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What a difference a year makes. Last year’s Entertainment Law Initiative (ELI) Grammy Week Event was held during a recording business boom when AI was still an issue on the horizon and TikTok seemed like a surefire way to break new artists. This year’s event, held Friday (Feb. 2), took place amid a boom shadowed by clouds of uncertainty, including a difficult environment for new artists, a restructuring of Universal Music Group’s labels and what looks like the start of a battle with TikTok.
The winner of this year’s ELI writing contest, law school student Olivia Fortunato, wrote about the idea of a federal post-mortem right of publicity — a subject that was barely on the radar of most lawyers a year ago. The keynote speaker, Capitol Music Group chair/CEO Michelle Jubelirer, seemed to hint that her time running the label might be nearing an end. And the Entertainment Law Initiative Service Award Honoree, Atlantic executive vp of business & legal affairs/general counsel Michael Kushner, mentioned how much the industry has changed since the CD era in a way that could be taken as a sign of more changes to come.
Jubelirer’s speech got a good deal of attention, coming as it did a day after Universal Music Group (UMG) announced a restructuring of its labels that would put Republic chairman/CEO Monte Lipman in charge of the company’s East Coast labels and Interscope chairman/CEO John Janick in charge of its West Coast ones. That raises some questions about the future of Capitol Music Group that Jubelirer’s speech didn’t answer, but she dropped a hint. (A PR representative for Capitol declined to comment.)
Jubelirer said that her mantra was a question: “Am I changing the record company more than it’s changing me?” Standing at the event, “I am engaged in that very evaluation,” she said. “Asking myself that very question. And, for the first time in a very long time, I’m not so sure of the answer.”
Most of her speech was more upbeat: She spoke of growing up in Altoona, Penn., as a fan of Guns N ‘ Roses; how she went from a job in mergers and acquisitions law to Sony to the music law firm now known as King, Holmes, Paterno & Soriano; and her time at Capitol Music Group, where she worked with Katy Perry, Paul McCartney and, most recently, Ice Spice. She also praised several mentors and friends, including Universal Music Publishing Group CEO Jody Gerson, and took a moment to point out her mom, “the silver vixen over there.”
Atlantic Music Group chairperson/CEO Julie Greenwald presented the ELI Service Award to Kushner, who has worked closely with her and Atlantic chairman/CEO Craig Kallman. Kushner came to Atlantic after stints at Universal, Sony and PolyGram, where he started around the same time as Sony Music Entertainment executive vp of business affairs/general counsel Julie Swidler. After Greenwald spoke, Kushner received the customary video tribute, filled with praise both serious and silly.
Kushner then spoke about the importance of mentorship and the changes he has seen in the music business, where the only constant seems to be change itself.
Universal Music Group (UMG), the world’s largest music company, released an open letter to its artists and songwriters on Tuesday (Jan. 30) stating that the company’s music would soon leave TikTok due to disagreements over compensation, artificial intelligence, infringing works and harassment. TikTok replied a few hours later, calling UMG’s letter a “false narrative” and […]
The greatest impact of Universal Music Group and TikTok’s licensing stalemate will likely not come from UMG’s superstar artists leaving the platform, it will come from the loss of its songwriters.
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Losing music from record label signees like Taylor Swift, Drake, Morgan Wallen, BTS, Olivia Rodrigo and more on TikTok is seismic on its own, but media coverage of the now-expired license that lapsed on Jan. 31 has largely ignored that the world’s largest music company’s songwriters are leaving, too. That means that any record that was touched by a Universal Music Publishing Group (UMPG) songwriter will also be subject to removal from the platform — even if it was released on a non-UMG label. Artist-songwriters like Harry Styles, Bad Bunny and SZA are three of many notable examples of UMPG writers that release music under non-UMG labels that will be affected. Artists who work with UMPG hitmakers like Metro Boomin, Jack Antonoff or Fred again.. could also face this.
In today’s pop and rap markets, writing rooms are considered to be bigger than ever, crediting anywhere from one to 30 contributors in extreme cases like cases like Travis Scott’s “Sicko Mode.” A typical pop song on the radio likely has at least three or four people receiving publishing. This, mixed with the fact that UMPG is one of the largest music publishers in the world with 4 million copyrights to its name, means that removing all songs with UMPG interests will impact just about every other record label and music publisher in some way.
