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Liberty Media Acquisition Corp., a special purpose acquisition company (SPAC) launched by John Malone’s Liberty Media a couple of years ago in hopes of finding at least one takeover target, has taken a key step towards closing down the financial vehicle.
On Monday, a virtual special meeting of stockholders voted in favor of the move by approving updates to its certificate of incorporation, which allow it “to unwind and redeem all of its outstanding public shares prior to Dec. 30,” which is “in advance of the contractual termination date of Jan. 26, 2023.”
Liberty Media president and CEO Greg Maffei told the online meeting that his company — which owns the Atlanta Braves and the Formula One race car circuit among other media and entertainment assets — looked at around 140 companies in all as potential acquisitions, without identifying who they were. He added a picky Liberty Media saw no targets worth pursuing for a merger.
Maffei added Liberty Media had been working amid an industry backdrop where financial markets had turned down. That made financing any potential transaction more difficult and jumping through regulatory hurdles for a time extension to work out taxation issues more challenging.
“Frankly, getting an extension wasn’t worth it, given we had nothing on the table that was attractive enough for us to take us look,” Maffei told investors about the decision to wind up the SPAC.
SPACs, or “blank check companies,” have been a popular vehicle in recent years, including for former top media executives, including James Murdoch and former Walt Disney executives Tom Staggs and Kevin Mayer, to raise cash and hunt for acquisitions. But stock market volatility, macroeconomic uncertainty and the disappointing performance of some SPACs, along with other factors have led to questions about the outlook for SPACs.
Liberty Media Acquisition (LMAC) had announced the special meeting in October, detailing the challenges of its management team, led by Maffei, in finding a suitable merger deal.
“Since its IPO on Jan. 23, 2021, LMAC’s management team has employed a broad set of search criteria for potential target business combinations and evaluated more than 140 such target companies,” the firm said back then. “In evaluating these businesses, management remained focused on finding fair valuations amid volatile market conditions. LMAC’s management has observed what it believes were high valuations in 2021, a declining IPO market in 2022 and significant public and private market volatility, which have prevented the company from securing an opportunity that it believes will offer a compelling return on investment for its stockholders. In light of these circumstances, LMAC has determined that it is not feasible to complete an initial business combination (or enter into an agreement in principle with respect to an initial business combination) by Jan. 26, 2023.”
LMAC also noted “recent changes in U.S. tax law” that “could create corporate-level tax liabilities in connection with stockholder redemptions following year-end.”
This article was originally published by The Hollywood Reporter.
The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
Most publicly traded companies have released earnings for the latest quarter (ended Sept. 30), and most of those results have shown encouraging signs for investors and the music industry alike. Earnings by Universal Music Group, Spotify, Live Nation, SiriusXM are in the books. Notable companies yet to announce include Warner Music Group (Nov. 22) and Tencent Music Entertainment (Nov. 15).
If there is one over-arching narrative, it’s that inflation and economic uncertainty haven’t ruined music’s post-pandemic recovery. Revenue growth is strong, aside from some softness related to a slowdown in advertising spending that impacts broadcast radio and ad-supported streaming. Consumer spending on everything from concerts to vinyl records is healthy – despite the around-the-clock warnings of an impending recession and the highest inflation rates in four decades eating into consumers’ wallets. When companies have raised prices for tickets and concessions at concerts, music fans, by and large, haven’t blinked. Even long-stagnant music subscription prices are on the rise, and nobody expects a consumer backlash.
Not that music companies’ stock prices reflect this optimism. Stocks in general have taken a beating in 2022. Music stocks have suffered, too, although stocks ended the week on a high note. The Billboard Global Music Index, a measure of 20 publicly traded music companies’ stocks, climbed 12.7% this week after markets rallied on Thursday and Friday on encouraging news about the slowing U.S. inflation rate.
Here are five quick takeaways from third-quarter earnings and the statements made by the companies’ management teams.
