BMG Revenue Up Double-Digits in First Half of 2019, Driven By Digital Growth
BMG garnered €49 million euros ($55.7 million) in earnings before interest, taxes, depreciation and amortization (EBITDA) on revenues of €269 million ($305.8 million) for the six-month period ended…
BMG garnered €49 million euros ($55.7 million) in earnings before interest, taxes, depreciation and amortization (EBITDA) on revenues of €269 million ($305.8 million) for the six-month period ended June 30, 2019, according to the company’s earnings announcement.
That represents an operating EBITDA improvement from the €42 million ($47.7 million) the company produced in the corresponding year-earlier period when revenues were €241 million ($274 million). That represents a 16.7% improvement in EBITDA and 11.6% growth in revenue. Moreover, as a percentage of revenue, BMG operating EBITDA improved to 18.2% from 17.4%.
“Our EBITDA margin of 18%, even in this structurally weaker six months of the year, was…way in excess of that of our competitors,” BMG CEO Hartwig Masuch said in a staff memo obtained by Billboard. “Our financial performance is not just important for our shareholders: it allows us to invest further and unlock even more resources to deliver for our artist and songwriter clients.”
Bertelsmann said that the fastest component of BMG’s growth was its recorded music operation, but also noted that its publishing business also showed strong revenue increases. Overall, the company said digital formats are driving growth in both businesses and now comprise 56% or revenue, or about €150 million ($190 million).
Looking at the recorded music segment, the company cited releases by Keith Richards, Kylie Minogue, Lil Dicky, Avril Lavigne, Dido, the Cranberries, AJR and Adel Tawil, as well as hit albums by Jack Savoretti (UK) and Kontra K (Denmark), as driving revenues. Further, the company said it signed new record contracts were signed with The Shires, Seeed, the Zac Brown Band, Sugar Ray and Richard Marx.
“Unlike some, we are not here to maximize our share price: we are privately owned; we have no [publicly-traded] ‘share price,” Masuch said in the memo. “We are not here to buy songs and recordings and then ‘flip’ them, nor are we trying to create a technology ‘unicorn’. Instead we work with artists and songwriters to optimize their careers and their income…. We believe music companies should exist to serve artists and songwriters. The music industry would be a much healthier business if everyone held this view.”
Also, within recorded music, Black Sabbath extended its deal with BMG; and the company launched the Trojan Jamaica label.
“We are in a very competitive environment so to renew that level of a deal [with Black Sabbath], makes us confident” that the BMG game plan is working, Masuch tells Billboard. Besides the recorded music catalogs it acquires, BMG mainly negotiates deals that allows artist to retain ownership of their masters, which is very different than the major label model where the label gets ownership of the records.
Masuch suggests BMG now is firing on all cylinders, where the company has had “very definite success,” including a number of top 10 hits and songs that stream a billion times. “When I launched BMG [in 2009] there was a certain level of frustration over how much time it takes to accept a new way of doing business,” Masuch says. Now, I am proud of how many artists reach out to join us.”
As for Trojan Jamaica, that label was launched in February in partnership with musician and producer Zak Starkey and artist, musician and producer Sharna “Sshh” Liguz. The label, which has operations in Jamaica and New York City, had its first release with a cover of “I Put a Spell on You,” performed by Mykal Rose, featuring Sly & Robbie. In addition to working with heritage artist, the label is also signing new artists.
Moving over to publishing, the company said that Lewis Capaldi’s “Someone You Love” has sold over 3 million copies globally was a standout, while noting that BMG songwriters were involved in 24 number one hits across the Billboard charts. It also said new publishing agreements were signed with Cage the Elephant, AnnenMayKantereit and Jason Duke, while it extended its global music publishing partnership with Latin music label, DEL Records.
Publishing may be under indexing compared to the explosive growth recorded music is experiencing, but “all is good” on that side of the company, Masuch says. There, the company continues to mainly explore organic growth because the multiples that publishing acquisitions are trading on “are challenging,” Masuch adds.
Finally, BMG launched its 15th international office, in Hong Kong, to further strengthen its footprint in the Asian market, the company said.
Overall, BMG parent Bertelsmann posted €1.292 billion ($1.47 billion) in operating EBITDA on revenues of €8.612 billion ($9.8 billion), which represents a 20.5% improvement from the €1.071 billion ($1.22 billion) in operating EBITDA and 4.6% growth in revenue from the €8.237 billion ($9.36 billion) produced in the year earlier six month period.
“Bertelsmann had a very successful first half of 2019,” Bertelsmann chairman and CEO Thomas Rabe said in a statement. “In the past few months, we once again stepped up the pace of our growth; the expansion of our digital and growth businesses is increasingly paying off. Bertelsmann is now a faster-growing, more digital, more international, and [a] more diversified company. We will further increase our investments in local premium content and service offerings in the years ahead.”
In a strategic move to realize more opportunities, in February the parent company created the Bertelsmann Content Alliance, which manages the collaboration among Bertelsmann’s content businesses, beginning in Germany, but with plans to roll it out globally. This will “align the interests” of the various Bertelsmann segments to look for synergies between the magazine, books and music companies. Says Masuch, “This will allow us to present much stronger joint opportunities to the BMG artist community.”