The music biz’s 2020 may be dominated by the impact of the coronavirus pandemic, but BMG’s 2019 financial results are a timely reminder of just how well the industry was doing before Covid-19 struck.
Published yesterday as part of BMG owner Bertelsmann’s annual report, the stats show BMG’s revenues rose 10.1% in 2019 to €600 million (£550m). Operating EBITDA was up 12.7% to €138m (£126m), with a margin of 23%.
The success was largely fuelled by growth in its recordings division, where the likes of Dido, Kylie Minogue and Jack Savoretti helped BMG outperform the market – as revealed by Music Week back in January – and firmly establish itself as the UK’s No.4 record company. Last month, BMG UK president, repertoire & marketing Alistair Norbury appointed Gemma Reilly and Jamie Nelson to head up the company's frontline record business.
Meanwhile, on the publishing side, despite increased competition from moneyed players such as Merck Mercuriadis’ Hipgnosis Songs Fund, the likes of Bring Me The Horizon and Lewis Capaldi added to the success of established songwriters such as Mick Jagger and Keith Richards, AC/DC and Roger Waters.
So Music Week got on the phone with BMG CEO Hartwig Masuch – sounding relaxed from his home in locked-down Berlin – to talk about the key elements of his company’s success…
How do you feel about the financial results?
“The thing that pleases us is that we’re making progress in those areas we really care about. On the catalogue of established artists, we feel very confident we’re moving in the right direction. That’s an area that is really important for us; taking the repertoire outside of the core territories and having a more consequential interaction with new markets, specifically Eastern Europe and South America. We feel absolutely good about the progress we’ve made in those areas.”
Where did the 10% increase in revenues come from?
“Mainly the recordings side. That’s our main driver right now. The segment that really contributes right now is the release of super deluxe packages. Look at Keith Richards and the other packages we did, we feel very confident that the future of physical music is not selling cheap, but delivering value – and we see a lot of room for us. That’s where our teams are focused, as well as the digital side and how we can maximise the presence of established artists in new territories where people might not have heard a lot about those artists, but definitely have an interest in them.”
What are the new global hotspots?
“South America in general is a big area of interest, it’s a very exciting territory that will explode over the next few years in [terms of] consumption. There was always massive interest in live entertainment, if you see how successful the big global acts were in South America, now there will be a massive catch-up in recorded music and in publishing as well. For too long, [the music industry] would take what we got there, instead of applying the same attention and scope as in other regions. It’s a fascinating dynamic in South America. They have a very affluent middle class and they’re willing to pay for [music], in streaming subscriptions and beyond. It’s a big interest for us moving forward.”
There could be a big change on the way for the whole structure of the music industry
On the publishing side, you were very quiet in terms of acquisitions. Is your approach now completely different?
“It really requires a change in focus. We focus more on those artists or catalogue owners who need a good service. We know we will not be able to compete with certain vehicles who are buying music assets, so we look at being the best executor in delivering the services that those people need to monetise their repertoire. It worked really well, and with Lewis Capaldi and a couple of other big successes, we also did well with new repertoire in publishing, so it’s all good.”
Has the whole atmosphere around publishing acquisitions changed?
“There could be a big change on the way for the whole structure of the music industry. When we relaunched BMG, we benefitted from the collapse of investment vehicles that were basically set up to buy assets and sell them at a more expensive price later. Now, if people look at investments, not from the perspective of flipping them, but because we know it’s a very long-term, proven source of income and can create a return of 3-5% on a very safe asset, that’s a very different game. Our industry could be up for a big, big change, where the ownership of assets is totally separated from the management of assets.”