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New Warner Music Group CEO Robert Kyncl addressed investors for the first time since taking over the company at the top of the year, acknowledging the “tough quarter” for the major label while also laying out a vision for how he sees the music industry’s present and future.
The company posted revenues of $1.48 billion for the quarter that ended Dec. 31, 2022, down 8% from the same period the year before, which the company noted contained an extra week, skewing comparisons slightly. Growth came from the publishing sector, which saw revenues up 9.2%, or 14.2% in constant currency, while recorded music revenue fell 10.6%, or 5.6% in constant currency, with recorded streaming revenue down an 6.7%, though the company said that streaming revenue was up half a percentage point when adjusted for the extra week, with a lighter release schedule and falling ad-supported streaming revenue the causes.
That led to Kyncl’s acknowledgement that WMG had a tough quarter, noting that, “like most companies, WMG has been dealing with macroeconomic headwinds and the impact of currency exchange rates.” He added that WMG’s release schedule for this year is weighted toward the second half of the year, with releases from Ed Sheeran, Cardi B, David Guetta, Aya Nakamura and Bebe Rexha on the horizon.
Kyncl then spoke about both his decision to join Warner after 12 years at YouTube and seven at Netflix, as well as his vision for growth for the music industry and the effects of artificial intelligence and TikTok on how that future will look, both creatively and monetarily.
“This industry has achieved something rare: It’s built mutually beneficial, long-term partnerships with many of the world’s biggest companies — Amazon, Apple, Google, Meta, Spotify and Tencent among them,” he said. “As successful as music has become, there’s still meaningful upside ahead for three reasons. One, as technology opens up emerging economies, the industry’s addressable market will continue to expand even further. Two, innovation is constantly creating new use cases for music, giving us the opportunity to diversify our revenue sources. Three, music is still undervalued, especially when compared to other forms of entertainment, like video.”
On the last point, Kyncl pointed out that Netflix’s subscription price has roughly doubled since 2011, the year that Spotify debuted in the U.S., while the price of a music subscription has remained largely flat, even though music subscriptions contain access to a wide swath of the world’s available music, whereas video streamers — of which nearly 80% of U.S. households subscribe to three — are segmented.
He also spoke about his vision for WMG’s role in that future, noting that he hired two former YouTube employees in his first five weeks — Tim Matusch as executive vp of strategy and operations, and Ariel Bardin as president of technology — which should “tell you something about our priorities” in the future.
“We will continue to invest in new artists and songwriters, our catalog and our global expansion,” he said. “At the same time, we plan to thoughtfully reallocate some resources to accelerate how we use technology and data to empower artists and songwriters, as well as drive greater efficiency in our business.” That, he added later in the Q&A section of the call, will come “with continued focus on financial discipline and cost containment.”
That doesn’t necessarily mean layoffs, however; he noted that WMG “has actually been much more measured in its headcount growth, for instance, over the last few years than others in the industry who are now undergoing significant layoffs,” and had been addressing financial initiatives even before the recent fluctuations in the market. “But again, I’d like to reiterate that I’ll be focusing on reallocating our internal resources in order to invest in technology and drive not only more tools for our creators, but also greater efficiencies for us,” he added.
On the topic of AI — which he called “probably one of the most transformative things that humanity has ever seen” — Kyncl said that the conversation falls into four buckets in how content owners need to work with AI platforms: “One is the use of existing copyrights to train generative AI. The second is sampling of existing copyrights as the basis for new and remixed AI generated content. The use of AI to help and support creativity — so an assistive way to do that. And most importantly, find ways to protect the craft of artists and songwriters from being diluted or replaced by AI-generated content.”
But he also stressed that the conversation is not just about the future of AI, but about how things can be handled today to prepare for that future — namely, that the processes for identifying and tracking copyrighted material on platforms and making sure they are monetized for the copyright owner need to be better in the present to prepare for what is to come. That’s something Kyncl has plenty of experience with from his time with YouTube, whose ContentID system was overseen by new WMG exec Bardin, and something he says Warner will be focusing on under his purview.
Another benefit from his YouTube days, Kyncl says, is his experience being on the other side of the negotiating table from the major labels when it came to developing YouTube as a partner with and contributor to the music industry. During his tenure, Kyncl helped steer the relationship between YouTube and the labels from one of animosity to one of mutual benefit, which he stressed came from a collaborative approach — one he intends to bring to Warner in its approach to its relationship with TikTok, which is currently in a similar situation to the YouTube of old, in terms of being under fire from the music business for its perceived low payouts and under-valuation of music on its platform. Kyncl described how YouTube’s position changed in answering a question about whether the labels will push for changes with its relationship with TikTok.
“At YouTube, we looked at this problem very closely, and we decided that music was very important to us, and that’s why we did it,” he said, referencing YouTube’s push into subscription streaming, tools like Shorts and improvements to ContentID, among other initiatives. “TikTok needs to do that. It’s the right decision for them to evaluate. And you can see from YouTube’s execution what the results of the finding was for us. But I can’t speak to what TikTok finds. That’s up to them. But my answer is, a holistic relationship is what we’re looking for.”
Warner Music Group adds another YouTube veteran to its executive leadership team with the hiring of Ariel Bardin as the label’s first president of technology. In his new position, Bardin will head tech and data teams tasked with creating new systems and products to “support the next phase of WMG’s global growth,” the company said on Tuesday (Feb. 7).
The New York-based Bardin will report to his former Google colleague Robert Kyncl, who officially became CEO of WMG on Feb. 1 following the departure of longtime chief Stephen Cooper.
