MBW’s Stat Of The Week is a series in which we highlight a single data point that deserves the attention of the global music industry. Stat Of the Week is supported by Cinq Music Group, a technology-driven record label, distribution, and rights management company.
Last year, Universal Music Group went public.
The really great news about that for music industry muckrakers like MBW? In theory, we should get more transparency on UMG’s fiscal numbers than we ever saw back when it was owned by Vivendi.
And so it proves today (March 3), with Universal not only revealing the amount of money it spent on “content investment” last year, but further breaking down that figure into what it spent on: (a) Catalog acquisitions; and (b) Royalty advances to signed artists and songwriters.
The most intriguing category out of those two, of course, is catalog investments.
And thanks to UMG’s aforementioned fiscal transparency, we now know not only what Universal spent on catalog buyouts in 2021, but in 2020 too.
We also know that – according to a new investor presentation given by UMG’s EVP/CFO Boyd Muir – that Universal does not consider participation in the catalog buyout gold-rush as “required” to satisfy its core future business objectives.
In 2020, Universal spun the head of the global music business by spending what is believed to be close to USD $400 million to buy Bob Dylan’s song catalog.
That acquisition, it transpires, was part of €929 million (USD $1.06 billion) total annual spend by Universal on music catalogs that year.
In 2021, however – the year UMG floated on the Amsterdam Euronext – UMG’s expenditure on catalog buyouts slowed considerably.
In fact, it was down by 58% YoY… less than half the size it was in the prior year.
According to that investor presentation handed to shareholders today (March 3), Universal spent €388 million (USD $459m) on catalog rights last year.
Obviously, the best part of half a billion dollars is, y’know, still a princely sum. But it’s also a significantly smaller figure than certain other players splashed on music catalogs in 2021.
For example, KKR spent a whopping $1.1 billion buying a portfolio of rights from Kobalt Music Group in October last year.
Sony Music Group then spent an estimated $550 million (with a little help from Eldridge Industries) on Bruce Springsteen’s publishing and recorded music catalogs in the same 12 months.
Sony also spent north of $150 million on Bob Dylan’s recordings catalog in 2021, and it bought Paul Simon’s publishing rights in a deal rumored to be worth upwards of $200 million.
Not to be outdone, Warner Music Group splashed $250 million on the David Bowie song catalog, as well as splurging over $100 million on David Guetta’s recordings.
All of that being said, Universal has already been noticeably more active in the blockbuster catalog buyout space in 2022 than it was in 2021.
In the past month alone, UMG has announced its acquisition of Sting’s song catalog – in a deal believed to have cost north of $300 million – as well as the buyout of Neil Diamond’s song catalog and master recordings.
In the presentation given by Boyd Muir to Universal investors today (see slide above), UMG notes that it considers itself a “highly selective, strategic acquirer of assets we can control and [for which we can] improve monetization”.
It adds that it is not keen on buying “passive rights” – aka music income streams over which it has no control – and takes a “financially disciplined, ROI [return on investment]-based approach” to catalog acquisitions.
Worth noting for context: UMG has told its investors it is aiming to achieve an EBITDA margin in the “mid-twenties” as part of its mid-term outlook.
On an adjusted basis, that figure hit 21.0% in 2021.
Interestingly, UMG suggests in its new investor presentation that its investment in advances to active songwriters and artists are, unlike catalog acquisitions, “required/core to our business”.
UMG further notes that it is currently spending big on “front-loaded advances” to “secure long-term, broader, multifaceted rights” from artists.
The presentation reveals that UMG spent €364 million ($430m) on royalty advances to talent across the course of 2021, down 38% year-on-year.
According to MBW’s calculations based on UMG’s newly-announced annual results for 2021, the major music company topped USD $10 billion in annual revenue last year, with an annual adjusted EBITDA above $2 billion.
Note: EUR-USD currency conversions in this story are based on the IRS’s published annual average exchange rates.
