finance
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Universal Music Group’s revenues rose 11.5% to 2.45 billion euros ($2.71 billion) last quarter, as sales generated by Morgan Wallen, Taylor Swift, TOMORROW X TOGETHER bolstered results in both recorded music and music publishing.
The world’s biggest music company reported revenue from its recorded music division rose 11.7% to 1.92 billion euros ($2.1 billion) in the quarter ending March 31 compared to the same period a year ago. Revenue from subscriptions and streaming rose by nearly 10% to 1.33 billion euros ($1.47 billion) and physical revenue rose a whopping 32% to 313 million euros ($346 million), while revenue from downloads and other digital revenue — the smallest line item in the division — fell by 19.1% to 55 million euros ($60 million).
The publishing division’s overall revenues rose 13.3% to 425 million euros ($469 million), with digital revenue contributing the most, increasing by nearly 21% from a year ago to 231 million euros ($255 million). Synchronization revenue rose around 11% to 69 million euros ($76 million), while performance revenue slipped 1% to 90 million euros ($99 million).
“Our strong start to the year demonstrates our consistency in developing great artists and introducing their music to fans around the world,” UMG chairman and chief executive Lucian Grainge said in a statement. “We look forward to building on this momentum and furthering our track record of transforming disruptive technologies into opportunities to accelerate our business for our artists, fans and shareholders.”
Overall earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter fell by nearly 43% to 261 million euros ($288 million), driven primarily by equity-based compensation expenses UMG began rolling out in the fourth quarter of 2022. Stripping out those compensation expenses, UMG reported adjusted EBITDA rose 14.7% to 522 million euros ($576 million) compared to the year-ago quarter, and adjusted EBITDA margin grew 0.6 percentage points to 21.3%.
UMG’s Earnings Highlights:
Revenue rose 11.5%, or 9.3% in constant currency, to 2.45 billion euros ($2.71 billion) versus the year ago quarter.
EBIDTA fell 42.5% to to 261 million euros ($288 million)
Adjusted EBITDA rose 14.7% to 522 million euros ($576 million)
Adjusted EBITDA margin grew 0.6 percentage points to 21.3%
Recorded Music Division Highlights:
Recorded music revenue overall rose 11.7% to 1.92 billion euros ($2.1 billion)
Subscriptions and streaming revenue rose by nearly 10% to 1.33 billion euros ($1.47 billion)
Physical revenues rose 32% to 313 million euros ($346 million)
License and other revenue rose 9.2% to 226 million euros ($250 million)
Downloads and other digital revenue fell by 19.1% to 55 million euros ($60 million)
Music Publishing Highlights:
Music publishing revenues overall rose 13.3% to 425 million euros ($469 million)
Digital revenues rose by nearly 21% from a year ago to 231 million euros ($255 million)
Performance revenues slipped 1% to 90 million euros ($99 million)
Synchronization revenues rose around 11% to 69 million euros ($76 million)
YouTube brought in $6.69 billion in advertising revenue to start the year, continuing a downward trend for the video giant after past quarters of explosive growth during the earlier years of the pandemic.
The first-quarter revenue figure, reported as part of parent company Alphabet‘s quarterly earnings on Tuesday, is roughly a 2.6 percent decline compared to the $6.87 billion in revenue reported during the first quarter of 2022. The video platform previously reported $7.96 billion in ad revenue during the holiday season, falling short of Wall Street expectations and representing an 8 percent year-over-year decline.
In a call with investors, Alphabet CFO Ruth Porat said the company was “encouraged by progress” in monetization for YouTube Shorts, which rolled out its revenue-sharing program with creators in February. The executive also said there was “significant ongoing subscriber growth” in YouTube Music Premium and YouTube TV, though the company has not disclosed subscriber numbers.
YouTube is now led by Neal Mohan, the former chief product officer who assumed the CEO role in February after longtime executive Susan Wojcicki said she was stepping down to focus on her family and “personal projects.”
