earnings
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Believe benefitted from geographical expansion and strong streaming growth to post revenue of 880.3 million euros ($952.8 million at the average exchange rate) in 2023, up 15.7% from the prior year, the company announced Wednesday (Mar. 13). Organic growth was 14.4%, matching the guidance the company provided in October of organic growth exceeding 14%. After adjusting for foreign currency headwinds, Believe’s adjusted organic growth rate was 19.5% in 2023 and 21.8% in the fourth quarter.
The current growth rate should extend into the current year. Believe expects to achieve organic revenue growth in excess of 20% in 2024, adjusted to 18% to account for expected foreign currency headwinds. That high growth rate stems from a healthy paid streaming market and the belief that the ad-supported streaming market will rebound in the second half of the year. Believe also expects to make market share gains, especially in countries where it is not yet a top three company for local artists.
In 2023, Believe was helped by price increases at music streaming services in 2023 — Amazon Music in January, Spotify in July and Deezer in November. The company had market share gains in all key countries and with all key digital service providers, Xaiver Dumont, chief financial and operating officer, said during Wednesday’s earnings call.
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Adjusted earnings before interest, taxes, depreciation and amortization (EDITDA) of 50.3 million euros ($54.4 million) was up 45%. Adjusted EBITDA margin rose to 5.7%, surpassing guidance of at least 5.5%. Free cash flow was -3.1 million euros (-$3.4 million), although free cash flow turned positive in the second half of the year.
The earnings release arrived as Believe is the subject of a bid to be taken private by a consortium led by CEO Denis Ladegaillerie and investment firms EQT X and TCV. Warner Music Group (WMG) revealed last week that it’s interested in pursuing Believe and willing to beat the consortium’s offer. Believe’s executives did not address questions about the take-private bid during Wednesday’s earnings call, however.
The publicly traded French music company’s business model is built around helping to develop artists and using digital marketing and distribution to impact local charts. That approach is increasingly relevant when any artist can go viral on social media. Case in point: Believe landed a hit in 2023 when a 2022 single, “Si No Estás’” by Iñigo Quintero, become a TikTok hit in Spain before topping charts in France, Germany, Norway, Sweden, Austria and Belgium. “These success at the top are being achieved in a wider variety of genres of music” including hip-hop, pop and metal, Ladegaillerie said during the earnings call.
Believe also landed 42 albums in the top 200 in its home country and 48 singles in the Top 100 in its second-largest market, Germany. In the United Kingdom, consumption was up 394%. In China, Believe expanded to 80 staffers in five offices that serve 300 record labels. In India, where Believe acquired White Hill Music’s catalog in December, the company had 66 songs on local charts.
Revenue in France, where Believe is in the top three recorded music companies for local artists, rose 14.9% to 147.8 million euros ($160 million). Revenue in Germany dropped 2.4% to 110.9 million euros ($120 million), while revenue in Europe, excluding France and Germany, rose 25.9% to 264.6 million euros ($286.2 million). The Americas accounted for 128.1 million euros ($138.7 million), up 17.4% on strength in Brazil and Mexico. Asia-Pacific and Africa contributed 228.9 million euros ($247.8 million), up 14.9%, with China and Japan being particularly strong. India and Southeast Asia grew at slower paces due to those regions being affected by weakness in the ad-supported streaming market.
Revenue for the company’s premium solutions division rose 15.8% to 825.1 million euros ($893.1 million), while the division’s adjusted EBITDA improved 16.8% to 118.3 million euros ($128 million). Premium solutions mainly consists of the sale, promotion, marketing and delivery of digital content for artists and labels. It also includes some physical sales, synchronization services, neighboring rights and music publishing.
In the automated solutions division, revenue increased 14.6% to 55.2 million euros ($59.7 million), and adjusted EBITDA rose 53% to 10.1 million euros ($10.9 million). The slower growth rate was expected, said Dumont, because of lower ad-supported monetization and a new TuneCore pricing structure launched in 2022 that led to lower average revenue per client and was “not yet compensated by the ramp-up in new clients.”
