BMG CEO Hartwig Masuch added in a statement "To deliver a record result in the midst of a pandemic is a remarkable achievement. It is a testament to our artist-centric business model, but also to our 926-strong team worldwide who went to extraordinary lengths to maintain service to our artist and songwriter clients."
In an interview with Billboard, Masuch reports that profitability was constrained by partially suspending the release schedule due to the pandemic. "We postponed [a few important physical] releases that would have impacted those [financial] ratios," Masuch says, adding those releases are about to come out. The company said that the growth of digital helped it to outpace the pandemic downturn, with digital now accounting for 59% of revenue, up from 56% in the first half of 2019.
That means digital revenue grew to 165.2 million euros ($182 million), up from 150.1 million euros ($169.5 million). Within that recorded music streaming grew 26%, but the company didn’t break out revenue numbers.
"Thanks to dynamic growth in music streaming, further facilitated by the company’s broad and highly digital setup, any lost revenues due to postponed releases or disruptions of physical distribution were more than compensated for," according to the company’s mid-year report.
However, the pandemic did have an impact on Bertelsmann’s overall operations as the parent reported €488 million ($537.8 million) in net income on revenues of €7.85 billion ($8.65 billion), versus the year-earlier corresponding six month period in 2019 when the company posted €502 million in net income ($567.1 million) on revenues of €8.6 billion ($9.73 billion). That represents an 8.9% drop in revenue and a 2.8% decrease in net income.
Getting back to BMG, the company says its recorded music operation is 31% of revenue while its music publishing division is 69%, which calculates to 86.8 million euros ($95.7 million) and 193.2 million euros ($212.9 million), respectively.
Within that, digital comprised 83% of recorded music revenue, or 72 million euros ($79.4 million); and music publishing 92.7 million euros ($102.2 million).
Breaking out revenue geographically, the company reported that Germany comprised 13.9% of revenue, France, 6.1%, the U.K. 11.8% and Europe as a whole 42.1% while the U.S. contributed 49.6% of revenue and other countries, 8.2%.
The company said that its recorded music business, which Billboard estimates is roughly a third of volume, enjoyed successes from releases by KSI, hip-hop duo Run The Jewels, reggae singer Conkarah, and newcomer Curtis Waters, while new signings included Aloe Blacc, Jason Mraz, Run The Jewels and CHAII.
Meanwhile, the company’s music publishing operations — about two-thirds of BMG volume — enjoyed strong performances from Lewis Capaldi, the rock band Blossoms, the rappers Ufo361 and NAV, as well as Tame Impala from Australia, according to the company’s report.
Looking specifically at the U.S., BMG's recorded music operation enjoyed market share growth to 1.07%, up from 0.9% at the mid-year point in 2019, according to Nielsen Music/MRC Data. Within that, its country operations—Broken Bow Records — enjoyed a market share surge to 4.71%, up from 2.77%.
BMG also produced a big gain in catalog market share in the U.S. in the first half of 2020, almost doubling to nearly 1% from 0.52% in the first half of 2019, while the overall U.S. industry was only up 11%. Masuch explains the company has been aggressive in maximizing catalog opportunities, including getting its artists to help on that front. "Our team is doing a lot of work behind the scenes to keep listeners tuned into our catalog," Masuch says.
BMG reported that during the first half of the year, the company signed global deals with Dark Horse Records, the label owned by the George Harrison estate; and Britain’s ITV studios, while launching Renew Records, focusing on Americana music; The company also expanded into Canada’s production music sector, signing a cooperation agreement with MatchTune, the music-to-video platform; and increased its range of artist services by moving into the neighboring rights business.
"We are here to help artists and songwriters make a living from their creativity in every way possible; and we will continue to expand our services," Masuch said in a statement. With artists missing out on revenue from live concerts and synchronization, BMG made sure its artists and songwriters "were paid on time and exactly to plan," according to a BMG document.
While BMG initially grew through dozens of acquisitions, since 2017, when valuation multiples began to skyrocket, the company has relied on organic growth. "Despite the high levels of M&A in the wider music industry, we have not made a major acquisition since 2017," Masuch said in a statement. "Our focus is on growing by delivering better, fairer, more efficient services to artists and songwriters. There is no doubt musicians are hurting through the pandemic, particularly with the loss of live business. That puts a particular responsibility on record labels and music publishers to help artists and songwriters maximize their earnings."
In dealing with the economic downturn, the company distributed nearly 2,800 masks to its global team to its staff who switched locations from the company’s 19 offices to their own homes. Without office interactions, that meant that the company spent nearly 212,000 hours on team calls, including 24 updates to the staff, the company reported. "If you note that six months into the crises, we didn’t make any [staff] redundant; we made sure they were comfortable, telling them you will be around this year and next," he adds.
BMG’s messaging included outreach to its artists and songwriters as well, activating an instant message facility on the myBMG app to update clients on its COVID-19 measures. For example, with recording studios closed, BMG reports it set up over 1,4000 digital songwriting opportunities around the globe.
Beyond the pandemic, BMG reported an update on the company’s response to racial disadvantages, in a Masuch note to staff, made available to reporters. "Action is more important than words and I am glad to say we are already making good progress on the pledges we made in the wake of Blackout Tuesday," he said in the note, according to the excerpt made available to the press.
"Elections are underway for our new Diversity & Inclusion Council; we will be announcing details of our latest Black community outreach effort in the US later this week and we are in the middle of consultation on the results of our review of historic acquired recording contracts. We will not waste this opportunity to move things on."
In its company documents, BMG notes that the first half of 2020 was a "half a year like no other." Yet, Masuch adds, "I am very proud of how our team managed the business during this crises."
This story uses a currency translation of €1 euro to $1.102 dollars for 2020 and €1 euro to $1.1297 dollars for 2019, the average currency exchange experienced and reported by Bertelsmann.
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