Music record companies love being “artist-centric” — but how much do they pay out to artists?

Billionaire investor Bill Ackman’s latest big bet is a merger proposal for Universal Music Group, a deal with a $64 billion price tag.

With the offer coming at a whopping 78% premium to the group’s closing price on Monday, it’s fair to say that Ackman feels confident about the future of the music business.

According to Pershing Square, the move reflects its view that the stock has “languished” from “a combination of issues that are unrelated to the performance of its music business.” It also reflects Ackman’s long-standing belief that Universal’s ownership of music rights offers “forever” cash flows for the company that owns the rights to roughly one-third of the world’s recorded music, including The Beatles.

Indeed, even as Universal doubled down on being “artist-centric,” it continued to grow its bottom line (up 13%) at a pace faster than its artist costs (up 7%). All told, the company reported $5.8 billion in artist payments, on total revenues of $12.5 billion.

While only 47% of its revenue went to artist costs, that’s actually higher than peer Warner Music, which reported that just 35% of its revenue went explicitly towards artists in FY2025. That comparison isn’t perfectly apples to apples as the splits between publishing and recording revenue aren’t equal for each business, and the disclosure detail varies.

To grow its profits, UMG has been doubling down on direct-to-consumer channels to squeeze sales from “superfans,” noting that its D2C business — which includes sales from physical music, merchandise, and fan platforms — has been growing more than 30% a year.

Let’s get down to business

Despite predictable payments in the glamorous industry, investors have somewhat fallen out of love with record companies in the last year. Universal, for one, was down 23% year to date before Tuesday’s move, and Warner Music Group fell 15%.

On that, Dan Coatsworth, head of markets at AJ Bell, said: “On paper, you might think is a money-making machine. In reality, it’s not that simple.” In his view, cutthroat marketing competition in the business means that “Universal must constantly spend money to make money,” adding that growth in the music streaming market has also been slower than expected, which matters “because Universal relies heavily on the likes of Spotify and Apple Music for royalty payments.”

And for artists, it’s the same story: those payments are just a headline figure, and they certainly don’t directly represent the dollars in the pockets of your favorite bands or singers. Those payments have to get split with managing agencies, performing rights organizations, songwriters, and more.