Ladegaillerie has formed a consortium with two of its shareholders, investment firms EQT X and TCV, to take the company private at 15 euros ($16.43) per share. That offer ran into competition last week when WMG revealed its interest in Believe and said it might be willing to pay at least 17 euros ($18.62) per share. The consortium has attempted to speed the process and waive the board’s condition that an independent expert provide a report to Believe’s ad-hoc committee on the offer’s fairness from a financial viewpoint. The parties are now waiting for French financial regulators to say if the consortium can unilaterally waive the independent expert’s report and whether WMG’s preliminary proposal prevents the waiver of the board’s condition.
The radio business’ slog through a slow advertising market appears to be improving in 2024. “As we look to the year ahead, we see 2024 as a recovery year and we expect a return-to-growth mode,” iHeartMedia CEO Bob Pittman said during the company’s Thursday (Feb. 29) earnings call for the fourth quarter of 2023. Explore […]
French streaming company Deezer‘s revenue grew 12.1% to 130.7 million euros ($141 million) in the fourth quarter, bringing its full-year revenue to 484.7 million euros ($524 million), up 7.4% year over year, the company announced Wednesday (Feb. 28).
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Full-year adjusted earnings before interest, taxes, depreciation and amortization (ABITDA) was roughly halved to -28.8 million euros (-$31 million) and net loss was cut by almost two-thirds to 59.6 million euros ($64 million).
This year, Deezer expects to achieve a 10% growth in revenue — to roughly 533 million euros ($575 million) — and again halve adjusted ABITDA to -15 million euros (-$16.2 million) behind improved gross margins and cost controls.
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Deezer’s subscriber count grew 11.5% to 10.5 million from 9.4 million at the end of 2022. The entire gain in subscriptions came from business-to-business partnerships, which grew by 1 million to 4.8 million. Last year, Deezer launched new partnerships with home audio company Sonos, media company RTL in Germany and e-commerce company Mercado Libre in Brazil and Mexico to power those companies’ branded music streaming services. It also renewed partnerships with mobile carrier TIM in Brazil, retailer Fnac Darty in France and mobile carrier Orange in France.
Average revenue per user (ARPU) from B2B subscribers rose from 2.6 euros ($2.81) to 2.8 euros ($3.03) per month. “Our partnership strategy is bearing fruit, driving our overall growth and helping us win market share outside France,” CEO Jeronimo Folgueira said in a statement.
Deezer’s direct subscribers remained flat at 5.6 million but those user’s ARPU increased from 4.7 euros ($5.09) to 4.9 ($5.31) euros per month. Last year, the company raised monthly subscription fees in France, Spain, Italy and the Netherlands from 10.99 euros to 11.99 euros with “minimal churn” on its subscriber case, according to the earnings release.
The company also announced Wednesday that Folgueira is stepping down “to pursue personal projects.” Folgueira joined Deezer as CEO in 2021. During his tenure, Deezer went public through a merger with a special purpose acquisition company, I2PO, in 2022, and forged a partnership with Universal Music Group in 2023 to introduce an artist-centric model for royalty calculations.
Shares of Deezer rose 0.5% to 2.18 euros ($2.36) Wednesday before the company released earnings results. The stock has almost doubled its 52-week low of 1.19 euros ($1.29) on April, 2023, 13 but is well below its 52-week high of 3.19 euros ($3.46) set on Nov. 2, 2023.
Universal Music Group’s revenue reached 3.21 billion euros ($3.45 billion) in the final period of 2023, up 9% year-over-year (up 15.6% in constant currency) as the company’s non-subscription streaming growth slowed again and its record labels got a boost from strong physical sales and licensing.
