June 25, 2019 / 11:26 AM / 25 days ago

Breakingviews - Could Taylor Swift be a strategic American asset?

Taylor Swift performs at the iHeartRadio Wango Tango concert in Carson, California, U.S., June 1, 2019. REUTERS/Mario Anzuoni

LONDON (Reuters Breakingviews) - Is Taylor Swift a strategically important American asset? The answer may seem obvious to her devoted fans, or “Swifties.” But they don’t get to decide. A partial sale of Tay Tay’s label, Universal Music, may fall under the purview of a U.S. foreign-investment oversight body, and ultimately President Donald Trump. That makes Chinese interest in Universal awkward.

The recording giant, also home to Lady Gaga and Kendrick Lamar, is owned by France’s Vivendi. The $35 billion group controlled by tycoon Vincent Bolloré wants to sell up to half to “one or more strategic partners”. On the same revenue multiple as Walt Disney, it could be worth over $30 billion. China’s Tencent, the social media behemoth which also has a music-streaming service, is a logical investor.

That could prove delicate. Reforms last year strengthened the Committee on Foreign Investment in the United States, which screens deals for national-security risk. Known as CFIUS, it recently forced Grindr’s Chinese owner to sell the dating app popular with gay men.

In theory, CFIUS has jurisdiction over California-based Universal, even though Vivendi is French and has said it’s selling less than half. The body’s remit extends to foreign-owned companies with substantial U.S. operations: Universal fits the bill all too well. And the inter-agency task force, led by the Treasury Department, can now intervene in minority investments that might bring board seats or access to non-public information to a foreign investor.

The tougher question is whether partial Chinese ownership of recordings by Frank Sinatra and Eminem represents a national security risk. As unlikely as it sounds, labels increasingly collect data on users’ listening habits. Personal information proved the source of bad blood in Grindr’s case.

And everything has changed in the U.S.-China relationship since U.S. politicians sounded the alarm over Chinese group Dalian Wanda’s ultimately unsuccessful 2016 tilt at Golden Globes producer Dick Clark Productions. Others in Congress subsequently pushed for extra CFIUS powers, citing “China’s efforts to censor topics and exert propaganda controls on American media”.

The implications for music are less obvious: even in her wildest dreams Katy Perry isn’t churning out anti-Xi Jinping protest ditties. But CFIUS looks politically malleable under Trump, who has a track record of targeting companies to gain trade-war leverage, as the Huawei Technologies affair shows. At the margins, that makes it a little harder to imagine Swift’s catalogue easily falling into Chinese hands without sparks flying.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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