It is always difficult to forecast the outcome of M&A rumors, other than whether or not they have some underlying logic. Last week, it was reported China Mobile is looking at buying EMI through
The driver behind this alleged deal is most likely the domestic Chinese music market, which offers huge unrealized potential. I say “potential,” as few of
What to do? A plucky effort was made last year by Motorola to beat the mainland music pirates by going back down the value chain and becoming a record label, signing up big-name local artists such as Jay Chow. Tracks were released exclusively on mobile with DRM, and the service seemed to go pretty well.
Motorola reported China Mobile were happy to take a back seat for a cut on the transaction fee, as well as the data download charges. Motorola got brand ambassadors and some new revenues selling tracks at Rmb2 a time….although maybe selling phones should have been priority, looking at its last handset sales.
But it all does sound a bit convoluted. No doubt Motorola’s music foray was also a useful learning exercise for China Mobile. Rather than try and become a record label itself, why not use its deep pockets to buy one? Also, then if
Discreetly using a private-equity firm would also appear a smart move. It is likely to stop China Mobile overpaying, pick up some of the stake itself and deflect criticism of menacing sovereign asset funds. The operator is, after all, still 75% owned by the Chinese government and in this company even private-equity is likely to win a popularity contest.