Annual report 2014

Group Profile |

Businesses

| Litigation | Risk Factors

Universal Music Group

UMG’s recorded music business primarily consists of the discovery and

development of artists and the associated marketing, distribution, sales

and licensing of the content created by these artists. With a diverse

range of labels in the major music markets and direct representation in

approximately 60 countries across the globe, UMG has a global market

share of more than 30% and holds market-leading positions in most of

the world’s major music markets, including the United States, the United

Kingdom, France and Germany.

For those countries that have not traditionally been major markets for

recorded music, such as the BRIC countries (Brazil, Russia, India and

China), Latin America, Africa, the Middle East and Eastern Europe, UMG

is partnering with innovative new companies to increase fans’ access

to music. By utilizing these partnerships, UMG makes its content legally

available in countries where historically music availability is very limited

or non-existent.

UMG’s diverse range of labels helps the business consistently cater

to evolving consumer tastes. UMG’s major recording labels include

everything from popular music labels (such as Capitol Music Group,

Interscope Geffen A&M, Republic Records, Island Records, Def Jam

Recordings, Universal Music Group Nashville and Polydor) to classical and

jazz labels (such as Blue Note Records, Decca, Deutsche Grammophon

and Verve).

In 2014, UMG’s best-selling artists included not only global best-selling

established acts such as Katy Perry, Maroon 5 and Taylor Swift, but also

emerging talents such as Sam Smith, Ariana Grande, Lorde, 5 Seconds

of Summer and Imagine Dragons, as well as regional bestsellers such

as Stromae, Indila and Kendji Girac in France, and Helene Fischer in

Germany. In the United States, UMG had the top three albums of the

year: Disney’s

Frozen

soundtrack, Taylor Swift’s

1989

and Sam Smith’s

In The Lonely Hour

. In the United Kingdom, UMG had eight of the top

20 tracks, led by Sam Smith’s

Stay With Me

(Sam was the only artist to

sell more than a million albums in both the United States and the United

Kingdom).

Sales from prior releases significantly augment UMG’s recorded music

revenues each year, and UMG benefits from its ownership of the most

comprehensive catalog of recorded music in the world. The catalog

includes a wide array of performers, including, among others, ABBA,

Louis Armstrong, The Beatles, The Beach Boys, Andrea Bocelli, Elton

John, Guns n’ Roses, Nirvana, The Rolling Stones, Andre Rieu, Frank

Sinatra and Amy Winehouse.

UMG markets its recordings and promotes its artists through a variety of

highly coordinated activities, including radio, television, digital channels,

social media, and live appearances.

While UMG’s products continue to be sold in physical form at

retail outlets as well as through online physical retailers, sales and

consumption continues to shift to digital formats. UMG plays a leading

role in the evolution and expansion of the digital music market and

continues to encourage and support innovation through partnerships

with the leading players in the market, including Spotify, iTunes, Deezer,

Google and Vevo.

UMG is also extremely active in developing new sources of revenue,

including through advertising and sponsorship agreements. Universal

Music & Brands is a leading music and media group, creating incremental

revenue streams for UMG across a diverse partner base, which includes

Hewlett-Packard, Turkish Airlines, and Coca-Cola. In addition, UMG

fosters the participation of artists in live and TV productions, such as

“The Voice”, which has local productions in 55 countries and is aired in

160 countries.

2.2.3.

Music Publishing

Universal Music Publishing Group (UMPG) is one of the world’s leading

music publishing companies. Music publishing involves acquiring the

rights to musical compositions (as opposed to recordings) and licensing

those compositions for use in a variety of formats.

UMPG licenses musical compositions for use in sound recordings, films,

television, advertisements, and live and other public performances, such

as broadcasting and film performances. It also licenses compositions for

use in printed sheet music and song portfolios.

Generally, UMPG licenses compositions after acquiring a direct interest

in their copyrights by entering into agreements with composers and

authors of musical compositions. The company also administers musical

compositions on behalf of other owners, which can include other music

publishers or authors who have retained or acquired such rights.

UMPG is a global leader in the “Music Production Library” business.

UMPG owns or controls a vast catalog of original music and arrangements

(through numerous libraries and niche brands) and offers this music for

use in films, television, advertising and new media industries, essentially

as an economical licensing alternative to live or popular music.

UMPG’s combined publishing catalog contains more than three million

owned and administered titles, including some of the world’s most

popular songs. Some of the major artists/songwriters whose works are

represented include Eminem, Adele, Justin Timberlake, The Beach Boys,

Justin Bieber, Billy Joel, Burt Bacharach, Irving Berlin, Mariah Carey,

Coldplay, Jon Bon Jovi, Imagine Dragons, André Rieu, Diane Warren,

Andrew Lloyd Webber, Ne-Yo and U2.

During 2014, UMPG completed a number of publishing deals, including

agreements to represent the songs of Nick Jonas, Alejandro Sanz, Neil

Diamond, Axwell & Ingrosso of Swedish House Mafia, Mark Pellizzer of

Magic!, Dreamworks Animation, Benny Blanco, Paul Simon, Florence and

the Machine, the Grateful Dead’s Ice Nine, Juan Luis Guerra, Claudia

Brandt, Jimi Hendrix Estate, Paul Weller, Steve Booker and John Mamann

among many others.

2.2.2.

Recorded Music

Annual Report 2014