In the third quarter of 2023, it was calculated that UMPG held a fifth of the market share on the Billboard’s Pop Airplay and Hot 100 charts. For Country Airplay, UMPG represented a tenth of the chart.
There’s also a chance of this standoff spreading to other publishers this spring. On Thursday (Feb. 1), at the Association of Independent Music Publishers event in Beverly Hills, National Music Publishers Association president and CEO David Israelite revealed during a speech that his organization’s TikTok model license is up for renewal in April. This license is negotiated by the trade association and adopted by a large number of the country’s independent publishers.
The NMPA has been known for its aggressive approach to licensing negotiations with other social media sites, games and apps in recent years, including a recent $250 million lawsuit against X (formerly Twitter) for alleged copyright infringement, and it would not be surprising if the trade organization considered following suit with UMG. If that happened, all indie publishers would be on their own to decide whether they wanted to negotiate with TikTok directly or leave the platform.
Already 21 of the 50 tracks on the TikTok Billboard Top 50 chart have been removed due to their UMG affiliation, but so far those take downs have focused on the company’s recordings, not publishing. Removing UMPG songs will be a far more arduous and complicated task than removing UMG records, given there are sometimes multiple recordings by multiple artists for the same underlying song. Publishing metadata — which keeps track of who wrote what song — is also notoriously incomplete or incorrect. In some cases, the metadata is often not even finalized and input until weeks or months after a song is released, making matters even more complicated.
It is widely believed that the process of taking down publishing interests will likely take a while and will be piecemeal and spotty, potentially forcing the UMPG team to police the platform and to issue takedown notices.
In the interim, UMG and TikTok are showing no signs of backing down. TikTok said the music company had “put their own greed above the interests of their artists and songwriters” after the letter was released. UMG fired back with another statement Thursday, calling TikTok’s view on compensating artists and songwriters “woefully outdated.” Amidst all the finger pointing, TikTok users are attempting to fill the gaps with non-UMG songs or covers of UMG records, while at least one UMPG writer, Metro Boomin, took to the internet to show his support: “It’s about damn time,” he posted to X.
Two days after Universal Music Group (UMG) announced it would likely pull its music catalog from TikTok over a licensing dispute, indie publishing giant Primary Wave Music has come out in support of the company’s decision.
In a statement released Thursday (Feb. 1), Primary Wave, led by founder/CEO Larry Mestel, said it applauds UMG “for standing up to TikTok and its blatant disregard for artists and songwriters” while blasting TikTok’s response to UMG’s decision, which UMG announced in an open letter addressed to its artists and songwriters on Tuesday (Jan. 30).
“The notion that TikTok would try to rationalize willfully underpaying artists because, the platform says, it offers artists ‘promotion’ is a decades-old canard that has no place in any modern music business,” the Primary Wave statement continues. “Artists and songwriters need to be compensated appropriately for their work and protected from unethical uses of AI. Period. We’re proud to stand alongside UMG and the artist advocates that have called upon TikTok to appropriately pay and protect the songwriters and artists who are critical to the growth and cultural relevance of the platform.”
Primary Wave represents multiple artists and estates with deals with UMG, including Olivia Newton John and Bob Marley.
In UMG’s open letter, the company — which boasts such superstars as Taylor Swift, BTS, Drake and The Weeknd on its roster — announced that all UMG music would be removed from TikTok after its current licensing deal expired Thursday (Jan. 31) while citing deep disagreements over artist compensation, artificial intelligence, TikTok’s alleged failure to combat infringing musical works and user safety. It also accused TikTok of attempting to “bully” UMG “into accepting a deal worth less than the previous deal, far less than fair market value and not reflective of their exponential growth” by threatening to selectively remove the music of some of UMG’s developing artists.
Just hours later, TikTok responded by accusing UMG of putting “greed above the interests of their artists and songwriters” while slamming what it called UMG’s “false narrative and rhetoric…the fact is they have chosen to walk away from the powerful support of a platform with well over a billion users that serves as a free promotional and discovery vehicle for their talent.”
On Thursday (Feb. 1), UMG responded to TikTok by saying the platform’s own statement “perfectly sums up its woefully outdated view: Even though TikTok (formerly Musical.ly) has built one of the world’s largest and most valuable social media platforms off the backs of artists and songwriters, TikTok still argues that artists should be grateful for the ‘free promotion’ and that music companies are ‘greedy’ for expecting them to simply compensate artists and songwriters appropriately, and on similar levels as other social media platforms currently do.”
