Record Labels
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Ghazi believes some stories are “better told in rewind than forward.” How EMPIRE — the independent label, distributor and publisher that he established in 2010 — acquired Dirtybird is one of them.
On October 20, EMPIRE announced its acquisition of Claude VonStroke’s stalwart dance imprint, which has nurtured an inimitable, off-kilter brand of house and techno since its 2005 launch.
Under the agreement, EMPIRE obtains ownership of Dirtybird’s back catalog and all future releases, for which EMPIRE will now handle distribution and publishing. The deal — representing EMPIRE’s first stride into the dance/electronic space — includes Dirtybird’s clothing and Web3 assets, excluding only Dirtybird’s live events and festival brands. These rights are retained by Dirtybird CEO VonStroke, known by his given name Barclay Crenshaw, who will also continue to A&R Dirtybird and direct creative for its apparel line. (The rights to Dirtybird’s live events and festival brands were not a part of the negotiations. “I told Barclay early on, ‘We’re not an events company at this time — I think [the events are] better served to stay under your umbrella than under ours,’” Ghazi tells Billboard.)
Though negotiations between Ghazi and Crenshaw’s respective San Francisco-based multihyphenates started in October of 2021, Dirtybird’s appeal was apparent much earlier, according to Moody Jones, EMPIRE’s Senior Vice President of Digital & Creative, who will lead its dance/electronic department.
As the story goes, well before he accepted a role as EMPIRE’s Digital Marketing Director in 2018 — a move that propelled him from Canada to California’s Bay Area — Jones began producing his own music. In 2007, he went to a Toronto event where Crenshaw played an opening set as Barclay Crenshaw, his hip-hop-centric artist project that predated his launch of the Claude VonStroke moniker in 2006. There, Jones first met Crenshaw. Five years later in Montreal, Jones played the first-ever Dirtybird BBQ.
Over the years, one slot at a Dirtybird event begat another for Jones, who along the way formed a professional relationship with Crenshaw, his wife Aundy Caldwell Crenshaw (who serves as Dirtybird’s Chief Operating Officer) and the sprawling Dirtybird collective at large. A friend of the brand with an ear for Dirtybird’s idiosyncratic sound and an eye for business solutions, Jones assisted the Crenshaws with advising, consulting, marketing and artist promotion. Their early collaboration — coupled with Jones’ newfound proximity to Dirtybird HQ and his continued closeness with the Dirtybird crew — organically created the circumstances that would underscore the now-17-year-old brand as a complementary fit for EMPIRE and later aid its acquisition.
“I was very interested in their business model,” says Jones. “When we were out, I’d always ask questions and they’d always ask me for advice on how things are done on our end. The conversation started shifting from being about marketing to being about operating and scaling. I’d learned so much from being around Ghazi that a lot of the things I started saying [about EMPIRE] seemed like competitive advantages to Dirtybird. We [the Crenshaws] began talking about Dirtybird and what it would take to scale it.”
Thus, when Ghazi expressed interest in expanding EMPIRE’s hip-hop-concentrated scope to include dance/electronic, Dirtybird emerged as a natural fit.
Jones highlighted the similarities of the cultures within Dirtybird and EMPIRE, Ghazi’s own homegrown business — which has been responsible for several Billboard Hot 100 hits and key releases that have raised the profiles of hip-hop mainstays like Kendrick Lamar and Anderson .Paak. Armed with proprietary software that enables EMPIRE to distribute its music to digital streaming platforms, the hip-hop stronghold has increasingly expanded its sonic purview, venturing into Afropop and Afrobeats, country, Latin, R&B, and now, dance/electronic.
“He [Jones] jumped into my office and he said, ‘Hey, what do you think about buying Dirtybird?’ And I basically responded, ‘Why not? That would be a great acquisition for us, a San Francisco company,’” says Ghazi. “And he proceeded to tell me that there might be a synergy and a possibility for us to make the acquisition.”
“Aundy and I spoke to several companies in this process,” Crenshaw tells Billboard of the deal. “EMPIRE was always the best fit, simply because Ghazi understands the value of our brand name. We kept every single employee from top to bottom, and I still run the label with Deron Delgado and our killer team. I have also been friends with Moody Jones for years and years, so it was very reassuring that he was spearheading the dance division.”
