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New Warner Music Group CEO Robert Kyncl addressed investors for the first time since taking over the company at the top of the year, acknowledging the “tough quarter” for the major label while also laying out a vision for how he sees the music industry’s present and future.
The company posted revenues of $1.48 billion for the quarter that ended Dec. 31, 2022, down 8% from the same period the year before, which the company noted contained an extra week, skewing comparisons slightly. Growth came from the publishing sector, which saw revenues up 9.2%, or 14.2% in constant currency, while recorded music revenue fell 10.6%, or 5.6% in constant currency, with recorded streaming revenue down an 6.7%, though the company said that streaming revenue was up half a percentage point when adjusted for the extra week, with a lighter release schedule and falling ad-supported streaming revenue the causes.
That led to Kyncl’s acknowledgement that WMG had a tough quarter, noting that, “like most companies, WMG has been dealing with macroeconomic headwinds and the impact of currency exchange rates.” He added that WMG’s release schedule for this year is weighted toward the second half of the year, with releases from Ed Sheeran, Cardi B, David Guetta, Aya Nakamura and Bebe Rexha on the horizon.
Kyncl then spoke about both his decision to join Warner after 12 years at YouTube and seven at Netflix, as well as his vision for growth for the music industry and the effects of artificial intelligence and TikTok on how that future will look, both creatively and monetarily.
“This industry has achieved something rare: It’s built mutually beneficial, long-term partnerships with many of the world’s biggest companies — Amazon, Apple, Google, Meta, Spotify and Tencent among them,” he said. “As successful as music has become, there’s still meaningful upside ahead for three reasons. One, as technology opens up emerging economies, the industry’s addressable market will continue to expand even further. Two, innovation is constantly creating new use cases for music, giving us the opportunity to diversify our revenue sources. Three, music is still undervalued, especially when compared to other forms of entertainment, like video.”
On the last point, Kyncl pointed out that Netflix’s subscription price has roughly doubled since 2011, the year that Spotify debuted in the U.S., while the price of a music subscription has remained largely flat, even though music subscriptions contain access to a wide swath of the world’s available music, whereas video streamers — of which nearly 80% of U.S. households subscribe to three — are segmented.
He also spoke about his vision for WMG’s role in that future, noting that he hired two former YouTube employees in his first five weeks — Tim Matusch as executive vp of strategy and operations, and Ariel Bardin as president of technology — which should “tell you something about our priorities” in the future.
“We will continue to invest in new artists and songwriters, our catalog and our global expansion,” he said. “At the same time, we plan to thoughtfully reallocate some resources to accelerate how we use technology and data to empower artists and songwriters, as well as drive greater efficiency in our business.” That, he added later in the Q&A section of the call, will come “with continued focus on financial discipline and cost containment.”
That doesn’t necessarily mean layoffs, however; he noted that WMG “has actually been much more measured in its headcount growth, for instance, over the last few years than others in the industry who are now undergoing significant layoffs,” and had been addressing financial initiatives even before the recent fluctuations in the market. “But again, I’d like to reiterate that I’ll be focusing on reallocating our internal resources in order to invest in technology and drive not only more tools for our creators, but also greater efficiencies for us,” he added.
On the topic of AI — which he called “probably one of the most transformative things that humanity has ever seen” — Kyncl said that the conversation falls into four buckets in how content owners need to work with AI platforms: “One is the use of existing copyrights to train generative AI. The second is sampling of existing copyrights as the basis for new and remixed AI generated content. The use of AI to help and support creativity — so an assistive way to do that. And most importantly, find ways to protect the craft of artists and songwriters from being diluted or replaced by AI-generated content.”
But he also stressed that the conversation is not just about the future of AI, but about how things can be handled today to prepare for that future — namely, that the processes for identifying and tracking copyrighted material on platforms and making sure they are monetized for the copyright owner need to be better in the present to prepare for what is to come. That’s something Kyncl has plenty of experience with from his time with YouTube, whose ContentID system was overseen by new WMG exec Bardin, and something he says Warner will be focusing on under his purview.
