| ETA & Associates

Mavin Records x UMG: The M&A Landscape for record labels and music services companies in Africa

March 22, 2024

Summary

The announcement of Universal Music Group (‘UMG’) majority investment in Afrobeats pioneer label Mavin Records (‘Mavins’) is the latest in the recent string of deals carried out by the ‘Big Three’ record labels – Warner Music Group, Sony Music and UMG – in their attempt to capture more of the growing African market.
In keeping with UMG’s typical acquisition approach, creative control and strategic autonomy will be left in the hands of Mavins’ expert CEO Don Jazzy and COO Tega Oghenejobo, allowing UMG the benefit of their local market expertise.
The deal is structured in a way that will secure a pipeline of new talent emerging under the UMG family’s roster, following in the footsteps of current acts such as Ayra Starr, Rema, LadiPoe, and Johnny Drille.
UMG’s rivals are not far behind in their attempts to attract existing and emerging talent – each member of the Big Three globally dominant record labels is constructing innovative solutions to increase their presence in the continent, such as Warner Group’s partnership with Kenya’s WCB-Wasafi label and Sony’s numerous partnerships with key service providers in media and distribution companies. A Match Made in Heaven: Mavin Records’ Collaboration with UMG While the specific financial details remain undisclosed, UMG’s investment in Mavins signifies their strong confidence in the ongoing growth of the African music market. The advisory role of DLA Piper in facilitating this deal is notable, particularly considering their involvement in brokering Kupanda Management Holdings’ significant multimillion-dollar equity investment in Mavins in 2019. As one of the first notable venture-backed investments into a Nigerian record label, this was a landmark event. The infusion of investment has empowered the company to secure exceptional talents along the way such as Ayra Starr, Rema, LadiPoe, Johnny Drille, Boy Spyce, Magixx, and others, positioning themselves as contenders on the global stage and allowing them to solidify partnerships with key players such as Virgin Music, Platoon, and Vydia. Now, with the partnership with UMG, they are poised to extend their expansion even further. From UMG’s perspective, Mavins presents an appealing opportunity for several reasons. With a roster boasting some of the continent’s top talents, the label’s leadership, spearheaded by CEO Don Jazzy, demonstrates expertise and possesses a strong track record within the industry. Don Jazzy’s extensive experience as a producer and his access to local networks add significant value to UMG’s ambition to bolster their presence in Africa.

The collaboration between Mavins and UMG on notable projects like Rema and Selena Gomez’s ‘Calm Down’, distributed by Virgin Music and later licensed to Interscope Records, underscores the synergies between the two entities. UMG’s CEO and Chairman recognises Mavins as “ideal partners” for mutual growth, granting Mavins considerable autonomy in ongoing management.

The deal is structured to support key initiatives within Mavins, including both the “Mavin’s Artist Academy”, which focuses on training new talent in music and performance skills while expanding the label’s roster, and an “Executive Leadership Programme”. Although they aim to enhance Mavins’ full-service offering through their global network, UMG’s involvement is not solely beneficial to Mavins. The strategic approach to the deal ensures that UMG continues to maintain access to a steady stream of promising talent poised to join the roster in the future, with the assurance that these artistes will receive expert management under the guidance of their trusted partners and peers.

The collaboration is also expected to accelerate Mavins’ strategic development, create opportunities for their talent to gain international recognition, and extend the reach of their artiste roster. Overall, the partnership signifies a mutually beneficial relationship aimed at amplifying the impact of African music on a global scale.

UMG’s African Expansion to Date

The Mavins x UMG deal only signifies the latest step of progression in UMG’s continuous expansion efforts. The African continent has emerged as an increasingly attractive investment destination for the ‘Big Three’ major labels and for other truly global and ambitious entities, greatly influencing the appeal of the UMG x Mavin Records deal.