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Spotify’s price increase helped drive the recorded music division’s subscription revenue up 8.9% (up 15% at constant currency, which removes the effects of foreign exchange rates) to 1.14 billion euros ($1.22 billion). As a percent of recorded music revenue, subscription revenue increased to 47% from 46.7% in the prior-year quarter.
Non-subscription streaming revenue declined 1.3% as reported (increased 5.6% at constant currency) in the quarter, however. That followed a 1.4% decline (a 5% gain at constant currency) in ad-supported streaming revenue in the third quarter. Ad-supported streaming “remains strong” but the ad market recovery “has not been uniform” and UMG is “cautious” about near-term growth, CFO Boyd Muir said during Wednesday’s earnings call. The soft streaming revenue was not affected by UMG’s decision in early February to pull its catalog from TikTok, which accounts for 1% of UMG’s annual revenue.
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Sales were strong elsewhere in the recorded music division, though. Physical revenue of 447 million euros ($481 million) was up 10.6% (up 17.0% at constant currency). Licensing and other revenue of 410 million euros ($441 million) was up 26.5% (up 34.0% at constant currency). Downloads and other digital revenue declined by 49.2% (45.8% at constant currency), but at 32 million euros ($34) accounted for just 1.3% of recorded music revenue in the quarter.
Universal Music Publishing Group’s fourth-quarter revenue of 576 million euros ($620 million) was up 8.7% (up 15.4% at constant currency). Digital revenue of 339 million euros ($365 million) was up 26.0% (36.1% at constant currency). Sync revenue of 70 million euros ($75 million) was up 18.6% (up 25.0% at constant currency). Mechanical revenue of 31 million euros ($33 million) was up 24.0% (up 29.2%). Performance revenue fell 19.1% (15.8%) to 123 million euros ($132 million).
Top sellers in the quarter were Taylor Swift, The Rolling Stones, Drake, Jung Kook and Stray Kids.
For the full year, UMG’s revenue of 11.1 billion euros ($12 billion at the average exchange rate for the year), up 7.4% as reported and a 11.1% increase at constant currency that removes the effects of foreign exchange rates. That’s similar to the 13.6% revenue growth at constant currency reported in 2022, but well below the as-reported growth of 21.6% that includes foreign currency exchange.
Adjusted EBITDA of 2.37 billion euros ($2.6 billion) was up 11% (up 14.6% at constant currency). Unadjusted EBITDA of 1.81 billion euros ($2 billion) was down 10.8% (down 7.8% at constant currency.) Unadjusted EBITDA eliminates the effects of the Copyright Royalty Board’s Phonorecords III ruling and a 15-million euro ($16 million) legal provision.
In the recorded music division, full-year revenue of 5.7 billion euros ($6.2 billion) was up 6.6% (up 10.2% at constant currency) and physical revenue of 1.38 billion euros ($1.49 billion) was up 14.3% (up 19.4% at constant currency). Licensing revenue of 1.17 billion euros ($1.27 billion) was up 9.5% (up 13.6% at constant currency).
Full-year publishing revenue of 1.96 billion euros ($2.12 billion) was up 8.7% (up 12.3% at constant currency). Digital revenue of 1.13 billion euros ($1.22 billion) was up 8.5% (up 12.5% at constant currency). Mechanical revenue of 108 million euros ($117 million) was up 11.3% (up 14.9% at constant currency). Performance revenue of 416 million euros ($450 million) was up 12.1% (up 15.9% at constant currency).
At constant currency, UMG’s fourth quarter improvement was similar to the other two major music groups. Warner Music Group was up 17.5% to $1.75 billion and Sony Music was up 16% to 358.2 billion yen ($2.5 billion). Smaller companies have also posted similar growth rates.
Strong album sales by K-pop groups Seventeen, Tomorrow X Together and New Jeans helped Korean music company HYBE enjoy record revenue of 2.18 trillion won ($1.67 billion), up 22.6%, in 2023, according to the company’s latest earnings report.
