The music enterprise is getting again to fundamentals.
In just a few brief years, the key labels have gone from investing in and partnering with speculative tech startups to pouring cash into regionally centered music corporations throughout Asia, Africa and Latin America. After a quick flirtation with NFTs and live-streaming companies, something resembling a faddish expertise appears to be out of favor, judging from the offers and partnerships they’ve been making currently. As a substitute, the majors are focusing on old-school music corporations that personal catalogs and develop artists — and might profit from the majors’ international community of distribution and different providers.
In 2024 alone, the three majors — Common Music Group, Sony Music Leisure and Warner Music Group — have acquired or invested in 11 file labels, music catalogs and repair suppliers in small or growing markets. The flurry of offers — there have been much more in 2023 and previous years — gives the majors with extra content material for his or her ever-increasing distribution pipeline and extra worldwide artists to take to Western markets.
Take UMG’s run of acquisitions and investments in 2024: the remaining stake of European indie label group [PIAS], the remaining stake within the catalog of Thai music firm RS Group, a majority stake in Nigerian file label Mavin World and the outright acquisition of Outdustry, a multi-faceted firm with an artist- and label-services arm that focuses on China, India and different high-growth rising markets. Outdustry will likely be a division of Virgin Music Group, UMG’s fast-growing distribution and artist providers firm that features distributor Ingrooves Music Group and Integral, previously the artist providers division of [PIAS].
UMG, specifically, is letting the world find out about its intentions. On Thursday (Oct. 31), UMG CEO Lucian Grainge devoted a lot of his earnings name opening statements to the corporate’s efforts to increase into doubtlessly profitable markets that merited little consideration earlier than authorized streaming providers changed digital piracy. UMG plans to make “a number of different investments” earlier than the tip of the 12 months, CFO Boyd Muir mentioned throughout the earnings name. In whole, he mentioned, funding spending within the second half of the 12 months will likely be 350 million to 400 million euros ($380 million to $434 million).
The give attention to rising markets and artist providers is a noticeable change from just a few years in the past. When NFT costs soared and followers have been caught at dwelling throughout the pandemic, the majors invested in blockchain, digital actuality and live-streaming startups. At this time, because the majors face slowing streaming development in mature markets and the wants of an rising variety of impartial artists, they’re centered on constructing a world community of service suppliers with a watch on up-and-coming markets.
The give attention to rising markets goes past acquisitions. In September, UMG launched a brand new firm, Common Music Group Higher Bay Space, that will likely be primarily based in Shenzhen, making “the primary time a serious music firm has established a division in China’s Higher Bay Space, the world’s most populous city space,” the corporate mentioned.
One other improvement talked about on UMG’s earnings name was GTS, a world expertise providers enterprise in Latin America. In October, GTS turned a standalone firm separate from UMG’s file labels. “By separating from our native labels,” Grainge defined, “GTS will now have the ability to additionally supply its providers to artists outdoors of the UMG household.”
Grainge and Muir painted an image of a world enterprise decided to increase outdoors of the mature markets they know finest and construct a presence in high-growth ones. UMG’s opponents — together with impartial Imagine — are doing the identical.
WMG has additionally had a busy 12 months investing in conventional music corporations. In March, WMG bought a stake in India’s World Music Junction (India’s The Financial Occasions reported it was a 26% stake) and launched Warner Music South Asia in April. Final 12 months, the corporate took a majority stake in Divo, an Indian digital media and music firm. Earlier this week, CEO Robert Kyncl advised The Financial Occasions that China and India are the corporate’s high markets for enlargement. “We’re already doing nice in India, however it may be a a lot larger a part of our story,” Kyncl advised the paper.
The majors proceed to purchase catalogs, in fact. This 12 months, Sony Music bought Pink Floyd’s recorded music catalog (along with merchandising and title and likeness rights) and UMG purchased a minority stake in Chord Music Companions, which holds the rights to over 60,000 songs. Costly music catalogs give the majors rights to property with lengthy, productive lives. However given the big dimension of those corporations, artist catalog acquisitions barely transfer the income needle. A legendary artist’s catalog may cost a little $200 million however generate a gradual $10 million a 12 months — a wholesome sum however a pittance to an organization with annual gross sales exceeding $12 billion.
Fairly than pour cash into simply catalogs, the majors are shopping for total corporations and constructing new companies with development potential. As Morgan Stanley analysts wrote in an investor notice about UMG on Thursday (Oct. 31), earlier acquisitions have had “a negligible impact on income and a small influence on revenue development.” However sooner or later, they’re prone to be a extra vital driver of income development, and Morgan Stanley expects UMG’s monetary reviews will get away their influence (e.g. reported income vs. natural income).
In shopping for regional music corporations and constructing artist-services enterprise, the majors are additionally taking a defensive measure. Independents equivalent to Imagine have been investing in native markets for years. In 2024 alone, Imagine bought the remaining stake in Turkish file label DMC and acquired Indian label White Hill Music’s music catalog and YouTube channel. Unbiased distributors equivalent to UnitedMasters, Stem, Symphonic Distribution and Create Music Group have given artists a viable different to main label-owned methods. The majors are merely altering together with the market.
In 2012, UMG acquired the recorded music property of EMI Music and later bought some items to WMG to fulfill antitrust regulators. Opposition to larger consolidation within the U.S. and Europe means it was in all probability the final acquisition of its dimension in these areas. (WMG’s temporary flirtation with shopping for Imagine in April and Could rapidly drew opposition from French indie labels.) There’s much less opposition to extra gradual development happening elsewhere on this planet, although. The majors are persevering with to increase, however they’re taking many small steps, not single EMI-sized leaps — they usually’re doing it by old school music companies.
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