1. The subscription business model is insulating creators and rights holders from economic uncertainty. Music royalties are popular with investors in part because they are counter-cyclical, meaning their returns have little correlation with changes in the broader market. Put another way, when the economy sours, people are more likely to cut back on grocery spending or travel than cancel a Spotify subscription. Consumers might feel pinched in their pocketbooks, but Spotify and SiriusXM added 7 million and 187,000 subscribers, respectively, in the third quarter, and YouTube announced on Wednesday that it surpassed 80 million subscribers to YouTube Music and Premium, an increase of 30 million in about 14 months. Stock prices at companies more exposed to inflation pressures fared best on Thursday, as stocks surged on news that the annual change in the consumer price index in the U.S. fell to 7.7%. Shares of radio companies iHeartMedia and Audacy climbed 10.0% and 14.0%, respectively. Live entertainment companies also did well: MSG Entertainment was +5.6%, Live Nation was +5.1%, and ticketing companies Eventbrite and Vivid Seats were +8.3 and +9.2%, respectively.
2. Podcasts are a growing, stabilizing force. Spotify’s podcast business has rightly captured headlines as the company uses spoken-word content to build engagement, generate advertising revenue and improve on the gross margins of its core music business. The number of monthly users who consumed podcasts grew “in the substantial double-digits” year-over-year, the company said. But other companies’ podcast businesses get less attention despite their importance to their own futures. Radio companies – namely iHeartMedia, Cumulus Media and Audacy – have fast-growing podcast businesses. LiveOne, primarily a music streaming company, has a fast-growing podcast division, PodcastOne, that made $17.2 million of revenue in the last two quarters on the strength of such shows as The Adam Carolla Show, Cold Case Files and Uncut with Jay Cutler. The catch is that podcast growth has little direct impact on the music business outside of helping those platforms – digital and broadcast – that produce royalties for record labels and publishers. Music rights owners could better tap into this growing market if there were better systems for licensing music to podcast creators.
3. With share prices relatively low, companies are increasingly buying back shares to bolster shareholder value and help share prices. Among the companies currently engaged in stock repurchase programs are Spotify, MSG Entertainment, Cumulus Media, Audacy, SiriusXM, Townsquare Media and LiveOne. Spotify announced a $1 billion share buyback program in August 2021, and it spent $2 million and $24 million repurchasing shares in the second and third quarters, respectively. Cumulus Media has $21.1 million remaining in its $50 million share repurchase authorization announced in May. Last month, MSG Entertainment authorized $75 million for share buybacks on top of a $175 million, one-time dividend worth $7 per share paid on Oct. 31 to shareholders of record on Oct. 17. And LiveOne announced on Thursday that it will expand its share repurchase program, originally planned for 2 million shares (worth about $1.5 million at Friday’s closing price), by an additional $2 million. More buybacks could be on the way soon: Universal Music Group shareholders voted in May to give the company’s board the ability to repurchase up to 10% of the issued share capital.
4. Strong growth in “rest of world” markets. Believe’s revenue in Asia Pacific and Africa grew 61.1% to 52.3 million euros ($53.2 million), about the same as its European revenues excluding France and Germany. Spotify’s “rest of world” markets improved their share of monthly active users to 26% in the third quarter, up from 21% in the prior-year period. Also, “rest of world” and Latin America each gained a percentage point in shares of Spotify subscribers while North America and Europe both lost a percentage point of subscriber share. As Billboard’s Elizabeth Dilts Marshall reported last week, investors are increasingly eyeing companies in the Middle East and North Africa as streaming transforms those regions.
5. Spinoffs are going to separate high-growth, high-potential businesses. MSG Entertainment plans to spin off its MSG Sphere venue currently under construction in Las Vegas along with its Tao Hospitality Group. The remaining MSG Entertainment will retain the live entertainment business – namely the portfolio of venues such as Madison Square Garden and Radio City Music Hall – and MSG Networks, a sports broadcast network. Ryman Hospitality will spin off its Opry Entertainment Group – possibly within four years, based on its agreement with two new investors, Atairos and NBCUniversal. LiveOne plans to file an S-1 document with the SEC by Dec. 15 for a spin-off of its podcast division, PodcastOne, which accounted for about 37% of the company’s total revenues in the six-month period ended Sept. 30. LiveOne’s management and board believe the company’s share price undervalues the sum of its parts and spinning off PodcastOne would maximize shareholder value and better position the division for M&A and talent acquisition.
