Sony takes controlling stake in EMI

The Japanese company is raising its stake in the music publishing giant to about 90 per cent, as a boom in streaming services fuels valuations for music copyrights

Sony is buying EMI Music Publishing, whose roster of songwriters includes Alicia Keys (above), Kanye West, Drake and Pink.
Sony is buying EMI Music Publishing, whose roster of songwriters includes Alicia Keys (above), Kanye West, Drake and Pink. PHOTO: AGENCE FRANCE-PRESSE

LOS ANGELES • Song copyrights are sound investment assets.

Take Judy Garland's Over The Rainbow, for example, which continues to be a top 10 money-spinner even today, more than 75 years after its release.

The song's copyright is owned by EMI Music Publishing, whose roster of songwriters includes Kanye West, Alicia Keys, Drake, Pink and Hozier.

That lucrative catalogue is now changing hands, with Sony buying EMI as it embarks on a new growth plan built on content and services.

EMI is the second-largest music publishing company by revenue and either owns or holds the rights to 2.1 million pieces of music.

The Japanese company will buy about a 60 per cent equity interest from a consortium led by Abu Dhabi-based firm Mubadala Investment for US$1.9 billion (S$2.6 billion).

Tokyo-based Sony already owns almost 40 per cent of EMI, operates the business and had been in talks to buy the library for the past few months.

EMI's extensive catalogue will solidify Sony's position as the largest music publisher amid a boom in streaming services that has fuelled valuations for music copyrights.

The transaction is the first major strategic move by Mr Kenichiro Yoshida, who took over as chief executive officer last month.

"We are thrilled to bring EMI Music Publishing into the Sony family and maintain our No. 1 position in the music publishing industry," he said.

While Sony is paying US$1.9 billion for the 60 per cent equity stake, the cost of warrants for stock and management incentives will push the price to US$2.3 billion.

"This is certainly on the high side of what we previously expected," said Mr David Dai, an analyst at Sanford C. Bernstein & Co in Hong Kong.

"It is a high price to pay for the strategy to shift from hardware to content."

In its mid-year plan, Sony predicted profit growth across most divisions over the next three years, but provided a mostly conservative outlook that weighed on its share price.

However, music publishing has long offered owners a steady source of cash, in contrast to the more cyclical recorded music business.

The latter is dependent on hits and retail sales and has historically gone up and down, depending on the success of new releases in a given quarter.

Growing paid streaming services from Spotify and Apple have boosted music-industry sales for three years in a row and enticed investors to splurge on catalogues.

Labels own the recordings of the songs, while publishers own the songs as originally written.

On Tuesday, Mr Yoshida also unveiled a three-year plan that embraces Sony's growing reliance on income from gaming subscriptions and entertainment.

He aims to pursue the direction that his predecessor, Mr Kazuo Hirai, had sought, to revitalise one of Japan's well-known firms.

"We are a technology firm, but the technology means not only electronics, but also entertainment and content creation" in today's world, Mr Yoshida said.

Sony will continue to strengthen its content services - as shown by yesterday's deal - and also invest heavily in cutting-edge technologies, including image sensors.

Last month, the company reported record annual profits of US$4.5 billion, a roaring recovery supported by better sales across the board and helped by box-office blockbusters such as its Jumanji reboot last year.

Those figures were seen as a fitting send-off for Mr Hirai, who recently stepped down as chief executive after spending the past six years pulling the firm out of deep financial troubles.

He led an aggressive restructuring drive, cutting thousands of jobs while selling business units and assets.


A version of this article appeared in the print edition of The Straits Times on May 23, 2018, with the headline 'Sony takes controlling stake in EMI'. Print Edition | Subscribe