UMG has long been a pioneer in this market, establishing operations in Africa over 30 years ago, initially from its base in Johannesburg. Since then, it has actively expanded into new African markets, establishing offices in locations in Nigeria, Senegal, Cameroon, Kenya, and Morocco at the time of writing, amongst others, and even opening a second headquarters in Abidjan.
UMG’s acquisition strategies have been diverse, encompassing individual artiste deals alongside strategic partnerships or acquisitions with independent labels pivotal in their respective local markets. Notable examples include South Africa’s Family Tree Records and Kenya’s AI Records.
In recent years, UMG, alongside major label competitors Warner Music Group and Sony Music, have intensified their operations and investment in Africa. This strategy has involved signing top African artistes, recruiting personnel for local operations, and entering strategic agreements with local labels and music streaming platforms. These efforts strategically position UMG to capitalise on Africa’s burgeoning music revenue. Key Moves in their Recent Strategic Expansion

● 2017: Universal Music Nigeria is launched, establishing UMG’s base in one of Africa’s biggest music exporting markets.
● 2018: UMG purchases a major stake in Kenya’s AI records, allowing it to digitise and sell East African music internationally. Universal Music Africa is also inaugurated, emerging as UMG’s largest African division, encompassing 25 French, Spanish, and Portuguese-speaking countries.

● 2020: UMG unveils Def Jam Africa, a subsidiary fully owned and operated by the parent company. With operations in South Africa, Nigeria, Côte d’Ivoire, Senegal, and Cameroon, the label primarily operates through partnerships, providing artistes access to publishing and distribution networks while allowing them to retain other label affiliations for additional services like production.
● 2021: The introduction of rap label 92i Africa in collaboration with Senegalese-French artiste Booba, securing exclusive rights to the artiste’s entire music catalogue.

● 2021: Virgin Music Group, a subsidiary of UMG acquires Electromode, a South African independent distributor.
● 2022: Responding to the surge in streaming during the pandemic, UMG extends licensing agreements with major African streaming platforms Boomplay, Sewasew and Mdundo, aiding these services in their efforts to obtain rights to indigenous music content.

● 2022: In 2022, Def Jam Recordings, the now multinational record label and subsidiary of UMG, initiated a joint venture partnership with Native Records, a UK-Nigerian record label established in the same year by the founders of The NATIVE – magazine, events company and media group. The partnership is focused on identifying and nurturing African talent both within the continent and abroad, aiming to contribute to the growth of the Afrobeats genre and African music in general in Western markets. This collaboration underscores the expanding influence of African creativity in the current era of globalisation.

2022: Virgin Music Group launches its “flagship” in Africa, Virgin Music Group Africa.
2023: Virgin Music Group launches Virgin Music Nigeria in Lagos establishing partnerships including Afrobeats label Dvpper, and the release of a single involving artistes Darkoo and Ayra Starr. Notable moves from competitors Warner Warner Music established its South African subsidiary in 2013 by acquiring Gallo Records. They also have a significant partnership with Mavins, which has aided in the promotion of artistes such as Rema and Ruger. Warner’s approach in Africa emphasises agility and collaboration, supporting local African players and leveraging their expertise to build successful businesses together, whilst also supporting the careers of Western-based artistes of African descent. There have also been a number of other notable deals:

Chocolate City:
Following Warner’s 2019 partnership with Chocolate City, Nigeria’s most influential independent label, a deal was struck. In exchange for licensing rights to Chocolate City’s entire catalogue, the label gained access to the extensive distribution capabilities of a major player. Echoing UMG’s collaboration with Mavins, Warner heavily invested in talent signings and development to broaden their influence into the future.
Africori
In 2020, Warner Music Group expanded its presence across several new markets by making a significant investment in the pioneering ‘Africori’, one of Sub-Saharan Africa’s largest music distributor. Similar to UMG’s recent approach, Warner recognised Africori as a trailblazer in the market. Rather than adopting a controlling acquisition strategy, Warner opted for a less invasive method to retain Africori’s talent pipeline and the market expertise of its leadership – an approach that has benefitted all parties since. In our view, the success of the approach in the Warner-Africori deal may have played a part in UMG’s decision making when considering its investment in Mavins.

3. Ghana’s Small World Records:
In 2023, it was announced that Warner was partnering with Small World Records, an initiative led by Ghanaian entrepreneur, SmallGod. This deal once again has leveraged indigenous management to capitalise on mutual connections, expertise, promotion, and “artists and repertoire” services – better known as ‘A&R’.