Endeavor Group Holdings, the parent company of UFC, WME and IMG, posted revenue of $1.2 billion in its third quarter, as foreign exchange rate headwinds pushed it to a net loss of $12.5 million.
Despite the difficult macroeconomic environment being felt across the tech and media sectors, Endeavor remains bullish on its prospects, touting its exposure to sports and live music, which are still posting strong results.
“Our business performed well in the quarter despite a turbulent macroeconomic environment,” said Endeavor CEO Ari Emanuel, in a statement. “Given our unique positioning relative to a set of highly resilient secular industry trends across premium sports and entertainment content and live events, we remain confident in our ability to continue delivering on our long-term growth strategy while also being good stewards of capital.”
Emanuel elaborated on those comments on the earnings call, saying that the company simply isn’t seeing demand for live events and experiences slow down.
“Spending habits have shifted, but our company has a presence at every point on the purchase chain,” he said. “During COVID people were buying stuff, and post-COVID, they are more focused on experiences, and we are the benefit of that side of the equation.”
Endeavor also adjusted its full-year 2022 guidance, raising its guidance for adjusted EBITDA to between $1.145 billion to $1.175, and indicating that revenue will be between $5.235 billion and $5.325 billion, on the low end of its prior guidance.
During the earnings conference call, Emanuel reitrated the company’s position as a middleman, able to carve out pieces of the content and live sports business, and in its owned and operated segments, to take the entire slice.
“These leading tech companies go head to head with major streaming and media players, including Disney, Netflix, NBCUniversal, Warner Bros. Discovery and Paramount for the best video, podcasts gaming, and social content,” Emanuel said.
On the sports side, Emanuel said that “we’ve positioned ourselves on the supply side of this industry, working directly with rightsholders, and sportsbooks to deliver everything from official data, streaming feeds to betting and mobile apps.”
“In sports, the demand for premium talent-led content and shows no sign of slowing. In fact, opportunities for talent are expanding into new formats,” he added.
The company is also undergoing significant change in its structure, as it completed the acquisition of OpenBet (and prepares to launch a new sports betting division) and with the sale of 80 percent of Endeavor Content, which impacted revenues at the company’s representation unit.
In representation, revenue was $388.3 million, down 42 percent from the same quarter a year ago. That drop was almost entirely due to the loss of Endeavor Content, which was sold to CJ ENM. When excluding revenue tied to Endeavor Content, the company’s representation business was up 17 percent compared to last year, suggesting continued strength in the sector.
In sports, which is led by UFC and Professional Bull Riders, revenue was $402.3 million, up 39 percent, thanks to increased rights fees, an extra live pay-per-view event, and more live attendance at events.
And in Endeavor’s events, experiences and rights segment, revenues were $440.6 million, down 1 percent compared to last year, due to the timing of some events.
Endeavor says it also paid off some $250 million in debt in Q3, and plans to pay down the same amout in Q4.
This article was originally published by The Hollywood Reporter.
Deezer named Maria Garrido chief marketing officer. Based in Paris, Garrido will lead the company’s marketing team and help further the development of the Deezer brand. She will report directly to CEO Jeronimo.
Ron Savage was named vp and executive director of the Berklee College of Music, where he previously served as dean of the college’s professional performance division and chair of the ensemble department; he also attended Berklee as a student. Savage will be responsible for oversight and direction of all academic programs, facilities, operations and faculty and staff for the college’s three divisions. He will additionally join the core leadership team at Berklee and help devise a strategy for the organization as a whole. He reports to executive vp and provost Dr. David Bogen. Savage can be reached at rsavage@berklee.edu.