In his first public message released on March 1, Mohan said his top priorities included supporting YouTube’s creators by improving monetization tools, increasing accessibility on the platform and focusing on growth in areas like gaming and podcasting. Included in those areas were YouTube’s short-form offering, Shorts, and its streaming products like YouTube TV and Primetime Channels.
The executive also noted YouTube will continue to contend with an advertising downturn that notably impacted the company’s revenue growth last year. “This is a pivotal moment for our industry. We face challenging economic headwinds and uncertain geopolitical conditions. AI presents incredible creative opportunities, but must be balanced by responsible stewardship. Creators, viewers, and advertisers have more choices about where to spend their time than ever before and platforms like YouTube need to deliver across a range of formats while investing in the policies that protect platforms from real-world harm,” Mohan said in his letter at the time. “As I look ahead to what’s next for YouTube, I’m confident we’ll put our full energy into what matters most for creators and viewers.”
Parent company Alphabet saw modest growth during the first quarter, with total revenue increasing 3 percent year over year to hit $69.79 billion. The company said it took $2.6 billion in charges related to the January layoffs that resulted in 12,000 employees — or around 6 percent of Alphabet’s workforce — losing their jobs.
This article was originally published by The Hollywood Reporter.
Annual revenue for Round Hill Music Royalty Fund grew 32% to $32.4 million in 2022, driven by strong performances of the Guernsey-based company’s rights management and synchronization business, coupled with underlying growth in the global recorded music industry, according to year-end financial results published Tuesday (Apr. 25).
Income from music publishing rights grew 12% year-on-year to $17 million, a rise of 12% on 2021, accounting for 69% of Round Hill’s annual revenue. Master rights revenues, derived from music streaming, CD and vinyl sales and downloads, grew by 70% to $10.9 million.
The fair market value of Round Hill’s portfolio — which includes the rights to over 120,000 songs across 51 catalogs, including tracks by Celine Dion, Bush, The Offspring, Carrie Underwood, The Supremes, Wilson Pickett and Whitesnake — was up 13% year-on-year to $602.6 million.
Economic net asset value also increased 13% to $519.6 million. The valuations are based on a report by the company’s independent valuer, Citrin Cooperman, and a second independent valuation by FTI Consulting, says Round Hill.
Almost half (44%) of the company’s publishing revenue came from performance rights royalties generated by music being played on radio and television, live concerts or in public spaces such as shops, bars and restaurants, Round Hill said.
Breaking down the company’s publishing revenue, more than a quarter (27%) was generated by synch deals, including the placement of “All by Myself,” by singer-songwriter Eric Carmen, in advertisements for Adobe Photoshop; Spacehog‘s “In the Meantime” featuring in the trailer for Marvel Studios’ Guardians of the Galaxy Volume 3; and Alice In Chains‘ “Rooster” being spotlighted in the Netflix series Super Pumped.
Speaking of Alice in Chains, Round Hill — which is listed on the main market of the London Stock Exchange — acquired a majority share of the band’s publishing catalog, neighboring rights and master recording rights from remaining living members Jerry Cantrell, Sean Kinney, Mike Inez and William Duvall in February. The estates of the late singer Layne Staley and late bassist Mike Starr sold their rights and income streams to Primary Wave at the same time.
The start of last year also saw Round Hill acquire master and publishing rights to the catalog of David Coverdale, the Whitesnake frontman and former lead singer of Deep Purple. In its financial results, Round Hill says the two acquisitions marked “the full deployment” of the $85 million the company raised through a share placement in July 2021.
In total, Round Hill said it successfully placed 560 songs across a range of high-profile films, television series and brand campaigns last year, fueling 33% year-on-year growth in synch revenues.
New two-year license agreements with TikTok and Meta on more favorable terms in 2022 also contributed to the strong financial results, generating higher digital revenues in the second half of last year, the company said.
Josh Gruss, CEO of Round Hill Music, tells Billboard the company’s strong financial results are attributable to its “very in-demand repertoire” and an experienced team of 70 employees in the U.S. and Europe, including London, Los Angeles, New York and Nashville, “sweating that repertoire really hard.”