“Tons of buyers just wanted to analyze the catalog and look at pure math,” Crenshaw continues. “I’ve never been a math guy; I’m a vibes guy. Dirtybird means something special to its fans, and that is why it’s one of maybe one or two U.S.A. house brands that everyone recognizes by name. Ghazi and Moody understand that, and I think we are going to have even more fun in our new home.”
Ghazi and Jones declined to disclose financial details of the acquisition to Billboard, but expounded on their motivations for bringing Dirtybird to roost at EMPIRE.
There are a number of independent dance labels that EMPIRE might have considered acquiring. Beyond the personal association, why Dirtybird?
Jones: I don’t know if Ghazi would’ve even considered Dirtybird [if not for my suggestion]. I was at Dirtybird Campout West Coast 2021 with Nima [Etminan, also of EMPIRE], and we saw the culture, the fanbase, the loyalty, the energy, and we knew it had a synergy. I saw them being hands-on with everything.
Our company is very culture-driven. Having an impact on culture is one of the pillars for us, and being a Bay Area company meant so much to us. We wanted to move into dancefloors a little bit stronger, and I can’t think of another company that would’ve complemented us the way Dirtybird does. There’s no other company that crossed every one of those boxes for us.
And when Ghazi sat down with Barclay and Aundy and got to meet her, knowing the people behind the company and how hard they work, it [was clear that it] really was their blood, sweat, and tears that put Dirtybird together. That meant a lot to us. Family is a big thing for us, and Dirtybird is literally their family business. Luckily, we [Barclay and Aundy] had built a relationship a long time ago — and honestly, life just came full circle.
Ghazi: It was a perfect fit. Our core DNA has always been hip-hop, and Barclay had a really strong affinity for hip-hop, so there were a lot of synergies between what Dirtybird was doing primarily as a dance company, and what we have historically done as a hip-hop company that’s moved into all these other verticals — like Afrobeat, Latin, R&B, and things of that nature.
I saw that there would be this holistic approach to music. You could just see it all blend together, merge into one, and be really impactful, because it makes all the sense in the world to have a dance department or a dance arm in a company like ours. We have tons of hit records that deserve to have dance remixes and dance mixes in general, and that goes beyond even just the core of what Dirtybird has already accomplished on their own.
So, for me, the initial thought process in the very beginning was like, “Oh cool, we could have a remix arm.” And then I got to spend time with Barclay and see the festivals, the culture, and everything else, and I was like, “Yo, this is a no-brainer. These guys, through and through, mean to the dance world what I think EMPIRE means to the hip-hop space.”
Naturally, it sounds like there will be an increase in the amount of hip-hop sound on Dirtybird given EMPIRE’s strength in this domain.
Jones: If you look at the sound that Dirtybird has embodied over the last three years, you’ll notice that it’s changed so much compared to the Dirtybird sound that we had early on. They’re moving into drum ‘n’ bass, they’re doing a lot more garage, and they’re doing a lot more experimental. And Barclay Crenshaw [the artist project] is more hip-hop-leaning than electronic, so I think Dirtybird will continue to be experimental. We’re going to continue to push the boundaries of electronic music, but I think now, we’re going to be able to equip Dirtybird with the ability to work with more hip-hop artists and work in different territories to push the sound to even more regions.
Outside of hip-hop, are there any other genres that you’d like to see Dirtybird work with to a greater degree?
Ghazi: Definitely a lot of the African music [Afropop/Afrobeats] that we’re doing at EMPIRE, 100%.
Given that Barclay will continue to A&R Dirtybird, you’ll be working together to advance these sounds. What do you hope this relationship will look like?
Ghazi: We’re hoping to continue letting Dirtybird do what they do best, but on top of that, increasing the volume and variety of releases that they’re doing, and giving them the tools and resources that they need to go even further. In the past, they did a few albums per year. We want to increase that number significantly, and we want to be able to give them more music videos — whatever types of tools and resources other genres have been accustomed to. We want to bring those to dance to give dance the same spotlight other genres have.
Looking ahead, what is the value of the Dirtybird catalog going forward?
Ghazi: Definitely in syncs, stems, derivative works, physical like vinyls and merch, and emerging territories where the music might not have even touched yet. I don’t know the whereabouts of the previous distributor’s reach, but we have a very far reach, so we’ll make sure that the music is in every nook and cranny in every part of the world.
Jones: It’s also in the re-releasing of a lot of products. I think a lot of the Dirtybird sound was ahead of its time, and I think a lot of these albums and singles can resurface again and be repackaged and delivered to an audience that is ready for it today that might not necessarily have been ready for it back then. Plus, there are a lot of [digital-only] releases that might have [worked well on] vinyl.