UMG’s catalog began disappearing from TikTok on Thursday.
The Universal Music Group announced a massive restructuring of its record label operations Thursday (Feb. 1), reorganizing its web of frontline labels to align them under two main companies, in Republic Records and Interscope Records. The move, which can loosely be termed an East Coast (Republic) and West Coast (Interscope) realignment, means that Interscope’s John Janick and Republic’s Monte Lipman will be leading U.S. label operations for UMG.
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As part of the move, the other U.S. label heads will now report through to Janick and Lipman, a source confirms. In the new alignment, Janick will now oversee Interscope, Geffen, Capitol, Motown, Priority, Verve and Blue Note, while Lipman will oversee Republic, Def Jam, Island and Mercury.
UMG chairman/CEO Lucian Grainge announced the move today in a memo to staff, in which he acknowledged that Republic and Interscope have been the two market leaders in current market share in recent years; in 2023, Republic claimed 13.47% of the U.S. market, while Interscope was second, at 8.80%.
“As our labels continue to maintain their creative A&R and marketing independence, unique identities, and entrepreneurial spirit, they’ll also be provided with access to the talent and resources best able to support their rosters and bring them to new levels of success,” Grainge wrote in the memo, obtained by Billboard. “It’s a proven model we pioneered on the East Coast several years ago — one that we will accelerate and expand.
“As this model takes shape and spurs new creativity, our U.S. recorded music business will continue to outperform and outgrow our competition,” Grainge continued. “Led by the industry’s best creative visionaries — we will cultivate more repertoire sources, we will invest more in new artists and emerging genres, and UMG will become an even more attractive destination for the world’s most gifted artists.”
The move comes after weeks of speculation about layoffs and restructuring at the company, and while no other moves were announced Thursday, layoffs are still expected, according to many sources. In his memo, Grainge said that “In the coming weeks, John and Monte will be making further announcements about structure, resources and next-generation partnerships. These and other developments will also power some of the other initiatives I outlined in my New Year’s note, including super-fan and audience monetization, state-of-the-art D2C, e-commerce, branding and more.”
Universal has restructured its label network in the past, generally during times of big change in the music business. In 1999, at the formation of what is now the Universal Music Group, the company structured its label operations into Island Def Jam, Universal Motown Republic, Verve Label Group and Interscope Geffen A&M. In 2012, UMG purchased EMI Music’s recorded music operations, bringing Capitol Records, Blue Note and others under its purview, forming the Capitol Music Group. Then in 2014, UMG unwound its East Coast operations to make Def Jam, Island and Motown all standalone labels; in subsequent years, Motown would be moved under the Capitol Music Group umbrella, while Island would begin sharing services with Republic. This new reorganization combines several of those labels under a streamlined structure once again.
“The competition within our own company in signing and developing artists is no accident. It’s by design,” Grainge wrote in his memo. “By creating a home for a variety of independent and competitive creative centers and the leaders that run them, we increase opportunities for growth and success.
“At the same time, our culture never lets our ‘in-house’ competition become destructive; our executives never forget that we are all part of the same UMG team. John and Monte consistently share strategies for success with our labels in the U.S. and around the world, strategies that benefit artists signed to all our labels, not just those on Republic and IGA.”
With Universal Music Group‘s catalog now being slowly removed from TikTok, the music company issued a new statement Thursday (Feb. 1) commenting on what it says are TikTok’s “woefully outdated” views on music licensing and compensation. Explore Explore See latest videos, charts and news See latest videos, charts and news The stalemate between the world’s […]
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Source: VALERIE MACON / Getty / UMG / Universal Music Group / TikTok
Your music selection for your TikTok posts took a serious hit.
Spotted on The Verge, artists like Taylor Swift, Drake, JAY-Z, BTS, Olivia Rodrigo, and more all had their music pulled off TikTok after the platform and UMG (Universal Music Group) failed to extend the expired licensing agreement when negotiations between the two entities broke down.
Per The Verge:
On Tuesday, UMG accused the video platform of attempting to bully it into accepting a “bad deal” that didn’t soothe the record labels’ concerns regarding adequate compensation for artists and songwriters, protections against AI-generated music, and online safety on the platform to protect artists from “hate speech, bigotry, bullying and harassment.” TikTok responded saying that it was “disappointing” that UMG had “chosen to walk away from the powerful support of a platform with well over a billion users,” and accused the label of putting its “own greed above the interests of their artists and songwriters.”