Going forward, he says, the focus is on narrowing the gap between Round Hill’s economic net asset value of $519.6 million and its current stock price, which was trading at between $0.64 and $0.66 on Tuesday. In terms of new catalog acquisitions, Gruss says Round Hill will have to raise more equity before it can make “meaningful” additions to its portfolio and adds that the company will remain focused on songs recorded and released in the early 2010s and before.
“We like to be really conservative in how we approach acquisitions and the problem we have with younger music is that it’s just really hard to forecast how those songs pan out over the next 10 years,” says Gruss. “Good music is timeless and it’s really important that we have timeless music. We don’t want to have the flavor of the [month] — a song that’s going to be popular today, but gone tomorrow. You can make a big mistake in those type of investments.”
Independent dance music label Armada Music said on Thursday it acquired the master recording rights of Detroit techno forefather Kevin Saunderson‘s KMS Records and Russian DJ ARTY to launch its new music investment fund focused on dance music.
The fund named BEAT–which stands for Best Ever Acquired Tracks–launches with $100 million in debt and financing from Pinnacle Financial Partners, which Armada says will be deployed over the next two years.
Launching into the redhot music IP investment market, Armada’s BEAT aims to capitalize on investments in a genre that has so far gotten less attention than others, like pop and classic rock.
A growing number of funds have launched in the past 18-months focused on genres like indie, Latin music and production music, aiming to use in-house expertise on a specific genre to find ways to make catalogs generate greater returns for the artists and rights holders.
“BEAT is in a unique position to add relevance to those tracks through creative additions, best practices in exploitation setup, and marketing methods and communication channels within the bigger (Armada) organization,” says Armada Music chief executive Maykel Piron.
BEAT says it is focused on acquiring catalogs that fall under the category of dance, including subgenres like techno, house, electronic dance music (EDM) and others. EDM alone is estimated to present a $9.5 billion market opportunity, growing to more than $20 billion in the next decade, according to a report by research firm Future Market Insights.
“We are seeing folks who are trying to be smarter, and one way to do that is to arbitrage certain genres,” says Matt Rosenberg, head of media finance at Monroe Capital. “It unlocks the investment ecosystem for more artists.”
Attached to Armada, BEAT will tap into the genre’s leading record label for “data on trends, creative resources, exploitation models (and) new artists,” Piron says.
“We are in a unique position in that we know everything on older catalogs since we have built one over the last 20 years through Armada,” Piron says. Armada has acquired catalogs from artists and dance labels, including Midtown Records, United Recordings and Combined Forces. “BEAT has 100% control over the exploitation and re-exploitation of the acquired catalogs.”
Saunderson made his name with a string of eight Top 10s between 1988-94, including “Good Life,” “Big Fun,” “Ain’t Nobody Better” and “Do You Love What You Feel” and others. The catalog of KMS, which Saunderson helped found over 30 years ago, includes Saunderson’s “Good Life” and “Big Fun,” recorded with Inner City.
“In the post-COVID period, we are seeing a huge revival of 90’s dance. Sometimes younger audiences don’t even realize they are dancing to 30-year-old tracks,” Piron says.
With a catalog of newer hits, ARTY is known for dance tracks “Sunrise,” “Save Me Tonight,” “Craving” and “Take Your Time” from between 2018 and 2021. Based in Los Angeles, ARTY has also produced and remixed songs for Skrillex, Armin van Buuren, Halsey and others.
When it comes to the red-hot market for music rights, the only people who may be more important than the buyers and sellers are number crunchers like Nari Matsuura.
The Ottawa, Ontario, native is the partner of Barry Massarsky and founder of the valuation division of their music economics and valuation services practice at Citrin Cooperman, one of just a handful of firms that calculate the future growth rates and discounts essential to determining a music catalog’s market value.
