Warner Music
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Keen observers noticed that last quarter Warner Music Group’s global streaming revenues were down 2.6% year over year, a rare sputter in the music industry’s main engine of growth. The company’s total revenue declined 7.8% as losses in recorded music’s physical and digital revenues couldn’t make up for publishing gains.
On its face, a year-over-year decline in streaming revenue – the driving force behind growth at labels as well as the rise in music catalog valuations – might seem alarming. Declines are routinely seen in download and physical sales. Streaming is typically the dependable bright spot of any earnings report.
The decline was more noticeable when compared to companies that released earnings for the same quarter. Sony Music Entertainment posted strong growth in the same period. SME’s streaming revenue improved 33.2% in its recorded music division and 59.8% in its publishing division. Reservoir Media didn’t show streaming softness last quarter, either. In its recorded music division, digital revenues were up 17% year-over-year. Digital revenues in its publishing division rose 29%.
So, what happened? Some of it is due to a quirk of WMG accounting, some of it is due to WMG, and some of it is due to factors that affect the entire music business.
One factor in WMG’s weak streaming revenue was a shorter quarter: WMG’s last quarter had one fewer week than the prior-year quarter, which gave the company a tough basis for comparison even before other factors could be considered. A 14-week quarter has 7.1% more days to generate income than a 13-week one and that’s a big gap to overcome. Adjusting for that, WMG streaming revenues would have been up 5% year-over-year.
The stronger dollar — WMG’s financial statements are reported in dollars, Sony reports in yen, Universal Music Group in euros — also played a part in the decline. In WMG’s recorded music division, streaming revenues declined 4% as reported but were flat on a constant currency basis (which assumes no change in foreign exchange rates). In its publishing division, streaming revenues grew 13.2% as reported and 16.8% at constant currency.
WMG also blamed the soft streaming numbers on a new release line-up that CFO Eric Levin called “a softer, largely U.S.-based release schedule” that “could roll into our fiscal Q2. But given our release schedule as second half-oriented this year,” he added, “we do feel good about our performance of releases and strength in the second half of the year.”
Another factor was not specific to WMG: a slowing ad market. Levin called it “a dislocated ad market” and warned “the decline is getting more pronounced.” The decline in ad-supported streaming revenue isn’t a surprise. The Ledger wrote about the soft advertising market in August 2022. Spotify CFO Paul Vogel warned advertising growth in the third quarter would be “slower than we might have forecast earlier in the year.” French music company Believe said “ad-funded streaming activities should be affected by rising inflation and economic uncertainties.”
The streaming market has become bifurcated. Subscription services have fared well through the pandemic and high inflation. Advertising is more closely associated with the direction of the broader economy. Consumers are generally reluctant to cancel entertainment subscriptions, but it’s easier for brands to pull back on ad spending, hurting everything from YouTube to broadcast radio companies like iHeartMedia (and music publishers to a lesser extent). At WMG, “subscription streaming grew by high single digits” but was partially offset by a drop “in the mid-teens” in ad-supported revenue, Levin said. WMG also noticed the slowdown in brands’ spending has created “a somewhat softer market for synch.”
In the fourth quarter, Spotify’s advertising revenue rose 14% compared to an 18% improvement for subscription revenue. With the growth of Spotify’s podcasting business, not all the advertising growth could be attributed to music. Advertising growth lagged subscription growth in the third quarter by three percentage points.
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.”
Carlton James Group invested $50 million in Bristol, U.K.-based distribution and artist label services company 3tone Music Group to fund the additional expansion of the company’s distribution platform. 3tone, which is run by CEO Dean Roberts and managing director Chris Borud, was first backed by Carlton James Group in 2019. The company offers indie artists unlimited digital distribution to multiple streaming platforms for an annual fee, a model that echoes more established companies like DistroKid and TuneCore.
Warner Music acquired a stake in Serbian label Mascom Records. The acquisition expands the companies’ relationship, as Mascom has acted as Warner Music’s local distributor for more than 20 years. Under the new arrangement, they will work together to build a roster of local artists, with the opportunity for artists to be upstreamed into Warner’s global network. Mascom’s catalog will continue to be distributed by Warner’s ADA. The companies have recently been jointly working with Serbian artist Sergej Panic on his new releases “Kabul” and “Mia Bella.” In a statement, Izabela Ciszek-Podziemska, general manager of Warner Music South East Europe, called the deal “a landmark development” for Warner in the region.