Universal Music Canada promoted Craig “Big C” Mannix to vp of Black music. In the role, Mannix will continue leading UMC’s commitment to Black music with “an integrated approach to marketing and A&R,” according to a press release. His expanded purview includes an A&R remit to discover, sign and support Black music created by Canadians while continuing to lead the teams responsible for domestic international Black music marketing. He reports to Universal Music Canada chairman & CEO Jeffrey Remedios. Mannix can be reached at craig.Mannix@umusic.com.
ASM Global named Gary Jacobus president of business development. He will oversee the company’s plans to grow its sales efforts and strategies for securing new accounts across the Americas while providing support to ASM Global’s European and APAC business development teams. Jacobus can be reached at gjacobus@asmglobal.com.
Sound Royalties is expanding its West Coast team, tapping Andrew Stess and David Blutenthal of StessCo Consulting Group as new representatives for the music financing company in the western U.S. Out of Los Angeles, the pair will help songwriters, artists, rights holders and other music creatives seek out funding solutions to support their careers. Stess can be reached at andrew@stess.co.
iHeartMedia Los Angeles named Doug Hall regional digital program director for the iHeartMedia radio clusters in Los Angeles and San Francisco that encompass 14 stations. In the role, Hall will handle strategy, audience growth and maximizing iHeartMedia’s digital platforms in those markets while reporting to John Peake, senior vp of programming for iHeartMedia in Los Angeles. He was previously senior digital director on the national iHeartRadio team out of Nashville.
UTA promoted a slew of staff members in its music department, including Brennan Duffy, Noah Friedlander, Alana Gift, Akhil Hegde and Lauren Holland to manager and Mackenzie Coberley, Alexis Lesko, Gabriella Librizzi, Lauren McClusky and Hope Murray to coordinator.
Bailey Sattler and Stephanie Marlow formed another/side, a new creative and public relations agency. The company “will focus on where the underground and mainstream culture collide,” according to a press release. Sattler comes from Grandstand Media and Marlow built her own brand independently before joining forces with Sattler. The roster at launch includes Blessed, Circle Jerks, Cold Cave, Drab Majesty, Emma Ruth Rundle, Have A Nice Life, High Vis, Knocked Loose, Narrow Head, Power Trip, The Spits and Trust Records. Sattler can be reached at bailey@another-side.net and Marlow can be reached at stephanie@another-side.net.
Vickie Nauman, founder & CEO of music and tech consulting company CrossBorderWorks, joined the board of directors for Evan Bogart‘s Seeker Music, which boasts a portfolio of music publishing, master recordings and ancillary rights as well as a roster of songwriters, producers and artists.
Jessica Bonner was named vp of publicity at Milestone Publicity, where she was previously an account executive. In addition to continuing to serve clients, she will be more involved in an internal leadership role at the firm. Bonner can be reached at jbonner@milestonepublicity.com.
DJ and music journalist Dani Deahl was named head of communications and creator insights at BandLab Technologies. She will serve as a cultural liaison, highlighting the company’s impact on the music industry and surveying industry changes.
Many music companies’ stocks soared on Thursday (Nov. 10) on news that U.S. inflation was less than expected in October. The Bureau of Labor Statistics revealed the consumer price index rose 0.4% last month, less than the 0.6% Dow Jones estimate. Although the annual inflation is still high at 7.7%, it had been as high as 9.1% in June and hadn’t been below 7.5% since January.
Spotify shares jumped 9.9% to $78.44. Universal Music Group shares rose 3.3% to 20.81 euros. Sony shares spiked 6.6% to $44.15.
Live music companies fared especially well: U.S.-based Live Nation and MSG Entertainment improved 5.1% and 6.6%, respectively, while German promoter CTS Eventim climbed 3.8%. Ticketing companies Eventbrite and Vivid Seats rose 8.3% and 9.2%, respectively.
Radio company stocks, recently hurt by the softening advertising market, enjoyed the biggest gains as iHeartMedia was up 10.0% and Audacy rose 14.0%. Cumulus Media and Townsquare Media had smaller gains of 3.3% and 2.5%, respectively.
