MBW Reacts is a collection of analytical commentaries from Music Business Worldwide written in response to main latest leisure occasions or information tales. MBW Reacts is supported by JKBX, a know-how platform that provides customers entry to music royalties as an asset class.
The corporate’s sturdy outcomes have turn into one thing of a recurring quarterly theme for UMG because it first started trading on the Euronext inventory trade in Amsterdam again in September 2021.
UMG Chairman and CEO Sir Lucian Grainge pointed to this truth on the corporate’s investor name final week, telling analysts that UMG’s most up-to-date “third quarter was our ninth consecutive quarter of sturdy progress since turning into a standalone public firm, simply over two years in the past”.
Simply a number of the highlights from the quarter included subscription streaming revenues of €1.057 billion ($1.15bn), which was up 13% YoY at fixed foreign money.
One other section value mentioning is Common’s ‘Merchandising and Different’ which generated revenues of €227 million ($247.06m) in Q3 – a rise of27.5% YoY at fixed foreign money, pushed “by progress in direct-to-consumer gross sales and better touring merchandise gross sales”.
Throughout all of its divisions (together with recorded music, publishing, and extra), UMG generated revenues of EUR €2.752 billion (USD $2.995bn) throughout the quarter.
The corporate’s high sellers throughout the quarter included releases from Taylor Swift, SEVENTEEN, Morgan Wallen, Olivia Rodrigo and King & Prince.
On the decision with analysts on Thursday, Sir Lucian Grainge, joined by Boyd Muir, EVP, CFO and President of Operations, andMichael Nash (EVP and Chief Digital Officer), mentioned a broad vary of matters, from the corporate’s funds to AI, Deezer‘s new ‘artist-centric’ mannequin and UMG’s international growth.
One of many soundbites from the decision that’s been doing heavy rotation within the music commerce press over the previous few days resulted from a query posed by Thomas Singlehurst of Citigroup.
Singlehurst requested why “a few of [UMG’s] friends don’t seem like fairly as constructive concerning the Deezer artist-centric mannequin” to which Grainge supplied the (in his personal phrases, “blunt”) suggestion that, “these peer teams” are “unsurprisingly these whose enterprise mannequin relies on being merchants of garbage”.
Much more was stated on the decision, nonetheless. We listened in, and right here’s what we discovered…
1. UMG is ‘decided to convey an artist-centric strategy to each DSP…”
Final month, France-headquartered music streaming service Deezer unveiled its new artist-centric streaming mannequin in partnership with Common Music Group.
France-based indie music firm Wagram additionally signed up to the mannequin earlier this month, whereas Sacem struck a take care of Deezer to discover how the mannequin might work for publishing rights in music streaming.
Commenting on the brand new mannequin on the decision with analysts final week, Sir Lucian Grainge stated in his opening remarks that it “honors actual artists by higher rewarding them for music tracks and have interaction their followers and by defending towards unhealthy actors who deprive artists to pay compensation”.
“Deezer’s essential step ahead is just the start of this vital evolution in streaming.”
Sir Lucian Grainge
The brand new mannequin will see “skilled artists” – outlined by Deezer as those that have a minimal of 1,000 streams per thirty days and a minimal of 500 distinctive listeners – obtain a so-called “double enhance” to royalty funds, which signifies that when calculating their royalty funds, streams of their music will carry double the load versus streams of ‘non-professional’ artists.
The mannequin can even apply a ‘double enhance’ – doubling the load of streams once more – for performed tracks by artists that followers have actively looked for.
Different key parts of the mannequin will see Deezer sort out streaming fraud and de-monetize “non-artist noise audio”
Talking with analysts final week, Grainge quoted an indie energy participant’s latest reward for the brand new mannequin, citing [PIAS] co-founder Kenny Gateswho told [PIAS] employees in an inner memo final month that, “for labels who make investments yearly relentlessly in new expertise, this needs to be excellent news”.
UMG’s Chairman and CEO defined that “Deezer’s essential step ahead is just the start of this vital evolution in streaming” and that the corporate is “decided to convey an artist-centric strategy to each DSP”.
He added that UMG “may have extra bulletins on this entrance within the close to future as we work with different DSP companions”.
Chubo / Shutterstock
2. UMG’s AI technique will see it work with even ‘extra corporations dedicated to accountable AI improvement’
On Common’s previous (Q2) earnings call, on the finish of July, Sir Lucian Grainge informed analysts that UMG is “optimistic about AI and see[s] this as a robust software within the service of artists when deployed responsibly”.
He added that the corporate may have “bulletins within the very close to future about how AI can unlock different industrial and inventive alternatives in our enterprise”.
“I meant what I stated,” Grainge informed analysts on Thursday, highlighting the corporate’s latest partnership with YouTube to develop “a commercially viable AI part inside YouTube‘s music and video ecosystem”.
He additionally pointed to the corporate’s new “first-of-its-kind” alliance with social music creation platform BandLab Applied sciences.
“As our AI technique progresses, you’ll see extra corporations dedicated to accountable AI improvement working with us on options to unlock creativity, discover new industrial alternatives for us and compensate artists appropriately.”