HYBE’s album sales from its Korean artists nearly doubled to 43.6 million last year from 22.2 million in 2022, while album sales accounted for 44.6% of total revenue, up from 31.1% the prior year. In Korea, Seventeen led the way with 15.9 million album sales (HYBE’s earnings release cited numbers from Circle Chart, which tracks sales only in Korea). Tomorrow X Together sold 6.5 million albums and NewJeans sold 4.3 million albums.
Streaming revenue got a boost from the company’s acquisition of Atlanta-based hip-hop label Quality Control in February 2023. Revenue from HYBE’s U.S. record labels — Quality Control as well as Big Machine Label Group — grew 70% to 150 billion won ($114.9 million) and accounted for nearly half of HYBE’s streaming revenue growth for the year. Streaming revenue from the company’s Korean labels outside Korea also performed well last year, increasing 102% to 107 billion won ($81.9 million). Within Korea, streaming revenue from those labels increased only 64%, however, to 41 billion won ($31.4 million).
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Concert revenue increased 39.1% to 359.1 billion won ($275 million) and accounted for 16.5% of total revenue, up from 14.5% in 2022. Much of that was due to volume, as HYBE had 125 concerts from seven touring artists in 2023 compared to 78 concerts from four touring artists in 2022.
Most other revenue sources declined year-over-year. Ads and appearances fell 12.3% to 141.9 billion won ($109 million). Merchandise and licensing dropped 17.7% to 325.6 billion won ($249 million). Content sank 15.1% to 289.9 billion won ($222 million). One bright spot was fan clubs, which increased 35.9% to 91.2 billion won ($70 billion).
Company-wide gross profit improved 19.7% to 1 trillion won ($773 million), lower than revenue’s 22.6% growth rate because cost of sales rose 25.2% (gross profit is sales minus cost of sales). Sales, general and administrative expenses increased only 17.7%, however, which helped operating profit improve 24.9% to 295.8 billion won ($227 million). Net profit soared 288% to 186.5 billion won ($143 million).
Korea’s share of HYBE’s revenue increased from 33% in 2022 to 36% in 2023. Japan’s share of revenue also increased, from 28% to 31%. North America fell from 32% to 26% despite the addition of Quality Control.
The Weverse social media platform ended the year with 10.1 million monthly active users (MAUs) in the fourth quarter, down from an all-time high of 10.6 million MAUs in the third quarter but well above the 8.5 million MAUs in the fourth quarter of 2022. Weverse finished the year with 122 artist communities, up from 71 at the end of 2022.
Live Nation had another record year in 2023, topping the all-time highs reached in 2022 when artists hit the road in heavy numbers after COVID-19 restrictions shut down the touring business for most of 2020 and 2021.
The concert promoter and ticketing giant had revenue of $22.7 billion in 2023, up 36% from the prior year, thanks to record levels of attendance, ticket sales and sponsorships. Adjusted operating income (AOI) was $1.86 billion, up 32% year-over-year and double the AOI from 2019, the last full year before the pandemic.
As artists went on tour in record numbers, there was ample fan demand to soak up the increased supply of live music. Concert attendance climbed 20.3% to 145.8 million. Attendance in North America rose 16.6% to 81.3 million and international attendance spiked 25.4% to 64.5 million. The biggest attendance gains came from stadium shows — notably Metallica, Beyonce and Luke Combs — which grew 60% to 29 million. The number of concerts — individual shows and festivals — rose 15.3% to 33,629 in North America and 13.5% to 16,430 internationally.
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The rise of K-pop and Latin music, along with Live Nation’s Dec. 2021 acquisition of Mexican promoter OCESA, led to an increasingly international concert business. Live Nation’s top 50 tours had 50% more international acts in 2023 than five years ago, and additional international dates meant tours had 15% more shows on average.
