Polygram

PolyGram : history & business profile

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PolyGram was the world's biggest record company until it was sold by Philips in 1998. At the time, its purchase by Canada's Seagram for $10.4bn was the third biggest entertainment deal in history after Disney's purchase of Capital Cities/ABC and the Time Warner merger. The music company was merged with Seagram's existing Universal to form Universal Music. Later, ownership bounced back across the Atlantic when Seagram was in turn acquired by Vivendi Universal.

PolyGram's phenomenal growth during the 1980s and early 1990s mirrors the staggering worldwide impact of the product upon which the company's success was in no small part based - the compact disc, invented by parent Philips and launched globally in 1982. But PolyGram's roots actually lay further back in a 1962 alliance between Philips-owned Phonogram Records, and Deutsche Grammophon, owned by German engineering company Siemens. That joint venture was formalized a decade later under the name PolyGram. The launch of the CD in 1982 revolutionised the music industry during the rest of that decade. All record companies witnessed an unprecedented increase in sales of back catalogue, as consumers rushed out to replace their ageing vinyl with higher-quality, longer-lasting CDs. 

To make the most of this new boom, Philips took full control of PolyGram, buying out Siemens entirely by 1987. In 1989, Philips launched an IPO of the business, and used the proceeds to fund a series of acquisitions of major independent labels in Europe and the US. The group already controlled Polydor, Fontana, Mercury Records, Decca and London. In 1989, PolyGram paid £272m to snap up Island Records from founder Chris Blackwell, and £460m to buy A&M from Herb Alpert and Jerry Moss. In 1991, PolyGram took a 30% stake in Andrew Lloyd Webber's Really Useful Group, and this was followed by the acquisition of Motown from Berry Gordy in 1993 (for $301m), Def Jam in 1994 ($33m) and Latin America's Rodven Records in 1995 ($57m). 

The group also jumped into the film industry. Primarily this was to support the demands of its record companies for music videos, but it also dipped its toes into mainstream movies, part-funding or distributing films including An American Werewolf in London, Flashdance and A Chorus Line. This was followed in the 1990s by stakes in independent producers Working Title Films and Interscope, as well as production deals with a variety of independently-minded filmmakers including Tim Robbins, Jodie Foster and Alan Parker. Breakthrough movies including Four Weddings & A Funeral, The Usual Suspects, Fargo and Trainspotting established PolyGram as a significant force in high quality filmed entertainment.

However, the industry boom came to a grinding half in 1996. Two underlying factors were already taking shape. By now, the drive to replace vinyl which had fuelled the 1980s CD boom had been exhausted, while the globalization of the industry had raised the stakes for contemporary artists. With musical tastes and fashions now changing so fast, record companies were finding it harder and harder to find new artists who could maintain a consistent track record in sales. Most burned out after one or two albums. The trigger for a slump was sudden economic turmoil in Asia, previously one of the biggest growth markets for music. As PolyGram's sales slowed dramatically, Philips took the decision to sell off its remaining 75% stake in the business as part of a general restructuring of its over-diversified portfolio. The eventual buyer was Seagram, which initially agreed to pay $10.6bn to buy out Philips as well as minority shareholders. As profits fell even further in the first quarter of 1998, the two sides agreed a $200m reduction in the price, down to $10.4bn.

PolyGram's music business was merged with Seagram's MCA and Universal labels. However Seagram already had its own substantial film division in Universal Studios, so had little interest in more arthouse-oriented PolyGram Filmed Entertainment. When no buyer could be found, the business was broken up. The production operations were absorbed into Universal, and PolyGram's valuable film library was sold to MGM for $250m. Carlton Communications acquired the TV library (including all episodes of The Pink Panther, The Saint, The Avengers and Thunderbirds) for a further £91m.

The PolyGram brand continued to be owned by Universal Music. It was resurrected in 2017 for a new filmed entertainment division specialising in music-related documentaries. The first two projects were The Story of Motown and Mystify, about INXS singer Michael Hutchence.

Last full revision 4th January 2018


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