Another benefit from his YouTube days, Kyncl says, is his experience being on the other side of the negotiating table from the major labels when it came to developing YouTube as a partner with and contributor to the music industry. During his tenure, Kyncl helped steer the relationship between YouTube and the labels from one of animosity to one of mutual benefit, which he stressed came from a collaborative approach — one he intends to bring to Warner in its approach to its relationship with TikTok, which is currently in a similar situation to the YouTube of old, in terms of being under fire from the music business for its perceived low payouts and under-valuation of music on its platform. Kyncl described how YouTube’s position changed in answering a question about whether the labels will push for changes with its relationship with TikTok.
“At YouTube, we looked at this problem very closely, and we decided that music was very important to us, and that’s why we did it,” he said, referencing YouTube’s push into subscription streaming, tools like Shorts and improvements to ContentID, among other initiatives. “TikTok needs to do that. It’s the right decision for them to evaluate. And you can see from YouTube’s execution what the results of the finding was for us. But I can’t speak to what TikTok finds. That’s up to them. But my answer is, a holistic relationship is what we’re looking for.”
MusicBird AG, a Swiss-based music rights investment firm, has signed a term loan facility with a capacity up to $100 million with Mitsubishi UFJ Financial Group (MUFG). With publishing rights from hitmaker J.R. Rotem (Rihanna, Jason Derulo, Fall Out Boy) and master income and publishing rights from Shaggy already part of their acquired catalog, the firm is hoping to invest even further in music.
Founded in 2020, MusicBird began acquiring music rights in 2021. The company is focused on becoming a “boutique house of hits,” as described in their announcement, with a highly selective portfolio of “evergreen” songs. The firm notes it is open to all types of genres and regions when considering new catalogs and hopes to harness technology to help grow music revenue.
In addition to this new push into growing their catalog, MusicBird also recently appointed a new CEO, Paul Brown — who previously served as vp global content and platforms for HTC and svp strategic partnerships at Spotify — as well as a new CFO, Roger Howl — who previously worked as senior vp of finance at Hipgnosis Songs Fund.
This announcement comes shortly after a number of key catalog deals have been announced, including Opus Music Group’s 9-figure acquisition of Juice WRLD’s catalog and Hipgnosis’ acquisitions of parts of Tobias Jesso Jr. and Justin Bieber’s catalogs. Meanwhile, Variety is reporting a possible upcoming sale for Michael Jackson’s estate. Though last year some were predicting a slowdown in the catalog market, it appears there are still many players continuing to invest in music IP, despite an economic downturn, rising interest rates and other extenuating circumstances affecting the global economy.
Tony Beaudoin, managing director of entertainment finance at MUFG says: “MUFG is thrilled to lead the senior debt facility for MusicBird, which will allow the company to expand its catalog acquisition initiative of valued music rights. Paul and Roger bring trusted experience in the music space to the company and MUFG is confident in their ability to grow MusicBird’s IP library.”
Primary Wave Music struck a multimillion-dollar deal with Stevie Van Zandt through which Primary Wave will manage Van Zandt’s music publishing and recorded music catalogs, as well as a portion of his name and likeness rights. The agreement includes a stake in producer royalties from Van Zandt’s work with Southside Johnny & the Asbury Jukes as well as band member and producer royalties from his longtime collaboration with Bruce Springsteen. Encompassed by the deal are some of Van Zandt’s biggest songs, including Southside Johnny & the Asbury Jukes’ “I Don’t Want To Go Home” and “This Time It’s For Real”; his protest anthem “I Am A Patriot” (covered by artists including Jackson Browne and Pearl Jam); the theme song for his Netflix series, Lilyhammer; and Darlene Love’s “All Alone On Christmas.” Van Zandt will have access to Primary Wave’s marketing team and publishing infrastructure, including digital strategy, licensing, synch opportunities and film & TV production.
