MBW Reacts is a sequence of analytical commentaries from Music Enterprise Worldwide written in response to main current leisure occasions or information tales.
The sound of alternative for the report enterprise throughout the Center East and North Africa (MENA) is getting louder.
The newest proof: Common Music Group‘s announcement yesterday (August 30) that it’s acquired Chabaka Music, an organization based mostly within the United Arab Emirates and based in 2013 by brothers Ala’a and Tarek Makki.
Chabaka focuses on digital distribution, advertising and marketing, publishing, and artist providers throughout the MENA area. It would now develop into a part of UMG’s Virgin Music Group.
The deal marks UMG’s newest strategic positioning within the MENA recorded music market, following its launch in 2021 of Common Arabic Music (UAM) in tandem with Republic Information and music biz entrepreneur, Wassim ‘SAL’ Slaiby.
The business potential of MENA for music rightsholders is apparent to see.
In accordance with stats printed by IFPI, the Center East and North Africa was the world’s fastest-growing market in 2021, and its third-fastest-growing in 2022.
Final yr, MENA’s recorded music market grew 23.8% YoY, and represented the very best share for streaming of any area globally, at 95.5%.
However why has Common swooped for Chabaka now – and the way ferocious can we anticipate the music biz’s business exercise within the MENA area to develop into within the months and years forward of us?
Listed here are three key bits of context you should know…
(1): Common’s Virgin Music Group plan
In September 2022, Common Music Group launched a brand new international division known as Virgin Music Group (VMG) that consolidated UMG’s current artist providers companies.
These companies embrace (i) Ingrooves, the music distribution and advertising and marketing agency acquired by UMG in 2019, and (ii) Virgin Music Label and Artist Providers, which was launched by Common in 2021.
Each grew to become subsidiaries of the brand new international WMG division, alongside mtheory Artist Partnerships, which UMG ingested as a part of the ‘acqui-hire’ of mtheory’s founders (JT Myers and Nat Pastor) as Co-CEOs of VMG.
“As we proceed to develop our footprint in rising territories everywhere in the world, Chabaka represents an essential artistic hub in one of many world’s most promising music markets.”
JT Myers, Virgin Music Group
Many within the trade noticed the launch of VMG as a dedication from Common to make an aggressive and actually international funding into impartial artist and label providers for the primary time – with VMG going toe-to-toe with Sony Music‘s The Orchard.
The acquisition of Chabaka Music suits with this image.
The Orchard’s unprecedented success in Latin America (for instance, through its partnership with Unhealthy Bunny and Noah Assad’s Rimas Leisure) has left a query mark over the place on this planet VMG would possibly discover its personal future alternatives for speedy development.
VMG’s ingestion of Chabaka means that the Center East is most actually on Myers and Pastor’s radar as a market with vital potential.
JT Myers mentioned as a lot in his official quote within the announcement of UMG/VMG’s Chabaka acquisition: “As we proceed to develop our footprint in rising territories everywhere in the world, Chabaka represents an essential artistic hub in one of many world’s most promising music markets.”
(2): MENA is already a hotspot of worldwide music enterprise exercise
Common and Virgin Music Group may need sky-high ambitions in MENA, however we shouldn’t neglect that the previous few years have already seen rampant M&A exercise within the area from numerous music firms.
Warner Music Group, for instance, has been investing closely within the Center East for a while, buying a minority stake in Saudi Arabia’s Rotana Music in February 2021 and shopping for Qanawat in March final yr.
“we’ve additional formidable development plans in MENA, which Ahmed [Nureni] will assist us ship.”
Simon Robson, Warner Music Group
Since WMG’s funding in Rotana Music, the corporate – claimed to be the most important report label within the Center East – has signed offers with Spotify and TikTok.
Warner Music Group additionally appointed a brand new boss in MENA in October final yr, bringing over Qanawat’s GM, Ahmed Nureni, as the brand new Normal Supervisor of Warner Music Center East.
On the time, Simon Robson, WMG’s President of Worldwide for Recorded Music, mentioned, tellingly: “[This] is a precedence marketplace for us, highlighted by our accelerated exercise in MENA within the final 18 months, however we’ve additional formidable development plans, which Ahmed will assist us ship.”
In July, Sony Music additionally appointed new administration within the Center East, bringing in Rami Mohsen, Spotify‘s former Head of Music Center East, North Africa & South Asia, as the brand new MD for Sony Music Center East.
