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Warner Music launches its IPO

[NEW YORK] The Warner Music Group, home of stars like Ed Sheeran, Cardi B and Led Zeppelin, announced Tuesday that it would proceed with an initial public offering that would value the company at up to US$13.3 billion.

The listing, planned for Nasdaq, would be the latest sign of the dramatic turnaround in the fortunes of the music business. Warner was bought for US$3.3 billion in 2011 by Access Industries, the conglomerate controlled by Russian-born billionaire Len Blavatnik, when the industry seemed to be on a terminal decline.

Since then, the music business has been reinvigorated by streaming services, leading investors to cash in. Last year, the Chinese company Tencent Holdings bought 10 per cent of Universal Music Group at a price that valued Universal at more than US$33 billion.

The Warner IPO would float 70 million shares, or 13.7 per cent of its common stock, for between US$23 and US$26 a share — valuing the company's equity from US$11.7 billion to US$13.3 billion.

Warner's IPO reflects a revitalised industry. The global recorded music business had US$20.2 billion in revenue last year, up from US$14 billion in 2014, according to the International Federation of the Phonographic Industry, a trade group. Disrupted by changes in technology that nearly killed its golden goose — the compact disc — the music industry had been sliding since 2001.

Streaming, which barely registered as a source of income a decade ago, now represents nearly 80 per cent of US retail sales revenue, according to the Recording Industry Association of America. While many artists complain that their royalties from streaming services are minuscule, the new format has been a boon for major record companies and music publishers, which collect large licensing payments for the use of their catalogs.

Warner has ridden the streaming wave. For its last fiscal year, which ended in September, Warner Music had US$4.5 billion in revenue, according to its prospectus. That was up from US$3 billion in 2015.

Warner announced its plans for an IPO in February before pausing them as the coronavirus spread. The company's prospectus lists the pandemic as a risk factor to its business. A Goldman Sachs report this month projected that global music revenue would drop by 25 per cent this year, mostly because of the heavy blow the pandemic has dealt to live events, but forecast that overall revenues would rebound next year.

NYTimes

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