BandLab Technologies — parent company of social music creation platform BandLab, digital audio workstation Cakewalk and artist services platform ReverbNation — acquired beat marketplace Airbit. The acquisition expands BandLab’s creator toolset, which also includes DAW and AI musical idea generator SongStarter. According to a release, artists have earned over $50 million on Airbit, with more than 2 million beats sold. Airbit CEO Wasim Khamlichi will step down from the role after a transition period, though all current Airbit employees will be retained under the deal.
Utopia Music is selling ROSTR, a free-to-use music industry directory and data platform, back to ROSTR founders Mark Williamson and Adam Watson. Utopia purchased the company in December 2021 with the intention of strengthening its direct offerings for creators, but, following a recent strategic reorganization, it has since refocused its efforts on serving creators through third parties via its B2B offerings, according to a press release. “Utopia and ROSTR came together with a shared mission of making a better world for music, although we’ll be pursuing this mission on separate paths, we know ROSTR is an invaluable resource for the music industry and we wish Mark, Adam, and the whole ROSTR team the best of luck,” said Utopia Music executive chairman and founder Mattias Hjelmstedt in a statement.
Codiciado signed an exclusive distribution deal with Virgin Music U.S. Latin via Golden Ink Entertainment. The signing comes shortly after the trap corridos singer, born Erick Aragon, launched his solo career independent from his longtime band Grupo Codiciado. As a soloist, he’s released a handful of singles, including “La Que Se Fue” and “Ando Enfocado.” About the deal, Frank Medina, executive producer and chairman at Golden Ink, said, “We are very excited for everything that is coming with Codiciado, Golden Ink and Virgin Music. We remain focused on producing quality music for our audience and carrying the Mexican flag high.” – Griselda Flores
Web3 record label and in-house entertainment studio Hume signed with CAA. The agency will help the company “identify and create opportunities across a variety of areas, including licensing and merchandising, brand partnerships, live events, film, and television and more,” according to a press release. “Working with CAA presents an opportunity to bridge the gap between traditional media and Web3 to bring metastars into the mainstream,” added Hume chief artist officer and co-founder Jay Stolar in a statement. Hume “metastars” include Angelbaby and the recently-launched Clio.
Warner Music India acquired a majority stake in Divo, a digital media and music company in India with a presence across all four South Indian language music markets. Divo works with labels, artists and musicians to help distribute and monetize their content across digital platforms, radio and TV stations. It released more than 30,000 songs last year in the Tamil, Kannada, Malayalam and Telegu music industries. “This move will strengthen our presence in the south of the country, enabling us to have a truly strong Pan-India presence,” said Warner Music India managing director Jay Mehta in a statement.
“Astronaut in the Ocean” rapper Masked Wolf reunited with Australian indie label Teamwrk under a new global distribution partnership with Ingrooves Music Group, which will now distribute releases for all Teamwrk artists. Masked Wolf’s first single under the partnership, “Never the Same,” drops on Friday (Feb. 10).
Warner Music Central Europe and Stefan Dabruck Management (SDM) extended and expanded their partnership. Under the new deal, the two companies “will build on their joint success and focus on taking European Dance music to a new global audience by marrying up Warner Recorded Music’s powerful global network and SDM’s second-to-none creative talent,” according to a press release. The new chapter of the partnership will kick off with a series of songwriting camps and releases in 2023.
Secretly Distribution reached a strategic partnership with independent royalty accounting platform Infinite Catalog. According to a press release, the partnership will make it easier for Secretly labels including Dead Oceans, Jagjaguwar, Saddest Factory Records and Secretly Canadian to pay their artists “more often.” Infinite Catalog is already in use by more than 20 Secretly Distribution labels. “Like us, Infinite Catalog is committed to bringing scale advantage to small and medium-sized labels, so that at a relatively low cost they can have the same caliber of royalty processing capabilities as the biggest music companies,” said Secretly Distribution co-CEO Darius Van Arman in a statement.
