The Ledger: Inside Universal Music’s 2021 Annual Report

The Ledger: Inside Universal Music’s 2021 Annual Report thumbnail

The Ledger, a weekly newsletter on the economics and business of the music industry, is sent to Billboard Pro subscribers. The newsletter can also be accessed online in an abbreviated form.

Universal Music Group’s first ever annual report ,, released Thursday, provides a comprehensive look at the company’s finances and operations, as well as its environmental, social, and governance initiatives. If you want to know how many metric tons of paper was purchased for internal use (24) or the number of megawatt hours of electricity from renewable sources (7,982), it’s in there.

The annual report highlights a few important facts in terms of the dollars and cents behind investments as well as catalogs.

  • UMG sold Alamo Records for 102 million euros ($112.7 million) for a gain of 98 million euros ($108.3 million). Sony Music reportedly bought a 75% stake in the label, which industry veteran Todd Moscowitz founded in partnership with UMG in 2017. The label helped to build the careers of Rod Wave and Lil Durk, Blackbear, and Smokepurpp among others.
  • UMG spent 388 million euros ($428 million at the current exchange rate) in catalog investments, down from 975 million ($1. 08 billion) in 2020 (this was also mentioned in the fourth quarter 2021 earnings report). Companies don’t usually discuss price tags so we only have the aggregate amount. UMG acquired Sting’s songwriting catalog in 2021 (it was announced in Feb. 2022), which puts the artist’s songwriting under the same house as his entire recorded music catalog (solo works and the Police recordings are on A&M, Interscope and Cherrytree Records). Billboard reported that Sting’s representatives were shopping the catalog for roughly $360 million. As a point of comparison, BMG spent 281 million euros ($311 million) on catalog acquisitions in 2021, according to Bertelsmann’s 2021 annual report. Warner Music Group used $481 million to acquire music-related assets in its fiscal year ended Sept. 30, 2021.
  • UMG made 364 million euros in royalty advance payments (net of recoupments), down from 588 million euros in 2020. UMG stated that the decline in royalty payments was due to UMG’s “timeliness of major artist renewals” and higher recoupment rates. This is a significant difference from 311 million euros in 388.

As for other UMG investments, the report revealed that revaluing its Spotify and Tencent Music Entertainment investments resulted in a net expense (non-cash) of 315 million euros and a 135 million euro decrease in income taxes reported to net income. These stock prices can change from one year to the next. In 2020, Spotify and TME appreciated in value, resulting in a net income of 591 million euros. Both stocks are down year-to-date, but performed well in March.

Overall, UMG posted strong financial growth in 2021 across its recorded music, publishing and merchandise segments. At constant currency — ignoring currency exchange rates — revenue rose 17.0%, operating profit improved 15.4%, adjusted EBITDA increased 20.9% and adjusted EBITDA margin rose 0.9 percentage points.

Oddly, one the most striking groups of numbers in this report is not financial. The report has a list of the top 10 “influencers” from May 2021, as ranked by number of social media followers. Six of the 10 names are UMG artists, including Justin Bieber (No. 2), Ariana Grande (No. 3), Selena Gomez (No. 3), Selena Gomez (No. 5). Cristiano Ronaldo, a Portuguese soccer player currently playing in the Premier League for Manchester United, is currently No. 1. Dwayne Johnson is the only big screen actor who has made it to No. 6. Kylie Jenner is No.8 and Kim Kardashian is No. 8 and No. 10. The list does not include any of UMG’s competitors record labels. UMG also has 8 of the top 10 global artists, as measured by the IFPI, and 8 of the top 10 artists in the U.S., as measured by Billboard.

It is often overlooked that today’s hits can be incredibly valuable. They will turn into tomorrow’s catalogue, the steady earners that will continue to be popular on streaming services for many years. UMG’s chart dominance today is going to translate into a valuable catalog later.

STOCKS

Through April 1, the % changes over the last week and the year-to date change.

Spotify: $153. 66, 5.2%, -34.3% YTD
Universal Music Group: 24. 00 euros, 2.4%, -3.1% YTD
Warner Music Group: $36. 98, -2.5%, -14.4% YTD
Believe: 14. 31 euros, 12.1%, -15.3% YTD
Live Nation: $114. 37, -1.7%, -4.4% YTD
Vivid Seats: $11. 50, 5.7%, 5.7% YTD
Eventbrite: $14. 93, 6.0%, 14.0% YTD

NYSE Composite: 16,787. 75, 0.0%, -2.2% YTD
Nasdaq: 14,261. 50, 0.7%, -8.8% YTD

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