What’s Rob Stringer’s biggest challenge as leader of Sony Music Group(and Sony Music Entertainment)? Well, it ain’t profit margin.
He made that abundantly clear at Goldman Sachs’ Communacopia conference in New York last Thursday (September 19), where he said: “At Sony, margin is really important and our margin [at Sony Music] is excellent. Are we perfect? Of course not, we have other areas to improve — but the margin is not an issue.”
(MBW analysis suggests that Sony Corp’s Music operation – encompassing records, publishing and ‘Visual Media & Platform’ – posted a $1,28bn , which only included a few months of ownership of EMI Music Publishing.)
So, if it’s not profit margin, what does Stringer see as the biggest test of Sony’s mettle in the years ahead? Speaking with Goldman analyst Lisa Yang, he indicated that, actually, it might be artists – as in, signing enough of them, while ensuring the quality of their output remains high across the board.
“The sheer volume of music that comes through the distribution platforms has increased greatly – there are 40,000 tracks added every single day,” said Stringer, referring to the oodles of recordings which are uploaded to Spotify every 24 hours.
“It would be obvious to anybody with common sense that we would need to up the number of tracks we potentially have ownership [on] or a partnership [with].”
“The [three major music] companies are not the same: yes, we all work in music, we all put out frontline repertoire, we’re all looking for hits… but we’re not the same in terms of structure and size. Our parent companies are very different.
“MARKET SHARE CAN BE BOUGHT FOR A CERTAIN PRICE.”
“[We have] different overhead structures, numbers of people [employed], different reasons for [prioritising either market share, profit or revenues]… Market share can be bought for a certain price.”
“Parent companies differ in their philosophies and strategies. We just bought EMI Music Publishing for over $4bn so that shows you Sony [Corp’s] commitment to the music market – I don’t think they would have done it otherwise.
“The value of [EMP] is [already] probably worth more [than $4bn]; people are buying [publishing] catalogs this year at multiples of 22 to 23X [EBITDA]. I think we got a pretty good deal in EMI, from the time we signed it at the turn of the decade to now.”
ON… WHY SONY PAID $200M TO BUY THE 50% IN THE ORCHARD IT DIDN’T ALREADY OWN IN 2015
“My predecessors and some of my team today bought 50% of The Orchard less than 10 years ago for $30m; we bought the second half for $200m, and it’s probably worth now – and I’ll be conservative – hundreds and hundreds of millions of dollars as a section of our business.
“That was good timing; it was a necessary shift to where, as it turns out, the streaming model has gone. We have to be an aggregator for a lot more content. And The Orchard’s at the center of our strategy… with the huge number of labels [and artists] it distributes, it partially [tackles] the 40,000 tracks a day syndrome.
“Also, there is an upstream potential [for Orchard artists] with the major label structure we have. It works across two facets.”