“Ariel understands how technology can serve creativity to have real, long-lasting cultural and commercial impact,” Kyncyl said. “He has a tremendous appreciation for artistry, deep technical expertise, and a proven track record in execution at the highest level. We’re fortunate to welcome him to our team.”
Bardin spent 16 years at Google, where as vp of product management he helped build, launch and grow some of the company’s household-name products, including Google AdWords and Google Payments. For YouTube, he is credited with leading teams working on various creator-centric products as well as its Content ID system, which finds and monetizes user-uploaded videos for rights owners. In the fall of 2021, Bardin joined software company Celonis as its chief product officer.
“I had the pleasure of working with Robert during our time together at Google, where I especially enjoyed our work empowering and equipping YouTube creators,” Bardin said. “WMG is entering an exciting new era under his leadership, and I’m looking forward to joining him and the rest of the company on a mission to provide the highest level of service to the company’s artists, songwriters, and teams.”
The appointment of a newly created president role arrives two days before WMG will announce financial results for its first quarter — along with its first earnings call with Kyncyl at the helm.
LiveCo, a new concert promotion company that combines BASE Entertainment, Premier Productions, Icon Concerts, Rush Concerts and Peachtree Entertainment, launched with a team that includes Brian Becker and Mark Maluso (BASE Entertainment), Michael Pugh and Shane Quick (Premier Productions), Paul Meloche (Icon Concerts), Jacob Reiser (Rush Concerts) and Bradley Jordan (Peachtree Entertainment). “Designed to help expand the live entertainment industry,” according to a press release, LiveCo represents talent and productions including Jimmy O. Yang, Criss Angel, Cocomelon Live, Cody Johnson, Jo Koy, Dude Perfect, Zach Bryan, MercyMe, Elevation Worship and Gabriel Iglesias.
BMI announced several key promotions within its creative team. Rafael Martinez and John Ellwood were appointed to the newly created roles of vp of strategy and business affairs, creative and assistant vp of strategy and business affairs, creative, respectively. Reema Iqbal was named executive director of creative, film, TV & visual media. LuAnn Davidson was promoted to executive director of creative administration. Nina Carter was promoted to senior director of creative, partnerships & events. Jon Miller was named director of creative, Europe. Lastly, Katie Kilgallen and Reginald Stewart were both promoted to director of creative. Ellwood can be reached at jellwood@bmi.com, Iqbal can be reached at riqbal@bmi.com, Carter can be reached at ncarter@bmi.comm, Miller can be reached at jmiller@bmi.com and Kilgallen can be reached at kkilgallen@bmi.com.
Todd Moscowitz‘s Santa Anna label appointed Dave Anderson as GM and Carlos “Los” Orgando as vp of promotion. Anderson, who previously served in vp of commerce roles at Geffen and Warner Records, will oversee Santa Anna’s marketing, promotion and digital teams. Orgando, who will assist the label in developing and executing its promotion strategy across several formats, previously held the vp of promotion role at both Geffen and Warner Records. Elsewhere, Derek Lee added the title of CFO of Santa Anna to his existing title of senior vp & CFO at Moscowitz’s Alamo Records.
William “Andy” Anderson was promoted to chief revenue officer at American Urban Radio Networks (AURN); he was previously president of sales. In the role, Anderson will help maximize revenue opportunities, product acquisitions and original content creations for the company. Anderson previously served as director of urban/Canadian advertising at Billboard. (via Radio Facts)
Markus Holzherr was appointed to the newly created role of chief business officer at Warner Music Central Europe. In his new role, Holzherr will oversee the finance, new business, research & analytics and legal departments. He comes from DFB GmbH & Co. KG, where he served as managing director of finance and controlling.
Rob Gross was hired as senior vp of label services at The Syndicate. In the newly-created role, Gross will provide full-scale project management for album releases and sales for all aspects of the company’s services in radio, marketing and PR. Most recently a partner at Shark Attack, he brings clients Warner/Rhino Records and Dine Alone Records to The Syndicate. Gross can be reached at gross@thesyn.com.
Fresh N Sassy Productions CEO/founder Janishia Jones launched ENCORE Music Tech Solutions, a music tech consultancy that signed EMPIRE Publishing as its first client. Under that deal, ENCORE will work with EMPIRE Publishing to scale and improve the publisher’s performance across royalty payment, reporting, synch and other complex systems. ENCORE has already “helped create crucial systems” for EMPIRE Publishing including solutions to better manage agreements, financial accounts and copyrights, according to a press release. Jones can be reached at Info@encoremusic.tech.
Liberty Wilson was promoted to vp of international marketing at Warner Music UK, advancing from her previous role of international marketing director. She’ll continue reporting to the label’s senior vp of international marketing, Victor Aroldoss.
Human Re Sources hired Junko Takeda as vp. Based in Los Angeles, Takeda will oversee day-to-day label relations of Human Re Sources’ Los Angeles and Atlanta operations and continue building the company’s roster of artist clients with support from The Orchard. Takeda most recently served as head of A&R operations at Warner Chappell Music.
The National Independent Venue Foundation (NIVF) appointed Carl Atiya Swanson as executive director. In the role, Swanson will play a key role in “expanding and solidifying NIVF’s programmatic vision,” according to a press release, collaborating with the executive leadership of the National Independent Venue Association (NIVA) and NIVF “to preserve and nurture the ecosystem of independent live performance venues, festivals and promoters throughout the U.S.” He will work to strengthen the independent venue sector via economic development initiatives and workforce development programs while managing critical services including emergency relief funding. Swanson was previously associate director at Springboard for the Arts.
