LA Times: Apple In Talks To Buy Universal Music For Up To US$6 Billion

by , 1:15 PM EDT, April 11th, 2003

In a fascinating development, the LA Times is reporting that Apple is in talks to buy Universal Music from floundering French giant Vivendi International for between US$5 billion and US$6 billion. The LA Times is the same publication that broke the story that Apple was working on a music sharing network for Mac users that had already been signed off on by 4 of the Big 5 music labels, including Universal Music. Now the Times is reporting that Vivendi execs were so enchanted by Apple CEO Steve Jobs' vision for the future, that they asked him to buy a minority stake in Universal. That, in turn, has led to talks of Apple buying the division outright. From the LA Times:

The discussions, a closely held secret for several months, could founder over unresolved issues. Apple hasn't made a formal bid but may offer $5 billion to $6 billion for the music company before Vivendi's April 29 board meeting, according to the sources.

[...]

The Cupertino, Calif.-based computer maker's surprise play for Universal Music could alter the dynamics of the bidding for Vivendi's entertainment assets. The French giant, in a move to reduce debt, seeks to raise $7 billion this year by selling assets that probably would include some or all of its Universal film, television, theme park and music units.

Investor Marvin Davis has offered about $13 billion for 65% of the entertainment assets and has been the only known bidder to express serious interest in the music company. A separate sale of the music operation would appear to work in favor of Liberty Media Corp. and others that are focused on the company's other entertainment properties.

Jobs' pursuit of Universal comes at a time when Apple, with less than 3% of the desktop computing market, has been struggling to find its next wave of growth and the music industry has been buckling beneath the pressure of online piracy and falling sales.

Defying conventional wisdom, Jobs apparently is betting that music is finally on the verge of becoming a profitable presence on the Internet. Apple has been quietly testing a service that some music business insiders believe could pave the way for widespread online distribution of songs.

There is a lot more information in the full article at the LA Times, which we recommend as a very good read. Note that the LA Times requires a free registration.

The Mac Observer Spin:

Curiouser and curiouser. First of all, we think it is most likely that the LA Times is spot on with this story. That out of the way, this could well be what is holding up Apple's supposed music sharing service.

The Times' article suggests that Apple buying Universal Music would reshape the music industry. Our thought is that it could reshape the technology industry, as Apple would overnight become a content provider. More importantly, that content would be generating more profit than does Apple's own hardware and software business.

What would that mean for the company? For Mac users? For Apple's competitors? Would Dell then make a play for another label? That's doubtful, but Microsoft certainly could. Microsoft has been investing directly and indirectly in content for many years. At the same time, Big Redmond has been doing its best to get into bed with content providers by providing Digital Rights Management (DRM) controls that restrict how and where content is used.

As Microsoft seeks to work with content providers in the movie, music, and publishing fields to make them happy at the user's expense, Apple would be a content provider itself, and one that has gone on record as saying users should be free to do what they want with their legally owned music. That would put the two companies on markedly different courses (yet again), and one that could possibly force consumers to wake up from their Windows-flavored Kool-Aid delirium.

Then again, Apple could well change its tune on consumer freedom if it becomes a content provider. With Apple, it is impossible to guess exactly which direction the company will be going.

LA Times Article