Rolling Stone reports takedowns on the platform began “gradually” on Wednesday night when “UMG-owned recordings such as Taylor Swift’s “Cruel Summer,” Olivia Rodrigo’s “Get Him Back,” and Lana Del Rey’s “Let the Light In” were no longer appearing in search results.”
Videos from popular TikTok accounts like Dwayne “The Rock” Johnson featuring songs from UMG artists were also pulled off the platform.
In an open letter shared by Rolling Stone, UMG wrote:
TikTok proposed paying our artists and songwriters at a rate that is a fraction of the rate that similarly situated major social platforms pay. Today, as an indication of how little TikTok compensates artists and songwriters, despite its massive and growing user base, rapidly rising advertising revenue and increasing reliance on music-based content, TikTok accounts for only about 1% of our total revenue.
Ultimately TikTok is trying to build a music-based business, without paying fair value for the music,” UMG claimed. It accused TikTok of trying to “bully” it into accepting a “bad deal” by “selectively removing the music of certain of our developing artists, while keeping on the platform our audience-driving global stars.” Universal further alleged that TikTok was allowing its platform to be “flooded” with AI-generated recordings. The company described TikTok’s response to AI as “nothing short of sponsoring artist replacement by AI.
TikTok Responded
The popular Chinese-owned platform had something to say in response to UMG’s open letter in a statement shared online writing:
It is sad and disappointing that Universal Music Group has put their own greed above the interests of their artists and songwriters.
Despite Universal’s false narrative and rhetoric, the fact is they have chosen to walk away from the powerful support of a platform with well over a billion users that serves as a free promotional and discovery vehicle for their talent.
TikTok has been able to reach ‘artist-first’ agreements with every other label and publisher. Clearly, Universal’s self-serving actions are not in the best interests of artists, songwriters and fans.
It sounds like UMG and TikTok are far apart, but we believe cooler heads will prevail, and you will be adding Taylor Swift songs to your cooking videos in the future.
There is just too much money possibly being left on the table here.
It’s too soon to say what impact Universal Music Group’s plan to pull all its music from TikTok will have. But if you’re looking for a clue, try asking an Australian.
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Last February, TikTok began running tests in the country in which it limited the amount of licensed music some users encountered on the platform. The intent was to measure and compare the different ways people interact with the app — and what impact music has on their experience.
Some users took to X (formerly Twitter) to decry the tests: “Tiktok really ruining its own app with all this ‘sound removed’ garbage,” one Australian user posted. Another added: “wtf is up with tiktok removing like half the sounds??? like i swear ive seen SO many tiktoks where the sound has been removed.”
Some guessed at the time that the results were possibly meant to inform TikTok’s licensing strategy, but now, the social platform is facing an even bigger test.
Starting today, music from the Universal Music Group (UMG) catalog will begin to disappear from TikTok in countries around the world after negotiations between the companies soured. According to an open letter penned by UMG, the two failed to agree on key points like compensation, artificial intelligence and infringing works on the social app.
The ramifications will reverberate across the entire music business. UMG’s TikTok license covered its recorded music and publishing holdings, meaning that it’s not just artists on UMG labels like Republic and Interscope whose music will soon disappear. Universal Music Publishing Group is the second largest publisher in the world, holding a 21.16% market share on the Pop Airplay chart in the third quarter of 2023, not to mention a formidable trove of evergreen catalogs. When the company pulls that catalog, it will pull any song any of the songwriters it represents contributed to as well, impacting many other labels and publishers in the coming weeks.
As one A&R from another publisher put it last night at Spotify’s Songwriter of the Year Grammy event, this move by the world’s largest music company feels akin to the Writers Guild of America and SAG-AFTRA strikes that halted much of the film business last year. Though the pain will be felt in the short term, the hope is that UMG’s stand will lead to substantive change that benefits everyone in the music industry in the long term. There’s an opportunity for the “movement” to grow too, should the other major music companies, Sony Music Entertainment and Warner Music Group (WMG), as well as indies, decide to pull their catalogs as well when their licensing deals expire. (WMG, however, announced a multi-year licensing deal with TikTok last July, and it is unclear when other licenses will be up for renewal.)