U.S. stocks had their biggest single days since 2020. The Dow Jones Industrial Average, a group of 30 prominent stocks, rose 3.7%. The S&P 500 improved 5.5% and the tech-heavy Nasdaq climbed 7.4%.
The good news quickly spread to Asia after U.S. markets closed. Shares of South Korean music companies HYBE and SM Entertainment were up 8.3% and 4.5%, respectively, early on Friday morning. Likewise, the Hang Seng Index, a selection of companies on the Hong Kong Exchange, was up 5.0% in early trading Friday.
Persistently high prices have had damaging effects to economies of the U.S. and other countries re-opening from COVID-19 restrictions. Businesses have encountered higher costs for labor, manufacturing and services, and often pass them along to consumers rather than absorb them. Everything from vinyl manufacturing costs to tour buses have soared. Some bands, such as Anthrax and Cold, pulled out of tours because of logistical issues and high costs. “There are tours being canceled left and right,” Jamie Streetman, operations manager for Nashville-based Coach Quarters, told Billboard in Sept.
To tame inflation, the U.S. Federal Reserve Bank, which targets 2% annual inflation, has raised the federal funds rate six times in 2022 to tame inflation. That has made borrowing more expensive for everyone from investors in music publishing catalogs to consumers with credit card bills.
The pairing of high interest-high inflation has wreaked havoc on stock prices, too. Year to date, the Dow index is down 7.2% and the S&P 500 is off 17.0%. Music companies that are otherwise having a solid year have seen their share prices sink, too. UMG shares are down 16.0% and Spotify shares are off 66.5% this year.
While investors celebrated the improvement in the CPI, inflation is still abnormally high and energy costs – a significant cost for touring musicians – were up 17.6% year-over-year in October. Presidents of the Federal Reserve indicated on Thursday that more rate hikes would probably be forthcoming, although at a slower pace.
Irving and Jeffrey Azoff‘s recently-launched Giant Music record label signed Detroit rapper Tay B in partnership tie AFLN Music Group. Tay B released his most recent album, 4Eva In My Bag, earlier this year. Run by Shawn Holiday, Giant Music previously signed Atlanta-based trap artist SwaVay in partnership with Def Jam. Giant Music is a resuscitation of the Giant name for the Azoffs, with Irving having launched Giant Records in 1990 as a joint venture with Warner Bros. Records.
Podcast company Audio Up, which focuses on trying to create hit tracks by leveraging podcasts as the launch pad, announced a new strategic partnership with WME to support the development of artists from Audio Up’s podcast slate. Under the deal, WME will advise Audio Up on its touring and content opportunities across film, TV and digital and provide the company with access to its network across music, entertainment and brands. One of the first initiatives under the partnership is the development of Latin artist Balam, who will star in and contribute original music to the forthcoming Audio Up scripted podcast Day of the Dead. In tandem with promotional efforts around the podcast, WME served as an advisor on booking Balam’s Dec. 10 debut performance at reggaeton festival Viva Urbano. WME will also work with Audio Up on the podcaster’s Apple Music show The Ballad of Uncle Drank by turning the show’s title character into a real-life touring country experience.
Sony Music Masterworks made a majority investment in Dubai-based concert promotion, talent management, events and production company MAC Global. Day-to-day operations of MAC Global will continue to be led by co-founders Rob McIntosh and Daniel Goldberg, who will work with Sony Music Masterworks president Mark Cavell, senior vp of business development Josh Lerman and managing director of Senbla Ollie Rosenblatt. Under the arrangement, MAC Global will expand its remit to include comedy, sports, virtual events, orchestral events and immersive music experiences.
The Black Music Action Coalition (BMAC) teamed with Jimmy Jam and Terry Lewis for the Jimmy Jam & Terry Lewis Music Makers Grant, which will award $5,000 annually to an emerging BIPOC songwriter or producer. BMAC will screen applicants, with Jam and Lewis personally picking the finalist. Online applications for this year’s grant close Nov. 15, with the winner to be announced in December.
