Masayoshi Son is very upright. He stated: SoftBank does not want cash, so SoftBank can take full ownership of the US$100 million in equity.
Therefore, to shareholders other than SoftBank, the transaction can be regarded as completed as "$2.8 billion in cash."
Zhang Yida holds 26.88% of the shares and can receive US$752.64 million in cash.
Of course, a multi-billion dollar deal cannot be completed that quickly and involves various due diligence and work handovers.
After Zhang Yida handed over the aftermath work to Howard and Huang Xiaofeng, he started the second round of negotiations with the three major record companies.
"Mr. Zhang, after discussion, Universal, Sony and Warner have agreed to invest in the music streaming platform Resso.
Each of the three parties invested US$100 million, and also authorized Resso to use the music copyrights outside mainland China for three years. The price of this part was US$50 million.
This is equivalent to us investing US$150 million in cash and resources per company, accounting for 15% of the shares;
Zhonghe Group invested US$550 million in cash, accounting for 55% of the shares.”
Universal Music CEO Grange said while observing Zhang Yida's expression.
Seeing that Zhang Yida had no special reaction and was calm, he continued: "Let's talk about the Musical.ly authorization, US$300 million of Zhonghe Group's equity, and three years of global music copyright authorization except mainland China.
This is the biggest compromise we have ever made. If we make any more concessions, we will not be able to explain to our shareholders."
Zhang Yida laughed and said: "Resso is a streaming media that has not officially launched a product. Is the music copyright fee of US$17 million a year too high?"
"It's not high at all. We have great confidence in Mr. Zhang. If you give him three years, Resso will definitely become one of the top five music streaming platforms in the world."
Sony Chairman Kazuo Hirai smiled, "Penguin Music Group currently has 15 million paying users, and its payment scale is among the top five in the world. It pays more than 100 million U.S. dollars in copyright fees to the three of us every year.
If you really think about it, the conditions offered to Resso by our three major labels are a bit of a disadvantage.
But it doesn’t matter, we believe Mr. Zhang can definitely help us earn back the loss of copyright fees through equity appreciation.”
Compared with Penguin, the copyright licensing fee is indeed not high, and is even very cheap.
The main thing depends on whether Resso can develop. If it can develop and have 10 to 20 million paying users, the copyright licensing fee will not be a loss.
Of course, the three major record labels are not losing money. Music streaming media with 20 million paying users must be valued at at least four to five billion US dollars.
A 15% stake is worth 6 to 7 billion US dollars.
What's more, the three major records now have another target to collect rent from, so why not do it?
These old men are indeed professional managers who have been working for thirty or forty years. They are indeed cunning and calculating.
Zhang Yida did not argue too much about Resso, and mainly negotiated with the three major labels around Musical.ly's licensing fees.
“The three major record labels alone have to pay US$300 million in copyright fees every year, and when we include other record companies, we have to pay more than US$400 million in music copyright fees every year.
This is unacceptable!”
Zhang Yida paused and said, "Let's do this. You reduce the three-year copyright fee to US$100 million, and Musical.ly will provide free traffic to Resso.
The three gentlemen should take a longer view. Resso is the company that really makes big money.
If we surpass Shengpotian and our valuation exceeds US$20 billion, your 15% stake will also be worth more than US$3 billion.
Music streaming is no less important than long-form video. Think about how much YouTube is valued at: 150 billion U.S. dollars!
If Resso reaches the status of YouTube in the future, how much will your equity be worth?"
Cooper, the CEO of Warner Music, pondered for a while and said: "But Resso will need to raise funds midway, and our equity will be diluted. When Resso is valued at tens of billions or even hundreds of billions, we will only have a few equity points left."
Already."
Zhang Yida shook his head, "Mr. Cooper, you are wrong. Where do the two largest costs of music streaming come from?
It comes from copyright procurement and traffic promotion. There are currently three major records providing Resso with copyright, and this cost is controllable;
As a music short video platform, Musical.ly has hundreds of millions of active users, which can also save a lot of costs for the promotion of Resso.
Resso will not need a steady stream of financing like other Internet companies.
The US$850 million in cash on hand is enough for Resso to achieve balanced revenue."
Now the three of them were finally tempted. Grange asked: "How long can Musical.ly's free promotion last? Can we sign an agreement?"
Zhang Yida smiled and said: "Signing the agreement is not a problem. As for the time, it should be three years!
Three years is enough for Resso to grow up!"
Grange thought seriously, seeming to weigh the pros and cons.
The other two people were also thinking, "Is it worth spending US$600 million to buy three years of free promotion?"
Moreover, they only hold 45% of the shares in this Resso company, and the majority is still owned by Zhonghe Group.
Of course, their price of US$300 million is also very high, and the bottom line is almost between US$100 million and US$150 million.
"Okay, 100 million US dollars is 100 million US dollars, let's sign the agreement!"
With Grange taking the lead to agree, the other two quickly agreed.
Zhang Yida breathed a sigh of relief. He finally dealt with these vampires. It was really not easy.
But everything is worth it. To achieve music streaming, you must tie the three major record companies onto the chariot. These three companies cannot be bypassed no matter what.
When Zhonghe Group becomes stronger, Zhang Yida also wants to invest in the three major records to achieve a mutual shareholding situation.
Zhang Yida's heart moved, and he said again: "100 million US dollars, converted into Zhonghe Group's equity, is only 0.157%, not even two thousandths, it is too little."
Kazuo Hirai nodded, "Indeed, at least 1% of the equity is required. Mr. Zhang, do you still accept investment?"
Zhang Yida smiled and said: "Of course I accept it. Why, Sony is interested in investing in it?"
Kazuo Hirai smiled and said: "Zhonghe Group also has gaming, film and other sectors, and we can definitely strengthen cooperation with Sony in this area."
Zhang Yida smiled and nodded. Sony has a lot of industries, which can be summarized as electronics, games, entertainment, and finance.
This well-established group is very strong, and investing hundreds of millions of dollars in Zhonghe Group is just a drop in the bucket.
Zhang Yida looked at Cooper and Grange again, and both of them waved their hands, expressing no interest.
Zhang Yida was not too surprised by this result.
The Vivendi Group behind Universal was born purely for profit. Game companies have been squeezed out of a lot, and they have little interest in investing in Internet companies.
As far as Universal Music and Universal Pictures are concerned, there are reports of sales from time to time. This is a company that has always been a company that can only get in but not get out.
Warner Music is owned by Russian oil tycoon Leonard, and it parted ways with Time Warner, one of Hollywood's six largest companies, many years ago.
Zhang Yida originally wanted to establish a connection with Time Warner through Warner Music, but after understanding the relationship, he had no choice but to find another way.
Zhang Yida had a separate chat with Hirai Kazuo, who said that he could invest US$600 million in cash, plus three years of music copyright authorization, to acquire 1.09% of Zhonghe Group's equity.
Zhang Yida immediately agreed, and also reached a copyright cooperation with Sony Columbia Pictures on behalf of Zhonghe Group. Rocket Video will purchase their film rights in the future.