NEAR TRUTHS: TRANSFORMATIONS

WINDS OF CHANGE: In the opening days of 2024, Sir Lucian Grainge hailed the beginning of a new era for the biz with a manifesto about the “transformative” year ahead. It proffered the anticipated beats about artist-friendly DSP reforms, technological opportunities and challenges, and the super-serving of superfans.

Robert Kyncl, for his part, delivered a Google-ish set of best practices and areas of focus for this “first year of the next 10.” But bizniks are reading between the lines of these broadsides and intuiting that other kinds of change are afoot.

A 1/12 Bloomberg report citing sources asserting that UMG would be cutting “hundreds” of staff in Q1, largely in recorded music, presumably confirmed this. Flattening growth—and the delay before DSP fee increases and other improvements appear in the bottom line—were cited as reasons to trim. In the fall, Sir Grainge had referred to a “cut-to-grow strategy.” (WMG made a 4% reduction in headcount in Q1 of 2023.)

Most of the big media and tech companies have recently cut costs by reducing overhead; the video-on-demand streaming subscription services spent mountains of money over the past few years but struggled to generate sufficient revenue. This was also in part because production was so severely hampered during the COVID era—and then two major strikes shut things down again. Rising interest rates also played a role in the economic equation. Downsizing was increasingly inevitable, particularly given that these companies or their corporate parents are publicly traded.

According to reports, U.S. consumers are increasingly canceling video subs. Netflix continues to dominate, but its competitors are struggling. After years of spending billions, companies are pivoting toward cost-cutting, price hikes and bundles, and more consolidation in the market is likely. Paramount shares are worth half what they were after the 2019 Viacom-CBS merger; the company is reportedly in merger talks with competitor Warner Bros. Discovery, with other deals being floated. WBD spent last year working toward its benchmark of $3.5b in cost savings. Comcast's Peacock laid off employees as part of a restructuring. Disney announced a further $2b cut in expenses, having already made a $5.5b reduction, and CEO Bob Iger was said to be toying with the idea of selling off assets.

Not even tech companies are immune. Amazon just announced the layoff of hundreds in its Prime Video and studios business. Apple continues to spend billions on content for its video streaming service, though that’s just a rounding error for this giant.

While the pandemic halted most TV and film production and the live sector almost completely shut down, recorded music flourished; labels found they could function virtually, leaning into TikTok and copiously crunchable data on one end of the chain and DSPs and socials on the other as homebound consumers dove into streaming.

But one downside of the virtual office is that you invariably have a lot of people on the payroll who aren’t necessarily doing much—and you’ve already demonstrated that a smaller crew can run the ship, with certain traditional departments playing a more marginal role. What’s more, the streaming-income rate of return has flattened out as markets in the U.S. and Western Europe become mature and secondary markets remain less remunerative. Between this and other factors, a correction began to seem inevitable as the biz took stock, so to speak, and retooled for this new era. How significant might it be?

COASTAL KINGDOMS: The Lipman brothers’ Republic and John Janick’s Interscope have, over the last five years or so, become powerhouse labels and a large part of UMG’s foundation. Between them, they have accounted for almost 20% of U.S. marketshare during the last half-decade and more than 50% of Uni’s total. Rumors have been flying that the heads of these two labels were due for larger roles in the UMG machine; considering their impressive recent performance, it would seem those rumors may well be based in reality.

A glance at the top titles in the 2023 marketplace tells the tale: The two companies jockeyed for the biggest slice of the overall pie for much of the year, with Republic taking that prize while holding the lead in current.

The heads of these formidable beasts—Janick on the West Coast and Monte on the East—are truly the two hottest label players in the business. (By the way, Peter Edge and his RCA, which relocated from the East Coast to the West, had another terrific year—thanks in large part to superb A&R and artist development.) One is an artist-development visionary and the other the shrewdest dealmaker in the biz. Janick retains the relentless world-building focus he’s had since the Fueled by Ramen days; his home-brewed entrepreneurial vision has effectively scaled up to global proportions. Monte identifies targets, wields his abundant charm and builds consensus with aplomb. He has an insider’s savoir faire, thought it’s important to remember that he and Avery built their empire from the dining-room table.

Both leaders take shots aplenty and score with alarming regularity. How much bigger are their remits about to become?