From 2021 to 2022, Matsuura estimates she oversaw 750 catalog valuations totaling $15.5 billion for such clients as Hipgnosis Songs Fund, Primary Wave and Reservoir Media.
But as billions have flooded the music intellectual property market, the practice of valuing catalogs has encountered unexpected controversy, with Massarsky and Matsuura’s team occasionally in the middle. Banks put considerable weight on catalog valuations when determining how much to lend to a buyer, and some question whether Citrin Cooperman’s discount rate — which has not budged since spring 2022 — ignores macroeconomic pressures, such as the rising cost to borrow, that could affect valuations. Lower valuations could lead banks to decrease the amounts they lend overall, which could have a cooling effect on the market. “The reason we did not increase our discount rate along with the rising interest rate environment is because we had originally started at a higher discount rate so that we could accommodate for that rise,” Matsuura says. “We knew that this low interest rate environment was not sustainable in the long term.”
Billboard‘s Global Music Index rose 4.2% this week to 1,263.70, its high level in six weeks, as 14 of the 20 stocks in the index were in positive territory. The index’s most valuable companies were among the gainers: Universal Music Group was up 2.1%, Spotify improved 4.1%, and Live Nation climbed 6.1%.
With additional help from Warner Music Group (+5.9%) and Tencent Music Entertainment (+8.1%), the Billboard Global Music Index outperformed the major indexes. The S&P 500 rose 3.5% to 4,109.31 and the Nasdaq composite improved 3.4% to 12,221.91. In the U.K., the FTSE 100 rose 3.1%.
In the first quarter, the Billboard Global Music Index was up 8.2% overall.
Radio company Audacy was the greatest gainer of the week, improving 18.2% to $0.13. In a proxy statement filed March 24, Audacy said it will propose a reverse stock split at the company’s May 24 shareholder meeting. The New York Stock Exchange will initiate a delisting process for stocks that close below $1.00 for 30 consecutive trading days; Audacy’s share price has not exceeded $1.00 since July 5, 2022. A reverse stock split will reduce the number of outstanding shares. Since the value of the company is unaffected by the event, the reverse split will increase the share price.
Elsewhere, Madison Square Garden Entertainment (MSGE) improved 9.6% to $59.07. On Thursday (March 30), MSGE revealed its final plan to separate its live entertainment company from the rest of its businesses. On April 20, the current parent company will be renamed Sphere Entertainment Co. and be comprised of the state-of-the-art Sphere venue, MSG Networks and Tao Group Hospitality. That will leave a pure-play live entertainment company, MSG Entertainment, which includes such venues as Madison Square Garden and Radio City Music Hall.
Competing interests drove SM Entertainment shares higher in February and early March, but the stock has fallen 36.9% in the last three weeks after dropping another 13.1% this week. The K-pop company’s share price started the year at 76,700 won ($58.71) and surged to 114,700 won ($87.79) on Feb. 10 after HYBE acquired a 14.8% stake from SM’s founder, Lee Soo-man. By March 10, when HYBE and Kakao Entertainment were locked in a battle to become SM’s largest shareholder and lead the company’s expansion following its break from Lee, SM shares hit 147,800 ($113.13). Once Kakao Corp. and Kakao Entertainment’s tender offer expired on March 26, the share price plummeted. Still, SM Entertainment shares are up 21.5% year to date.
The largest publicly traded music companies gained this week as investors digested the impacts of another increase in the Federal Reserve’s benchmark interest rate.
Billboard‘s Global Music Index rose 2.1% this week to 1,213.30 despite 11 of its 20 stocks being in negative territory. Shares of Universal Music Group, the most valuable component of the 20-stock Index, rose 6.7% to 22.82 euros ($24.58). K-pop company HYBE rose 4.5% to 187,500 won ($144.70), Warner Music Group improved 4.3% to $31.50, SiriusXM rose 3.6% to $3.77 and Spotify was up 1% to $128.30.