Jacee Badeaux and Halle Bartlett were promoted to senior creative director of A&R and coordinator of A&R, respectively, at Big Yellow Dog Music. In his new role, Badeaux will continue to curate activity for the company’s writers, artists and producers; he was previously creative director. Bartlett, who was previously creative assistant, will be responsible for calendar management, writer coordination, song pitching and social media for Big Yellow Dog songwriters. Badeaux can be reached at Jacee@bigyellowdogmusic.com and Bartlett can be reached at halle@bigyellowdogmusic.com.
Stephanie McGuire was appointed senior A&R international at CTM Publishing. She will continue to guide CTM’s composers, authors and producers while also focusing on fostering more international collaborations and createingmore overseas opportunities for the company’s roster. McGuire can be reached at Stephanie.mcguire@ctm.nl.
John Page joined Oak View Group (OVG) as senior vp of Acrisure Arena, the Coachella Valley Firebirds and OVG360 Facilities. In the role, he will oversee the management and oversight of all three entities. Based in Palm Springs, Page reports to Coachella Valley Firebirds president Tod Leiweke, OVG business development president Francesca Bodie and OVG360 president Chris Granger. Prior to joining OVG, he served as president of Spectra, which OVG acquired in November 2021.
Nashville’s Society of Leaders in Development (SOLID) announced the newly elected members to its 2023 board of directors: President Erin Pettit (Wiles + Taylor), vp Rio Van Risseghem (The Orchard), secretary Jenna Smith (SESAC) and treasurer Ryan Cunningham (ONErpm). Additionally, Grayson Flatness (Sounds Good) was named alumni president of the SOLID Alumni Board.
Hyperreal — the tech company that develops “digital twins” for artists and other creators, allowing them to control their digital identities in the metaverse and beyond — named Scot Barbour chief technology officer and Tim Coleman vp of digital humans. Meanwhile, the company’s chief innovation officer, Sergi Sagas, joined the Hyperreal board of directors. Barbour, who was previously head of production and digital DNA acquisition, will drive the company’s technology roadmap and partnerships and supervise physical and virtual production for Hyperreal. Coleman, who joined Hyperreal in 2020, will head up the effort to build the company’s “highly-detailed, performance ready, photoreal digital avatars known as ‘HyperModels,’” according to a press release.
Warner Music Group will launch Rhythm City — a “music-themed social roleplay experience” — on the gaming platform Roblox on February 4th.
Not only will Rhythm City host events and shows from Warner’s artists, it will allow users to take on roles like DJ, producer, or dancer as they explore the virtual world and purchase digital items only available on Roblox. Rhythm City was developed in partnership with Gamefam, a metaverse-focused gaming and content company.
Warner is the latest music company to partner with Roblox, which has been around for more than 15 years but exploded in popularity with young users during the pandemic. Sony Music and BMG announced partnerships with Roblox in 2021. Spotify became “the first music-streaming brand to have a presence on Roblox” last year.
Earlier this month, Roblox announced that it had more than 61 million daily active users in December who spent close to 5 billion hours on the platform. It’s no surprise, then, that record companies are eager to find new ways to seed their music to Roblox users.
“Immersive online environments represent a meaningful opportunity for reaching a growing number of fans who want to use virtual communities to enjoy shared music experiences,” Dennis Kooker, Sony Music’s president of global digital business and U.S. sales, said in 2021. When BMG announced its Roblox partnership, Christopher Ludwig, BMG’s vp of global digital partnerships and strategy, noted that the platform “has transformed the gaming experience for millions and is proving a powerful way to introduce new generations to music they love.”
In a statement announcing Rhythm City, Oana Ruxandra, chief digital officer and evp, business development at Warner Music Group, struck a similar tone. “As our lives become increasingly digital, exciting opportunities are opening up for artists and fans to engage and interact,” she said. “WMG is focused on facilitating the foundations of these new experiences by building and experimenting across evolving ecosystems. This partnership with Gamefam sees WMG creating a place for artists and audiences to come together to define and contextualize their communities within living spaces.”
Joe Ferencz, founder and CEO at Gamefam, added that “we are thrilled to have a chance to combine our passion for developing authentic, highly-engaging metaverse content with our love of music.” “WMG has been a brilliant partner in pushing innovative strategies, and together with our expertise, we’ve channeled that into production excellence creating a new community for music lovers in the metaverse,” he continued.
Warner acts, including Twenty One Pilots and David Guetta, have previously hosted virtual concerts on Roblox.
YouTube executive Tim Matusch has joined Warner Music Group (WMG) as executive vp of strategy & operations. The news was announced in a company memo sent last week by CEO Robert Kyncl, who worked alongside Matusch at YouTube before stepping down as chief business officer at the company to join WMG.
Matusch most recently served as managing director of strategy and business operations at YouTube, a role he held for more than two years. Prior to that, he served in senior consulting roles at Boston Consulting Group and Oliver Wyman, where he spent more than 12 years and eventually rose to partner. He also worked in senior operating roles at AOL, including general manager at AOL.com and AOL Products. He graduated from Eton College in 1996 and earned his master’s at the University of Oxford in 2001.
In the memo sent to WMG staff and obtained by Billboard, Kyncl noted that Matusch will be working closely with the greater WMG leadership team “to help define, facilitate, and execute our 5–10 year vision” while also playing a key part in “evolving” the label’s “cross-company plans, including deploying business intelligence to strengthen our decision-making, developing and tracking a set of critical KPIs, and ensuring everyone is on the same page as we build our future together.”