Electro-pop trio ARIZONA signed with Fueled By Ramen and will release a forthcoming project on the label. Their new single, “Moving On,” is the band’s first new music release in four years.
Singer-songwriter Dylan Marlowe signed with Sony Music Nashville in conjunction with Play It Again Entertainment, with whom Marlowe signed a publishing and artist development deal in 2020. He recently released the track “Record High” and was named one of Spotify’s 2023 country artists to watch.
SoundCloud and Pandora renewed their advertising sales agreement. Pandora parent company SiriusXM’s combined sales group, SXM Media, will continue to serve as the exclusive ad representative for SoundCloud into 2024. SoundCloud’s ad inventory will now be available through AudioGO, the new self-serve advertising platform owned by SiriusXM subsidiary AdsWizz.
Decca Classics signed composer and conductor Tan Dan, who in 2000 won an Oscar for his score to the blockbuster action film Crouching Tiger, Hidden Dragon. The label will release several Dun projects this year, including Five Souls (Mar. 3), Buddha Passion (Apr. 7) and The Tears of Nature (September). It will also release five of his previously unavailable catalog albums.
Warner Music Asia signed Singaporean singer-songwriter Gentle Bones. The label will work to grow his fan base in key markets outside Singapore. Gentle Bones’ debut release on Warner Music Asia, “The Right Words,” is slated for release on Friday (Feb. 10) as the first single from his forthcoming EP.
ASM Global has assumed the management and operation of Wake Forest University‘s Lawrence Joel Veterans Memorial Coliseum in Winston-Salem, N.C. The company’s purview will include facility operations, staffing, event-booking and production services for Truist Field, LJVM Coliseum and David F. Couch Ballpark. ASM Global’s Wake Forest team is led by GM Brandon Berry, who assumed the role in September; a total of seven ASM Global employees work at the venue, with two additional full-time positions due to be added this year. Wake Forest will sunset its formal booking collaboration with Greensboro Coliseum, which has been in place since 2013.
SaveLive announced two new venue partners: Eagles Entertainment, which boasts a network that includes Eagles Ballroom, Rave and the Rave II in Milwaukee; and The Fremont Theater in San Luis Obispo, Calif.
The Red Clay Strays signed with WME for global representation in all areas. The group will be represented by Jay Williams, co-head of WME’s Nashville office, as well as Aaron Tannenbaum, Alex Collignon and Kanan Vitolo. They’re slated to play 28 dates opening for Elle King this spring, as well as four dates opening for Eric Church this summer, in addition to various festival dates. The group, which released their debut album, Moment of Truth, last year, is managed by Cody Payne of Conway Entertainment Group.
Nettwerk signed Florida band The Haunt and alt-pop artist Kevitch. The first Haunt release by the label is the group’s new single, “Shake.” Nettwerk will also release Kevitch’s single, “Secrets,” on Friday (Feb. 10).
Country singer Aaron Watson signed with Roundhouse Entertainment for management. On Feb. 2, Watson embarked on a headlining tour, Roughstock Road Show, to support his current album, Unwanted Man.
Rapper Vico C has signed a record deal with Nain Music, a division of Rimas Entertainment, Billboard has learned.
Previously signed to EMI Latin, where he released albums such as En Honor a la Verdad and Desahogo following his release from prison in the early 2000s, Vico C is kicking off a new phase in his career with a new deal and an upcoming studio album due in May.
“During these times, when it’s a great necessity to put out content that’s pure, a new platform opens to continue to do what I’ve always done with my music: touch hearts and revolutionize a lost society,” Vico C said in a statement. “That’s why I think the most important part of my union with Nain/Rimas is the liberty they’ve given me to express what I want.”
The Puerto Rican artist, born Luis Armando Lozada Cruz, became one of the most recognized and respected Latin rap artists of the 90s with songs such as “Me Acuerdo,” “Bomba Para Afincar,” “La Recta Final” and “Viernes 13.” On the charts, Vico C has eight entries on Billboard‘s Top Latin Albums, three hit the top 10, and three entries on both Hot Latin Songs and Latin Airplay.