Townsend Music signed Kaiser Chiefs in partnership with Absolute Label Services/Utopia, V2 and The Orchard for the band’s next studio album, which is slated for release next year. Townsend and Absolute will provide physical and digital distribution for the album in the U.K. under Townsend’s D2C+ model, while V2 will distribute it in France and Benelux and The Orchard will distribute it in other territories.
SoundExchange struck deals with Zelle and Cash App allowing registered creators to elect to receive their royalty payments via either of those mobile payment apps. Creators can contact the SoundExchange customer services team to learn more about app-specific eligibility requirements and sign up to receive royalty payments via the platforms.
Country newcomer Dalton Dover, who appeared on Season 16 of The Voice and has since garnered a following on TikTok, signed with Universal Music Group Nashville. He will release his upcoming music via Mercury Nashville.
Pop and melodic rap artist Zzz. signed with Warner Records in partnership with Lil Bibby‘s Grade A Productions. His major-label debut single is “All I Never Wanted.”
Live Nation has signed on as the exclusive booking partner for the nonprofit Capital One City Parks Foundation SummerStage festival. Ahead of the 2023 summer season, Live Nation will book all benefit concerts between June and October at the flagship Rumsey Playfield site in New York’s Central Park.
Composer Max Richter appointed Huxley as his global publicity and brands agency, which will also represent Richter and Yulia Mahr‘s Oxfordshire recording studio and multi-arts production facility Studio Richter Mahr.
U.K.-based Logan Media Entertainment teamed up with BMG to create a new record label, Tag8 Music, that will “specialize in the growing market for resurgent established artists,” according to a LinkedIn post by Logan Media. The label will launch with a roster including Blue, Pixie Lott, Roachford and a cast album of The Drifters Girl musical featuring Beverley Knight.
Naxos Music Group signed an extensive partnership with Downtown-owned FUGA. Under the deal, Naxos will have access to FUGA’s full suite of services including digital distribution, marketing services, royalty accounting and use of FUGA’s trends and analytics platform for Naxos and associated labels.
Los Angeles-based queer singer-songwriter Olive Klug (they/them) signed with Nettwerk, which will release their single “Out of Line” on Nov. 18.
European music royalty investing marketplace ANote Music partnered with Revelator, which provides digital IP infrastructure to music rights holders and music companies, for an arrangement that will allow Revelator clients to list their shares of tracks in their catalogs on ANote. The two companies will also collaborate on integrating Revelator’s technology, data management, predictive models and payment systems into ANote.
Symphonic partnered with music company Ropeadope for exclusive global distribution and marketing. Under the deal, Symphonic will provide digital and physical distribution and playlist pitching for Ropeadope’s full back catalog and key new releases. The partnership will encompass forthcoming releases by The Headhunters, Sarah Elizabeth Charles and Mthunzi Mvubu.
North Dakota pop-punk band Brooklane signed to Los Angeles-based Adventure Cat Records, an indie label from the artist management team at KMGMT. The band has new music in the works with producers Andrew Wade and Steve Knight. They are managed by David Pinder and Desanka Ilic at Cold Coffee Entertainment.
Vancouver-based artist management company Macklam Feldman Management signed on to represent acoustic folk-pop trio Tiny Habits, comprised of Maya Rae, Cinya Khan and Judah Mayowa.
BET president and CEO Scott Mills is adding to his portfolio at Paramount Global.
In the latest piece of reorganization at the conglomerate, VH1 will move under Mills’ BET Media Group. The cable outlet was previously part of the Chris McCarthy-led Paramount Media Networks, along with Paramount Network, MTV, Comedy Central, CMT and others.
Paramount CEO Bob Bakish wrote in a memo to staff Wednesday (see it in full here) that the move will allow for better alignment of priorities and make VH1 “best positioned for future success as a key part of the powerful BET ecosystem.” VH1 is the second most popular entertainment cable outlet among Black viewers, behind only BET.
