Common Music Group has at the moment (February 28) confirmed particulars of a “re-designing” of its organizational construction, which it says will generate EUR €250 million (USD $270 million) in annual value financial savings.
UMG says this “redesign” – which incorporates “headcount discount”, aka layoffs – will lead to €75 million ($81 million) of cost-savings in 2024 (vs. 2023).
These annual value financial savings (vs. 2023) will then develop to €125 million in 2025, earlier than finally reaching €250 million by the top of 2026.
UMG says all of those annual run-rate financial savings might be “accretive to EBITDA” – i.e. will straight enhance the corporate’s revenue margins.
In a be aware to buyers at the moment, UMG mentioned that it’ll obtain its €250 million annual cost-savings goal through “a mixture of headcount discount and different operational efficiencies”.
The corporate didn’t verify what number of staff can be affected by the deliberate headcount discount; Bloomberg has beforehand reported that “lots of” of layoffs are anticipated at UMG in Q1 this yr.
(Common Music Group had a worldwide headcount of 9,992 staff on the shut of 2022, in keeping with its monetary disclosures.)
The brand new “redesign” plan, says Common, will “obtain efficiencies in focused value areas whereas strengthening labels’ capabilities to deepen artist and fan connections”.
The corporate added: “UMG’s redesign is a rigorously crafted stability that preserves the core of the place our labels excel – artistic A&R and artist-development, advertising and marketing and model constructing innovation, distinctive identities and imaginative and prescient, and a shared entrepreneurial spirit.
“Our long-term progress technique, together with this organizational redesign, represents a brand new paradigm for artist assist and fan engagement.”
As MBW has beforehand identified, UMG has a promised margin growth to attain: in August 2021, forward of its IPO on the Euronext the next month, Common pledged to buyers {that a} mid-20% (i.e. 25%) EBITDA goal at its firm was potential within the “mid-term”.
Boyd Muir, CFO and EVP of Common Music Group, confirmed on an earnings name at the moment with UMG buyers that Common’s new cost-saving plan is “required to get us to [that] mid-20s margin steerage”.
Discussing why UMG must enact a headcount discount now to hit a mid-20% EBITDA goal that was outlined in 2021, Muir added: “The truth is that [since 2021] we’ve added prices that had been inconsistent with these projections, particularly with regard to SG&A [Selling, General, & Administrative] prices.
“We have to realign these prices with a purpose to carry us again to the place we had been in our monetary projections that supported the mid-20s adjusted EBITDA margin [target].”
“The truth is that we’ve added prices that had been inconsistent with these projections [of a mid-20% EBITDA]… we have to realign these prices with a purpose to carry us again to the place we had been within the monetary projections that supported a mid-20s adjusted EBITDA margin [target].”
Boyd Muir, Common Music Group
Muir additional confirmed that in 2024 – presumably because of the brand new organizational “redesign” – Common expects to incur restructuring prices of €125 million ($135 million) of which roughly €100 million ($108m) will fall in Q1.
He added that Common could look to speed up “section two” of its restructuring plan – the cost-cutting presently deliberate for 2025 – and produce components of that plan into the 2024 monetary yr, which might lead to further restructuring/severance prices being incurred this yr.
Right this moment’s information is available in the identical month that Common Music Group introduced a brand new label group construction within the US.
Below this new mannequin, Interscope Geffen A&M’s John Janick and Republic Information‘ Monte Lipman will improve the variety of labels beneath their command.
Janick, on the West Coast, will present management to Blue Be aware, Capitol, Geffen, Interscope, Motown, Precedence, and Verve; Lipman, on the East Coast, will take accountability for Def Jam, Island, Mercury, and Republic.
The previous CEO & Chair of Capitol Music Group, Michelle Jubelirer, introduced she was leaving the corporate on February 6. Throughout her two-year tenure as CMG boss, she reported straight to Sir Lucian Grainge, Chairman and CEO of Common Music Group.
Jubelirer has since been succeeded as CEO & Chairman of CMG by Tom March. As an alternative of reporting to Grainge on this function, March studies to John Janick.
Common Music Group generated EUR €11.108 billion within the calendar yr of 2023 – throughout recorded music plus publishing and different divisions – it confirmed at the moment, up 11.1% YoY at fixed forex.
In This autumn 2024, UMG generated EUR €3.208 billion, up 15.6% YoY at fixed forex.
Its adjusted EBITDA for the 2023 yr stood at EUR €2.369 billion, representing an adjusted EBITDA margin of 21.3%.
Three weeks in the past, on February 7, Warner Music Group boss, Robert Kyncl, introduced that his firm can be chopping round 600 roles from WMG this yr – equal to roughly 10% of the agency’s present international worker base.
Kyncl mentioned that this headcount discount would lead to annual value financial savings of round USD $200 million at WMG by the top of September 2025.
“Nearly all of these financial savings,” mentioned Kyncl, “might be reinvested, placing extra money behind the music”.Music Enterprise Worldwide