EMPIRE is a strong proponent of artist empowerment. What are some of the resources at EMPIRE that will help empower Dirtybird artists in ways that might not have been previously possible?
Ghazi: We have a huge facility in San Francisco where we do a lot of creative work. We just did a writing camp there a few months back for an African album we’re about to release. I would love to be able to do writing camps in the dance space, and I would love to increase the output of music videos with both our in-house video staff and the resources and the relationships that we have across the video sphere in the marketplace.
Additionally, more strategic marketing, more digital marketing, and greater transparency on analytics — because we are a supply chain distribution company by design, so I think empowering the artists with analytics and information is going to give them greater insight into how to market their music. We’re a very powerful marketing company, and there could be a momentous shift onward and upward for the Dirtybird side of the company and for dance as a whole for EMPIRE.
Jones: One of the last things we’re working on — and I don’t want to give away too much too soon — [is changing the nature of label deals in dance music]. One of the things I’ve noticed is that a lot of genres [have changed] in terms of the deals that labels have with artists, and I feel dance is one of the very last ones to make that change and have more transparency in deals and give better splits.
With the aid of EMPIRE, I think we can help revolutionize the whole dance scene — not just Dirtybird — by bringing this sound onto all the digital streaming platforms, and giving artists more favorable deals. I think [the deals] are a reason why, in the past, a lot of artists haven’t been loyal to their labels. You know, when every release is with a different label. But I think we can help revolutionize that and build a proper dance culture with the artists as well.
As part of our annual Indie Now package, we asked notable figures in the independent scene to offer advice on how to succeed in the industry. Below, electronic producer/digital artist Pat Lok talks to Billboard’s Katie Bain.
I was lucky enough to write an NFT clause into an indie single deal of mine back in February 2021, via the Australian label Club Sweat [a subsidiary of Sydney-based record label Sweat It Out]. Verbatim, the contract said, “Licensers shall retain exclusive rights to create and exploit NFTs in connection with license masters.” I actually did exploit that for my Alaska drop, a collaboration with Party Pupils, on [NFT marketplace] Catalog in October 2021.
[These clauses] allow you to be versatile in a way that’s reminiscent of the SoundCloud and Hype Machine era, where the energy was, “Who knows what we’re going to do today?” You can talk to your audience and get them excited about something you’re dropping tomorrow. That’s something labels traditionally shy away from. Often, it’s hard to get even a same-day response from a label because they’re so busy.
The thing to keep in mind is that a lot of NFT collectors are already following artists they like or have found [out about] through the Web3 space, so the marketing of NFTs is really driven by artists doing the legwork. My perspective is to consider the value-add [of a label]. There are a few different scenarios of how they may be involved with an NFT project, but a lot of labels are not even really thinking about it yet because even the majority of artists don’t yet know how to do this. It’s cool if you’re able to say, “We agreed upon 10% for the gross of my share.” That seems super fair, as it’s similar to an agent contract. Meanwhile, the manager/artist split on this stuff is also all over the board, and that should be as important [as a conversation with a label] because the manager is going to be talking to the label side.
These clauses are niche, but very important, and I think the standard is being built deal by deal right now. It’s important we have conversations about NFT clauses so that artists, especially new artists, don’t just give up their NFT projects before knowing what they’re worth. It’s just like with your masters.
This story will appear in the Nov. 5, 2022, issue of Billboard.
Legendary lawyer Don Passman has likened the music biz and its transformation in the digital era to a Rubik’s Cube. It shifts so much that there have now been 10 editions of his industry bible, “All You Need to Know About the Music Business.”
The industry’s challenges, however, did not deter the lay economists at NPR’s Planet Money podcast after they heard an old song called “Inflation.” The funky, moody track with lyrics like “Inflation is in our nation… I can see a depression coming on” was written in 1975 when inflation was at levels slightly higher than today. A cassette tape of the song by Earnest Jackson‘s Sugar Daddy and the Gumbo Roux showed up in Planet Money hosts Sarah Gonzalez and Erika Beras‘ mailbox one day, and they “got a little obsessed” — so obsessed they embarked on an 8-month effort to start a record label and publish the song.
Gonzales and Beras discuss the challenges of creating a label, striking deals with different stakeholders and promoting the never-before-published song over two episodes of the podcast, this week.
