Universal Music Group has issued its full year financial results to December 31.
While the major has been in the headlines for its licensing row dispute with TikTok, these results cover the performance for last year. Universal Music recordings and UMPG-controlled songs have come down from the platform in recent days and weeks.
UMG CEO & chairman Sir Lucian Grainge used the earnings call to speak out on the licensing row with TikTok. While it’s early days to assess the impact of the removal of UMG repertoire, a research note from JP Morgan suggests that TikTok has lost momentum in terms of dwell time growth and that Instagram Reels and YouTube Shorts will be the beneficiaries of that.
“There must not be free rides for massive global platforms such as Tiktok that refuse to meaningfully address issues around AI, platform safety, or pay their fair share for our artists' and songwriters' work,” said Sir Lucian Grainge on the earnings call.
“That is why we are grateful for the outpouring of support not only from individual artists and songwriters, but from artists rights organisations, independent labels and publishers, songwriters, advocacy groups and others who share our resolve that all platforms that operate, or seek to build businesses on the music that artists and songwriters [create], must protect as well as fairly compensate them.”
During the Q&A with analysts, Sir Lucian added: “We're friendly people that like win-win situations, we've laid out what's important to us. And I believe it's important to the industry. I believe it's important to our writers and artists.”
UMG previously said that TikTok only accounted for 1% of its global revenue.
“Because other platforms in the social video category achieved much greater monetisation, we're focused on accelerating our partnerships with YouTube, Meta, Snap and others,” said Boyd Muir, EVP, CFO and president of operations for UMG, on today’s earnings call.
Muir also promised “exciting competitive developments and incremental opportunities” in the digital and social space.
Asked about the impact of the TikTok music takedown in terms of promoting releases, Michael Nash, EVP, digital strategy, stressed that it was early days but that there was nothing to worry UMG so far.
“We do know that Universal Music Group audio streaming consumption remains stable globally and regionally for frontline and catalogue,” he said. “In fact, we've observed no discernible negative impact on our broader digital business [from the loss of TikTok to promote music]. In fact, we've seen a slight uptick in terms of frontline consumption and catalogue consumption over the short period of time.”
Sir Lucian added: “Let me be clear, free doesn't work for us. We've spent years creating a path to digital monetisation. Every single facet of the [TikTok] monetisation is so poor that a minimal transfer into other platforms will have a better financial outcome. And I'm also not prepared to compromise the future of the social [music] category by doing something that completely undermines the economics for us, and for everybody else for that matter.”
In a bullish address by Grainge, he suggested that the major had been ahead of the curve in the past year on key issues such as streaming reform and AI.
“Relating to a key concern we have with TikTok, our responsible AI initiative was launched last year to place the protection of artists and the advancement of their interests at the very core of how we think about AI,” he said. “It includes things like ensuring that human artists are not economically disadvantaged, protections against deep fakes and transparency requirements for AI companies regarding how they train their models on our IP and the artists’ work and their creativity.
“It is critical that, as an industry, we advocate for the public policies that put the appropriate guardrails in place, so that the market can best deliver win-win outcomes. That's exactly at the core of who and what we are – win-win outcomes.”
Sir Lucian also reflected on the progress made in the past 12 months in terms of streaming and remuneration models.
“In my remarks last year, I also made one other point about the artist-centric approach that has recently become, I suppose, a rather hot topic and that is this philosophy that must apply to all platforms that are reliant on artists and songwriters and their music,” he said. “All platforms, not just music streaming platforms; all platforms, including short form video and social media.
“We meant it a year ago with artist-centric principles being put into practice. We mean it even more today. We're committed to supporting a healthier, sustainable, exciting, and yet more competitive music ecosystem. An environment in which great music is not drowned out by a sea of noise, where music is easily and clearly accessible for fans to discover and enjoy, and, most importantly, an environment in which the creators of all music content – whether in the form of audio or short form video – are fairly compensated, and they will therefore be able to thrive as artists and creatives for decades to come.”
I'm not prepared to compromise the future of the social music category by doing something that completely undermines the economics for us, and for everybody else
Sir Lucian Grainge
UMG has implemented ‘artist-centric’ royalty models with Deezer and Spotify.
“Initial deals have been structured to better reward artists and music that are attracting and engaging fans, attack fraud and gaming, and reduce the amount of low-value content available on DSP platforms,” noted today’s statement.
With a lot of industry buzz about superfans, Sir Lucian also expanded on the recent investment in Complex.