U.K.-based livestreaming company Driift acquired the livestreaming technology and sales platform Dreamstage, with the combined businesses set to operate under the Driift name, led by CEO Ric Salmon and COO Claire Mas. Driift also secured an additional $4 million investment from Deezer, bringing the company’s total investment from the European streaming service to $7 million in 2022. Deezer is now the largest shareholder in Driift; it had become a majority shareholder in Dreamstage prior to the acquisition.
Atlantic Records partnered with Record Store Day for a new series that will showcase developing artists at independent music retail stores across the U.S. The first artist to be highlighted by the program is Neon Gold/Atlantic singer-songwriter Joe P, who will kick off the series with the release of a deluxe vinyl edition of his debut EP, Emily Can’t Sing. The series will feature 10 to 12 emerging artists over the next year while incorporating exclusive in-store signings and performances. Joe P has already signed on for eight upcoming in-store signings while he’s on tour. The partnership was negotiated by Record Store Day’s Michael Kurtz and Atlantic Records’ Jack McMorrow. In November and December, the series will feature the artist Surf Curse.
Warner Music Poland and Groupa STEP, owner of the independent Polish hip-hop label Step Records, launched a new business partnership to support local hip-hop artists. No further information was provided about the deal.
Cyanite, which offers AI-powered music tagging and search, will provide BMG with automatic tagging to make its entire 3 million song repertoire more searchable and accessible for synch placements. Under the agreement, Cyanite’s technology will be integrated into BMG’s internal content management system BMG Songs.
Social-first media company The News Movement will use UnitedMasters‘ independent music repertoire to soundtrack its news stories on TikTok, Instagram, YouTube, Twitter and Snap under a new partnership.
Session, the company behind the collaboration app Session Studio for music creators, partnered with SoundCloud in a deal that will see the streaming platform become the first to digitally receive both song audio and essential song metadata directly from the Session Studio app. Session Studio is designed to make it easier for songwriters, artists, producers and more to track who contributed what at the point of creation across mobile, desktop and online.
Web3 platform OneOf signed an exclusive three-year partnership with the Latin Recording Academy. Under the deal, OneOf will host the first-ever NFT collection tied to the Latin Grammy Awards. The first collection will debut throughout October 2022.
Pop-rock singer Charlotte Sands (“Dressed,” “Loved You a Little”) signed a distribution deal with Vydia, as did house DJ Robbie Rivera, for whom Vydia will also handle marketing, synch, project management and DSP pitching for forthcoming releases on Rivera’s Juicy Music Group along with Rivera’s existing catalog. The Rivera deal includes a catalog transfer of over 350 songs via Juicy Music.
Ryan Oakes signed a recording and publishing deal with Position Music that will cover both new and existing repertoire.
New York artist VÉRITÉ partnered with Troy Carter and Suzy Ryoo‘s Venice Music, which offers tools, services and artist support while allowing artists to retain creative autonomy and ownership over their work.
Berlin-based house and techno record label Get Physical Music signed a global sales and distribution deal with independent digital label services provider LabelWorx. The deal covers Get Physical’s full catalog, along with its imprints Cocada Music, Kindisch, Metaphysical and Poesie Musik.
Digital collaboration-based music platform BeatConnect closed an initial investment round of $2.2 million. Participants include lead investors FICC (Fonds d’investissement de la culture et des communications) and its partners, which contributed a total of $1 million. Also joining the round was angel investor network Anges Québec with around $615,000 and entertainment tech investment fund Triptyq Capital with around $540,000. BeatConnect will use the funds to build a new tool aimed at linking multiple DAWs together for cross-platform collaboration and remote sharing sessions for music creators.
R. Wayne Martin‘s boutique management firm mthree signed music producer John Hiler (Rihanna, Madonna, Smashing Pumpkins) to its new division focused on managing music producers. His day-to-day manager at the firm is Jeff Betten.
Nettwerk Records announced a slew of signings, including lo-fi trio PanCake, Flemish lo-fi producer Phlocalyst, Germany-based singer-songwriter M. Byrd, Berlin-based songwriter and producer Chris James, Los Angeles rock band The Strike and pop singer Michal Leah, whose new single “the way i love you” drops on Friday (Oct. 14).
Triple 8 Management signed singer-songwriter Erin Kinsey, who is signed to RECORDS/Columbia Nashville.
Texas-based singer E Bleu signed a 10-song partnership with AWAL that will provide him with marketing and streaming support while allowing him to keep his masters. His most recent release is the Shawn Barron-executive produced single “No Biggie.”
Create Music Group signed Bored Ape Yacht Club (BAYC) #9797 (a.k.a. Jimbo).