Universal Music Group

Business was good for Universal Music Group in 2021, according to the company’s financial results for Q4 and the full year.

UMG’s annual revenues grew by 14.4% to just over €8.5bn ($9.37bn), including 16.9% growth for the company’s subscription and streaming income from recorded music. The major recorded an adjusted net profit of €1.27bn for the year, up from €1.03bn in 2020.

Breaking out the stats, that 16.9% growth in recorded streaming revenues meant that streaming generated €4.48bn for UMG last year, accounting for 65.7% of its overall recorded music revenue.

Physical sales grew sharply from Covid-hit 2020 too: up 18.6% to €1.12bn. There was growth in publishing for UMG too: up 12.6% year-on-year to €1.34bn.

In UMG’s earnings call with analysts, chairman and CEO Sir Lucian Grainge talked about the further growth potential the company sees in streaming. He cited increasing demand from “older demographics”, as well as “the diversification of and the competition amongst DSPs and improved product offerings”.

Also flagged up by Grainge: health and fitness licensing deals, of which UMG now has 19 (the newest including Strive, Mentra by SATS and Steezy). Meanwhile, he said that UMG is firmly in the game for buying music catalogues: “but only the best catalogues at the right price, and only after we thoughtfully assessed the value of the rights, and have a clear view of how we will make returns well in excess of our cost of capital.”

We won’t be alone in detecting a desire to suggest that some rival catalogue buyers are not doing this kind of due diligence? There was no shortage of shade being thrown in Grainge’s remarks on the acquisitions space, for sure.

“We are not in the business of buying individual royalty revenue streams or assets over which we will have no ability to make the most of those rights. We are more than happy to leave those deals to others,” he said.

And then: “We’re not a financial investor nor are we a new-to-the-market fund on the hook to do deals on a set schedule. Further, unlike a fund, we will never sell or divest these rights.”

Hipgnosis, Round Hill Music and the other funds buying catalogues will have plenty to say about this, we’re sure. Whether you agree or disagree, it’s useful to see how UMG is seeking to define itself against the new breed of music-rights buyers.

Grainge also offered some thoughts on NFTs, an area in which UMG has announced several deals recently. “You may see one-off NFT drops. I’m far more interested in a long-term sustainable business model where this product, this opportunity – and I include the metaverse in that – is part of the conversation with our artists where it’s baked into their long-term marketing campaigns,” he said.

“I want it to become something sustainable and long term as opposed to just a headline today about something that everyone talks about for an hour. I want it to be baked into our business.”

UMG’s digital boss Michael Nash offered a neat soundbite on how the company is viewing this particular growth sector. “You can think of web3 and NFTs as kind of the tip of the technological spear of our overall ecommerce strategy with our artist roster.”

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