In most respects, Universal Music Group had a very positive Q1.
Despite seeing revenues from downloads (iTunes, mainly) plummet 32% in the three months to end of March, the major’s digital income still increased by 8% overall – thanks to a 60% rise in streaming revenues.
(One explanation for that iTunes tumble, aside from wider market erosion, was the windowed TIDAL exclusivity of major releases from artists such as Rihanna and Kanye West.)
UMG’s overall recorded music income was up 0.5% to €890m ($1.02bn) in Q1, while across all business divisions, UMG enjoyed a 0.6% rise in revenues to €1.12bn ($1.28bn).
(All figures above at constant currency/perimeter.)
So it was a surprise, considering these impressive operational results, to see UMG’s total EBITA for the quarter fall by 4%.
EBITA is the best indication of profitability we have for UMG. (The major operates under Vivendi’s control – and its figures are therefore a little more obscured than Warner Music Group‘s, which trades its debt publicly.)
According to Vivendi’s earnings result, UMG’s EBITA was down from €82m ($93m) in Q1 2015 to €79m ($90m) in Q1 2016.
How come?
An usually high ‘special items’ charge of €23m ($26m) – compared to just €7m ($8m) in the previous year’s Q1.
The majority of this cost was for restructuring: Vivendi even told investors this week that its own company-wide €21m restructuring charge in Q1 was “primarily incurred by Universal Music Group”.
What kind of restructuring has UMG been up to?
If you’ve been reading MBW this year, you’ll already know.
Staff changes have included the complete restructuring of UMG International, with more than 50 roles affected.
There were a number of big individual exits from the company in the early part of 2016 – including Universal Music France CEO Pascal Nègre (pictured inset), sales veteran Pat Monaco, South African boss Randall Abrahams, merch head Tom Bennett, UMG Austria boss Hannes Eder, UMG International Director Jamie Hole and Capitol Music Group’s Dave Lombardi.
Tom Bennett was replaced by former Sony exec Mat Vlasic, Pascal Negre by former MD of Mercury France Olivier Nusse and Randall Abrahams by former SAMRO boss Sipho Dlamini.
Evidently, such moves came at a cost.
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