Acknowledging that strategy & operations is “a new function” at WMG, Kyncl continued that he’s “a firm believer in tapping into, growing, and unleashing the expertise within the company itself. That way, we’re more directly investing in ourselves, and compounding our knowledge and skills over time. It results in well organized, better informed, more realistic plans.”
Kyncl added that he worked with Matusch “across a wide variety of projects” at YouTube and has “been consistently impressed by what his team has delivered and how they did it – in a very collaborative fashion – which is particularly important to me.”
Kyncl officially assumed the role of CEO at WMG on Jan. 1, though he’ll share CEO duties with outgoing chief executive Stephen Cooper for the remainder of the month. Matusch is the first major hire announced under Kyncl’s tenure.
With 2022 now officially in the books, the U.S. market share report is in: with Bad Bunny, Lil Nas X and Harry Styles leading the way, it was a banner year for Sony Music, as it gained in both overall market share and, more drastically, in current market share on the leading Universal Music Group, narrowing the gap among releases less than 18 months old to 6.58% in 2022 — a chasm that stood at 13.7% at the end of 2021.
But there was good news for UMG, too, as Republic Records rode a red-hot fourth quarter — led by Taylor Swift’s Midnights, the No. 2 album of all of 2022 despite only being released in October — to rank No. 1 among labels in current market share for the entirety of 2022, coming in at 10.38%. That makes it the only label to top double digits in the final ranking of the year. And UMG maintained a double-digit lead in overall market share over second-place Sony, leading 37.54% to 26.87% despite the latter’s gains throughout the year. Interscope Geffen A&M finished the year as the No. 1 label in overall market share once again, coming in at 9.63%, though it was down from the 10.08% share it held at the end of 2021.
Sony’s overall market share grew 0.76% year over year — up to 26.87% in 2022 from 26.11% in 2021 — marking a big stride forward for the music group. That gain was largely at the expense of Universal Music Group, which dropped 0.66% year over year, from 38.20% in 2021 to 37.54% at the end of 2022. Meanwhile, Warner Music Group’s market share grew from 16.06% in 2021 to 19.05% in 2022, though that is not an apples-to-apples comparison; this year, Warner-owned distributor ADA — which distributes dozens of independent labels — was factored into WMG’s market share, adding 2.96% to its total and accounting for almost all of Warner’s jump. (The move more accurately aligns Warner’s distributed market share with the other majors, which also include their distribution wings in their totals.) That switch also explains the commensurate dip for the indie sector, which fell from 19.63% in 2021 to 16.54% in 2022.
In current market share, Universal fell more than 4%, from 37.89% in 2021 to 33.57% in 2022, with all three other major players picking up that slack, led by Sony, which ballooned significantly almost 3 percentage points to 26.99% in 2022 — up from 24.19% in 2021. Warner — even taking into account the 3.32% in current share added by ADA — was also up, from 14.42% in 2021 to 18.30% in 2022 (an increase of 0.56% beyond the ADA bump), while the indie sector went from 23.50% last year to 21.14% in 2022, which is up 0.96% year over year when taking into account the loss of the ADA labels. Universal did, however, raise its catalog percentage from 38.33% in 2021 to 38.94% in 2022, while the other three all fell slightly.
Following Interscope in overall market share, Atlantic remained in second, at 8.89%, although it, too, was down slightly from 2021, when it posted a 9.17% overall share of the market. Republic ended the year in third — the only label in the top five to grow its overall market share year over year — with an 8.44% mark, up from 8.28% through the end of 2021, while Columbia (6.98%) and Capitol Music Group (6.40%) rounded out the top five. (A note on these labels: Interscope’s market share includes Verve [0.85%]; Atlantic’s includes the now-combined 300 Elektra Entertainment Group [2.35%], which would have been good enough for ninth place on its own; Republic’s includes Island [1.51%], Cash Money [0.71%], Big Loud, Imperial and Mercury; Columbia includes some indie labels from distributor RED; and Capitol includes Virgin [1.78%], Motown/Quality Control [1.05%], Capitol Christian Music Group [0.61%], Astralwerks and Blue Note.)
In sixth, Warner Records — which includes Rhino, Warner Latin and a chunk of Warner Nashville in its market share — grew year over year, from 6.16% in 2021 to 6.35% in 2022, having steadily increased its share each quarter of the year. RCA, whose market share stands alone, did the same; the label came in seventh, growing in each quarter to a finish of 5.12% — up from 4.89% in 2021 — wrapping the year strongly with the four-week No. 1 run of SZA’s S.O.S. In eighth, Epic Records also picked up market share, rising to 2.63% in 2022 from a 2.38% share in 2021. Def Jam, in ninth, faltered to 2.07%, down from 2.25% in 2021; while Sony Nashville jumped into 10th, leapfrogging UMG Nashville by growing its market share from 1.99% to 2.04% year over year.
UMG Nashville dropped to 11th, slipping from 2.04% in 2021 to 1.85% in 2022, while Concord jumped from 13th (1.68%) in 2021 to 12th (1.73%) in 2022. Disney — with its early-year Encanto boost — was up to 1.60% in 2022 from 1.40% the year before, good for 13th, while Universal Latin (1.47%) and Sony Latin (1.24%) rounded out the top 15, both up from the year prior as well.