“This is to create a new commercial marketplace for the superfan,” he explained. “Our collaboration with them will also give our artists access to a dynamic network that will deliver industry-leading and culturally innovative opportunities to deepen connection with those superfans, through unique and unprecedented experience content offerings that will create… a powerful marketplace to sell products.”
Global artist success in 2023 included nine of the Top 10 on the IFPI Global Recording Artist Of The Year chart; six of the Top 10 global artists on Spotify; and 13 of the Top 20 most-streamed songs globally on Apple Music.
UMG’s revenue increased by 7.4% (11.1% in constant currency) year-on-ear to €11.108 billion in 2023 (all further figures will be reported in constant currency). UMG adjusted EBITDA of €2.369 billion for 2023 represented a year-on-year increase of 14.6%.
Overall, recorded music revenue was up 10.2% year-on-year in 2023 (11.2% if excluding a one-off item in the prior year).
Recorded music subscription revenue increased by 12.8%, while streaming revenue (ad-funded) grew by 3.6%. Physical revenue grew by a massive 19.4%. License and other revenue was up 13.6%.
Top sellers for the year included multiple albums from Taylor Swift, and albums from Morgan Wallen, King & Prince, Karol G and The Weeknd.
Music publishing revenue was €1.956 billion in 2023, up 12.3% (15.8% if excluding the CRB Phonorecords III accrual in 2023).
The Q4 performance was particularly strong with revenue during the quarter of €3.208 billion (up 15.6% year-on-year). That was driven by strong growth across all segments, including a 14.7% year-on-year increase for recorded music.
Recorded music streaming subscription revenue grew 15.0% year-on-year in Q4, while streaming revenue (ad-funded) was up 5.6% (although it was down 1.3% before currency fluctuations are taken into account).
UMG’s overall adjusted EBITDA of €677 million in Q4 represented a year-on-year increase of 15.1%.
Top sellers in Q4 included Taylor Swift, the Rolling Stones, Drake, Jung Kook and Stray Kids.
“2023 was another exceptional year for UMG: creatively; financially; and strategically,” said Sir Lucian in a statement. “From our artists’ and songwriters’ record-breaking performance, to our work advancing the industry through innovative business models, to our leadership fostering responsible AI, to driving our long-term strategy through partnership and thoughtful investment, UMG is uniquely positioned to seize the next wave of growth opportunities on behalf of its artists, employees and shareholders.”
Boyd Muir added: “We continued our strong performance in 2023, with robust top- and bottom-line growth driven by both our artists’ and songwriters’ exceptional performance, as well as progress across our strategic initiatives. The strong cash flow generated by our operations also allows us to make strategic, long-term investments in our company, while maintaining a healthy balance sheet and still returning significant cash to shareholders through our dividend programme."
Subject to shareholder approval, the final dividend proposal is for €492 million, or €0.27 per share, which would bring the total dividend for 2023 to €929 million, or €0.51 per share.
As previously reported, UMG has announced staffing cuts. The major today unveiled its "strategic organisational redesign" that will generate €25m in annual run-rate savings by 2026, through a combination of headcount reduction and other operational efficiencies. The first phase will achieve €125m in annual run-rate savings in 2025, including €75m in 2024.
The plan is “designed to achieve efficiencies in targeted cost areas while strengthening labels capabilities to deepen artist and fan connections”, according to today’s statement.
The major reported progress on the strategy to accelerate investment in high-growth music markets. UMG closed catalogue acquisitions of RS Group in Thailand and Oriental Star Agencies, a British label focused on South Asian repertoire. It also closed the acquisition of UAE artist services business Chabaka, among other items.
The latest big deal is for a majority stake in Nigeria’s Mavin Music Group, and Grainge noted the “pretty impressive” streaming numbers by Afrobeats star Rema.
“Our investments in Mavin will provide UMG with greater exposure to the fastest growing continent for recorded music consumption,” said Sir Lucian. “Thanks to young demographics and increasing connectivity, Africa, we believe, is poised for significant growth. Mavin also gives us an opportunity to increase our global presence in Afrobeats.”
Sir Lucian also noted the investment in Chord and plans for “acquiring significant premium as well as timeless music catalogue”.
Looking ahead following another successful year as a public company, Sir Lucian concluded: “There’s so much more to come.”
The major will hold a capital markets day at Abbey Road in September around the third anniversary of UMG’s IPO.
PHOTO: Cindy Ord/VF23/Getty Images for Vanity Fair
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