“It’s a privilege to work with an artist of this stature with a great trajectory like Vico, who’s legacy in Latin music and and in the new generations is still in full force,” added Fidel Hernández, CEO of Nain Music.
Vico C is managed by his wife Sonia Torres.
Warner Music Group’s net revenues fell nearly 8% to $1.48 billion, despite growth in streaming revenues and its music publishing business, as the company suffered from a tough comparison to the year-ago quarter, it reported on Thursday.
WMG reported net profits declined by 34% to $124 million compared to the year ago period when the company reported $188 million in net income. This quarter, which ended Dec. 31, 2022, had one fewer week than the quarter ending Dec. 31, 2021, which resulted in outsized earnings in the year-ago period.
Executives said that beneath those headline figures, the company saw a 9% growth in music publishing revenue, 13.2% in music publishing streaming revenue and 11% increase in operating income.
“The foundations of this company are strong, and our addressable market is continuously growing,” Warner’s new CEO Robert Kyncl said in a statement. “Music’s value, power, and ubiquity are among the many reasons I decided to join WMG and lead the next phase of our evolution. As we navigate a challenging business environment, we expect to have a strong release schedule in the second half of 2023 while managing our costs throughout.”
The company’s music publishing division contained most of the quarter’s highlights, with revenues up 9.2%, or 14.2% in constant currency, driven by increases in digital and performance revenue. Digital revenue increased by 12%, or 15.5% in constant currency, and streaming revenue increased 13.2%, or 16.8% in constant currency, on growing streaming and timing of new digital deals, the company said. Digital revenue now represents 59.6% of total music publishing revenue, up from 58.1% last year. Performance revenue increased thanks to continued growth from the hospitality industry, concerts and live events, while mechanical revenue was flat. Synchronization revenue declined on lower commercial licensing activity in the U.S.
In the recorded music division, revenue fell 10.6%, or 5.6% in constant currency, on lower digital, physical and artist services and expanded rights revenue. While streaming revenue was down 6.7% in the quarter, when adjusted for the impact of the extra week in 2021, WMG said recorded music’s streaming revenue was up half a percent, impacted by al ighter release schedule and a slowdown in ad-supported revenue due to macroeconomic conditions.
WMG revenue fell 7.8%, or 2.7% in constant currency, compared to the year ago quarter, which had an extra week
Digital revenue decreased 5%, 0.9% in constant currency
Streaming revenue decreased 4%
Music publishing revenue increased 9.2%, or 14.2% in constant currency
Music publishing streaming revenue grew 13.2%, or 16.8% in constant currency
Recorded music streaming revenue decreased 6.7%, or 2.6% in constant currency, on a lighter release schedule impacted by the fewer number of weeks in the quarter
Net income was $124 million this quarter, down 34% from $188 million one year ago
Adjusted net income of $110 million was down 51% from $223 million in the year ago quarter
South Korean music company HYBE has made a major entry into the U.S. market by acquiring Atlanta-based QC Media Holdings, the company behind hip-hop label Quality Control Music and a roster that includes Migos, Lil Baby, City Girls and Lil Yachty.
Founded in 2013 by CEO Kevin “Coach K” Lee and COO Pierre “P” Thomas, Quality Control will fall under the HYBE America umbrella and the leadership of its CEO, Scooter Braun. HYBE America encapsulates SB Projects, as well as Big Machine Label Group, which HYBE obtained through its 2021 acquisition of Braun’s Ithaca Holdings.
“Based on hip-hop, QC has been making a strong presence in the American music scene,” HYBE CEO Jiwon Park said in a statement. “With our shared vision, I have high hopes in what we can operate and achieve together.”
In HYBE, Quality Control gets a team with a history of building artists from scratch into global stars. “All of HYBE’s leaders are entrepreneurs with phenomenal combined history [of] finding talent and taking it to the next levels,” said Thomas in a statement.