Republic had a big fourth quarter (9.57%), with four major releases — Stray Kids’ Maxident, Swift’s Midnights, Drake and 21 Savage’s Her Loss and Metro Boomin’s Heroes & Villains, all of which debuted at No. 1 on the Billboard 200 — collectively topping the Billboard 200 for eight weeks. That helped boost its current market share from 8.77% through the first three quarters of the year to 10.38% by year’s end, with that late push taking it to No. 1 among all labels in terms of current market share in 2022.
Atlantic, in second place in current share, essentially maintained its level from last year, coming in at 9.15% (from 9.16% in 2021), though it moved up one spot from third place; while Interscope dropped sharply, from a stellar 11.05% in 2021 to 8.72% in 2022, falling from first to third. Columbia and Capitol, in fourth and fifth, respectively, both fell in share, the former from 6.83% to 6.67% and the latter from 5.64% to 4.97%; while Warner and RCA, in sixth and seventh, both grew in share, the former from 4.48% to 4.86% and the latter from 4.37% to 4.65%.
Outside the top seven labels, there was a bigger shakeup in current market share. Epic Records moved up to eighth place, gaining from a 2.04% current share in 2021 to 2.23% in 2022, while Sony Nashville jumped up to ninth, growing to 1.89% from 1.59% in 2021. Alamo made the biggest leap, all the way up to 10th in current share in 2021 at 1.56% in its first full year as a standalone Sony Music label; in 2021, its share was split between UMG and Sony as it was sold midway through the year, making an apples-to-apples comparison difficult. BMG, in 11th, held steady at 1.42%, while Disney, perhaps unsurprisingly, surged into 12th, up to 1.36% year over year from 0.52% in 2021. Def Jam, however, saw its current share sink from 2.21% in 2021 to 1.27% in 2022, finishing 13th, while Sony Latin (1.24%) and UMG Nashville (1.23%) rounded out the top 15.
As is generally the case, catalog market share tracked similarly to overall market share, as older titles generally perform consistently as a percentage of the market year over year. But both UMG and the indie sector grew year over year, while Sony and Warner, the latter accounting for the ADA switch, were both down slightly as well.
Former Atlantic Records employee Dorothy Carvello lost her bid for a seat on Warner Music Group’s board of directors last month after failing to comply with certain requirements in the company’s bylaws, spokespeople for Carvello and the record label said on Tuesday (Jan. 3).
Under a new rule passed by the U.S. Securities and Exchange Commission last year that makes it easier for minority shareholders to wage campaigns for board seats, Carvello sought to nominate herself for a seat on WMG’s board, to be voted on at the next shareholder meeting. The activist and author, who alleged in her memoir, Anything for a Hit: An A&R Woman’s Story of Surviving the Music Industry, that she was subjected to sexual abuse and misconduct while working at Atlantic from 1987 to 1990, plans to run again next year, according to her spokesperson.
Carvello’s odds of being elected by WMG investors to a seat on the company’s board were slim because a sizeable chunk of the record label is owned by WMG vice-chair Leonard Blavatnik, the Financial Times reported earlier on Tuesday. Still, Carvello’s novel attempt could set the stage for future bids by activists aiming to bring attention to causes not often discussed in the staid corporate arenas of annual shareholder meetings.
“While this is an unfortunate attempt by the corporation to block an important mission, she will continue to seek to have her name placed on the ballot next year,” a spokesperson for Dorothy Carvello wrote in an email.
Carvello submitted her nomination notice to WMG in early December, but it failed to meet certain requirements in the company’s bylaws, including that Carvello be a registered shareholder, a spokesperson for WMG wrote in a statement. Because Carvello bought her WMG shares through the online brokerage Robinhood, the brokerage’s name was on the shares, not Carvello’s.
WMG said it gave Carvello additional time to resolve the issues but the documents ultimately did not fulfill company requirements.
“We value the input of all shareholders, and anyone desiring to nominate director candidates must satisfy the standard requirements of WMG’s Bylaws, including being a registered shareholder,” WMG said in the statement.
Requiring that investors be registered shareholders to submit proposals or board nominations at annual meetings is a common corporate rule. However, it presents a complication for retail investors who most frequently purchase stocks through brokerages.
Carvello has gained attention in recent months for a letter sent by her lawyer to WMG board members requesting records relating to the company’s investigations into previously-reported sexual misconduct claims and royalties accounting at the label. And last month, Carvello filed a lawsuit against Atlantic Records and the estate of its late co-founder Ahmet Ertegun, along with WMG and two former Atlantic executives, alleging she was “horrifically sexually assaulted” by Ertegun and Morris and that Atlantic, WMG and Jason Flom (whom the suit says was an Atlantic vp at the time) enabled the abuse.
In its statement, WMG said its board and management “have made significant enhancements to our policies and procedures and take any allegations of misconduct seriously and are consistently working toward eliminating all forms of discrimination and harassment.”
Music companies’ quarterly results in October and November were a bright spot amid a mostly bleak earnings season. High inflation, rising interest rates and the chance of a recession presented a triple-whammy to most sectors — particularly tech and retail — but in the music industry, those macroeconomic threats weren’t enough to dampen consumer demand and investors’ confidence.
“While the broader economy is facing challenges, the music industry as a whole remains healthy,” says Golnar Khosrowshahi, founder and CEO of Reservoir Media, which raised its full-fiscal-year forecast by 11% for both revenue and adjusted earnings before interest, tax, depreciation and amortization (EBITDA).
So what worked in music companies’ favor? In short, more people are going to concerts and buying streaming subscriptions, and revenues from those sectors helped bolster quarterly results for nearly every publicly listed music company.
