10 Takeaways From Sony Music Group’s 2020 Review and Future Forecast

Rob Stringer
Josh Cheuse/Sony Music Group

While the pandemic sidelined untold numbers of physical businesses, Sony Music Group saw significant gains to its bottom line in 2020. That was the upshot of the company’s 2021 presentation to investors, held on May 27. The New York-based division of Tokyo’s electronics giant, led by chairman Rob Stringer (pictured), covers music in all territories except Japan, and it’s been thriving, albeit ever-so-slightly under the radar.

If anything, SMG has spent the last three years under Stringer growing its M&A and fortifying existing alliances, like that of The Orchard, which Sony acquired fully in March 2015 — in retrospect, for a song. More recent acquisitions include AWAL, which offers artist services to independent musicians; Beatstars, a marketplace for cleared-for-use beats and sounds; and Kobalt’s neighboring rights arm. In total, Sony spent $1.4 billion in M&A in 2020.

As Stringer noted in his video, SMG hit an all-time high in revenue and a fourth consecutive year of record profit and margin, with revenues increasing by nearly $2 billion since 2016, outpacing the overall industry at a compound annual growth rate of 12% (8% adjusted for the impact of the consolidation of EMI’s Music Publishing, of which Sony acquisition was completed in 2018).

Artists who received presentation shout-outs by name included Travis Scott, Future and Giveon, signed to Epic; Harry Styles, Lil Nas X, The Kid Laroi and Powfu, signed to Columbia; and Doja Cat and Tate McRae, signed to RCA. They are but a few of the acts contributing to Sony’s Music 36% share of Spotify’s weekly worldwide chart (up from 28% from 2019).

Stringer has been with the company for 35 years and credits the “positive global brand that is Sony” for its long run as an entertainment powerhouse. “There’s not an artist in our system that doesn’t like Sony,” he told analysts.

Read on for 10 takeaways from Stringer’s presentation and post-video Q&A (listen to the full program on the Sony Corp. site).

A billion-plus to invest 

Sony has gone on a bit of a shopping spree in recent years, with big-ticket items bought including AWAL, the artist and neighboring rights services company that functions as a supplement to The Orchard. In hindsight, the price tag for the Orchard, Sony’s label-services company, which itself distributes 26,000 labels, looks like a bargain as top-selling acts like BTS came in through the system. The growing DIY market also boosts Sony’s bottom line, as the company’s roster has expanded by 40% over the past three years, strengthened by the AWAL acquisition.

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Streaming revenues inching towards 75%

As streaming revenue continues to drive the industry’s growth, accounting for 83% of recorded music revenue in 2020, according to the RIAA. At Sony, it’s hit 68% of total revenue and is likely to reach the 75% mark in the coming quarters.

Artist signings remain competitive — and expensive 

Stringer noted that Sony is “aggressively investing in new talent,” along with M&A. Multi-million-dollar deals for new artists, along with shared master rights, are increasingly the norm, putting pressure on labels to deliver hit songs. To that end, SMG has been competitive in launching the likes of The Kid Laroi and Lil Nas X and in delivering two massive radio smashes in Harry Styles’ “Adore You” and “Watermelon Sugar.”

Spotify surge 

As mentioned above, Sony’s average weekly share of Spotify’s worldwide top 100 tracks grew to 36%, over the fiscal year, up from 28% in FY 2019. Top Sony streamers on the platform included Harry Styles, Bad Bunny and Future. Sony also claims the highest share of new recorded music artists entering the U.S. streaming chart for the first time at nearly 30%. Those include the likes of Powfu, Giveon and Tate McRae. Sony anticipates 1 billion paid subscriptions by 2030.

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Publishing power 

According to SMG data, the former Sony/ATV Music Publishing, now Sony Music Publishing, had a 27% average weekly share of Spotify’s worldwide top 100 during FY 2020, up from 24% the year before. That had meant participation in the publishing of some 58 of those songs. SMP chairman Jon Platt appeared in the presentation as well; his team is responsible for an uptick in publishing growth to the tune of +5.2% overall and +35.5% digital. Sony has been the top publisher, according to revenue, since 2012.

Catalogs still bubbling

Noting that $7 billion was spent on catalog acquisition just in the first four months in 2021, and with valuations for hit songs currently at multiples of 20x – 35x, the sector remains among the more robust of entertainment assets currently making their way through the SPAC and private equity worlds. Sony has put itself in the ring, announcing a handful of recorded-music and publishing catalog acquisitions, including Paul Simon and John Mellencamp.

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China and India lead emerging markets; Latin explodes 

Sony is already a market leader in Latin America, with a 35% share of recorded music market and demonstrating 15% growth year over year. Brazil happens to be the biggest and most explosive markets in the world currently, making Sony’s recent investment in Som livre, the leading independent music label in the country, particularly prescient. Elsewhere around the globe, SMG boasts 34% growth in China, is a leader among the majors in India and has seen significant penetration of markets in Russia, Nigeria, Philippines and Israel.

Podcast subs are coming

Sony anticipates a subscription model for podcasts and has already invested heavily in the growing audio sector, which is expected to register $1.6 billion in advertising worldwide in the coming year, via joint ventures and an in-house podcast division.

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When the competition goes public…

Ever the statesman, Stringer was asked about competitors Warner Music Group (WMG) and Universal Music Group (UMG) each heading towards IPOs. To that, the Sony chief pointed to outpacing the industry overall in recent years. “Our metrics are more positive than our competitors,” Stringer said, noting that there is an understanding and respect among the majors. “It’s been three big companies for a long time,” he remarked. “Obviously there are nuances, [but] we have caught up quickly in challenges we may have faced just two years ago.” Ultimately, Stringer offered, “We’ll learn from their IPOs.”

“Content shapes culture”

Between video games, films, social and digital media, the greater Sony family can tap into a multitude of synergistic opportunities, as it has with Travis Scott serving as brand ambassador for the PlayStation 5 console (the campaign generated over 1 billion impressions) as well as a performer within the Fortnite universe. Sony also takes seriously its place as an influencer of culture. Said Stringer: “Content shapes culture. … Every idea has to be different. We want to be innovative. We have to be ahead of the game.”

Slides courtesy of Sony Group Corporation