Describing their reporting to Billboard, Gonzalez and Beras say that in the course of creating a contract that split revenue between the label and musicians, they came up with what Passman describes as “possibly the worst record deal I’ve ever seen, from a record company point of view.” (Passman was interviewed for the podcast.)
“We are not doing this to make money. We are really doing this because we want to explain the music industry,” Gonzalez says. “It’s just really difficult to make money in this industry, which we all knew. But it’s not until you get into it that you really understand it.”
If a typical deal gives 80% of revenues generated by a song to the record label and 20% to the musicians, Planet Money proposed giving 80% to the musician, namely singer and songwriter Earnest Jackson, and keeping 20% for their label. The hosts felt that was a fair deal given that even if the song was streamed 1 million times, they could only expect to collect around $4,000 total.
After much back-and-forth with Jackson’s old bandmates, which included Journey bassist and American Idol host Randy Jackson and others who went on to successful music careers, they landed on a deal that gives about 67% to Earnest Jackson, 15% to the bandmates and the remainder to the label and others.
Any revenue generated from the song that goes to NPR will go back into producing more shows, Gonzalez and Beras say. They say they do not plan to recoup expenses from publishing and promoting the song, which included at least $10,000 in legal fees.
Once they uploaded the track to TuneCore and started promoting their first, possibly only hit, they learned that “Inflation” had to be streamed 5,000 times in the first week for the label to be able to pay for promotion. Fortunately, the song crested 65,000 plays in its first few days, but it still has some way to go to reach 1 million plays.
“No one ever makes money on streaming,” Beras says, when asked what she learned from her reporting. “I feel like I’ve repeated that a thousand times and never understood what I said.”
“We put all of our effort behind this song and behind Earnest Jackson and are going all in,” Beras says.
Next, they plan to make it a ringtone — which earns a bit more than streams — and they are trying to land it in a Netflix documentary.
Since launching their label last week, Planet Money has received two more submissions from musicians, according to Beras. For now, they are focused on “Inflation” and have no aspirations to “become music moguls,” Beras jokes.
Yahritza Y Su Esencia has signed a label deal with Columbia Records, Billboard can confirm. The deal is a partnership between Columbia and the trio’s regional Mexican indie label Lumbre Music, who first signed them in February.
Composed of 15-year-old singer-songwriter Yahritza Martinez and her brothers Armando (guitar) and Jairo (bass), the sierreño band is currently managed by their older sister, Adriana Martinez. In April, Yahritza y Su Esencia made chart history with their heartbreak track “Soy El Unico” as the youngest Latin performer to enter the Billboard Hot 100 debuting at No. 20. Since then, major Latin and mainstream record labels had expressed interest in signing the regional Mexican act.
“Lumbre is really happy to partner with Columbia Records for Yaritza Y Su Esencia. It speaks volumes for an American-Mexican indie label like us to work hand in hand with a major label,” says Ramon Ruiz, CEO of Lumbre Music. “We have been working hard to develop and really get the kids’ music out to the masses and we have done some great work with them, including their first diamond certification, but are so excited to take them to the next level. We are all so passionate about this project it was important that whoever came into the project felt that same passion, and both the artists and Lumbre felt that with Columbia from the get-go. It felt like the right choice. Great things are coming for Yahritza Y Su Esencia!”
Yahritza Y Su Esencia, up for best new artist at the 2022 Latin Grammys, broke out on TikTok earlier this year where they uploaded covers and quickly created a zealous fan base. In March, after being discovered by Lumbre Music on the platform’s For You Page, they released their first single, “Soy El Único,” which peaked at No. 1 on Billboard’s Hot Latin Songs chart.
Since, they scored their first No. 1 on the Regional Mexican Albums chart with their debut album, Obsessed, released in May. Elsewhere, the five-track set debuted at No. 7 on Top Latin Albums, and it also entered the all-genre Billboard 200 at No. 173.
Yahritza Y Su Esencia added in a statement: “We are so excited to be working now with not only Lumbre but also a big label like Columbia! For us it’s just another step forward in accomplishing our dreams. We still have to go to school, but we are working hard on recording new music for our fans that we love so much and who helped get us to where we are today. We are very grateful to our entire team for all their support, and we can’t wait to see what the future holds.”
Sony Music increased its annual forecast for revenue and operating income on Tuesday (Nov. 1) as it reported quarterly revenues were up 5.9% on the strength of its subscription streaming income and chart-topping hits.
