Warner Music Plans 10% Staff Reduction To Strengthen Core Business

Continuing the challenging trend in the music industry, Warner Music has announced plans to reduce its workforce by 10%, equating to approximately 600 employees, in the forthcoming weeks. This decision precedes the company's earnings report scheduled for tomorrow, with management asserting that the action stems from a position of strength and aims to reinvest the resulting savings into the company, aligning with CEO Robert Kyncl's strategic vision for the next decade.

Primarily impacting the company's owned and operated media properties, such as Uproxx, HipHopDX, IMGN, and Interval Presents, this workforce reduction is being positioned amidst Warner Music's early release of its earnings report. Notably, the report highlights a record 11% revenue growth for the quarter ended December 31, 2023, indicating a 17% increase in total revenue (or 16% in constant currency) and a net income of $193 million compared to $124 million in the preceding year's quarter. Bolstering this, Warner Music currently boasts 5 out of the top 10 songs on the Billboard Hot 100 this week, signaling its recent market strength.

However, this strategic move occurs against the backdrop of a challenging period for the music industry and the broader entertainment sector. Recent months have witnessed significant layoffs in tech companies, widespread job cuts in the media industry, including notable publications like Pitchfork and Sports Illustrated, and impending layoffs at Universal Music Group as part of a larger restructuring initiative, mirroring Warner's announcement.

Last spring, Warner Music had already laid off 270 employees, citing similar rationale for ensuring survival. Since his arrival from YouTube in January of the preceding year, CEO Robert Kyncl, with a background in technology rather than music, has spearheaded substantial cultural and structural changes within the company, with more anticipated in the future.

This downsizing trend at Warner Music and Universal Music Group unfolds as the streaming boom begins to stabilize. After enduring challenging years from approximately 2000 to 2015, marked by declining CD sales due to piracy, the music industry experienced a resurgence with the advent of Spotify in the U.S. in 2011 and the subsequent widespread adoption of streaming, leading to years of double-digit revenue growth.

While the pandemic provided an unforeseen boost to streaming consumption during lockdowns, resulting in renewed growth, this momentum has waned post-pandemic. Consequently, akin to the tech sector, music companies that expanded their workforce during the pandemic are now streamlining operations in response to shifting market dynamics.