Much like the Hollywood strikes, this battle will also come with casualties. UMG-affiliated artists and songwriters with releases already slated for the coming weeks, those who just released something new, and those who are currently trending on TikTok are all likely to feel the effects. Among them: Sophie Ellis-Bextor’s “Murder on the Dancefloor,” which has seen a remarkable resurgence more than 20 years after its release on UMG’s Polydor label thanks to Saltburn and, now, TikTok; and “Made For Me” by Muni Long, which was released in September via Supergiant/Def Jam and is currently No. 2 on the TikTok Top 50 chart. As Justin Lehmann, manager to Amine and Khai Dreams, previously said in an interview with Billboard, “without breaking [on TikTok], it’s difficult to say what else can cause a big moment to happen for anybody.”
It’s easy to imagine that some artists affiliated with UMG would consider pushing back their release dates given how important TikTok has become to label marketing efforts. If the holdout lasts months, it could lead to a bottleneck for major album releases awaiting a resolution. Meanwhile, UMG will be forced to protect its copyrights against unlicensed user uploads, issuing takedown notices to combat them.
In the interim, indie artists might see a bigger window to get their songs noticed on the short-form app. One major label employee joked that he could see some people trying to make soundalike recordings or covers of big songs by UMG recording artists in hopes of filling the void.
The risk with UMG’s gamble is that TikTok fares just fine without its giant catalog, eventually forcing UMG and other music companies into worse negotiating positions than ever. It’s hard to imagine a comparable user experience without the likes of Taylor Swift, Drake, BTS, The Weeknd, Olivia Rodrigo and so many other superstars, but this moment will serve as the ultimate test. It turns out Australia was just the warm up.
Universal Music Group (UMG) says it will pull its entire music catalog from TikTok when its contract with the service expires on Wednesday (Jan. 31), accusing the platform of “trying to build a music-based business, without paying fair value for the music,” according to an open letter released Tuesday (Jan. 30).
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In the letter, addressed to UMG artists and songwriters, the company states that it’s particularly concerned about the rates that TikTok is offering to pay for its catalog. Other points of contention include the amount of content on TikTok that infringes its artists’ and songwriters’ works without providing “meaningful solutions” to help them combat it, the level of hate and harassment on the platform and TikTok’s stances on artificial intelligence (AI).
According to UMG, during the negotiations, the ByteDance-owned social giant “demanded a contractual right which would allow [AI] content to massively dilute the royalty pool for human artists,” which UMG states is “nothing short of sponsoring artist replacement by AI.”
If UMG pulls its catalog, it would affect all music distributed and administered by its recorded-music division as well as Universal Music Publishing Group.
The last deal UMG struck with TikTok to license both its recorded music and publishing was announced on Feb. 8, 2021. In July, WMG inked a multi-year licensing deal with TikTok that allows the company to use WMG’s music on its app as well as CapCut and its new “social streaming platform” TikTok Music, which is currently available in Brazil, Indonesia, Australia, Singapore, and Mexico. At the time the deal was announced, WMG CEO/chairman Robert Kyncl and TikTok’s chief executive Shou Chew said the agreement would benefit artists.
This is not the first time the music business has had issues with TikTok. In 2019, when the platform was just getting started, the National Music Publishers’ Association (NMPA) called on Congress to investigate TikTok for potential copyright theft. It was also reported around that time that TikTok was operating on expired deal extensions that were grandfathered in from when it acquired Musical.ly in late 2017. In March 2020, Billboard reported that all three majors had struck short-term licensing deals with TikTok.
Read the full open letter below.
Our core mission is simple: to help our artists and songwriters attain their greatest creative and commercial potential. To achieve these goals, our teams employ their expertise and passion to strike deals with partners all around the world, partners who take seriously their responsibilities to fairly compensate our artists and songwriters and treat the user experience with respect
One of those partners is TikTok, an increasingly influential platform with powerful technology and a massive worldwide user base. As with many other platforms with whom we partner, TikTok’s success as one of the world’s largest social platforms has been built in large part on the music created by our artists and songwriters. Its senior executives proudly state publicly that “music is at the heart of the TikTok experience” and our analysis confirms that the majority of content on TikTok contains music, more than any other major social platform.
The terms of our relationship with TikTok are set by contract, which expires January 31, 2024. In our contract renewal discussions, we have been pressing them on three critical issues—appropriate compensation for our artists and songwriters, protecting human artists from the harmful effects of AI, and online safety for TikTok’s users.