“Our digital world empowers artists to develop global followings, while inspiring fans to crave in-person experiences more than ever,” said president/CEO Michael Rapino in a statement. “At the same time, the industry is delivering a wider variety of concerts which draws in new audiences, and developing more venues to support a larger show pipeline.
The concerts division’s full-year revenue increased 39% to $18.76 billion as demand increased across markets and venue types. At Live Nation’s owned and operated venues — branded as Venue Nation — attendance increased 13% to 55 million and ancillary per-person revenue had double-digit growth. At its amphitheaters, per-person spending increased 10% to over $40. Because Live Nation owns and operates those venues, its bottom line benefits from increased fan spending on items such as beverages, food and merchandise.
At Ticketmaster, revenue rose 32% to $2.96 billion and AOI improved 35% to $1.12 billion. Total fee-bearing gross-transaction value (GTV) rose 30% to $36 billion — North America GTV rose 26% while international GTV jumped 42%. The number of fee-bearing tickets sold increased 17% to over 329 million. New clients accounted for 21 million additional tickets old, with about 80% of those coming from international markets.
The sponsorship and advertising division’s revenue increased 13% to $1.1 billion and its AOI rose 14% to $675.1 million. Led by growth in beverage, technology and financial services sectors, Live Nation’s sponsorship business had over 100 partners with multi-million-dollar, multi-year commitments.
In the fourth quarter, historically a slow period compared to the spring and summer months, Live Nation’s revenue rose 36% to $5.8 billion. The concerts division’s revenue soared 44% to $4.87 billion. The company’s AOI rose 20% to $116.9 million in the quarter.
Looking ahead, “we expect all our businesses to continue growing and adding value to artists and fans as we deliver double-digit operating income and AOI growth again this year, with our profitability compounding by double-digits over the next several years,” Rapino added. Through mid-February, Live Nation has sold 57 million concert tickets, up 6% year-over-year, and Ticketmaster had $13 billion in fee-bearing gross-transaction-volume for events so far in 2024, a double-digit increase. In addition, the company has booked 75% of its expected sponsorship commitments, also a double-digit increase from the prior-year period.
With SZA’s album SOS leading the way and the market enjoying more growth in streaming royalties, Sony Music’s revenue grew 16.0% to 422.1 billion yen ($2.85 billion at the period’s average exchange rate) in its fiscal third quarter ended Dec. 31, the company announced Wednesday (Feb. 14).
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Other top releases for the quarter were Travis Scott’s Utopia, Rod Wave’s Nostalgia, Doja Cat’s Scarlet, Blink-182’s One More Time…, Tate McRae’s Think Later, Harry Styles’ Harry’s House and Fuerza Regida’s Pa Las Baby’s Y Belikeada. A couple holiday classics were amongst Sony’s top albums in the Christmas quarter: Mariah Carey’s Merry Christmas and Phil Spector’s A Christmas Gift for You From Phil Spector.
Streaming fueled growth in both the recorded music and music publishing segments of the business. Paid subscriptions were a major factor in the first full quarter after Spotify raised prices in roughly 50 markets, including the U.S., in July. Favorable foreign exchange rates accounted for about 24% of the quarter’s 58.4 billion yen ($394.9 million) revenue increase.
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Its double-digit revenue growth was comparable on a percentage basis to other music companies that have released earnings. In the same quarter, Warner Music Group’s revenue grew 17.5% to $1.75 billion and Reservoir Media revenue improved 19% to $35.5 million. Spotify, the largest single source for music royalties globally, grew revenue by 16% to 3.67 billion euros ($4.05 billion).
Sony Music’s margins improved across the board, too. Operating income improved 20.8% to 76.1 billion yen ($514.4 million) and adjusted operating income before depreciation and amortization jumped 25.3% to 98.5 billion yen ($666.2 million). Adjusted OIBDA margin improved nearly two percentage points to 23.3% from 21.6% in the prior-year quarter.
