How Universal and Warner have become more efficient over the past 10 years

In September, Warner Music Group revealed that its restructuring plan implemented over the past year was expected to cost $135 million in non-recurring charges in the current fiscal year that ended Sept. 30, with a target of about $200 million in forward annualized savings. As part of this restructuring, the company has continued to lay off employees, most recently cutting 150-175 jobs at Atlantic Music Group.

When all is said and done, the company's restructuring will leave its staff with 750 fewer employees. While this year's headcount has yet to be disclosed — WMG reports staffing levels in its annual 10-K filing with the SEC, and it's expected to file shortly after Nov. 20, if recent years are any guide — a look at staffing levels over the years shows that the major music label, like rival Universal Music Group, has been steadily becoming more efficient, at least since 2015.

At the end of 2023, WMG's workforce consisted of approximately 5,900 employees. With revenue totaling $6.037 billion at the end of the fiscal year on September 30, 2023, that means Warner's average revenue per employee number was $1.023 million. In other words, Warner employed 0.98 people for every $1 million in revenue the company generated.

WMG's performance in 2023 was improved from the previous year, when revenue was lower at $5.919 billion and headcount was higher at 6,200 employees. That year, the ratio was 1.05 workers per $1 million, with average income per worker at $955,000.

While the financial world looks at revenue per employee, the music industry has long informally measured productivity by the number of employees per $1 million. At the record label level, a long-standing rule of thumb has been that efficiency is defined as one employee per million dollars in revenue, although in the days when physical was the dominant format, wholesalers, not labels, generally aimed for a ratio of three employees per 1 million dollars.

Since 2015, WMG has been steadily improving efficiency — which is to be expected, because as revenue increases, so does staff, and companies generally benefit from economies of scale. At the end of the fiscal year of September 30, 2015, WMG's revenues were $2.966 billion and the staff numbered 4,211 employees, representing an average revenue per employee of $704,000 or 1.42 employees per $1 million. In each subsequent year, WMG achieved efficiencies. (See chart above.)

Meanwhile, Universal Music Group, which reports its revenue in euros, is even more efficient than Warner Music Group. In the most recent fiscal year ending December 31, 2023, UMG generated €11.108 billion while employing 10,900 people. This breaks out to an average of €1.019 million in revenue per employee, or a ratio of .093 employees per €1 million. This is lower than in 2015, when UMG had revenues of 5.267 billion euros and 7,547 employees, which, like WMG that year, yields almost one and a half employees (1.48) per million euros. Similar to Warner, Universal became more efficient as it grew larger.

To have an apples to apples comparison, Bulletin board converted UMG's euro revenue into dollars. (Depending on the year, the metric used was the average exchange rate for the two currencies as provided by the MacroTrends website or as reported by Vivendi in its annual reports or as provided by UMG.) Last year, UMG was more efficient from WMG in dollars, with annual revenue per employee at $1.173 million, or 0.85 employees per $1 million. This, too, is to be expected because UMG's revenue is twice that of WMG's, meaning it benefits even more from economies of scale.

In 2015 dollars, UMG had 1.32 employees per $1 million in revenue, with each employee generating an average of $755,000 in revenue that year. (Comparing UMG and WMG is not an exact science, since as of 2019 WMG has rounded up its employee count, while UMG's measurement is more accurate.)

In 2015, of course, the music industry was at a very different point, at the low point of a 15-year slump. U.S. revenue totaled $7.016 billion that year, according to the RIAA, of which streaming was $2.417 billion, or 34.3 percent. while downloads were $2.382 billion, or 34%; and physical was nearly $2.024 billion, or 28.8%. In other words, the big companies had to support three different formats back then, each about a third of the revenue. Today, with streaming now the dominant format — accounting for 84% of US revenue in 2023 — it plays with the efficiency of the bigs.

In any case, thanks to the combination of a growing revenue base and format consolidation, the two major companies are now much more efficient than in the past, and are still increasing productivity. WMG and UMG declined to comment for this story. Sony Corp. does not distinguish staffing levels at the corporate level, let alone at the business unit level, so Sony Music Group could not be measured.