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Andre Jorge's avatar

Marvelous article, thank you! Coming from Eagle Point Cap.

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n0obInvestor's avatar

Hi Sleepwell, a thousand thanks for writing this. Someone posted a link to this under the PSTH subreddit and I'm so glad I caught it. This is very informative. I have a couple questions I would love to get your thoughts on, if you don't mind me asking.

Very broadly, what are your thoughts on Universal Music Group as an investment?

I was originally sold on the strong IP that UMG has, and more importantly their "know-how" of making a star. While it continuously gets easier to publish music online, the fact that this is a benefit to everyone results in it not being a benefit. In fact, that led me to the belief that UMG's ability to "make a star" by knowing how to promote/market is what upholds their importance and future success - their "moat". But with the advent of new technologies, such as Spotify, I am starting to wonder how defendable this "moat" really is. Thanks to technology, middlemen in any industry are increasingly being cut out, much like you alluded to, and I don't see how music is an exception. The Discovery feature that you mentioned even seems to be the beginning of exactly this. As Spotify is the platform that the users interact with, don't they have the power to one day choose which songs to promote? Thereby replacing what I had originally thought to be UMG's greatest asset - their knowledge of effective promotion?

From the other posts I've made asking for other's opinion on this I've gotten some counter arguments that UMG does a lot more than that and therefore will always be relevant. I don't completely disagree with that, but as an investment, I have to consider their future relative to today at the price I'm paying for today. In addition, I don't see the other services they provide as very defendable. Financing, for example, can very easily be Spotify's next path at vertically integrating itself within the industry.

I apologize for the length post, but would really like to hear your thoughts. Thanks!

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