Universal Music Group Announces ‘Strategic Redesign’ Saving $270 Million in Annual Costs
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In its latest earnings report, Universal Music Group touted top-selling acts including Taylor Swift, the Rolling Stones, Drake, Jung Kook and Stray Kids with a revenue increase of 9% for a total of $3.5 billion (3.2 billion euros) in its fourth quarter of 2023.
In the same report, the music company addressed in further detail a looming “strategic organizational redesign” aiming to generate over $270 million in annual run-rate savings by 2026. These savings would be achieved through what the company said were “a combination of headcount reduction and other operational efficiencies,” with the first phase set to achieve $134 million in annual run-rate savings in 2025, including $81 million in 2024.
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The plan “is designed to achieve efficiencies in targeted cost areas while strengthening labels capabilities to deepen artist and fan connections,” per the report.
This follows the news of a resurrected operating model at the company under which Interscope Geffen A&M’s John Janick and Republic’s Monte Lipman have been appointed to lead U.S. label operations for UMG. At the time of that announcement, Lucian Grainge, UMG’s chairman and CEO, described this unification as a move for both execs to “lead a broader part of our US recorded music business,” and “accelerate [their business] strategies and maximize their effect.”
The remainder of the earnings report touched on UMG’s first year of implementing its artist-centric royalty models with Deezer and Spotify. The music giant’s Q4 results showed streaming revenue declined 1.3% year-over-year, but grew 5.6% in constant currency. Its full-year-end results show streaming revenue grew 0.4% year-over-year, or 3.6% in constant currency.
In Q4, a push in vinyl sales across the U.S. and Europe expanded physical revenue by 10.6% year-over-year, or 17.0% in constant currency, driven by improvements in vinyl sales across the U.S. and Europe. Like the previous year, downloads and other digital revenue decreased in 2023 with a decrease of 49.2%, or 45.8% percent in constant currency.
UMG reported promising growth in neighboring rights, synchronization, touring and sponsorship deals, with revenue improving 26.5% year-over-year, or 34.0% in constant currency. Top sellers for the quarter included albums from Swift, the Rolling Stones, Drake, Jung Kook and Stray Kids, while top sellers of the year included Swift in addition to albums from Morgan Wallen, King & Prince, Karol G and the Weeknd. Top sellers in the prior year included Swift, BTS, Encanto OST, Olivia Rodrigo and Wallen.
In a statement, Grainge said, “2023 was another exceptional year for UMG: creatively; financially; and strategically. 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, executive VP and CFO/president of operations for UMG, 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 program.”
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