TIVP039: Universal Music Group (UMG): Owning The World’s Music Catalog w/ Shawn O’Malley & Daniel Mahncke
The Intrinsic Value Podcast - The Investor’s Podcast Network
What Is UMG's Fair Value and Portfolio Fit?
Shawn presents a €24.50 fair value, 7% discount, and rationale for a ~5% portfolio starter position given return targets.
Shawn O’Malley and Daniel Mahncke break down Universal Music Group (ticker: UMG), a company that controls a royalty stream on roughly ⅓ of the world’s music in an oligopolistic industry also dominated by Sony and Warner Music Group. Universal has incredibly high-quality earnings, with a very stable business and excess returns on capital — a recipe that is very appealing to investors at the right price.
In this episode, you’ll learn about the economics of the music industry, how Universal creates value for artists, what the company is doing in response to AI, the mutually dependent relationship between labels and music streaming platforms, and whether Universal Music Group’s stock is attractively priced, plus so much more!
IN THIS EPISODE, YOU’LL LEARN:
00:00 - Intro
05:00 - Why royalties from the music industry are so stable
07:57 - How Universal Music Group makes money and supports artists
11:12 - How Universal operates as an oligopoly alongside Sony and Warner Music Group
20:24 - The economics of digital streaming
43:48 - Why Universal’s leading market share position reinforces its advantages
01:04:48 - About UMG’s unique business model as a serial acquirer of music catalogs
01:10:35 - How to think about modeling UMG’s intrinsic value
01:21:27 - Whether Shawn and Daniel add UMG to their Intrinsic Value Portfolio
*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.
BOOKS AND RESOURCES
- Get smarter about valuing businesses in just a few minutes each week through our newsletter, The Intrinsic Value Newsletter.
- Sign Up for The Intrinsic Value Community.
- Shawn’s 2024 Millennial Investing episode on Universal Music Group.
- Shawn’s 2024 Millennial Investing episode on Spotify.
- Check out the Music Royalties 101 article.
- Bill Ackman’s presentation on Universal Music Group.
- Dive into Shawn’s past podcast on Disney for more on the power of beloved IP.
- Explore our previous Intrinsic Value breakdowns: Paypal, Uber, Nike, Reddit, Amazon, Airbnb, TSMC, Alphabet, Ulta, LVMH, and Madison Square Garden Sports.
- Related books mentioned in the podcast.
- Ad-free episodes on our Premium Feed.
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