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Warner Music Group acquires EMP a merchandising company for $180M

By Onkar Gupte
December 24, 2018
Warner Music Group acquires EMP a merchandising company for $180M
The business of Music Merchandise was started during the Beatles and Elvis Presley era and has been going on strong since then. In today's age selling merchandise for $45-$65 dollars with a free (sometimes non-existent) album has become a huge trend in Music Business. Many artists including new age pop-stars like Lil Pumps have started following this trend . In Lil Pump's case his mixtape "Harvered Dropout" was supposed to release in August 2018 along with his limited edition "Unhappy" line of clothing (which got sold soon after going on sale) but has been delayed ever since due to him losing his Master recording. Ahead of the release of his No.1 LP Astroworld (Cactus Jack/Epic) earlier this year, Texan rapper Travis Scott bundled his album with merch and tickets to an unannounced tour. Another recent Billboard 200 No.1 album campaign, Brockhampton’s Iridescence (RCA), also owed a lot to limited edition merch bundles, as did other recent releases from acts including Lil Wayne and Logic. WMG has taken notice of this growing trend and has decided to expand its merch capabilities. In November Warner Music Group completed a $180m deal by buying Germany-based music merch maker and e-tailer EMP Merchandising. The final price grew to $191M due to additional net debt. Speaking on the EMP acquisiton, Max Lousada, CEO of Recorded Music, WMG, said
In today’s streaming world, merchandise is still one of the best ways that fans can express their passions and personalities. It’s also a big part of how music has visible and physical impact on global culture and fashion - Max Lousada, CEO of Recorded Music, WMG
The other two majors - Universal Music Group and Sony Music Entertainment already have recognizable and visible standalone brands in merch –Universal has Bravado and Sony Music’s merchandise arm, The Thread Shop which handles everything from design, licensing, retail partnerships, tour merchandising and fulfilment, e-commerce platforms and pop up events, something that, pre-EMP, Warner was arguably lacking. The major labels’ biggest argument against this evolution has been the fact that they can offer a much broader scope of blockbuster services to artists – and, right now, Spotify doesn’t have a dedicated in-house merch company like Bravado, the Thread Shop or EMP.
When we’re involved with an artist in multiple ways – recorded music, publishing, merchandise, brand partnerships etc. – we can think longer-term about our relationship and make decisions on a holistic basis. You can take a loss in one segment and not worry about it if you know your company is going to make that revenue up elsewhere" - An insider from a major label to MBW.
Coming back to EMP, the company sells over 20,000 items via a network of websites serving 18 European countries, with a community of millions of customers and a fast-growing, Amazon Prime-esque loyalty scheme called the EMP Backstage Club. This program costs £9.95 ($13) per year, for which members get pre-sale access, free delivery, 100 days’ right of return, discounts, free gifts and even access to exclusive EMP member’s areas at European festivals. EMP’s roots are in alternative, metal and rock. Its most popular artist brands include Twenty One Pilots to Panic! At The Disco, Metallica, Motörhead, Guns n Roses, Nirvana, Pink Floyd, AC/DC, The Doors (pictured inset), and many others. Rock and metal audiences are loyal and engaged music fans who don’t mind spending money on physical products.
EMP's music-led expertise will give [Warner] great insight into what audiences love and what they want, and at the same time open up exciting new opportunities for our artists.” - Stu Bergen, Warner Music Group
EMP’s vast existing customer base of ‘superfans’ will not only improve WMG’s European merchandising capabilities, from licensing to fulfilment – it will also help the major plan release campaigns, new signings, tours, reissues and more. In 2016 WEA Corp combined of all its direct-to-fan and merchandise capabilities into one division called ‘Warner Music Artist Services’ – to handle direct-to-fan e-commerce, fan-clubs, website design, ticketing, merchandising, marketing, account management, and data research & analysis. The division is still part of WEA Corp, which today is headed up by President Tony Harlow. According to Warner, EMP will now become an additional, standalone, direct-to-fan business unit within WEA. WMG’s financial filings show that artist services and expanded-rights Recorded Music revenue – which includes revenue from expanded-rights deals as well as revenue from its artist services business – represented approximately 9% of its total revenue during the nine months ended June 30, 2018. WMG offers the disclaimer that “artist services and expanded-rights revenue will fluctuate from period to period depending upon touring schedules, among other things” – but the consistent growth over the past five years is plain to see: An annual survey published by the international Licensing Industry Merchandisers Association (LIMA) showed that the global music merchandise grew 9.4% in 2016 to $3.1 billion, compared to $2.83 billion in 2015. With its $180m EMP buyout, Warner has just placed itself in the center of the storm. - Inputs from MBW

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