Releases from artists including Beyoncé, Harry Styles, Future and Doja Cat helped Sony dominate Spotify’s Top Songs Global chart, with an average of 48 out of top 100 coming from the music major’s artists so far this year, executives said. That is up from an average of 36 songs in 2021.
Total Sony Music revenues rose 5.9% year-over-year to $2.58 billion (¥359.3 billion) for the second fiscal quarter ending Sept. 30. Operating income rose 23.9% to $570 million (¥78.7 billion) over the same period compared to a year ago.
Recorded music revenue rose 14.2% to $1.62 billion (¥224 billion). Within that segment, streaming for recorded music revenues rose 6.8% (in US dollars), physical revenues declined 4.2% (in US dollars) and “other” revenues, which includes sync licensing, merchandise and touring revenues, rose 33.4% (in US dollars) as the industry rebounded from a pandemic-led slowdown.
Publishing revenues overall rose 24% in US dollars. The visual media and platforms segment’s revenues declined 9% due to a softening in the Japanese company’s anime business.
Sony Music’s parent company believes the risk of a global economic slowdown is increasing due to rising tensions with China, high energy costs, persistent inflation and interest rates hikes in various countries. “We are taking steps to prepare for further deterioration of the business environment in each of our businesses,” said Hiroki Totoki, Sony’s executive deputy president and chief financial officer, during the earnings call.
However, Totoki is less concerned about the prospects of its music division. Sony Corporation raised Sony Music’s revenue target for the full fiscal year by ¥90 billion yen to ¥1.37 trillion ($9.8 billion at Sony’s assumed exchange rate for the second half of the fiscal year). Executives also raised Sony Music’s operating income target by ¥35 billion to ¥265 billion ($1.9 billion at the assumed exchange rate). “Streaming is very successful and we don’t really have that much of a concern,” he said when asked by an analyst about what risks the music segment faces.
In addition, the company’s recorded music and publishing segments’ operating income benefitted from a one-time benefit of $41.2 million (¥5.7 billion) in the quarter from settlements of multiple copyright infringement lawsuits.
Volatile foreign currency markets in the quarter negatively impacted Sony’s sales and operating income, executives said, and caused a divergence in the company’s earnings as reported in Japanese yen versus the U.S. dollar. This positively impacted Sony Music’s earnings as calculated in yen – about 61% of the yen-denominated gain came from the impact of foreign exchange rates – and negatively impacted the company’s earnings when converted to dollars.
The company’s operating income margin rose 22%, or 3.3 points year-over-year, while its EBITDA margin, a key measure of company profitability, was up 26.5%, or roughly 3 points.
Sony Music has set up a joint venture with label ONEWAY. Records focused on English-language repertoire from Israel.
ONEWAY. Records, which was founded by music executives and brothers Josh and Sam Fluxgold, who formerly managed Dennis Lloyd, the Israeli indie-pop artist known for his 2016 single “Nevermind” (released by Warner Italy).
The new venture will work to discover and develop new artists from Israel with “international appeal,” Sony says in a press release.
The Fluxgolds discovered Lloyd and helped guide his international success, which has featured Gold and Platinum records across several markets and sold-out world tours in the U.S., Europe and Australia. “Nevermind” peaked at No. 86 on the Billboard Hot 100 in August 2018 and reached No. 3 on Billboard’s Alternative Airplay chart.
“Josh and Sam have a proven track record for breaking Israeli talent abroad,” said Daniel Lieberberg, president of Sony Music Entertainment Continental Europe and Africa, in a statement.
The Fluxgolds will remain in Toronto, Canada, where they run ONEWAY., a Sony Music spokesperson confirms.
“During our time working in the Israeli market, we recognized the substantial talent that is being overlooked and underrepresented in the region,” the Fluxgold brothers said in a joint statement. “Together with our partners at Sony Music, we look forward to showcasing the unique Israeli sound and artists that the world has been missing.”
Sony will continue to lead its Israel business from its Continental Europe and Africa Head Office in Berlin, a spokesperson says, in contrast to its two main rivals, which have set up operations there over the past three years. Universal Music Group opened an office in Tel Aviv in 2020, becoming the first major label to set up standalone operations in the country; it is led by Yoram Mokady, a lawyer and entertainment executive. Universal Music Publishing Group followed suit in 2021, hiring Itamar Shafrir as general manager of the new outpost.
Warner Music Group said in May that it was launching Warner Music Israel and would open an office in Tel Aviv. Running the new imprint is Mariah Mochiach, general manager of Warner Music Israel, a veteran A&R and artist manager who worked for more than 10 years at Lev Group Media, which has acted as an Israeli distributor for Warner Music.
