden, 1 out of 2 people under the age of 35 listen to Spotify and 22% of the overall population use the
Slide 22: New Growth Opportunities: New Business Models
New Growth Opportunities: New Business Models Return on our creative investment • Strategic global and localized marketing partnerships • Expanding merchandise operations into the retail sector • Building brands with artists at the centre 22
Slide 23: Highlights Q3 YTD 2011
Universal Music Group HIGHLIGHTS Q3 YTD 2011
Slide 24: Highlights
Highlights • Recorded music market conditions remain challenging but the US music market has grown 1.1% in value in 2011 Q3 YTD (Source RIAA) . • UMG recorded music market share has remained steady bolstered by increases in Japan, France and Australia where success with domestic artists is complimen
Slide 25: Highlights: US Market
Highlights: US Market 25% Album Sales Units 20% 342 15% 324 307 10% 87 95 86 5% 5.4% 55 0% 2009 2010 2011 62 74 -5% -10% -9.5% -10.1% 200 -15% 159 154 -20% -25% 2009 2010 2011 Album w/TEA CD Digital Album Digital Track Physical Album Digital Album TEA 25 Source: SoundScan week 39 YTD Note: Track Equ
Slide 26: 2011 Outlook
2011 Outlook Double digit EBITA margin, despite restructuring charges Upcoming 2011 Releases Amy Winehouse Mary J Blige Andrea Bocelli Mylene Farmer Drake Rihanna Florence & the Machine Roberto Alagna Justin Bieber Snow Patrol Lady Gaga Taylor Swift Louise Attaque Take That 26
Slide 27: Universal Music Group to Acquire EMI Recorded Music
Universal Music Group UNIVERSAL MUSIC GROUP TO ACQUIRE EMI RECORDED MUSIC
Slide 28: UMG agrees to purchase EMI Recorded Music for £1.2 billion
UMG agrees to purchase EMI Recorded Music for £1.2 billion at a likely inflexion point in the music industry cycle Acquire a tremendous catalogue and superstar acts, complementary to UMG in genres and geographies Attractive valuation with significant synergy potential EBITDA multiple of 7x and
Slide 29: Transaction Price
Transaction Price Enterprise value of £1.2 billion 7x EBITDA*, and less than 5x EBITDA* post full synergies of over £100 million per annum Valuation is DCF-based with a 9.5% WACC, a 0% perpetual growth rate, and applying a 35% tax rate Multiple is below assumed price paid for Warner Music Gr
Slide 30: Summary
Universal Music Group SUMMARY
Slide 31: The Future
The Future The recorded music market is approaching its inflection point • UMG is best positioned to maximize the benefit from the evolving music market. • The balance of creativity and control are expected to deliver EBITA margins of 15% within 5 years. 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 32: Investor Meeting November 2011
Universal Music Group INVESTOR MEETING NOVEMBER 2011
Slide 33: Investor Relations team
Investor Relations team Jean-Michel Bonamy Executive Vice President Investor Relations +33.1.71.71.12.04 jean-michel.bonamy@vivendi.com Paris 42, Avenue de Friedland New York 75380 Paris cedex 08 / France 800 Third Avenue Phone: +33.1.71.71.32.80 New York, NY 10022 / USA Fax: +33.1.71.71.14.16 Phone
Slide 34: Important legal disclaimer
Important legal disclaimer Forward looking Statements This presentation contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materiall
Universal Music Group — Investor Presentation (November 2011) on 6ix