Diversifiction = Fortification
The major labels, which have a piece of the market in nearly every segment of the music industry, all reported quarterly revenue gains over the third quarter last year, ranging from 16% at Warner Music Group to 6% at Sony Music Entertainment. On Universal Music Group’s third-quarter call, chairman/CEO Lucian Grainge attributed the company’s 13.3% third-quarter revenue gains to UMG’s diversification strategy. While ad-supported streaming revenue slowed significantly, only growing 5.2% (from last year’s 15.6% growth), licensing and other revenues rose by 30% due to an $84.2 million increase in touring revenue from Latin American, European and Asian markets where UMG is in that business. Merchandising and other revenue related to those tours grew by over 100% to almost $199 million. “We are better positioned to navigate the inevitable ebbs and flows of revenue of any particular business, as well as to weather any macroeconomic headwinds,” said Grainge.
Live’s Alive Again
Live Nation Entertainment had its biggest summer concert season ever, reporting that more than 44 million fans attended 11,000 events in the third quarter, as attendance for stadium shows tripled to nearly 9 million. Companywide, Live Nation reported $6.2 billion in quarterly revenue, up nearly 67% from the last-comparable quarter, which for it was the third quarter of 2019.
Streaming’s Still Strong
On a call with investors, an analyst asked Sony deputy president/CFO Hiroki Totoki what risks Sony Music Entertainment faces. His reply: “Streaming is very successful, and we don’t really have that much of a concern.” Spotify’s third-quarter results confirm that. Revenue rose 12% to roughly $3.2 billion at a constant currency, on a 13% uptick in subscription revenue from more than 195 million subscribers — 1 million more than the company targeted.
French streaming company Deezer also reported double-digit revenue growth, although it attributed the increase in part to a one-euro price hike the company instituted in France earlier this year. Deezer’s revenues rose nearly 14% to $112.5 million at the Sept. 30, 2022, exchange rate.
Price hikes, coming at a time consumers’ costs are rising across the spectrum, are the final thing working for music industry companies. After Apple said it would raise its standard individual streaming plan price by $1 to $10.99 in the U.S. and Spotify signaled it was also considering a price increase, major labels and other streaming company executives all said they expect trickle-down benefits.
It’s also worth noting that although Totoki said on the call that Sony is “taking steps to prepare for further deterioration… in each of our businesses,” the company raised its revenue and operating income targets for the full fiscal year by $9.8 billion and $1.9 billion, respectively (at Sony’s assumed exchange rate for the second half of the fiscal year).
Just days after Atlantic Records and the estate of its late co-founder Ahmet Ertegun were hit with a sexual assault lawsuit filed by a former employee, the entities are now facing a second complaint detailing similar allegations of abuse –– only this one casts a wider net.
On Sunday (Dec. 4), Dorothy Carvello – a former A&R executive with the label and author of music-industry expose Anything for a Hit – filed suit against Atlantic, the label’s parent company Warner Music Group, Ertegun’s estate, former Atlantic co-CEO & co-chairman Doug Morris and former chairman and CEO Jason Flom. In the exhaustive complaint, Carvello alleges she was “horrifically sexually assaulted” by Ertegun and Morris and that Atlantic, WMG and Flom (then an Atlantic vp) enabled the abuse.
“During her employment at Atlantic Records from 1987 through 1990, Ms. Carvello was subjected to persistent and pervasive nonconsensual and forcible sexual contact, degrading sexual innuendo and insults, and outrageous ‘tasks’ for the sexual gratification of executives at Atlantic Records,” reads the complaint, which was filed in New York Supreme Court. “These injuries inflicted and abetted by Defendants include several sexual assaults and batteries, among other sexual misconduct, harassment, and discrimination, as well as intentional and negligent infliction of emotional distress.”
The complaint goes on to claim that her treatment at the hands of Ertegun (who died in 2006) and Morris was enabled by the other defendants, who went about “creating, maintaining, and perpetuating the toxic workplace culture in which such sexual assault was permitted, thereby inflicting extensive emotional distress as well.”
Carvello’s lawsuit was made possible by New York’s Adult Survivors Act (ASA), which created a one-year period beginning Nov. 24, 2022, allowing alleged victims of abuse to take legal action against their perpetrators in the state even if the statute of limitations on their claims had expired. Jan Roeg. the former Atlantic talent scout who filed the sexual misconduct suit against Atlantic and Ertegun’s estate last week. took action under the same law. More music industry cases are also expected to be filed under the ASA over the next year.
The claims by Carvello are not new, though this is the first she’s sued over her allegations. In her memoir Anything for a Hit (now being adapted for a docuseries), the former executive detailed how, while working as Ertegun’s assistant and later as Atlantic’s first female A&R executive, she was allegedly frequently sexually abused and harassed by Ertegun.
The new lawsuit covers much of the same ground, charging that Ertegun, along with Morris and other Atlantic executives, “treated the company, its corporate headquarters, recording studios, and—even its corporate helicopter—as places to indulge their sexual desires. Employees like Ms. Carvello were the collateral damage of this toxic workplace culture.” It goes on to allege that when Ertegun and Morris’ abusive behavior was reported within the company, victims were “routinely paid settlements with corporate funds in exchange for signed non-disclosure agreements.”
Carvello, who was hired by Atlantic in April 1987 at age 24, first worked as Ertegun’s secretary but claims she also provided significant assistance to Morris during that time. After bringing Skid Row to Atlantic, Carvello was promoted to an A&R role.