The strong quarter led Sony Music to raise its full-year forecasts for the third consecutive quarter. On Wednesday, the company raised the forecasts for both revenue and adjusted OIBDA by 10 billion yen ($68 million) — revenue from 1.56 trillion yen ($10.37 billion at the current exchange rate) to 1.57 trillion yen ($10.43 billion) and adjusted OIBDA from 350 billion yen ($2.33 billion) to 360 million yen ($2.39 billion). When the company released its fiscal second quarter earnings in November, it increased its revenue guidance by 5% to 70 billion yen ($485 million) and adjusted OIBDA by 4%, or 15 billion yen ($104 million). In August, it raised its revenue forecast by 6%.
Both music divisions each posted solid year-over-year gains in the quarter. Recorded music revenues jumped 19.9% to 286.5 billion yen ($1.94 billion). Streaming revenue rose 17.2% to 186.5 billion yen ($1.26 billion) and accounted for about 58% of the segment’s improvement. Physical revenue gained just 1.5% to 31.5 billion yen ($213.2 million). The “other” category — including merchandise, live performances and licensing revenue from synch, public performance and broadcast — jumped 45.9% to 59.7 billion yen ($403.9 million).
Music publishing revenue rose 16.1% to 86.1 billion yen ($582 million). Streaming revenue climbed 22.4% to 50.9 billion yen ($343.9 million) and accounted for 78% of the segment’s year-over-year gain. Publishing’s “other” category grew 8% to 35.2 billion yen ($238.1 million).
Visual media and platform revenue declined 5.1% to 45 billion yen ($304.4 million). The segment includes mobile gaming, software for PCs and game consoles, and software development contracts.
Financial metrics for Sony Music’s fiscal third quarter ended Dec. 31, 2023:
Revenue of 422.1 billion yen ($2.85 billion), up 16.0% year over year.
Adjusted operating income of 98.5 billion yen ($666.2 million), up 25.3% year over year.
Recorded music of 286.5 billion yen ($1.94 million), up 19.9% year over year.
Music publishing revenue of 86.1 billion yen ($582 million), up 16.1% year over year.
Visual media and platform revenue of 45 billion yen ($304.4 million), down 5.1% year over year.
With a slate of new artists and a recently launched North American joint venture, SM Entertainment’s revenue reached 250 billion won ($189.5 million at the period’s average exchange rate) in the fourth quarter of 2023, down 3.4% year over year and 6.1% lower than the third quarter, the company announced Wednesday (Feb. 7). Operating profit dropped 51.7% to 10.9 billion won ($8.3 million) while the company posted a net loss of 19.7 billion won ($14.9 million) compared to a 1.9 billion won ($1.4 million) net profit in the prior-year period.
The company attributed a decline in revenue from its concert-related subsidiaries to smaller-sized concerts and a decline in its content-related subsidiaries to “slow business conditions.” SM Entertainment’s share price rose 0.2% to 73,000 won ($54.77) after the earnings release.
SM Entertainment sold 5.6 million albums in the fourth quarter, up 40% from the prior-year quarter; NCT 127’s album Fact Check sold 1.86 million units and aespa’s Drama EP sold 1.26 million units. As for concerts, NCT Wish performed 24 shows in nine cities in Japan ahead of its debut album’s release later this quarter. SHINee performed for 80,000 fans at four concerts in Japan. NCT 127 had six concerts in Seoul, Korea with a total attendance of 60,000.
For the full year, SM Entertainment released 64 albums that sold a record 20.1 million units, and its artists performed at 340 concerts around the world. RIIZE, the first boy band launched under the company’s new multi-production system — an organizational structure introduced in 2023 to break from the previous system that relied solely on founder and ousted chief producer Lee Soo-man — sold more than 1 million units of its debut album, Get a Guitar, which was released in September.