The Index’s greatest gainer was streaming company LiveOne, which climbed 13.1% to $1.12. On Tuesday, LiveOne said it is extending the record date for the previously announced spinoff of its PodcastOne subsidiary to April 7. “We expect the special dividend and trading of PodcastOne to begin in April,” said Robert Ellin, LiveOne CEO and chairman. The company also announced it gained 136,000 paid subscribers since Jan. 1, to more than 2 million monthly paying members, and plans to reach 2.75 million subscribers by the end of the year.
Broadcast radio company Audacy, a relatively small component of the Index, had the week’s biggest decline of 21.4%. On March 16, a B. Riley analyst cut the price target for Audacy shares from 50 cents to 10 cents. The stock closed at 11 cents per share on Friday and is down 52% year to date.
The U.S. Federal Reserve Bank raised its benchmark interest rate a quarter of a percentage point on Wednesday — from 4.75% to 5% — and suggested additional hikes may not be needed “to return inflation to 2% over time,” the Federal Open Market Committee said in a statement. That decision sent markets into negative territory on Wednesday: both the Dow Jones Industrial Average and Nasdaq composite fell 1.6% while the S&P 500 dropped 1.7%. But stocks rallied on Thursday and Friday. The Dow finished the week up 1.2% while the Nasdaq composite and S&P 500 rose 1.7% and 1.4%, respectively.
The Nettwerk Music Group has recapitalized, bringing in a new investor in the form of Flexpoint Asset Opportunity Fund II and additional funding from existing investors Beedie Capital and Vistara Growth. Flexpoint Asset Opportunity Fund II is a buyout fund managed by Flexpoint Ford, a private equity firm with approximately $7.8 billion of assets under management. Terms of the funding weren’t disclosed.
“The capital from Flexpoint will enable Nettwerk to invest in artists and make music catalogue acquisitions that will benefit from the fast-growing independent sector of the music industry,” Nettwerk CEO and co-founder Terry McBride said in a statement. “We’re excited to partner with Flexpoint as we continue to execute on our vision of connecting artists with their fans globally.”
Nettwerk describes itself as a full-service artist development and music intellectual property brand builder with a history spanning nearly 40 years. Its current roster includes Passenger, Syml, Banners, the Album Leaf, Matt Maltese, Wild Rivers and Wrabel among many others.
“Nettwerk has been at the forefront of the evolution in the independent music sector building a compelling catalogue of music by offering white-glove services and growth opportunities to independent artists traditionally reserved for superstars,” Flexpoint managing director Mike Morris said in a statement. “We believe Terry and the team are well positioned to prosper in the rapidly evolving music industry and are excited to help the team execute their vision.”
Beedie Capital managing director David Bell added, “The team at Nettwerk are differentiated leaders in a complex industry, and we are excited to support them through continued execution of their unique, artist-centric strategy.”
Artisan served as buyside financial advisor and Latham & Watkins and Bennett Jones served as legal counsel to Flexpoint. Cooley and Morgan Daniels Slager served as legal counsel to Nettwerk.
China’s leading music streaming company Tencent Music Entertainment Group (TME) reported on Tuesday a 9.3% decline in the company’s annual revenues last year, as falling earnings from its social entertainment services business compounded a decline in monthly active users on its music platform.
TME’s total revenues fell to RMB 28.34 billion (USD $4.11 billion) in 2022 from RMB 31.24 billion 2021, with revenues for the fourth quarter ending Dec. 31 having fallen by 2.4% to RMB 7.43 billion ($1.08 billion) compared to the fourth quarter in 2021.
TME, which owns streaming platforms QQ Music, Kugou and Kuwo, plus karaoke app WeSing, said revenues from its social entertainment services and others fell 19.8% in 2022 to RMB 15.86 billion ($2.30 billion). The number of paying users fell 24.3% due to the macroeconomic environment, competition from other platforms and COVID-19, the company said.