Throughout her time there, Carvello claims that she and other female employees “were routinely exposed to Mr. Ertegun masturbating, including during work as he dictated correspondence to Ms. Carvello.” Among other claims, she also alleges Ertegun stored sex toys in her office cabinet without her consent; that Ertegun and other executives watched pornography in the office, including in meetings; and that Ertegun once directed Carvello to pick up used sex toys in his office and wash them.
The complaint goes on to allege a number of other abusive incidents involving Ertegun, including a claim that he “sexually attacked” her in a nightclub in Allentown, Pa., during a Skid Row concert and again during a subsequent helicopter ride back to New York City.
In the course of these alleged ncidents, Carvello says that Ertegun “grabbed and squeezed” her breasts, “clawed at the bike shorts she was wearing under her skirt and pulled them down to access her underwear, scratched the left side of her abdomen and caused her to bleed, violently attempted to remove her underwear, bruised her, and exposed her vagina to all and sundry.” She further alleges that while begging for help from Flom and others present during the attacks, “they simply looked on and laughed.” Ertegun additionally claims that Ertegun once fractured her forearm after slamming it forcefully onto a table.
Carvello also claims harassment and abuse at the hands of Morris, who was running the label with Ertegun at the time. While working as his de facto secretary, she claims Morris would “forcibly kiss” her on the face and touch her inappropriately on a daily basis while “constantly” commenting on her body and appearance. She also claims that on multiple occasions, both Morris and Ertegun would suggest that Atlantic would pay for her to get breast augmentation surgery.
In addition to claims that Flom enabled Ertegun and Morris’ abuse, Carvello accuses the then-vp of harassing her during a meeting, saying he requested, in front of other executives, that she sit on his lap. According to the lawsuit, she says this incident led her to write a memo to Morris complaining about the “blatant sexual abuse” at Atlantic headquarters in September 1990 and asking him what he was planning to do about it. One day later, she alleges, she was fired.
Though she was subsequently hired at WMG imprint Giant Records, Carvello claims Morris “was not done retaliating” against her and had her fired from Giant as well. “Her loss of two consecutive jobs and the damage to her reputation was permanent,” the complaint reads. “But for Mr. Morris’ vengeful and retaliatory actions, Ms. Carvello would still be working in the music industry, and likely would be working under the WMG umbrella with [now-CEO and chairman Craig] Kallman,” who Carvello claims she was instrumental in bringing to the label in the early 1990s.
Later in the complaint, Carvello alleges that in February 1998, while unexpectedly seated next to Ertegun at Clive Davis’ annual “Grammy Eve” party at the Beverly Hills Hotel, the executive continued his pattern of abuse. During that incident, Carvello alleges Ertegun “shoved his hand between” her legs and “forcibly pulled and ripped at her underwear, injuring” her vagina. After allegedly fighting him off and threatening him “in full view of the dinner guests” at the event, Carvello claims Ertegun “sought her out again” at the same event and told her to meet him at his hotel, The Peninsula.
Carvello is suing on seven counts: battery constituting forcible touching (against the Ertegun estate, Morris, WMG and Atlantic); battery constituting sexual abuse (against the Ertegun estate, Morris, WMG and Atlantic); attempted battery constituting forcible touching (against Flom, WMG and Atlantic); battery constituting sexually motivated felony (against the Ertegun estate, WMG and Atlantic); and, against all defendants, criminal and civil conspiracy, intentional infliction of emotional distress and negligent infliction of emotional distress. She is asking for monetary compensation as well as exemplary and punitive damages “in an amount to be determined at trial.”
In a statement to Billboard, a Warner Music Group spokesperson said that the company and Atlantic “take allegations of misconduct very seriously,” while stressing that Carvello’s allegations stem from an era decades in the label’s past.
“These allegations date back 35 years, to before WMG was a standalone company,” the statement reads. “We are speaking with people who were there at the time, taking into consideration that many key individuals are deceased or into their 80s and 90s. To ensure a safe, equitable, and inclusive working environment, we have a comprehensive Code of Conduct, and mandatory workplace training, to which all of our employees must adhere. We regularly evaluate how we can evolve our policies to ensure our work environment is free from discrimination and harassment.”
Representatives for Morris and Flom did not immediately respond to Billboard’s requests for comment. A representative for Ertegun’s estate could not be located for comment.
Over the past several years, Carvello has been a relentless voice calling for accountability in the music industry over what she alleges are longstanding patterns of abuse and attempts to silence victims. In October 2021, she revealed she had purchased shares in all three major record companies — UMG, WMG and Sony Music Entertainment’s parent company, Sony Inc.) — with the intent of becoming an activist shareholder “to bring more transparency to the music industry,” she told Billboard at the time.
This past September, Carvello stepped up her efforts by sending a letter to board members at WMG requesting records relating to the company’s investigations into previously reported sexual misconduct claims and royalties accounting. She noted at the time that she intends to ask questions of the other labels as well, though there are differing regulations and laws that pertain to Universal and Sony, given that the former is a publicly-traded company in Amsterdam and Sony is incorporated in Japan; only WMG is a publicly-traded company in the U.S.
In the years since her ill-fated stints at Atlantic and Giant Records, Carvello has worked as an independent public relations consultant, including for some major label executives, though — responding to a perception by some label insiders that this represents a conflict of interest given her activist work– she claims she was paid out of the executives’ own pockets and not by the record labels themselves. In April, she founded the Face the Music Now Foundation, an organization “established to highlight sexual abuse and harassment in the music industry, demand accountability and change, and pave the way for survivors to tell their stories and reclaim their lives,” according to a press release.