“The multi-production system, which is the core part of our SM 3.0 strategy, has been operating successfully since its introduction last year, and active musical activities are underway under the guidance of each production SM director,” CEO Jang Cheol Hyuk said during Wednesday’s earnings call. The system is meant to speed the introduction of new artists and material by providing other leaders with decision-making powers.
Looking ahead to 2024, SM Entertainment will launch four new artists: NCT Wish, virtual artist naevis, an unnamed girl group and a U.K.-based boy band. The company also plans to release global albums for major artists at least once a year and expand the scale of global concerts, Jang said.
In the first quarter, SM has EPs from NCT Dream, TEN, Taeyong and Wendy, while NCT 127 is performing 13 dates in Japan, Indonesia, the Philippines, Thailand and Macau. The second quarter will see a new album from aespa and EPs from Red Velvet, RIIZE, SHINee, SUHO and WayV, as well as 15 concert dates for NCT Dream in Korea, Japan and Southeast Asia. Other artists including MINHO, TVXQ!, Super Junior-L.S.S., SHINee, TAEmin and aespa each have a handful of shows in the first or second quarter.
SM Entertainment also expects to see results from its North American partnership with Kakao Entertainment. The two companies are “working to establish and expand local partnerships for artists,” said Jang. He pointed to the joint venture’s strategic agreement with Moon & Back, a U.K.-based entertainment and TV production company, that will cast a five-member boy group in the United Kingdom and perform songs sourced from KMR, SM Entertainment’s new music publishing subsidiary.
Warner Music Group (WMG) revenue reached a record $1.75 billion from October through December, the company announced Wednesday (Feb. 7). That’s up 17.5% from the prior-year quarter (up 15.9% at constant currency), as both the recorded music and publishing divisions posted their best-ever quarterly revenues.
With Spotify and other streaming services having raised prices in 2023, WMG’s digital revenue increased 16% and streaming revenue grew 16.6%. The company also posted gains in physical sales, licensing revenue and music publishing performance royalties, though the company saw declines in recorded music artist services and expanded rights revenue. Net income rose 55.6% to $193 million and operating income improved 33.6% to $354 million.
“These results reflect the impact of our chart-topping artists, hit-making songwriters, iconic catalog, and laser focus on execution by all our teams,” CEO Robert Kyncl said in a statement. “As we deliver our plan to accelerate our growth, we are becoming more efficient, increasing operating leverage, and freeing up more funds to invest in music and tech, which in turn will drive further sustainable growth.”
Moments after WMG released the quarter’s results — an earnings call will take place Thursday morning (Feb. 8) — news broke that the company will eliminate its staff by 10%, primarily through the sale of owned and operated media companies such as Uproxx and HipHopDX. The company will also eliminate its in-house ad sales function and plans to wind down its podcasting brand, The Interval, as well as social media publisher IMGN. The reductions will free up $200 million in cost savings that can be reinvested elsewhere, Kyncl wrote in a memo to staff obtained by Billboard.
WMG shares were up 6.4% to $36.19 in after-hours trading following the late afternoon release of earnings results and staff reductions.
Excluding three extraordinary items, WMG’s revenue growth was 12.1% (10.6% at constant currency). A previously disclosed licensing agreement extension for an artist’s catalog added $68 million of revenue and a digital licensing agreement renewal added $27 million to the quarter. The termination of a distribution agreement with BMG resulted in $13 million less revenue than the prior-year quarter.
Recorded music revenue improved 16.6% to $1.45 billion on the success of Zach Bryan, Bruno Mars, the Barbie soundtrack and Jack Harlow, whose track “Lovin on Me” first reached No. 1 on the Billboard Hot 100 singles chart in December and recently spent its fourth non-consecutive week atop the chart dated Feb. 3. The segment’s digital revenue grew 13.1% to $908 million while physical revenue climbed 15.8% to $154 million. Licensing revenue jumped 84.5% to $179 million.
