The 3 Biggest Stories in Music: Bieber’s Payday, Ye’s Comeback, and $64B for Universal Music Group

0:04Matt Belloni:This episode of The Town is presented to you by AMC Networks. Billy Magnuson and Zach Galifianakis star in the new series The Audacity on AMC and AMC+. Influence rises, people unravel, and CEO meltdowns are business as usual among Silicon Valley elite. Executive produced by Jonathan Glatzer, a writer-producer of Succession and Better Call Saul. Watch new episodes of The Audacity, Sundays exclusively on AMC and AMC+. This episode is brought to you by TaxAct. Taxes, trust me, they sound far more complex than they actually are, and it's all thanks to TaxAct. They make it easy to do taxes online, offering step-by-step guidance so you can finish your taxes ahead of the April 15th deadline and get your maximum refund guaranteed.

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1:01Matt Belloni:It is Monday, April 13th. So how much is the world's largest music label worth? About$60 billion, according to Bill Ackman, the billionaire investor. He and his Pershing Square capital would like to engineer a deal to buy Universal Music Group, home to Taylor Swift, Bad Bunny, Kendrick. They've got the Beatles now, Justin Bieber, more than 30 % of the market for recorded music, plus a huge music publishing unit. That$60 billion number would be a valuation, a huge premium on what UMG currently trades at. But why? What is his interest here? And what does it say about the overall trajectory of the music business?

1:39Matt Belloni:Ackman has been pretty interested in UMG for years now. He was even on the board. But he says, quote,

1:51Matt Belloni:Hmm,

1:55Matt Belloni:okay. Lots to discuss there. And it's one of a bunch of interesting music topics going on right now. There's Ye, the artist formerly known as Kanye West. He's been trying a comeback tour from quasi-cancellation after his outbursts about Hitler and releasing a song called Heil Hitler. Yes, that happened. He apologized in newspaper ads, and then he played a couple very big stadium shows in LA. They went fine, gross record numbers. But then he was booked to headline a festival in London, and the UK government basically blocked him from entering the country. So where does that leave one of the most influential artists of the past 25 years?

2:31Matt Belloni:All the potential partners like Live Nation that would very much like to make money off of him. We'll get into that, as well as some Coachella stuff, the Bieber performance in particular. Our Monday guy, Lucas Shaw, is here from Bloomberg. It's a music business check-in. The hostel bid for Universal, the Yay Comeback Tour, the business behind Bieber, all of it. From The Ringer and Puck, I'm Matt Belony and this is The Town.

2:58Matt Belloni:Okay, we are here with Lucas Shaw from Bloomberg, returning after a week off. You were not taking the week off to prepare for Coachella, were you? You know, I haven't been to Coachella in three or four years. Man, don't tell me you've aged out of that. People in their 30s in Los Angeles, there is a social contract that you must go to Coachella. I would go. I had a lot of other travel that I had to do this year. I know. I was sad that there was no rain. I would have liked to see Justin Trudeau and Katy Perry consumed by a river of mud. But I did see a video where Kourtney Kardashian's wellness tent got blown down by a sandstorm.

3:36So a little bit. I feel like this was a big Kardashian Coachella because, you know, between Haley, the Haley Bieber, Justin Bieber access. So then you had Kendall Jenner there. You had Kylie Jenner promoting her stuff. It was just, you know, a lot of, a lot of Kardashian.

3:48Matt Belloni:Yeah, that's okay. So you mentioned Bieber and we're going to talk about a bunch of music industry things today. It's high time we checked in, but the Bieber performance, very controversial on social media. And there was some chatter about the financials. And I thought that was an angle for us here. Very well-known, Bieber got$10 million to perform at Coachella, seemed to do a lot of YouTube scrolling on stage. He played some of the new songs, and then he went to his laptop and started scrolling YouTube and playing songs and then kind of singing along to the songs. and a number of people have wondered whether a youtube paid him to do that and b whether there was some kind of rights issue that he had to get around because he sold his catalog last year and let's just put those rumors to bed can you do that yeah i think this is a whole lot of nothing based on things i've heard but i haven't had i i would hesitate to report it myself in a story like There has been a lot of speculation about money that Bieber owes, in particular, actually, to his concert promoter, to the concert promoter AEG.

5:00Oh, I've been reporting on that. He owes like 20-something million dollars to them. Tens of millions of dollars for a concert, a tour that was canceled. It just so happens that he played Coachella, which is put on by Golden Voice, which is partially owned by AEG. So, yes, he may have gotten$10 million. I wouldn't be shocked if some of that just goes right back to Golden Voice and AEG.