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After a miserable year for music stocks — and stocks in general — 2022 could end on a string of positive notes.
As rising interest rates have hammered stocks and erased big gains made during the pandemic, the Billboard Global Music Index, a float-adjusted group of 20 publicly traded music companies, is down 36.1% in 2022, and shares of vital companies such as Spotify and Warner Music Group are down 65.7% and 20.5%, respectively.
But in recent weeks, the momentum has reversed dramatically. The Billboard Global Music Index is up 12.6% over the last two weeks and 14.6% in the five weeks since Oct. 28.
Since Oct. 28, the week when music companies began to release third-quarter financial results, the stocks of major labels rose an average of 23.1%. Indie music companies — Reservoir Media, Believe, Hipgnosis Songs Fund and Round Hill Music Royal Fund — rose an average of 8.2% over that time period. K-pop companies from South Korea averaged a 16.1% improvement.
Part of music stocks’ rebound can be attributed to overall market sentiment. Stocks have improved in recent weeks — the New York Stock Exchange composite index is up 6.6% in the last five weeks and the S&P 500 is up 4.4% over that time. This week, stocks surged on Wednesday (Nov. 30) after Federal Reserve chairman Jerome Powell said upcoming interest rate hikes will be smaller following “promising developments” in the Fed’s efforts to slow inflation. Stocks gave back some of those gains on Friday, however, after a solid U.S. jobs report showed a combination of strong hourly earnings and lower labor force participation. Higher wages erode corporations’ profits and persistent inflation could mean more rate hikes by the Federal Reserve.
But music companies have outperformed the broader stock markets thanks to solid third-quarter earnings results that met and occasionally exceeded expectations. In addition, many companies increased their fourth-quarter guidance when they announced third-quarter results. That tends to increase share prices as investors adjust upward their expectations for future performance.
Among the best performers of late has been Warner Music Group, whose shares improved 31.1% in the last five weeks. Last week, Warner beat analysts’ expectations for both revenue and earnings per share in the fiscal fourth quarter ended Sept. 30 and announced on Nov. 22. It posted revenue of $1.5 billion, up 16% year-over-year at constant currency (+9% as reported). Adjusted earnings before interest, taxes, amortization and depreciation grew by 16% to $276 million.
Shares of Universal Music Group have risen 16.1% since Oct. 28. The day prior, UMG’s third-quarter earnings showed a 13.3% jump in revenue at constant currency. Sony Corp., the parent company of Sony Music Group, climbed 23.7% over the same period. Sony Music’s quarterly earnings, released on Nov. 1, showed 5.9% year-over-year revenue growth. Sony’s music division accounts for just 11.4% of the company’s consolidated revenue and 16.7% of its operating income while UMG and WMG are pure-play music companies.
Smaller labels and publishing companies have improved, too. Reservoir Media shares have climbed 14.9% over the five weeks, while shares of Believe rose 19.1% over five weeks but stumbled 7.8% in the last two weeks. Both companies raised guidance for their fourth quarter results. Korean music companies have also fared well: the shares of four K-pop-focused companies — HYBE, SM Entertainment, YG Entertainment and JYP Entertainment — rose an average of 16.1% in the last five weeks.
Labels’ and publishers’ financial results were augmented by positive news that suggests even stronger streaming revenue in 2023. According to WMG CEO Stephen Cooper during the company’s Nov. 22 earnings call, announcements of price increases by Apple Music [on Oct. 24] and Deezer “in the current economic environment shows that music subscription services offer amazing value to consumers. Music remains undervalued, but we’re optimistic that there will be other increases to come.”
Cooper was also encouraged by subscriber growth reported by streaming companies. Spotify exceeded expectations in the third quarter by adding seven million subscribers — 1 million more than its guidance. YouTube announced on Nov. 11 it had reached 80 million subscribers of YouTube Music and Premium just 14 months after surpassing the 50-million mark. “Developed markets continue to grow in the double digits while emerging markets are growing at higher percentages,” said Cooper. “With global smartphone penetration expected to increase meaningfully in the coming years, our conviction in streaming growth remains strong.”
While labels and publishers have surged, streaming companies have been mixed. On average, streaming companies’ stocks rose 24.4% over the last five weeks. The biggest gains came from much smaller Tencent Music Group and Cloud Music, up 101.6% and 28.4%, respectively — but both have relatively small floats and remain majority owned by Tencent and NetEase, respectively. Even smaller yet are Anghami (-3.1%) and Deezer (-1.5%). Spotify, one of the largest companies in the index, declined 3.7%.
Companies in the live and ticketing space haven’t fared as well as others, however. Live Nation shares are down 7.7% in the last five weeks, due mainly to a 7.5% drop following its third-quarter earnings release and a 10.3% decline on Nov. 18 following reports that the company was being investigated by the Department of Justice after its controversial presale for Taylor Swift’s upcoming tour. The latter was a short-lived dip, however, and Live Nation shares have reclaimed that lost ground and more by rising 11.6% in the last two weeks. Over five weeks, MSG Entertainment shares rose just 2% and Vivid Seats shares are off 1.2%. On the other hand, shares of German concert promoter CTS Eventim rose 27.7% over five weeks after posting strong third-quarter results and sounding more confident about full-year results than comments it made in its second-quarter earnings release.
Four radio companies — iHeartMedia, Cumulus Media, Audacy and Townsquare Media — have fared the worst, falling an average of 6.8% since Oct. 28. IHeartMedia, the largest radio company and a member of the Billboard Global Stock Index, fell 9% over that time.