Revenues from music subscriptions rose 18.6% to RMB 8.70 billion ($1.26 billion) helping TME’s online music services revenues to increase overall by 8.9% to RMB 12.48 billion ($1.81 billion) for 2022. The number of paying subscribers grew by 22.7%. However, average revenue per user was slightly lower — RMB 8.6 in 2022 compared to RMB 8.9 in 2021 — due to higher marketing costs, and the number of mobile monthly active users (MAU) of its online music division fell 7.8% to 567 million in the fourth quarter.
“During the fourth quarter, as a result of macro headwinds, increased competition from other platforms and the surge in COVID cases social entertainment services MAUs and paying users declined year over year,” said Tony Yip, TME chief strategy officer, on a call discussing the company’s earnings on Tuesday.
China’s late-year increase in COVID cases as it loosened pandemic restrictions and increased competition also led to the year-over-year decline in online music mobile MAUs, Yip said.
Declining social entertainment services revenues held one benefit for TME: lower revenue sharing fees in 2022. That contributed to a savings of more than RMB 2.27 billion, as its cost of revenues for the year fell 10.4% year-over-year to RMB 19.57 billion ($2.84 billion).
This helped TME achieve an operating profit up nearly 17% to RMB 4.44 billion ($644 million) in 2022. Operating income is the income that remains after accounting for nearly all costs of doing business.
TME expects 2023 total revenues and profitability to be up from last year, and for the share of quarterly revenues coming from online music services will exceed those coming social entertainment services at some point this year as they continue to achieve “high quality growth in both subscription and non-subscription revenue,” Yip said.
Tencent Music Entertainment Group’s 2022 Highlights:
Mobile monthly active users (MAU) for its online music division fell 7.8% to 567 million in the fourth quarter 2022 from 615 million in the fourth quarter 2021
Mobile MAU for social entertainment fell 16.6% to 146 million in the fourth quarter of 2022 from 175 million in the fourth quarter 2021
Paying users of TME’s online music platform rose 16.1% to 88.5 million in the fourth quarter 2022 from 76.2 million in the fourth quarte 2021
Paying users of TME’s social entertainment platform fells 15.6% to 7.6 million in the fourth quarter 2022 from 9 million in the fourth quarter
Only four of the 20 stocks in Billboard’s Global Music Index were in positive territory this week: Spotify climbed 4.5% to $127.09, Tencent Music Entertainment rose 4.4% to $7.85, Warner Music Group increased 1.5% to $30.21 and Reservoir Media improved 0.2% to $6.15.
Stock markets were rattled again this week by problems in the banking sector. Following a run at Silicon Valley Bank last week, Signature Bank and First Republic faltered this week. Credit Suisse required the backing of the Swiss National Bank on Wednesday after its biggest shareholder refused to inject money to provide much-needed stability. The Dow Jones Industrial Average fell 0.1% this week after dropping 1.2% on Friday (March 17). The S&P 500 improved 1.4% on the week despite falling 1.1% on Friday.
The Global Music Index declined just 0.4% to 1,188.02 despite most stocks falling into negative territory. Spotify and Warner Music Group are two of the most valuable companies in the index. Other large companies had only small declines: Universal Music Group dropped 1.7% to 21.38 euros, SiriusXM fell 0.8% to $3.64 and Live Nation declined 0.4% to $66.36.
The biggest loser of the week was K-pop company SM Entertainment, which fell 23.5% to 113,000 won after HYBE canceled its bid to take control of the company. Last week, SM Entertainment was the Global Music Index’s biggest gainer, improving 14.4% to 147,800 won, after Kakao announced a tender offer to acquire up to a 35% stake from minority shareholders at 150,000 won per share.
The soft advertising market continued to be a problem for radio companies’ stocks. iHeartMedia dropped 12% to $4.31 and Audacy fell 12.5% to $0.14. Morgan Stanley analysts cut the price target for iHeartMedia to $5 from $8 due to “concerns regarding the long-term growth potential of broadcast radio,” according to a March 16 investor note. Year to date, iHeartMedia is down 29.7%, Cumulus Media is off 35.9% and Audacy has declined 39.1%.