In what could be the IT/Entertainment story of the year, Apple Computer is reportedly in talks to acquire the world's largest record company Universal Music in a $6 billion deal, reports the LA Times.
Citing "sources", the LA Times report explains that Vivendi Universal's Universal Music division reaps about $6 billion annually in sales. Its roster includes well-known Mac user Bryan Adams and Irish-born pop superstars U2.
The artist's roster extends across multiple genres. It includes Limp Bizkit, Beck, Blink-182, No Doubt, Sheryl Crow, Elton John, and S Club 7.
Universal Music's back catalogue includes Abba, Chuck Berry, James Brown, Eric Clapton, Patsy Cline, Jimi Hendrix, Bob Marley, Nirvana and The Who.
Universal Music also owns several labels, including: MCA, Polygram, Motown, Geffen-DGC, Interscope, Island, Def Jam, Polydor, Philips, and the Verve Music Group.
Apple CEO Steve Jobs has reportedly been in discussion with Vivendi for "several months", the report claims. It also says accountants from Morgan Stanley are looking at Universal Music's accounts on Apple's behalf. It also states that if an offer is made, it will be before Vivendi's April 29 board meeting.
According to the report, the French media giant Vivendi is trying to reduce debt - seeking to raise $7 billion this year by selling assets that would include all or some of its Universal film, television, theme-park and music units.
"There has been a lot of speculation surrounding Vivendi, and all the major music companies. Vivendi is in huge debt," a music business insider told Macworld.
"A possible deal to acquire Vivendi assets is in play," the source confirmed. The source also confirmed that analysts have been downgrading the values of the Big Five music companies "every month for months".
The move comes as the music business struggles to create an acceptable business model to offer honest consumers a paid service that competes with illegal music download services.
It also comes as Apple applies the finishing touches to its own forthcoming digital music download system for Mac users. Apple has signed up four of the big five music labels to contribute tracks to this service, the report claims. Reportedly, the service makes downloading and purchasing music as simple as buying a book from Amazon.
"Jobs apparently is betting that music is finally on the verge of becoming a profitable presence on the Internet," says the LA Times.
Apple has annual sales of about $5.74 billion with $4.4 billion in cash, cash equivalents, and short-term investments, according to its December 28 annual report.
Vivendi Universal has a market capital of $15.132 billion. Apple's market capital stands at $5.18 billion.
Steve Jobs also has a personal fortune worth an estimated $1.6 billion, according to a September 2002 report from analyst firm Christian and Timbers.
Universal Music, however, is in the doldrums as all the big music makers face declining CD sales; attributing this to music piracy. The company's operating profit fell 23 per cent to $510 million in its last fiscal year, despite its worldwide music business dominance.
Universal is not alone. Yesterday, Billboard reported that the value of global music sales fell 7.2 per cent last year to $32.2 billion, according to the International Federation of the Phonographic Industry (IFPI). Unit sales have fallen 8 per cent since 2001.
IFPI CEO Jay Berman told Billboard: "I sincerely believe we're getting close to a turnaround." He did warn of a potential worse case scenario in which the value of the music business declined a further 5 per cent.
In response, the major labels are currently examining ways in which they can "rewrite the business model," a source said. "Obviously, a strategic team-up with Apple or Microsoft would give a label a competitive advantage," a source confirmed. "The Internet is not going away," they said.
Reporting that negotiations began in December, the LA Times reports: "Impressed by Apple's new digital service and Jobs' vision of music's future, Vivendi initially proposed selling him a minority stake in its record operation, sources said."
In March, the report claims, Jobs hired investment bank Morgan Stanley to conduct due diligence.
The Los Angeles Times also warns: "The discussions could founder over unresolved issues."
Jobs believes online music piracy will become harder to achieve, as such services face aggressive action from government's and music industry forces worldwide, the report claims, "prompting fans to migrate to legitimate sources," it said.
The news breaks as the music business prepares to launch its own Top 40 chart of legitimate music downloads, according to the BBC. "Incorporating digitally distributed music sales makes perfect sense," a music business executive told Macworld.
The report also offers more details about Apple's forthcoming music download service. It was, purportedly, developed by Apple specifically for Mac users and iPods. "Apple is likely to develop a version to run on Windows," says the LA Times.
Neither Apple nor Vivendi have been able to comment.
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