Music publishing revenue grew 21.6% (19.7% at constant currency) to $304 million thanks to a 32.2% improvement in streaming revenue and a 31.5% gain in digital revenue. Mechanical royalties — which are tied to downloads and physical purchases — rose 7.1% to $15 million. Publishing’s synch revenue was flat at $39 million as lower commercial licensing activity in the United States was offset by the timing of some legal settlements.
WMG’s margins improved nearly across the board in the quarter. Company-wide, the company’s operating margin rose 2.5 percentage points to 20.3% and its adjusted operating income before depreciation and amortization (OIBDA) margin rose 3.3 percentage points to 25.8% (and was flat excluding BMG’s termination, the license extension and digital license renewal). Recorded music’s adjusted OIBDA margin rose 4.4 percentage points to 28.5% and its operating margin improved 3.1 percentage points to 25.9%. The publishing division’s operating margin rose 1.1 percentage points to 20.7% while its adjusted OIBDA margin declined 0.5 percentage points to 28.3%, due primarily to the impact of exchange rates.
Gains in recorded music and improved digital royalties helped Reservoir Media’s revenue increase 19% to $35.5 million in the fiscal third quarter ended Dec. 31, the company announced Wednesday (Feb. 7).
Strong results in the quarter allowed Reservoir Media to raise its guidance for its full fiscal year ending March 31. Guidance for full-year revenue increased from a range of $133 million to $137 million to a range of $140 million to $142 million, implying 15% annual growth at the midpoint. Adjusted guidance on earnings before interest, taxes, depreciation and amortization (EBITDA) increased from a range of $50 million to $52 million to a range of $53 million to $55 million, which would be a 16.5% year-over-year improvement. Reservoir Media also raised its guidance when it released its previous earnings in November.
The results “demonstrate our ability to manage the business and deploy capital to further grow our portfolio,” CEO Golnar Khosrowshahi said during Wednesday’s earnings call. “Along those lines during the quarter, we continued to invest in our business, with an emphasis on further diversifying our portfolio across various music genres.”
Recorded music revenues grew 32%, to $10 million, inclusive of catalog acquisitions. The segment’s digital revenue grew 26% to $6.6 million while physical revenue rose 51% to $1.7 million. Synch revenue doubled to $800,000 and neighboring rights royalties gained 16% to $1 million.
Publishing revenue dominated total revenue, though, improving 15% to $23.1 million. Publishing’s digital revenues grew 30% to $13.9 million and synch revenue gained 9% to $4 million. Performance, mechanical and other revenue fell from the prior-year quarter.
Synch revenue from both segments was affected by the writer and actor strikes in 2023, explained CFO Jim Hendlmeyer. A “very promising” ad market helped synch revenue during delays in TV and film production, he added.
The quarter was also helped by Reservoir Media’s numerous signings and acquisitions, including Theo Katzman, the founding member of Vulfpeck and a collaborator with such artists as Carly Rae Jepsen and Teddy Geiger. In December, Reservoir signed singer-songwriter grentperez, for whom it handles administration and creative aspects with its Australian sub-publisher, Mushroom Music. In October, the company signed a global publishing deal with Joe Walsh. Its last announced acquisition was the catalog of Arthur “Boogie” Smith in November.
Reservoir highlighted Grammy success for the songwriters and producers on its roster. Among the winners was best folk album winner Joni Mitchell, who signed a publishing administration deal with the company in 2021. Killer Mike, who signed with Reservoir in 2022, won in three rap categories: Best Rap Song (“Scientists & Engineers”), Best Rap Album (Michael) and Best Rap Performance (“Scientists & Engineers”). Elsewhere, Khris Riddick-Tynes’ collaboration with SZA, “Snooze,” won best R&B song and Blue Raincoat Music client Phoebe Bridgers had a hand in four awards, including best rock song, with her group boygenius.
Shares of Reservoir Media increased 6.1% to $7.26 early Wednesday morning before falling to $6.49, down 5.1%, by midday.