5:20Matt Belloni:And keep in mind that YouTube paid a lot of money for the exclusive streaming rights to Coachella. YouTube may or may not have suggested that it would be nice if there'd be a YouTube moment on stage with Bieber. He did sell his catalog to a company called Hypnosis. It's owned by Blackstone. He got a lot of money for it, and it was widely seen that he did that because he needed money just to support his lavish lifestyle. The lifestyle to which he's become accustomed. Yes. But the notion that he like played videos off of YouTube to like nickel and dime or affect who he's paying for his performance is ridiculous because the amount of money that goes to the performing rights organization for that song being performed at Coachella is so minuscule.

6:09Matt Belloni:Oh, it's infinitesimal. Relative to the amount of money that he's getting paid. it just it just i think he just had a fun creative idea or someone on his team did and we're like you know you got your start on youtube why don't we do it this way like it's it's it'll be fun for people to go back and hear your old songs and also for you who have struggled a little bit with your mental health this is like an easy way for you to sit on stage and scroll and have some fun and it feels relatable and approachable and earn 10 million dollars yeah i I mean, the one wild card is that, you know, he was singing along to the master recordings, which are owned not by him.

6:47Matt Belloni:So someone's getting paid there. And maybe, you know, YouTube has a license. YouTube has a blanket license. Yes, YouTube has license. So the owners, by the way, he's not, it's not like he's the sole owner. Universal Music also owns a bunch of it. And so, yes, did Universal get like a little bit of money because that was played on YouTube? yes but we are talking about pennies on the dollar nothing that matters for the 10 million dollars that um that he got paid all right well good for him good for everyone involved seemed like a great event lots of paparazzi photos lots of dumois action so we're happy for everyone all right speaking of money and universal music group bieber's label our guy bill ackman billionaire our guy twitter gadfly uh very opinionated billionaire he would like to own universal music group and this is not new he's been making noises about this for years he was actually on the board of umg at one point i don't understand a the financial machination and why this matters Like, why does Bill Ackman want to own UMG?

7:54Matt Belloni:What about the music industry is saying, yes, I want to be there. And I think I can run this more efficiently. He says that in his statement that UMG's stock would go up markedly if he were owning it. I don't understand. Can I? This is my somewhat hot take. Bill Ackman does not want to own Universal Music Group. Oh, okay. He just wants someone else to buy it at a higher price. Now, maybe if Bill Ackman could buy it and merge it with his SPAC and have that solve some financial problems for him, that would be great. But I think more than anything, he knows the French family, the Bolares own a piece of it.

8:33Tencent owns a piece of it. Bill Ackman is not going to own all of Universal Music Group. But he's pissed because he bought it at a price that's higher than it's currently trading at. Universal Music Group as a public company has not worked. One could even say it's a failure. The stock price is down from when it went public. That is not what you want to have happen. But why is it a failure? Why is the stock not doing well? Yeah. Because the record label is in a very perilous situation at the moment, I'd say. Like, the big headline reason right now is fear about AI and, like, what's that going to mean to a record label?

9:07But it's also, look, you know, their share of overall consumption is going down because independent music keeps eating more and more share. It's why the major music companies, Sony, Universal, Warner, have all tried to buy independent distributors where the margins aren't as good, but it'll prop up their market share. The major music artists like the Biebers are not giving them as much ownership. They are demanding ownership earlier from the outset of their contract. So Taylor Swift, Universal Music's biggest artist, Universal Music's not going to own her records in the long term, right?

9:38Matt Belloni:No, but Taylor is the anomaly, right? Explain that part about how younger artists are able to negotiate more of their masters than they once did. Why is that the case now? Because they usually go viral before they get signed or have a little bit of buzz before they get signed. It's just the power to break an artist has completely shifted to the platforms. And when you shift that power to the platforms, it gives the artists more power to negotiate with their label. the most valuable thing these music companies own is their catalog right because if you own catalog and it just passively making money that's pure profit for you it's the same reason a movie or tv studio the most valuable thing they own is their catalog because they don't have to do anything to make money from it well and the share of catalog listening has been going up craig is listening to abba and credence from the 70s damn straight i thought you're gonna say creed there which would make me really rethink things with craig i don't know about creed i cannot to vouch for that but but i do know that craig listens to a lot of abba and a lot of credence and those are two artists that a normal 30 year old guy 20 years ago would not be listening to but now because of they're all ubiquitous and the algorithm chooses you it found him and he loves it i don't totally agree with that because i think 30 years ago you the difference is he would have owned it on cd if he liked it and he would have listened to it that way but he never would have discovered it or he would have heard it on radio yeah okay he would have heard it on a classic music network radio station and that would have been enough for him the bar is way lower now for me to discover a great Fleetwood Mac song I didn't know before yeah exactly and why do you think the share of catalog music is going up so much part of it is the um the the generational adoption of streaming so at the beginning of streaming it was younger people mostly listening to newer music And as time went on, you had older people who are already listening to older music.