Sir Lucian Grainge
Elaborating on UMG’s YouTube partnership, Grainge defined that “as an additional growth of our artist-centric technique, this historic collaboration underscores our perception that the easiest way to make sure accountable AI improvement is thru market-led options”.
The partnership options two parts, together with a ‘Music AI Incubator’ that can incorporate suggestions and steering from UMG-signed expertise, in addition to YouTube publicly committing to 3 ideas/pledges that can information its improvement of music-based generative AI instruments sooner or later.
Commenting on the deal, Grainge stated that, “because of our shut relationship with YouTube, we’re collaborating on alternatives and options and inserting artists on the forefront.”
This strategy, he stated, is in distinction to “previous cases the place new applied sciences [were] launched into the world, and the music group was left to determine learn how to develop a enterprise mannequin that will defend artists’ rights and compensation.”
Grainge stated that UMG “may have extra to say within the close to future as our ongoing work with YouTube develops enterprise fashions and merchandise that additional unlock the artistic and industrial energy of AI”.
He added: “As our AI technique progresses, you’ll see extra corporations dedicated to accountable AI improvement working with us on options to unlock creativity, discover new industrial alternatives for us and compensate artists appropriately”.
3. UMG has accelerated its artist signings in China…
Sir Lucian Grainge additionally pointed to the growth of UMG’s presence globally, with M&A included as a part of that technique.
In August, for instance, UMG introduced the acquisition of distinguished UAE-based music firm Chabaka Music. Based in 2013 by brothers Ala’a and Tarek Makki, Chabaka has partnerships in place with over 150 impartial artists and native labels.
Following the acquisition, Chabaka grew to become a part of UMG’s Virgin Music Group. Grainge informed analysts final week that “with Chabaka’s unparalleled regional experience and Virgin Music Group’s artistic community and international footprints, the group will probably be uniquely positioned to achieve and construct the most important doable audiences for expertise from the area”.
The MENA area registered a 23.8% YoY progress in recorded music revenues in 2022, in response to the IFPI.
“UMG has the world’s main capabilities in international distribution, best-in-class know-how and a versatile infrastructure to permit us to simply broaden our distribution partnerships.”
Sir Lucian Grainge
Along with UMG’s M&A technique, Grainge defined that the corporate is “strengthening our administration groups in fast-growing markets”.
A type of markets is China, which overtook France because the world’s fifth-largest recorded music market in 2022.
In September, UMG hired Tim Xu as Chairman and CEO of Common Music Larger China, which incorporates the corporate’s operations in Mainland China, Hong Kong in addition to Taiwan.
UMG has additionally “accelerated” its artist signings in China,” Grainge stated.
Two key examples of these artists embody Chinese language pop icon Hannah Rebecca Jin (pictured) signing to Republic Records China, and Chinese language singer-songwriter, Tia Ray signing a global publishing deal with Common Music Publishing China. Grainge famous that Tia Ray is the “first and solely Chinese language singer to this point to achieve the IFPI‘s Prime 10 World Singles chart”.
Added Grainge: “UMG has the world’s main capabilities in international distribution, best-in-class know-how and a versatile infrastructure to permit us to simply broaden our distribution partnerships. ”
Credit score: Diego Thomazini/Shutterstock
4. There have been ‘extra new subscriber additions within the growing markets than within the developed markets’ this yr.
One of many largest highlights for UMG in Q3 was its 13% YoY progress in subscription streaming revenues, producing €1.057 billion ($1.15bn) within the quarter.
This consequence was pushed, in response to UMG “primarily by the expansion in international subscribers”.
That international subscriber progress was highlighted within the monetary and consumer replace of the world’s largest music subscription service, Spotify, simply two days earlier than UMG posted its personal outcomes.
Spotify’s paying Premium subscriber base grew 16% YoY in Q3 and by 3%, or 6 million web subscribers, versus Q2 2023, to finish the third quarter with 226 million paying customers.
“That is the primary yr the place there’s really been extra new subscriber additions within the growing markets than within the developed markets.”
Michael Nash, UMG
Commenting on UMG’s personal subscription streaming income progress throughout final week’s name, Michael Nash, UMG’s EVP and Chief Digital Officer famous that UMG is “very happy that we have been in a position to ship 13% year-over-year subscription progress on this quarter”.
He added that this progress was achieved “with out actually having the chance to appreciate probably the most not too long ago introduced pricing advantages”, referring to price increases introduced by Spotify for the US and 52 different markets again in July. Nash added: “We expect that that’s a robust efficiency as [an] indication of constant growth out there.”
Commenting on the potential for subscription streaming progress in growing markets, Nash stated that there’s “a big improve within the adoption of subscription which may be very encouraging”.
He added that “that is the primary yr the place there [has] really been extra new subscriber additions within the growing markets than within the developed markets”.
Nash continued: “We expect it’s a sign of the monetization alternative. And reflecting again on Lucian’s feedback about how we’re seeking to develop repertoire, [with] a number of the M&A strikes that we’ve made in these fast-growing rising market areas, we’re inspired by what we see.”