“P and I are ecstatic about this partnership with Scooter and HYBE and are confident they can get us to our global ambitions we’ve had in our scope since the beginning of the company as nothing means more than our artists impacting worldwide,” Lee added. “Over many years, Scooter and I have cultivated real trust and a common way of looking at the world and culture.”
Quality Control expands Braun’s purview to a genre that has been missing from HYBE’s broad roster. SB Projects clients include Justin Bieber, Ariana Grande, Demi Lovato and Kid Laroi. Big Machine’s country-focused roster features Tim McGraw, Thomas Rhett and Rascal Flatts. HYBE has dipped its toes into hip-hop with Big Machine’s partnership with Blac Noize! Recordings, the label behind the 2022 summer anthem “F.N.F. (Let’s Go)” by Hitkidd and Glorilla.
HYBE dominates K-pop with artists such as BTS, the BTS members’ solo projects, Tomorrow X Together, Enhypen and Seventeen. In December, it launched a new Japanese imprint, Naeco, and signed Japanese singer Yurina Hirate. HYBE also has a joint venture with Universal Music Group’s Geffen Records and is developing an international girl group in the U.S. But the ambitious Korean company had a limited presence in the world’s largest music market until the 2021 Ithaca acquisition. Quality Control, Braun’s first major acquisition as HYBE America CEO, further diversifies HYBE and gives it a premiere hip-hop brand.
Quality Control’s recordings have been distributed through Universal Music Group’s Motown Records, which formed a joint venture with Quality Control in 2015 along with UMG’s Capitol Music Group. A HYBE spokesperson did not comment on the state of the joint venture following the acquisition. Quality Control’s Thomas noted that both companies have a relationship with “the Universal Music Group family of companies [that] makes this seamless,” he said in a statement.
In 2022, Motown/Quality Control’s overall market share rose to 0.97% from 0.90% in 2021. In terms of current market share — music released over the previous 18 months — Motown/Quality Control improved from 1.18% in 2021 to 1.33% in 2022. It had remained part of Capitol’s market share during that period, despite its ostensible status as a standalone entity. Capitol’s overall market share declined from 6.81% in 2021 to 6.40% in 2022 while its current share dropped from 5.64% in 2021 to 4.97% in 2022.
In 2022, Lil Baby had 2.97 million equivalent albums – a metric that combines sales and streams – and 4.3 billion on-demand streams in the U.S. in 2022, according to Luminate. His track “In a Minute” peaked at No. 14 on the Hot 100 in April and ranked No. 43 on the year-end Hot 100 Songs chart. Despite not releasing a new album in 2022, Migos had 2.9 million album equivalent units and 4.3 billion on-demand streams last year. Lil Yachty had 424,000 album equivalent units and 637.8 million on-demand streams. City Girls had 251,000 album equivalent units and 361.6 million on-demand streams.
The acquisition also broadens HYBE’s tech portfolio. HYBE built its own social media platform, Weverse, to create a direct connection with its K-pop groups’ massive fan bases. It also owns a controlling stake in AI audio startup Supertone. Last year, Quality Control’s Solid Foundation Management, the company’s artist management arm, invested an undisclosed sum in music streaming platform SoundCloud. “This partnership is a vital part of our plan to innovate the entertainment industry through a diversified portfolio and innovative technologies,” said Bang Si-Hyuk, HYBE’s chairman, in a statement. “We will work together to continue adding to the global depth of hip-hop.”
Additional reporting by Dan Rys.
U.K. digital music company 7digital plans to accept an acquisition bid by Songtradr for 19.4 million pounds ($23.4 million), 7digital announced Wednesday (Feb. 8).
7digital shareholders will receive 0.695 pence ($0.84) per share in cash, a 114% premium over the prior day’s closing price.
7digital directors, who collectively hold 43.7% of outstanding shares, intend to recommend that shareholders vote in favor of the acquisition. Songtradr says it has also received irrevocable undertakings to vote in favor of the deal from institutional and other shareholders representing 24.8% of outstanding shares.