11:33Matt Belloni:Or they're just aging up. Someone like me, if you are Gen X and you now have access to all the songs you loved when you were 20 and you don't have to buy them, it's great. The pie has expanded so that I'm giving money to those artists that I loved when I was 20. Yeah. My argument all along has been that the majority of listening has always been to catalog. It just took a while for the streaming data to reflect it. And it does mean something financially because you are getting paid for every stream as opposed to like someone buying a CD and then it just sits on your shelf. And even if you listen to it, the artist doesn't get paid every time you listen to it.

12:12Matt Belloni:Yeah. I mean, the entire economics of the music business have changed because of streaming. It's just surprising to me that the labels haven't been able to translate that into a better narrative for Wall Street. Yeah. Well, look, they surrendered a lot of the control over their destiny to the streaming services, right? Like one of the best ways for the music companies to make money right now is for the streaming services to raise their prices. And they have some ability to sort of try to make that happen. But that's ultimately up to Spotify, Apple, YouTube. They haven't really invested in technology.

12:46So like a lot of the concern about AI right now, if Suno, which is the biggest AI company, were something that the labels had incubated, nobody would be worried about it, right? But instead, it's this outsider that is once again seen as a threat because the record label's role in the music business has just contracted over time.

13:04Matt Belloni:Yeah. Interesting, though, one of Ackman's proposals is to sell UMG's stake in Spotify for 1.5 billion euros. If the future of the music business is the platforms, why does Ackman want to sell Spotify? He just seems very eager for them to spend more money and be more aggressive, right? He wants Universal to take on more debt. I mean, the interesting thing about all this is Bill Ackman actually likes the current management of Universal Music Group. Yeah, they were very quick to put out a statement supporting Lucien Grange, the CEO, but he's not saying replace the management. Yeah, he's not really saying replace the management, and he's not really even saying change the strategy for music, right?

13:45He acknowledges that Lucien Grange has been the best record executive of his era, just like tremendous track record. They dominate the business in a lot of ways. He's a lot of his arguments are around how to how they're like allocating capital and how they're communicating with investors. Because to your initial question, they've just done a really poor job of convinced convincing investors that they have kind of a positive growth story. And that's either because of some of the stuff we've discussed where like there isn't a positive growth story or it's because they've just been bad at investor communications because none of them have any experience really being at a public company.

14:18Matt Belloni:Well, it's like the narrative in Hollywood. you know warner brothers discovery is in the toilet until someone wants to vastly overpay for them and then the stock triples right and that's i think what akman is basically hoping here is that someone will come along and offer a shit ton of money for universal and and suddenly he'll make a huge amount of money on his trade yeah and do you think this impacts the other two large record label conglomerates it impacts them if it trades yeah if if there is a 60 billion valuation on umg that's pretty good for sony and warner i think most of the other companies even though it's like it's very annoying if you're the management at umg most of the people in music business see it as a net positive because it should increase the value of what they do and it might even also force uh force some change in how these companies operate and if he's successful what a huge coup for Michael Ovitz.

15:15Matt Belloni:Mike Ovitz basically vanished from Hollywood after his CAA run and went to Disney and then started a management company and CAA blackballed him. He's been in the investment community for two decades now, making a lot of money, buying a lot of art. He popped up in this proposal as someone that Bill Ackman wants to be chairman of the board. What's going on there? He's good friends with Lucian Grange. So I think it was also positioned as a we can, you know, this is not hostile. I mean, it'd be really funny. I think that's exactly what's going on. It'd be really funny because if you had Mike Lovitz on the board, Sherry Lansing is already on the board.

15:52You'd basically be running back Hollywood in the 1990s, like, or even the 80s. Just like the power brokers of three decades ago are now in charge of the world's most powerful music company. Are you looking for support in your weight management journey? Zep Bound to Zepatide may be able to help. Z-Bound is a prescription medicine used with a reduced calorie diet and increased physical activity to help adults with obesity, or some adults with overweight who also have weight-related medical problems to lose excess body weight and keep the weight off. Z-Bound is approved as a 2.5, 5, 7.5, 10, 12.5, or 15 milligram injection.