It also lightens the load for McCarthy, a Bakish favorite who will add premium cabler Showtime to his purview following David Nevins’ departure at the end of the year. MTV Entertainment Studios, headed by McCarthy and Nina L. Diaz, will continue to produce a number of VH1 series, including the Love & Hip Hop franchise, RuPaul’s Drag Race and Black Ink Crew.
The VH1 move also separates it from MTV in Paramount’s structure, ending almost four decades of close association between the two networks. The cable network started in 1985 as a music-video channel targeting a somewhat older audience than the youth-driven MTV. It eventually branched into original programming with shows like Behind the Music, I Love the … and a host of “celebreality” shows like Rock of Love and The Surreal Life. And, like MTV, it has mostly left its music roots behind.
As has been the case across the cable universe, VH1’s on-air audience has declined in recent years as increasing numbers of TV consumers opt out of cable subscriptions. Within that smaller ecosystem, however, it still ranks in the upper third of cable networks in the key ad demographic of adults 18-49.
VH1 will join a BET Media Group that also includes the namesake cable channel, streaming platform BET+, BET Her, BET Studios and BET Digital. “Scott and his team continue to drive the evolution and growth of BET by building an interconnected set of leading platforms — linear, streaming, digital and studios — centered around the Black community, Black culture and content,” Bakish wrote.
Read Bakish’s full memo.
Following Adidas’ highly publicized split from Kanye “Ye” West last month after he espoused antisemitic sentiments on a multi-stop media tour, the sportswear company has plans to do what many predicted might happen: rebrand Yeezy products in order to continue selling them without Ye.
On a quarterly earnings call this morning (Nov. 9), according to Insider, Adidas shared that it intends to release more Yeezys without the artist, who began his business partnership with the company in 2013. Adidas CFO Harm Ohlmeyer confirmed what the company’s public statement, released in late October, said: “Adidas is the sole owner of all design rights registered to existing product. We intend to make use of these rights as early as 2023.”
Following Adidas’ highly publicized split from Kanye “Ye” West last month after he espoused antisemitic sentiments on a multi-stop media tour, the sportswear company has plans to do what many predicted might happen: rebrand Yeezy products in order to continue selling them without Ye.
On a quarterly earnings call this morning, according to Insider, Adidas shared that it intends to release more Yeezys without the artist, who began his business partnership with the company in 2013. Adidas CFO Harm Ohlmeyer confirmed what the company’s public statement, released in late October, said: “Adidas is the sole owner of all design rights registered to existing product. We intend to make use of these rights as early as 2023.”
In announcing their split from Ye last month, the company explained, “Adidas does not tolerate antisemitism and any other sort of hate speech. Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”
This article originally appeared on The Hollywood Reporter.
Adidas on Wednesday lowered its earnings forecast for the year to account for losses from ending its partnership with the rapper formerly known as Kanye West over his antisemitic remarks.
The German shoe and sportswear maker cut its sales and profit outlook for the year as part of its third-quarter earnings statement, even as the company’s chief financial officer said the profitability of the Yeezy shoe collaboration with Ye had been “overstated.” The company would largely offset the impact of the breakup next year by no longer having to pay royalties and marketing fees for the brand, CFO Harm Ohlmeyer said.
The company halved its expectations for net profit from continuing operations to 250 million euros ($252 million) this year from 500 million euros. That matched its earlier statement that ending the partnership with Ye would cost it 250 million euros in profits.
Adidas also lowered its revenue forecast for the year to a low single-digit increase from a mid-single-digit increase.
The Oct. 25 split with Ye, with production of all Yeezy products halted and royalty payments ended, will leave Adidas searching for another star to help it compete with ever-larger rival Nike. Adidas also is facing internal upheaval, with its CEO Kasper Rorsted stepping down Friday. He was previously expected to hand over next year, but the company announced the quicker change on Tuesday as it named Puma CEO Bjørn Gulden as his replacement.
Adidas faced pressure to split with Ye as other brands did earlier over the rapper’s antisemitic comments in interviews and social media, including a Twitter post earlier this month that he would soon go “death con 3 on JEWISH PEOPLE,” an apparent reference to the U.S. defense readiness condition scale known as DEFCON. He was suspended from both Twitter and Instagram.