While still a relatively small market, Israel is a growing territory that ranked 27th in global music collections in 2021, with 35.6 million euros ($35.2 million), up 5.5% from 2020, according to international collections body CISAC. Pop artists like Noa Kirel, who is signed to Warner Music imprint Atlantic Records, are big at home but have struggled to cross over, though that could change for Kirel, who is slated to represent Israel at the 2023 Eurovision Song Contest in Liverpool, U.K. (Israel has won the contest four times since 1978.)
Last year, UMG and Simon Cowell’s Syco Entertainment said they would award an international recording deal to the winner of the upcoming season of The X Factor Israel, something previously unheard of in the Israeli music market. Cowell was set to be a judge on the fourth season of the show but pulled out in May of 2021, Variety reported.
Universal Music Group on Thursday reported its fifth-straight quarter of revenue gains since its public spinoff from Vivendi last year, increasing revenue 13.3% as its many, varied business divisions helped offset slow-downs in areas sensitive to global economic uncertainty.
On a call with analysts, UMG chairman and chief executive Lucian Grainge attributed the company’s strong quarter — coming amid a downturn in the advertising market — to its diversification strategy. Over Grainge’s 17-years at the helm, UMG has built dominant positions in multiple geographic markets and across nearly every major segment in music, making it less susceptible to “the inevitable ebbs and flows in revenue of any particular business,” he said.
That helped UMG offset a slowdown in ad-supported streaming revenues, which have been hampered by companies spending less amid fears of a recession. Ad-supported streaming revenues for the quarter grew by 5.2% in constant currency compared to the third quarter last year. That’s a slowdown from the second quarter this year when ad-supported revenues grew by 15.6% in constant currency compared to second quarter 2021.
“We noted we would not be immune to a downturn in the advertising market, which is indeed what happened,” Grainge said on the call discussing the company’s earnings for the third quarter, which ended Sept. 30. “The slower growth in the third quarter in ad-supported streaming revenue was offset by growth in so many other areas of our business. From subscription to licensing, live touring to merchandising, to continued growth throughout music publishing.”
Subscription revenues grew by 8.7% from a year ago in constant currency — a measure UMG uses to strip out fluctuations in foreign exchange markets. UMG chief financial officer Boyd Muir said subscriber growth among the digital streaming providers remains healthy and “we have not seen any signs of economic related slowdowns.”
Licensing and other revenue grew by 30.2% in constant currency due to the recovery of live touring in certain European, Latin American and Asian markets where UMG is involved in that business. Merchandising and other revenue grew by over 100% in constant currency compared to the year ago quarter, also helped by growth in touring.
The company saw an $80 million increase in touring revenues in the quarter compared to last year from top selling acts like BTS, BLACKPINK, Ado, INI and Morgan Wallen, executives said.
While a significant contributor to the company’s quarter, touring earns UMG a lower profit margin compared to its other businesses, Muir said.
“As I’ve mentioned before, that’s a very low-margin business — let’s call it, the 8% to 10% kind of area,” Muir said. “Nevertheless, it’s an incredibly important part of our business. And it means that we can actually connect the fan with the artists. So it’s of increasing importance to us as we address the requirements of the super fans.”
Looking to the next quarter, the executives said to expect the company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin, a closely watched metric of profitability, to be flat for the year at around 20.8%.
The company’s stock price closed down 5.61% on Friday (Oct. 28).
Universal Music Group said revenues rose 13.3% to 2.66 billion euros in the third quarter at constant currency, as sales from BTS, BLACKPINK and Ado helped the world’s largest record label report growth across all segments on Thursday. Without considering changes in foreign currency exchange rates, revenues were up 23.7%.
The first of the major labels to report earnings this season, UMG said recorded music revenue grew 10.1%, music publishing revenues grew 6.9% and merchandise and other revenues grew 101.1% in the third quarter ending compared to a year ago based on constant currency conversion.
“Through our innovation, global reach, and unique understanding of the evolution of the market, we are continually improving the monetization of music and music-related content, generating high-quality revenue and recurring income from more sources than ever before,” UMG Chairman and Chief Executive Sir Lucian Grainge said in a statement.
UMG’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 9.1% compared to the year ago quarter, driven by the strong increase in revenue.