Since its founding in 2014, Santa Monica, Calif.-based Songtradr has raised over $100 million to build a company intent on solving many of the inefficiencies in music licensing. It acquired AI metadata and music search company Musicube in 2022, music licensing agency Massive Music in 2021 and licensing agency Big Synch Music in 2019. In addition, Songtradr established a global creative division, led by industry vet Amanda Schupf, in 2021.
Songtradr’s announcement highlighted a number of strategic benefits it will receive from the proposed transaction. For starters, 7digital would give Songtradr a platform and music catalog that “will enhance relationships with existing customers and accelerate new customer acquisition” and put the company “in an advantageous position to provide unmatched combined solutions” in the video game space for both licensors and music rights holders.
Also, 7digital, which launched in 2004, would give Songtradr a technology solution that “delivers both music and audio rights at scale, metadata enhancement, digital rights management, content tracking and royalty spending.” The acquisition would allow Songtradr to quicken its growth strategy and “simplify global music licensing,” the announcement added.
Following the acquisition, current 7digital CEO Paul Langworthy will join Songtradr along with the rest of the senior leadership team, though interim chairman Mark Foster, CFO Michael Juskiewicz and all non-executive directors will step down. Songtradr will additionally repay 7digital’s £2 million revolving credit facility as well as two £500,000 loans. It will continue to operate 7digital’s London office for the time being.
The acquisition marks the close of a turbulent few years for 7digital, which in July 2019 faced the possibility of going into administration — or the U.K. equivalent of Chapter 11 bankruptcy — unless it managed to raise £4.5 million ($5.5 million) in additional funds by the end of that month.
Reservoir Media’s revenues rose and profit margins expanded last quarter, as the strength of its music publishing business helped offset a $4 million net loss, the company reported Wednesday (Feb. 8).
Reservoir reported that its top-line revenues rose by 16% to $29.9 million for the third quarter of its fiscal year 2023, which ended Dec. 31. The main drivers of that jump were the music publishing division, where revenues of $22 million jumped 14% from a year ago on strong digital streaming revenues, and Reservoir’s small artist management business, which delivered a year over year revenue increase of more than 200% from touring and merchandise sales at live events.
Reservoir founder and chief executive Golnar Khosrowshahi said the firm, which recently bought Dion‘s catalog and signed publishing deals with popular Indian rappers MC Altaf and D’Evil, has $2.3 billion in prospective catalog acquisition deals in its pipeline.
“We will continue to benefit from the overall momentum in the music industry,” Khosrowshahi said on a conference call discussing the quarterly results. “We are approaching the last fiscal quarter of the year with confidence.”
Reservoir raised its guidance for the fiscal year 2023, which ends March 31, for the second straight quarter. Executives said they now expect to report full-year revenue in the range of $120 million to $122 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the range of $46 million to $47 million.
The company reported that its adjusted EBITDA for the third quarter rose 24% to $10.9 million.
“While we are happy with our continued strength in the top line and operating margins, we did experience some pressure on the bottom line due to elevated costs during the quarter,” said Reservoir CFO Jim Heindlmeyer during the earnings call.
Reservoir reported a net loss of $4.1 million, stemming from a one-time non-cash tax expense related to the higher U.K. tax rate for 2023 and the extinguishment of some existing debt. That resulted in a diluted loss of 7 cents for the quarter compared to earnings of 2 cents per share for the quarter.
Depreciation and amortization costs also rose due to catalog acquisitions, while company administration expenses rose 19%, mainly due to Reservoir’s expanding management business division.
In the recorded music division, Reservoir reported revenue of $7.6 million, up just 1% over last year. While digital revenues in the division rose 17% to $5.3 million, declines in physical and synchronization revenue resulted in roughly flat growth year over year.
Lawyers for YNW Melly have launched an appeal to the Florida Supreme Court, asking the court to overturn a ruling last year that said the rapper could face the death penalty if convicted in his upcoming murder trial.