Adidas owns the rights to product designs except for the Yeezy name and is developing plans for what to do with existing inventory.
Ohlmeyer said on a conference call with reporters that the profitability of the Yeezy business had been overstated because its costs only included expenses directly related to the products and not central overhead costs borne by the company.
“In other words, it does not include any further central cost allocation for sourcing, digital, retail, or any other services that this part of our business has been benefitting from and that were essential for its success,” Ohlmeyer said.
“At the same time, we will save around 300 million euros related to royalties and marketing fees; in combination, this will help us to compensate the majority of the top and bottom line impact in 2023,” he said.
The Yeezy brand accounted for up to 15% of Adidas’ net income, Morningstar analyst David Swartz said in a note Oct. 26.
The company had already cut its full-year earnings forecasts five days before announcing its split with Ye. The earlier outlook revision cited slowing activity in China, where severe restrictions aimed at limiting the spread of COVID-19 have held back the economy, and clearance of elevated inventory levels.
Net income for the third quarter from continuing operations was 66 million euros, down from 479 million euros in the same quarter a year ago.
The decrease largely reflected 300 million euros in one-time costs, the majority of it from winding down the company’s business in Russia.
Wasserman Media Group received an investment from private equity firm Providence Equity Partners that will provide capital for the talent agency’s growth initiatives and buy out two existing Wasserman investors, RedBird Capital Partners and Madrone Capital Partners. Financial terms of the deal were not disclosed.
Wasserman’s founder, chairman and CEO, Casey Wasserman, who continues to own a controlling ownership stake, said in a statement “there is no better partner to help us accelerate and scale this purpose-driven model than Providence. Their long relationship with our executive management group plus their extensive experience and established investment approach across the sports, media and entertainment sectors, and a shared commitment to culture will help accelerate the next phase of Wasserman’s expansion.”
Providence Equity Partners has experience in the music and entertainment space. In 2019, the firm created a $650 million investment platform — Tempo Music Investments — with Warner Music Group to invest in music publishing and recorded music catalogs. With interest rates rising in 2022, however, Providence is shopping its stake in Tempo and wants out of the music catalog market, according to reports.
Wasserman is a natural fit for Providence’s numerous investments in the live entertainment space. Providence has a portfolio of music festivals through its Superstruct Entertainment division, including International Concert Service, organizers of the Wacken Open Air metal festival, Dutch promoter ID&T, and Advanced Music SL, which operates Spanish music festival Sónar. Providence also owns majority stakes of U.S.-based music instrument retailer Sweetwater and U.K.-based Ambassador Theatre Group, which owns and operates 58 venues in the U.S. and Europe. Providence also owns a stake in Sofar Sounds through its investment in The Chernin Group.
Scott Marimow, managing director at Providence, complimented Wasserman’s “client-first approach” and influence in sports and music talent representation. “Wasserman is a natural fit with our firm, and we look forward to partnering with Casey and the entire Wasserman team to help fuel the Company’s next phase of growth and success,” he said in a statement.
“Wasserman has the potential to set the bar for the future of talent representation and brand and marketing consultancy,” said Davis Noell, senior managing director and co-head of North America at Providence, in a statement. “With our strong existing relationship, similar cultures and shared passion for media, sports, and entertainment, we are pleased to have reached this agreement to partner together.”
Wasserman became a powerhouse in music through its acquisitions of Paradigm’s North American live music roster in 2021 and U.K. live music business in April from Platinum Equity. Artists on the Wasserman roster include Coldplay, Kenny Chesney, Billie Eilish, Imagine Dragons, The Lumineers, Dave Matthews Band, Janelle Monáe, Kacey Musgraves, Old Dominion, Phish, Ed Sheeran, Lorde, Sturgill Simpson, Black Pumas, Brandi Carlile, Tyler Childers, Kaytranada, Normani, Run the Jewels, Tash Sultana, Diplo, DJ Snake, Flume, Jack Harlow, ODESZA and Skrillex.