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April 27 - May 4,2003 |
Apple as future of digital music?
Steve Jobs in talks to buy Vivendi Universal record company
By Alessandro Cancian
Originally Published: 2003-04-20
An article in The Los Angeles Times was enough to prompt a downfall of Apple stocks last week. The newspaper reported that the Cupertino company was in talks to buy the music division of Vivendi Universal for as much as $6 billion.
Quoting well-informed sources, The Los Angeles Times - following up on a story about Apple preparing to release a for-fee music service - claimed that Steve Jobs would be prepared to offer $5-6 billion for the purchase of Universal Music, an adequate figure but much less than what Vivendi had spent.
A record label acquisition would radically transform Apple from a computer maker into a company with hardware and music operations of similar sizes. It is still unclear where Apple would find the money, since its liquidity resources amount to some $4.5 billion and an exchange of stock is out of the question (Vivendi needs to sell a few family jewels in order to survive). According to the newspaper, Vivendi took the initiative to contact Apple as far back as last December, soon after a demo of the soon-to-be-launched system from Jobs' company was offered to the major record labels.
Universal Music, with a 23 percent share of the market, is one of the foremost, if not the biggest, record companies in the world. The Universal trademark covers some true icons of yesterday and today such as Abba, Chuck Berry, James Brown, Eric Clapton, Patsy Cline, Jimi Hendrix, Bob Marley, Nirvana, The Who, Limp Bizkit, Beck, Blink-182, Bowie, No Doubt, Sheryl Crow, Elton John, S Club 7, U2, Sting, Mariah Carrey, Marilyn Manson, Diana Ross, Pavarotti, and Andrea Bocelli.
Representatives of both Apple and Universal Music Group declined to comment but the fear from Apple investors on this move sent the company stock down about 8 percent.
Some analysts questioned whether it makes sense for Apple to purchase a record label at a time when media and the Net are transforming key label functions such as talent searches, promotions and distribution.
Should the news item prove correct, this would be evidence of Apple's intentions to pursue aggressively the market of digital entertainment. The scenarios that would be created with Apple in control of one of the major record labels are unexplored, but the choices of the last few months come to mind, recalling the launch and strengthening of the strategies on the iPod and musical audio software.
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