In an opening brief filed last month, Melly’s lawyers urged Florida’s top court to rule that prosecutors had forfeited the right to seek capital punishment. They say the government failed to give Melly and his attorneys proper notice that they planned to do so, violating strict procedural rules.
In making their argument to the state high court, the rapper’s lawyers said the justices should take the case because it raises issues of “great public importance” beyond Melly’s individual charges.
“Death penalty law is an area where it is in the clear interest of everyone — defendants, victims, lawyers, judges, etc. — to have precisely defined and easily understood rules,” Melly’s attorneys, Daniel Tibbitt and Philip R. Horowitz, wrote in the Jan. 27 brief.
Melly (real name Jamell Demons) has spent years awaiting trial on first-degree murder charges over accusations that he and another YNW rapper shot and killed Anthony “YNW Sakchaser” Williams and Christopher “YNW Juvy” Thomas Jr. in 2018.
A first-degree murder defendant in Florida would typically face the possibility of execution if convicted, but Melly’s attorneys argued in April that the state had failed to comply with strict laws on how they must warn defendants that they’ll seek the death penalty.
Florida requires prosecutors to give notice 45 days after arraignment if they plan to seek capital punishment. In Melly’s case, the state attorney filed such a notice when they originally indicted the rapper in 2019, but failed to do so when a so-called superseding indictment was handed down earlier this year.
In July, a trial judge sided with Melly’s attorneys and said prosecutors had forfeited the chance to seek death. But in November, an appeals court ruled the judge’s decision was incorrect. The court wrote that since prosecutors gave notice that they might seek death when they first charged Melly in 2019, they had complied with state rules: “Notice is notice.”
In taking the case to the Florida Supreme Court last month, Melly’s lawyers argued the state rules “plainly require” new notice be filed when a new indictment is handed down.
“The Petitioner was arraigned on a new indictment, and the State did not file the requisite notice within 45 days of that arraignment (or ever),” the rapper’s lawyers wrote. “The State relies on a notice that was filed as to an original indictment that is, and has been since the filing of the new indictment, a legal nullity.”
An attorney for the state of Florida did not immediately return a request for comment. The state can file a response to the brief in the months ahead.
Universal Music Group’s Def Jam Recordings is the latest major label imprint to venture into Web3 through the launch of a virtual band, The Whales. Comprised of cartoon NFT whale characters, the group’s debut full-length album has an all-star cast of producers and songwriters attached.
The deal is a partnership with The Catalina Whale Mixer, a collection of 5,555 NFT avatars on the Solana blockchain. Created by tech studio WAGMI Beach in December 2021, the concept of The Whales was born when co-founders Ben Willis and Joshua Andriano met with Def Jam’s DJ Mormile and Ryan Rodriguez. “We pitched the idea of a community-grown avatar group to DJ and [they] just got it,” says Willis. “To be working with Def Jam on releasing this one-of-a-kind new music project is a dream come true.”
Def Jam has not yet confirmed the musicians behind the project but says it will involve a “who’s who” of musical talent. The Whales’ first project will be released as a full-length album, while the group will tap into the broader Catalina Whales Mixer community to deepen the relationship between music and Web3 culture.
The virtual artist NFT playbook is becoming a trend among bigger record labels. The same concept was executed by 10:22PM — another Universal Music Group imprint — which licensed characters from the Bored Ape Yacht Club to create the animated band KINGSHIP. Warner Records’ Web3 subsidiary Probably a Label is also developing a virtual artist in collaboration with its 5,555 NFT holders through a voting system.
The team at WAGMI Beach — whose founders are music industry veterans themselves, previously at management company Indie Pop — believes this model will improve the way artists and labels engage directly with fans by letting them be part of the process. “At the core of all the NFT and Web3 attention is a fundamental technology change that will alter how music and art is consumed by generations to come,” said co-founder Alec Lykken. “This is our initial dive into what we believe to be an incredible new wave for artists and fans alike.”