Helped by paid music subscriptions and a robust efficiency from its music publishing division, Common Music Group generated income of two.59 billion euros ($2.8 billion) within the first quarter of 2024, a 5.8% improve (7.9% at fixed forex) over the prior-year quarter, the corporate introduced Thursday (Might 2).
Notably, UMG’s margins improved from a 12 months earlier. Adjusted earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) improved 13.2% to 591 million euros ($640 million). As a p.c of income, adjusted EBITDA margin was 22.8%, up 1.5 proportion factors from 21.3% from the primary quarter of 2023.
CFO Boyd Muir attributed the margin enchancment to income development and a change in product combine — specifically, much less bodily gross sales — however throughout Thursday’s earnings name he cautioned “to not learn an excessive amount of into anybody quarter” and urged traders to take a look at traits over longer intervals.
The quarterly earnings launch arrived a day after UMG introduced a brand new licensing take care of TikTok. Analysts probed for insights into the economics of the settlement and attainable impacts to UMG’s monetary statements. Executives declined to offer particulars in regards to the deal however insisted it gives honest worth relative to different short-form video platforms.
Michael Nash, UMG’s govt vp/chief digital officer, mentioned the brand new TikTok deal is “a considerable enchancment” from the earlier one and the income “does markedly enhance for our final deal.” A few of the deal’s worth is troublesome to quantify, nevertheless. Nash added the brand new settlement incorporates “elements of financial worth” — equivalent to advert credit, knowledge and advertising applications — that gained’t present up in future monetary statements.
Every of the corporate’s divisions — recorded music, music publishing and merchandise — confirmed enhancements within the first quarter. “This broad-based development continues to underpin our confidence in regards to the longer-term well being of our enterprise,” mentioned Muir.
Subscription companies had been a major driving drive in UMG’s quarter. Recorded-music subscription income grew 10.7% to 1.12 billion euros ($1.2 billion) and accounted for 43.3% of whole firm income, up from 41.4% within the fourth quarter of 2023. Current value will increase by Spotify, Apple Music and Amazon Music weren’t the one — or the first — issue. “Subscriber development is the largest driver of the year-over-year development charges we see at UMG,” mentioned Muir.
Whole streaming income grew at a slower charge, nevertheless, gaining 8.9% to 343 million euros ($371 million). Talking about ad-supported streaming, Muir mentioned he’s “inspired” by enhancements however “cautious” about development “till we see a constant broad-based enchancment throughout all companions and throughout all geographies and possibly over a extra constant, longer-term timeframe.”
Whole recorded-music revenues grew simply 3.4% to 1.99 billion euros ($2.15 billion). Prime sellers within the quarter got here from Taylor Swift, Noah Kahan, Morgan Wallen, Ariana Grande and Olivia Rodrigo. Bodily income within the recorded-music phase dropped 18.5% to 255 million euros ($276 million). (Taylor Swift’s The Tortured Poets Society, which bought 859,000 vinyl copies in its first week of launch, will affect UMG’s second quarter outcomes.) Muir defined the lower in bodily gross sales stemmed from specific robust bodily gross sales in Japan within the prior-year quarter. Licensing and different income fell 1.8% to 222 million euros ($240 million).
Music publishing income jumped 16.7% to 496 million euros ($537 million) because of digital income’s 22.9% improve to 284 million euros ($307 million). Efficiency income’s 26.7% improve to 114 million euros ($123 million) greater than compensated for synch income’s decline of 10.1% to 62 million euros ($67 million)
Merchandising income grew 6.5% (7.5% at fixed forex) to 114 million euros ($123 million). Touring merchandise gross sales elevated whereas direct-to-consumer gross sales and retail gross sales declined.
The corporate stays on monitor to comprehend 75 million euros ($80 million) in value financial savings in 2024, mentioned Muir. In February, the corporate introduced a plan to save lots of $270 million yearly by way of group redesign and layoffs. As a part of the redesign, UMG created label operations on the coasts underneath the management of two prime executives. On the East Coast, Republic Corps is led by Republic Information co-founder Monte Lipman. On the West Coast, Interscope Capital Labels Group is helmed by John Janick, beforehand the chairman/CEO of Interscope Geffen A&M.
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