Included in the revenue growth for the quarter was a 71 million euro benefit from the settlement of a copyright infringement lawsuit with an internet service provider, the company said. UMG also said the quarter included a 21 million euro hit in its music publishing division from a change in accounting policy. These factors also provided a 52 million benefit and a 7 million euro drag respectfully to the company’s EBITDA and Adjusted EBITDA for the third quarter.
Q3 Results:
Company-wide revenues rose 13.3% to $2.664 million in constant currency for the third quarter ending Sept. 30 from a year ago.Recorded Music revenues rose 10.1% to €2,060 million in constant currency.Subscription and streaming revenue grew 7.7% in constant currency, with subscription revenue up 8.7% in constant currency.Ad-supported streaming revenue grew 5.2% in constant currency.Physical revenue declined 9.6% in constant currency, which the company attributed to a weaker release schedule compared to the prior year.Downloads and other digital revenue were up 55.7% in constant currency in large part due to the settlement of the copyright infringement lawsuit.License and other revenue rose 30.2% in constant currency helped by strong touring revenues.Merchandising and other revenue of 189 million euros was up 101.1% in constant currency due to a rebound in touring-related merchandise revenue.
Kanye West‘s former record label and music publisher have joined a chorus of companies in denouncing antisemitic rhetoric following a rash of recent statements made by the rapper.
Though Universal Music Group (UMG) — which worked with West for many years via Def Jam and its merchandise company Bravado — and Sony Music Publishing (SMP), which administers West’s song catalog, no longer work with the rapper now known as Ye, both have taken a public stand against his recent antisemitic comments in statements sent to Billboard.
A spokesperson for UMG clarified that “Def Jam’s relationship with Ye as a recording artist, Def Jam’s partnership with the GOOD Music label venture and Ye’s merchandise agreement with Bravado all ended in 2021.” The company owns the copyright on his recordings up to 2016 and distributed his recordings until last year. The spokesperson continued, “There is no place for antisemitism in our society. We are deeply committed to combating antisemitism and every other form of prejudice.”
SMP has been the administrator for West’s extensive catalog of musical works for years but the rapper’s publishing administration deal expired in early 2022. In an internal memo to employees, Sony leadership assured their staff that “at Sony Music Group, commitment to tolerance, inclusion and equality for all are at the heart of who we are as a company. Consistent with these values, we denounce antisemitism. Through our partnership with the UJA Federation, we work to combat prejudice against the Jewish community.”
Pursuant to the old agreement, SMP will continue to administer West’s musical works for an undisclosed period of time. Because SMP’s dealings with West were purely administrative and did not include ownership, after this period ends the company will no longer have any interests in his catalog.
West’s former manager, Scooter Braun, who is Jewish, posted a graphic today on Instagram, seemingly in response to his former client’s recent statements. “First they came for the Socialists, and I did not speak out — because I was not a Socialist. Then they came for the Trade Unionists and I did not speak out — because I was not a trade Unionist. Then they came for the Jews, and I did not speak out — because I was not a Jew. Then they came for me — there was no one left to speak for me,” the post read.
These statements all follow West’s three-hour interview with MIT scientist Lex Fridman on Tuesday in which the rapper said, “It’s genocide and population control that Black people are in today in America, that is promoted by the music and the media that Black people make, that Jewish record labels get paid off of.”
Earlier on Tuesday, Adidas announced that it had ended its partnership with the Yeezy designer and rapper over his offensive remarks — a decision that the German sportswear brand said will affect its bottom line significantly — after celebrities and others on social media urged the brand to join the many other companies in fully cutting ties with West. As a result of being dropped from Adidas, West has lost his billionaire status, according to Forbes.
In a now-removed episode of the Drink Champs podcast, West told interviewer N.O.R.E., “the thing about it being Adidas is, like, I can literally say antisemitic s–t and they can’t drop me … I can say antisemitic things and Adidas can’t drop me. Now what?”
The hateful and discriminatory rhetoric West voiced on Drink Champs followed a number of other concerning statements from the rapper in recent weeks. On Oct. 3, the rapper wore a White Lives Matter shirt to his Yeezy Paris Fashion Week show. Just days later on the evening of Oct. 8, he sent out a tweet saying he wished to go “death con 3” on Jewish people, which was subsequently removed by Twitter. West is currently suspended from Twitter and Instagram for antisemitic posts that the social networks both said violated their policies.
Over the weekend, a group of demonstrators, inspired by West’s antisemitic remarks, unfurled a banner on a Los Angeles overpass that read “Kanye is right about the Jews.”
