Despite Making $400 Million Off of Beats, Universal Music Lost Money In 2014…

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Universal Music Group’s giant bet on streaming is falling flat, which may explain why top guys are getting axed.  According to financial details released by UMG parent Vivendi, Universal Music Group – across all of its many sub-labels and publishing entities – saw revenues slump 5.6 percent last year to €4.557 billion ($4.948 billion).

That happened despite a massive, $400 million windfall from Beats, sold to Apple for more than $3 billion.  UMG was a major, 13% shareholder in Beats from the beginning.

UMG has been milking this dying cow for more than a decade.  A giant part of the problem is the plunging CD, a giant, leaking balloon with now-nostalgic profit margins.  In the future that is now, Vivendi described an environment in which streaming gains are barely compensating for the precipitous drop in download sales, another ‘savior’ that started imploding last year.

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Strangely, UMG is crushing it on the superstar front: the 2014 hit-list included Frozen and Taylor Swift’s 1989, both of which jockeyed for the top-selling album in 2014.  Universal also made it rain with Sam Smith’s In The Lonely Hour, and boasted six mega-selling artists: Ariana Grande, Katy Perry, and Lorde, as well as French stars like Stromae, Indila and Kendji Girac.

There’s giant collateral damage ahead for Spotify, which gorges fans on free streams and commitment-free listening.  Just recently, UMG chief Lucian Grainge signaled a shift away from ad-supported streaming, and the mega-label has been brokering with Apple to re-launch a subscription-only platform.  That means Spotify could be forced to go pay-only, and suffer a giant blow in its battle against YouTube.

Image by ‘Captain Smurf,’ licensed under Creative Commons 2.0 Attribution Generic (CC by 2.0).

Vivendi’s complete financial disclosure is here.

6 Responses

  1. Chris H

    Well, they are learning from Youtube…on paper, I’m sure they did.

  2. Anonymous

    the independent artist does more in the process, puts out their work, handles their business, and maybe loses money, but just because a losing company pays their employees money, while doing less, they get to be celebrated as deity superstars, and anyone not them gets told to get a job and to grow up and that they are this and that. It doesnt make any sense.

    Things need to change…

  3. Tcooke

    Im confused here where the title says UMG lost money, meaning to me a negative profit, but then gross revenue is cited as less than the prior year. Were gross sales lower only or did they lose money? (I can’t read French)

    • JTVDigital

      Indeed the article title is misleading.
      If you look at the Vivendi financial report, gross revenue is -5.6% at constant exchange rate.
      BUT the EBITDA is +11.3%
      Meaning they did not lose money, on the contrary they made money, there was an “excellent performance” as the full report mentions.

      • Anonymous

        You right they still made money but they have shrank 6.7% in US dollars.
        If you would remove $400M for Beats the shrinkage would be in double digits.