In a nearly three-hour presentation Wednesday morning, Pershing Square Capital founder Bill Ackman made his love for the music business — and the reasons for setting his sights on Universal Music Group — clear, saying, “I can’t think of an asset I’m more confident in being consumed over time. … You need food and water to live, but music comes next.”
Given his choice between all those basic necessities, Ackman made his preference clear, adding that “you can’t license IP from food and water.”
Ackman’s comments came in a webcast for Pershing Square’s shareholders in which he explained the reasons for spending $4 billion to obtain 10% of UMG, the world’s largest music company, making the investment sound like a relative bargain in the process.
Other Pershing Square executives participating in the webcast said that they would have preferred to buy as much as half the company — and, perhaps more realistically, made an initial ask for a 17.5% share — but Vivendi, UMG’s parent company, cited tax reasons for only being able to sell 10%.
“The best analogy we can make here is what’s happened to software, and some of most highly valued companies in the world are software companies,” Ackman said in the meeting, according to the Wall Street Journal. “I’m confident in 25 years, 50 years, 100 years, Universal will be very high on the list of great companies.”
Ackman noted that UMG grew 5% during the pandemic, which he described as “about the worst thing that can happen in music,” proving, in his reasoning, that music is recession-proof. He cited UMG’s 31% share of worldwide consumption and relative lack of debt as additional attractions for ownership.
UMG’s CEO Lucian Grainge was showered with praise during the presentation, with Ackman comparing him to the most “iconic” business leaders in history, including Walt Disney, Steve Jobs and Reed Hastings.
In a deal that closed Sunday after seven months of negotiations, Pershing Square ultimately picked up 184.8 million shares, ahead of Universal going public in September on the Euronext Amsterdam stock exchange.
Pershing Square made a prediction that 67% of smartphone users will subscribe to paid streaming services by 2030, roughly doubling the percentage of subscribers — 34% — at the beginning of the decade. Citing Universal’s dominance, with no music consumption platform being able to survive without making a deal with the company, Ackman said that, in essence, “if you own UMG, you own a royalty on people listening to music.”
Ackman reiterated that music in general and UMG in particular is personal to him, citing a Sting record as the first he ever bought, and how his songwriter grandfather, Herman Ackman, wrote hit songs in the 1920s whose master recordings are now owned by Universal.