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18:04Matt Belloni:Speaking of power, let's talk about the artist formerly known as Kanye West. We will refer to him as Gay. That is his chosen name. Now, you've done some reporting on this subject. And I'm sort of fascinated from a different perspective, from the kind of perspective of what are the options for someone that has been canceled, quasi canceled. We've seen examples of this pop up. Louis C.K. is now headlining a Netflix event. Cancellation is over. People are back. Is it, though? Like, that's the thing. I read your story from a couple weeks ago about how Ye made, what was it,$33 million off of two shows?

18:43Matt Belloni:In two nights. Yeah. That's pretty good for two L.A. shows. $33 million in gross skate revenue. To me, that says not canceled. Then he goes off and heads to London. Or tries to head to London. Or he never actually went? Yeah, I don't think so. They said that he would not be welcomed into London because of his pretty openly anti-Semitic rhetoric. Then the festival he was going to headline was canceled. So where does that leave him? And more specifically, I want to talk about where does that leave Live Nation, which very much wanted to be in business with him? He is going to keep doing shows. I just don't know that he's going to go to the UK.

19:21I suspect he already performed in Mexico City. He performed in LA. They were both really successful. I think it's just a matter of time before they announce more dates, probably somewhere else in the U.S. There are plenty of countries around the world that I imagine will take sort of less of a hard line on his stance, especially if they see how much money he's making and how much they stand to benefit from it. So, yeah, I mean, he's in this this kind of interesting limbo right now where the album has done pretty well. The concerts have done quite well.

19:52Matt Belloni:And Spotify and Apple will platform him. They are sort of cautiously platforming him. They will they've playlisted him, but they're not doing sort of big promotional campaigns like they do for a Dua Lipa or a Harry Styles. Yeah, he's not sitting down with Zane Lowe. No, it's like a cautious embrace. And it's all of this is dependent on, like, is he going to keep behaving or is he going to have another outburst? But there is clearly a huge percent of the population that's cool with him. And then there's a lot of the population that is still wary and doesn't trust him. Brands, though, can't be anywhere near this.

20:26still pretty toxic yeah i think it's tough for them the brand look brands are always last right the brands are going to follow the people if he does like a you know if he does six eight ten more stage shows and they all do well and the album does well and he manages to continue to pull off sort of his apology tour i could see brands getting back in business with him but i don't see that being this year that's like a year or two down the line as he's become a little more accepted and that's all dependent on like can he keep it together well my colleague at puck who

21:00Matt Belloni:writes for us about music dave brooks had done some reporting that live nation wants to see more out of him they want to see some gesture of contrition apologies some of the quote unquote doing the work i don't know if kanye or yay is willing to do that or interested but it seems like to get into business with a major promoter or brands, he's going to have to do something like that. Do you think that his apologies would be received as sincere? I don't, but I don't think a lot of these apologies are sincere. They just, people do what they feel they need to do. And if there's enough money to be made, everyone will play along in the charade if there is enough, if it's mutually beneficial.

21:48So why is now the time where like Louis C.K. can come back? I mean, I know he's been touring, but it feels like this is a little different, right? Netflix is. Well, this has been a shift in the culture.

21:59Matt Belloni:Netflix has clearly taken a position that they are a platform that does not judge. And if there's offensive stuff to you, there may be stuff that you like that's offensive to someone else. You know, I don't know that Louis C.K. has done, quote unquote, the work or apologize in any meaningful way. but maybe he has maybe there was some assurance behind the scenes um and it's comedy ted sarandos has been pretty clear that he wants to be in business with top comedians regardless of the controversy right chappelle is perfect example well and netflix not that it was a you know a glowing portrait per se but netflix did have the yay documentary yeah but that was unauthorized right yes i mean they also they they did the you know the diddy documentary and like a bunch of other things yeah well the diddy one was the the opposite of authorized exactly um so two years is yay back he's so so fucking hard to predict because and you're asking me to that is all dependent on his behavior and he has been pretty unstable over the last decade i don't think he will.

23:11I think there will be something. The part of me that grew up with his music and thinks he's unquestionably the most influential artist of like this century. I know you wrote that. I was like,

23:20Matt Belloni:Taylor Swift would like a word. Taylor. No, Taylor Swift didn't influence how other people sound in the same way. She was she's from a business perspective, more influential, but from an artistic perspective. Yeah, he influenced just a lot, a lot of people. But so I hope so, because I hope he's also better. And I hope that a lot of his the horrible things he said were, in fact, a result of mental illness. Like I would like to believe that people can change and be redeemed, but nothing that he's done in the last 10 years gives me a tremendous degree of confidence that he will be. I assume that something will come up, right?

23:50Like the UK getting, getting not allowed into the UK came right after it seemed like he was on the precipice of, of good things happening.