Commenting on that appointment, Shridhar Subramaniam, Sony Music’s President of Company Technique and Market Growth Asia and Center East, mentioned: “Rami is well-positioned to take Sony Music Center East to new heights”.
“Rami is well-positioned to take Sony Music Center East to new heights.”
Shridhar Subramaniam, Sony Music, talking in July, on the hiring of Rami Mosen as Sony‘s MD for the Center East
Elsewhere, New York-based music rights firm Reservoir is making vital inroads within the Center Jap market.
On an earnings name earlier this yr, Reservoir CEO Golnar Khosrowshahi expressed her firm’s formidable aim of turning into “the most important holder of Arabic music copyrights” on this planet.
Khosrowshahi‘s feedback arrived two years after Reservoir fashioned a three way partnership with Abu Dhabi-headquartered music writer and music rights consultancy PopArabia.
Since then, Reservoir x PopArabia have engaged in a joint M&A marketing campaign that has included the acquisition of Egyptian label 100COPIES, in addition to the acquisition of Lebanese label and music writer Voice of Beirut.
Most just lately, Reservoir struck a deal to accumulate a catalog from Cairo-headquartered content material manufacturing and distribution firm RE Media, whereas buying the grasp and recording rights for the catalog of Egyptian rap duo El Sawareekh.
“With our community and skill to buy content material at enticing multiples, this area presents vital alternative as we work to develop into the most important holder of Arabic music copyrights.”
Golnar Khosrowshahi, Reservoir, talking in June
And it’s not simply publicly-traded Western music firms investing closely in MENA proper now, both.
In August final yr, South Korea-headquartered Ok-Pop specialist SM Leisure expanded in Saudi Arabia, signing a memorandum of understanding (MOU) with the Ministry of Funding Saudi Arabia (MISA) to enter the native market and promote joint tasks.
And don’t neglect about gamma.
The billion-dollar-backed firm, launched by Larry Jackson in March, just lately expanded its personal “dedication to Africa and the Center East” with the addition of two senior music trade executives in Dubai and Lagos, following a high-profile launch within the two markets earlier this yr.
As revealed by MBW, Jackson’s enlargement of its operations into Africa and the Center East is being led by music trade veteran (and former UMG exec) Sipho Dlamini, who joined gamma as President, Africa & Center East earlier this yr, alongside Naomi Campbell (named as gamma’s Particular Advisor, Africa & Center East).
(3): The long run potential for MENA – and Common’s international M&A sport plan
As talked about, the MENA area’s recorded music market is already rising at a big clip. In truth, in accordance with IFPI’s newest World Music Report, MENA’s annual commerce subscription streaming revenues almost doubled between 2020 and 2022 – getting near USD $50 million final yr.
With a lot funding and exercise in MENA from distinguished gamers from the worldwide music enterprise, the area is undoubtedly poised for much more speedy development sooner or later.
Talking on Common Music Group’s Q2 earnings name, forward of the announcement of the Chabaka acquisition, UMG Chairman and CEO Sir Lucian Grainge advised analysts about Common’s imaginative and prescient for “increasing [our] presence and accelerating [UMG’s] development in these music markets around the globe that we see as having nice potential”.
“The transaction will immediately make UMG the second-largest participant in one of many world’s fastest-growing music markets.”
Sir Lucian Grainge on UMG’s majority-acquisition of Thailand’s RS Group, as introduced in July
Grainge added: “We’re approaching this aim in three other ways. Firstly by signing and creating native artists, simply as we do in additional developed music markets.
“Second by partnering with native labels to supply them with international promotion, distribution and a full suite of artist providers. And thirdly by way of M&A. That’s the acquisition of native labels, catalogs, and artist providers companies.”
Grainge pointed to UMG’s current deal to accumulate a majority stake in Thailand’s RS Group in June, noting that “the transaction will immediately make UMG the second-largest participant in one of many world’s fastest-growing music markets and supply UMG with the dimensions to make an excellent better affect in Thailand and outdoors of it as properly”.
Trying to different markets, Grainge added: “We’re consistently looking out for equally enticing M&A alternatives in high-growth potential markets. Each time and wherever such a chance makes monetary and strategic sense, we are going to pursue it.”
UMG simply demonstrated its ambition in a single such high-growth market: MENA.
The race is on.
Music Enterprise Worldwide