Other business partners of West’s have also dropped him in recent weeks, including Creative Artists Agency, MRC, Balenciaga and JPMorganChase, though the latter relationship was severed prior to the rapper’s antisemitic outbursts. On Tuesday, Gap said it was taking immediate action to remove all West-related products from shelves a month after the rapper severed his relationship with the retailer.
Kodak Black is headed for Capitol Records — he just has to fulfill his obligations to his current label, Atlantic Records, first. That’s according to sources familiar with the situation, who note that Black still has two releases left under his agreement with Atlantic.
The rapper’s eventual move follows last month’s announcement that Orlando Wharton — who previously signed Black to Atlantic — had joined Capitol as executive vp and president of the relaunched Priority Records. Wharton starts the new role early next year.
Representatives for Atlantic and Capitol declined to comment.
Black released his major-label debut album through Atlantic Records in 2017, and has scored 34 entries on the Billboard Hot 100 to date, including “Super Gremlin,” a solo cut that climbed to No. 3 last year. When he moves to Capitol, he will be one of the biggest active artists on the label’s roster.
While Black has enjoyed commercial success, he has also faced a series of charges for sexual assault, drugs, robbery and weapons. The rapper was sentenced to 46 months in prison on federal weapons charges in 2019; former president Donald Trump later commuted that sentence on his last day in office. During a sexual misconduct case last year — Black was accused of sexually assaulting a high school student following a 2016 show — the rapper pleaded guilty to first-degree assault and battery.
While Black’s decision to eventually leave the label where he built his career is notable, entertainment attorneys say it’s not unusual for artists to start having conversations with potential new label partners once they enter into the final stretch of their current recording contract. Recording agreements are typically structured so that an artist is required to deliver a certain amount of music during an initial contract period. Labels can then usually choose to pick up an “option” (they have a set amount of months to mull over the decision), which triggers the release of another advance payment and recording budget for the artist to put towards the next project for that company. If the label decides not to pick up the option, it ends its relationship with the artist.
Historically, managers note, it was common for artists to sign longer-term deals — what the industry likes to call a “one plus four” or “one plus five,” meaning that the label was able to exercise four or five options and potentially keep the artist under contract for many years. Recently, in a world where acts are increasingly able to generate streams on their own without help from a label, the balance of power in some deals has shifted.
It’s more common now to hear about buzzing artists signing a “one plus one,” or even a deal for one album with no options attached, if an act has a lot of streaming momentum. Fewer options means that acts who are unhappy with their record company don’t need to stay with that partner for long if the relationship sours. Matt Buser, a music industry lawyer, says “it’s rough when an artist gets locked in with a team that has lost its appeal, or if the artist loses their champion in the building due to lateral movement or termination — that’s one reason why we try to keep the option number low in negotiations.”
When artists start to search for a new partner while still working with an old one, managers and lawyers alike say they usually try to keep these conversations discreet. If an artist still has music to deliver under his current agreement, but he’s flaunting the fact that he’s hunting for a fresh deal, “depending on the circumstances, it might undermine the enthusiasm of his current label to market and promote that last project,” according to Larry Katz, a veteran entertainment attorney.
There are other political reasons for an artist not to upset a record company before his or her contract is up. A label that feels spurned, for example, might decide to classify an artist’s project as a mixtape rather than an album, according to one manager. That seemingly small decision around nomenclature could mean that the act then has to turn in another entire project, depending on the terms of his or her contract, to fulfill recording obligations. (Debates over what constitutes an album and what constitutes a mixtape are more prevalent in hip-hop than in other genres.)
In addition, lawyers say that some artists make another mistake when they are gearing up to switch labels: They turn in the final album required by their contract and then immediately begin to record music in anticipation of a new deal elsewhere. But many exclusive recording agreements extend for nine to 12 months past the date that the last album was delivered or released — meaning songs that artists cut during this period still belong to their previous label partner. (Contract terms vary, of course, and stars have a lot of negotiating power, which gives them more latitude.)
“Artists may not be aware that in most record deals, the recording services remain exclusive during the entire term, and there’s often a period of time in between the release of the last project and the end of that exclusive term,” Katz says. “If you’re not careful, anything you record during that period is owned by the old label.”
Black released his fourth official album under his Atlantic deal, Back for Everything, in February. According to the rapper’s Instagram posts, he is now planning to release a follow-up, Kutthroat Bill: Vol 1, on Oct. 28.