Sony Music

Sony Music has adopted a multifaceted approach beyond traditional artiste signings, strategically positioning itself to wield influence across various sectors of the music industry. Despite this strategy, they have not faltered in curating an impressive roster boasting some of the continent’s most prominent names. Notably, artistes such as Wizkid, Tems, and Davido are signed to RCA Records, with South African artist Tyla signed to Epic Records; all falling under Sony’s umbrella and contributing to the global surge in the popularity of African music.

In addition to securing deals with streaming services like Boomplay and Audiomack – mirroring their competitors’ strategies – Sony has formed an ongoing groundbreaking partnership with MTN Global, Africa’s largest telecommunications provider. This collaboration grants MTN customers unprecedented access to Sony’s extensive music catalogue for use in ringtones.

Attuned to Africa’s cultural pulse, in 2022 Sony Music Africa also established its Culture Management Group, through which it has partnered with the likes of the ‘AfroFuture’ festival and Audiomack. This acquisition has allowed Sony to expand its flagship ‘Rising Star Challenge’ competition, tailored for unsigned and emerging artistes in Africa. Winners of the competition are offered distribution deals, further solidifying Sony’s commitment to nurturing talent and expanding its reach across the continent.

Future Developments in the Market

The distinct characteristics of the African music market have led major labels to seek partnerships not only with artistes but with top African entrepreneurs in the industry. As they strive to solidify their presence, the networks and local expertise of current label directors who have achieved success are highly appealing for partnership opportunities, fostering more collaborations similar to the models demonstrated by UMG’s investment in Mavins and Warner’s Africori deal.

However, as these partnerships evolve and pipelines are established, the dynamics of the market are likely to change. Investors may adopt a more aggressive approach to capturing a larger share of the market, leveraging their confidence in managing talent and navigating unique market landscapes independently.

Despite potential shifts towards more stringent contract terms, the Big Three labels appear to share a common goal of heavily investing in developing and nurturing new talent. These efforts are expected to intensify, and the desire to secure Africa’s talent may lead to stricter deal structures compared to previous agreements. Nevertheless, even within a potentially more restrictive contractual environment, these labels are likely to remain attractive to artistes due to their superior production quality, frequency of releases, and extensive publishing and licensing connections. This will no doubt continue to offer emerging artistes valuable opportunities for growth and exposure, should the individual deal make sense for them.

Recommendations for the Industry

1) The regulatory environment
Music piracy remains prevalent, and while the freemium model aims to transition pirates into legal users, legal systems are not adequately equipped to facilitate this shift. Established labels stand to benefit from their ongoing investments in Africa. Obi Asika’s recent appointment as Director-General of Nigeria’s National Council for Arts and Culture (NCAC) further supports this landscape. As a prominent figure in Nigeria’s music industry and the founder-CEO of Storm 360, Asika brings valuable insights and experience to the political arena. With his deep understanding of industry challenges, Asika is well-positioned to influence policy decisions, potentially transforming regulatory frameworks in Nigeria and beyond.
2) Profitability
Sync and licensing deals, catalogue acquisitions, and brand endorsements in Africa lag behind more developed markets in terms of profitability and prevalence. Monetising TikTok plays faces challenges, as debates continue to question its classification as a streaming platform and in light of the withdrawal of UMG music from the TikTok platform. Additionally, discontent remains regarding YouTube remuneration, particularly due to lower revenues for streams in Africa. By promoting artistes internationally, labels can also elevate their own brand presence.
3) Fairness and fears of exploitation
Various artistes and independent labels maintain a sceptical stance regarding the potential risk of exploitation posed by major players in the industry. Specifically, ‘360’ deals, which encompass all facets of an artiste’s career – including release strategies, publishing, rights management, live performances, merchandise, partnerships, and endorsements – are under scrutiny. Artistes often find themselves in unfavourable positions as a result of these agreements, leading to the possibility of actual or potential exploitation and discontent within the industry.

~ Oyin Olatuyi, Joy Kibaki, Aji Ayorinde