We have been working to address these and related issues with our other platform partners. For example, our Artist-Centric initiative is designed to update streaming’s remuneration model and better reward artists for the value they deliver to platforms. In the months since its inception, we’re proud that this initiative has been received so positively and taken up by a range of partners, including the largest music platform in the world. We’ve also moved aggressively to embrace the promise of AI while fighting to ensure artists’ rights and interests are protected now and far into the future. In addition, we’ve engaged a number of our platform partners to try to drive positive change for their users and by extension, our artists, by addressing online safety issues, and we are recognized as the industry leader in focusing on music’s broader impact on health and wellness.
With respect to the issue of artist and songwriter compensation, TikTok proposed paying our artists and songwriters at a rate that is a fraction of the rate that similarly situated major social platforms pay. Today, as an indication of how little TikTok compensates artists and songwriters, despite its massive and growing user base, rapidly rising advertising revenue and increasing reliance on music-based content, TikTok accounts for only about 1% of our total revenue.
Ultimately TikTok is trying to build a music-based business, without paying fair value for the music.
On AI, TikTok is allowing the platform to be flooded with AI-generated recordings—as well as developing tools to enable, promote and encourage AI music creation on the platform itself – and then demanding a contractual right which would allow this content to massively dilute the royalty pool for human artists, in a move that is nothing short of sponsoring artist replacement by AI.
Further, TikTok makes little effort to deal with the vast amounts of content on its platform that infringe our artists’ music and it has offered no meaningful solutions to the rising tide of content adjacency issues, let alone the tidal wave of hate speech, bigotry, bullying and harassment on the platform. The only means available to seek the removal of infringing or problematic content (such as pornographic deepfakes of artists) is through the monumentally cumbersome and inefficient process which equates to the digital equivalent of “Whack-a-Mole.”
But when we proposed that TikTok takes similar steps as our other platform partners to try to address these issues, it responded first with indifference, and then with intimidation.
As our negotiations continued, TikTok attempted to bully us into accepting a deal worth less than the previous deal, far less than fair market value and not reflective of their exponential growth. How did it try to intimidate us? By selectively removing the music of certain of our developing artists, while keeping on the platform our audience-driving global stars.
TikTok’s tactics are obvious: use its platform power to hurt vulnerable artists and try to intimidate us into conceding to a bad deal that undervalues music and shortchanges artists and songwriters as well as their fans.
We will never do that.
We will always fight for our artists and songwriters and stand up for the creative and commercial value of music.
We recognize the challenges that TikTok’s actions will cause, and do not underestimate what this will mean to our artists and their fans who, unfortunately, will be among those subjected to the near-term consequences of TikTok’s unwillingness to strike anything close to a market-rate deal and meaningfully address its obligations as a social platform. But we have an overriding responsibility to our artists to fight for a new agreement under which they are appropriately compensated for their work, on a platform that respects human creativity, in an environment that is safe for all, and effectively moderated.
We honor our responsibilities with the utmost seriousness. Intimidation and threats will never cause us to shirk those responsibilities.
During an October earnings call, Universal Music Group CFO Boyd Muir told investors the company was conducting “a careful review” of its costs. In the world of public company statements, that was a hint that UMG expected to make cuts to its workforce of roughly 10,000 — specifically hundreds of jobs in the first quarter of the year, as Bloomberg later revealed.
UMG has plenty of company. Until late last year, the music business had mostly escaped the job-cutting that ravaged industries that depend more on advertising in 2022 and 2023. That was still the best of times for the industry, which had found double-digit revenue growth in streaming. Since 2020, 10 music companies have gone public to take advantage of investors’ enthusiasm for music, including labels and publishers (UMG, Warner Music Group, HYBE, Reservoir Media, Believe, Round Hill Music Royalty Fund), streaming services (Deezer, Anghami, Cloud Music) and live-entertainment firms (a spinoff of MSG Entertainment).
That changed during 2023. In March, WMG’s new CEO, Robert Kyncl, a former YouTube executive, laid off around 270 people — 4% of the company’s workforce — to focus more on technology initiatives and “new skills for artist and songwriter development,” as he wrote in a memo to staff at the time. Downtown Music Holdings — owner of CD Baby, FUGA, Songtrust and more — also thinned its payroll in May. BMG laid off about 30 people in October. Digital music companies fared even worse in 2023: Spotify cut about 23% of its workforce in two rounds of layoffs, TIDAL cut 10%, SoundCloud cut 8%, and Bandcamp chopped half its head count after being acquired by Songtradr.
