Universal Music Group confirms cost-saving ‘redesign’, including layoffs, that will save $270m a year

Universal Music Group has today (February 28) confirmed details of a “re-designing” of its organizational structure, which it says will generate EUR €250 million (USD $270 million) in annual cost savings.

UMG says this “redesign” – which includes “headcount reduction”, aka layoffs – will result in €75 million ($81 million) of cost-savings in 2024 (vs. 2023).

Those annual cost savings (vs. 2023) will then expand to €125 million in 2025, before eventually reaching €250 million by the end of 2026.

UMG says all of these annual run-rate savings will be “accretive to EBITDA” – i.e. will directly improve the company’s profit margins.

In a note to investors today, UMG said that it will achieve its €250 million annual cost-savings target via “a combination of headcount reduction and other operational efficiencies”.

The company did not confirm at press time how many employees would be affected by the planned headcount reduction; Bloomberg has previously reported that “hundreds” of layoffs are expected at UMG in Q1 this year.

(Universal Music Group had a global headcount of 9,992 employees at the close of 2022, according to its financial disclosures.)

The new “redesign” plan, says Universal, will “achieve efficiencies in targeted cost areas while strengthening labels’ capabilities to deepen artist and fan connections”.

The company added: “UMG’s redesign is a carefully crafted balance that preserves the core of where our labels excel – creative A&R and artist-development, marketing and brand building innovation, unique identities and vision, and a shared entrepreneurial spirit.

“Our long-term growth strategy, including this organizational redesign, represents a new paradigm for artist support and fan engagement.”

As MBW has previously pointed out, UMG has a promised margin expansion to achieve: in August 2021, ahead of its IPO on the Euronext the following month, Universal pledged to investors that a mid-20% (i.e. 25%) EBITDA target at its company was possible in the “mid-term”.

Boyd Muir, CFO and EVP of Universal Music Group, confirmed on an earnings call today with UMG investors that Universal’s new cost-saving plan is “required to get us to [that] mid-20s margin guidance”.

Discussing why UMG needs to enact a headcount reduction now to hit a mid-20% EBITDA target that was outlined in 2021, Muir added: “The reality is that [since 2021] we’ve added costs that were inconsistent with those projections, in particular with regard to SG&A [Selling, General, & Administrative] costs.

“We need to realign those costs in order to bring us back to where we were in our financial projections that supported the mid-20s adjusted EBITDA margin [target].”

“The reality is that we’ve added costs that were inconsistent with those projections [of a mid-20% EBITDA]… we need to realign those costs in order to bring us back to where we were in the financial projections that supported a mid-20s adjusted EBITDA margin [target].”

Boyd Muir, Universal Music Group

Muir further confirmed that in 2024 – presumably as a result of the new organizational “redesign” – Universal expects to incur restructuring charges of 125 million ($135 million) of which approximately 100 million ($108m) will fall in Q1.

He added that Universal may look to accelerate “phase two” of its restructuring plan, which would result in additional restructuring/severance costs being incurred in the 2024 financial year.

The slide from UMG’s Capital Markets Day in August 2021 showing that the company is aiming for a 25% EBITDA margin in the “mid-term” (red circling MBW’s own)

Today’s news comes in the same month that Universal Music Group announced a new label group structure in the US.

Under this new model, Interscope Geffen A&M’s John Janick and Republic Records‘ Monte Lipman will increase the number of labels under their command.

Janick, on the West Coast, will provide leadership to Blue NoteCapitolGeffenInterscopeMotownPriority, and VerveLipman, on the East Coast, will take responsibility for Def JamIslandMercury, and Republic.

The former CEO & Chair of Capitol Music Group, Michelle Jubelirer, announced she was leaving the company on February 6. During her two-year tenure as CMG boss, she reported directly to Sir Lucian Grainge, Chairman and CEO of Universal Music Group.

Jubelirer has since been succeeded as CEO & Chairman of CMG by Tom March. Instead of reporting to Grainge in this role, March reports to John Janick.

Universal Music Group generated EUR €11.108 billion in the calendar year of 2023 – across recorded music plus publishing and other divisions – it confirmed today, up 11.1% YoY at constant currency.

In Q4 2024, UMG generated EUR €3.208 billion, up 15.6% YoY at constant currency.

Its adjusted EBITDA for the 2023 year stood at EUR €2.369 billion, representing an adjusted EBITDA margin of 21.3%.

Three weeks ago, on February 7, Warner Music Group boss, Robert Kyncl, announced that his company would be cutting around 600 roles from WMG this year – equivalent to approximately 10% of the firm’s current global employee base.

Kyncl said that this headcount reduction would result in annual cost savings of around USD $200 million at WMG by the end of September 2025.

“The majority of these savings,” said Kyncl, “will be reinvested, putting more money behind the music”.Music Business Worldwide