But UMG? The company’s revenue in the first nine months of 2023 was up 9.4% on a constant currency basis, 6.8% as reported due to foreign currency fluctuations. More than two years after spinning off from former corporate parent Vivendi, UMG is a profitable, hit-making machine that controlled 29.4% of the U.S. recorded-music market in 2023, easily besting Sony Music’s 18.9% and WMG’s 15.6%. It has Taylor Swift, Morgan Wallen, Drake and many other big stars. Perhaps understandably, there has been talk that other labels could follow, with cuts of one size or another.
UMG’s decision may be the most dramatic example of just how profoundly the music business is changing — and how quickly. Lean is the new black. Bloat, or anything that evokes it, is out. The old ways of finding, developing and marketing artists no longer work the way they used to. How big a radio promotion department does a label need — how many radio promotion departments does its parent company need — at a time when radio no longer plays as important a part in breaking hits? Social media and data analysis might matter just as much. So could developing markets that once didn’t account for much revenue.
UMG’s next focus, chairman/CEO Lucian Grainge wrote in a memo to staff in early January, will be “creating the blueprint for the labels of the future” by building the technology to do more work in-house, expanding in developing markets and finding ways to better monetize superfans. That requires moving resources away from the “legacy business,” Muir said in the October earnings call, to “benefit from all of the opportunities that we see ahead.” What that will mean for how UMG reshuffles its organizational chart remains to be seen, but it is already building an artist services business with Virgin Music Group and making aggressive moves in developing markets with investments in TM Ventures in India and Chabaka in the United Arab Emirates.
Other music companies are also reassessing their priorities. BMG’s staffing changes were spurred by new CEO Thomas Coesfeld as a response to an international marketing structure that didn’t meet expectations and duplicated the efforts of local teams, he wrote in a memo to staff.
“Businesses are repositioning themselves slightly to become more competitive,” Downtown Music president Peter van Rijn says. “One must always be mindful to not get complacent,” he adds, noting that his company needed to stay nimble enough to respond to the marketplace. “What you do see, in general, is the music industry is maturing. The digital growth is still there, but it’s slowing down.”
The world is changing, too. Along with the major labels, companies like Believe and Reservoir Media are investing in Africa, the Middle East, Southeast Asia and other regions where music revenue is growing. And both new companies and the established majors are expanding their artist services businesses to court creators who can now choose from among an increasing number of alternatives to a traditional major-label deal. Sony acquired the artist services company AWAL in 2022, UMG is building up Virgin, and WMG’s Kyncl wrote in an early-January memo that he wants to augment services to the “middle class of artists” and scale up the company’s publishing administration business.
Public companies in the music industry face pressure from investors to constantly improve their bottom lines, especially as streaming growth levels off. “Two-and-a-half years ago, we started making cuts because we knew the market was no longer about just growth,” says Rob Ellin, CEO of music streaming company LiveOne, which is cutting up to 100 staffers in a restructuring. “You had to be profitable.”
The growth-over-profits era finally ended at Spotify, too. When the streaming giant announced it would cut 17% of its global workforce in December, CEO Daniel Ek explained that costs were too high, efficiency was too low and too few people “contribut[ed] to opportunities with real impact.” Cutting roughly 1,500 jobs and seeking a replacement for CFO Paul Vogel, Ek wrote in an open letter, were necessary to become “relentlessly resourceful.”
Record labels and music publishers have better margins than Spotify, which will rarely turn a profit — but investors also expect more of them. In the first half of 2021, UMG — then a subsidiary of Vivendi — had a margin of 21.5% in earnings before interest, taxes, depreciation and amortization and told investors in August it expected to reach the “mid-20s” soon. Two years later, revenue had increased 34% but its EBITDA margin was almost unchanged at 21.5% (or 14.9% after deducting 345 million euros of noncash, share-based compensation for senior management). With layoffs can come better margins. Restructuring saved Warner $19 million in the fiscal year ended Sept. 30, and Barclays analysts estimated UMG’s layoffs could save the company $70 million annually.
To those who remember the crisis caused by the death of the CD, this talk of restructuring might have a familiar ring. As piracy ravaged the music business, the majors scaled back their physical distribution businesses, sold their CD pressing plants and retooled for a digital world. That’s why Grainge reminded investors that UMG is no stranger to managing disruption. “We’ve got decades of experience in executing cost-cutting programs in the various cycles of the industry, right back to the piracy days,” he said during the October earnings call. And currently, “we’re seeing a change in the business.”