What do music companies in different industries with revenue ranging from $3.9 billion to $23.1 billion have in common? Their CEOs are paid comparably.
On Tuesday (Aug. 19), Billboard published a recap of the top 20 music executives’ earnings in 2024. Universal Music Group, Warner Music Group, Spotify, SiriusXM, iHeartMedia, Live Nation, MSG Entertainment and Sphere Entertainment Co. are all represented. Each company’s CEO is on the list except for Spotify’s Daniel Ek, who doesn’t earn an annual salary or bonus (he made ends meet by selling approximately $375 million in stock last year).
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In 2024, the compensation given to most music company CEOs was nearly even when taking into account the amount of their company’s earnings. As a percentage of the company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), or similar measure of profitability, most CEOs’ annual pay fit within a narrow band of 1.30% (for Warner Music Group CEO Robert Kyncl) to 1.83% (iHeartMedia CEO Bob Pittman).
Universal Music Group and Live Nation have little in common other than making money primarily from music. They are different types of companies — the former focuses on recorded music and publishing, the latter is involved mainly in live music and ticketing — with different cost structures. In 2024, Live Nation’s $23.1 billion of revenue was nearly double UMG’s $12.8 billion, and UMG’s 15% operating margin was nearly four times Live Nation’s 4%.
But UMG and Live Nation CEOs’ pay was remarkably similar relative to the companies’ earnings. In 2024, UMG had $2.88 billion of adjusted EBITDA to Live Nation’s $2.15 billion of adjusted operating income (AOI). (Live Nation prefers adjusted AOI over adjusted EBITDA — more on that later.) And as a percentage of EBITDA or AOI, UMG chairman/CEO Lucian Grainge’s and Live Nation president/CEO Michael Rapino’s 2024 compensation were fairly close — 1.37% for Grainge and 1.53% for Rapino.
SiriusXM CEO Jennifer Witz’s pay-to-adjusted EBITDA ratio was 1.36% after her compensation ballooned due to stock awards and options related to a new, three-year employment contract. The satellite radio broadcaster has lost subscribers and seen its revenue shrink. But what the company lacks in growth it makes up for in earnings: SiriusXM had adjusted EBITDA of $2.73 billion in 2024 — more than UMG despite having approximately two-thirds of UMG’s revenue.
Comparing executive compensation to a company’s earnings gets into some technical accounting issues. For starters, EBITDA is not the same as operating income, so comparing companies by different metrics is imperfect. What’s more, the metrics are adjusted to remove one-time items such as impairment charges and restructuring expenses following layoffs. But there are no set rules for how a company must calculate adjusted AOI, adjusted EBITDA, or WMG’s preferred metric, adjusted operating income before interest, depreciation and amortization (OIBDA), because they are not defined by Generally Accepted Accounting Principles.
Whether a CEO’s pay is partially based on adjusted EBITDA, adjusted OIBDA or adjusted AOI, the executives ended up getting paid a comparable percentage of the company’s preferred profitability metric — except for James Dolan, CEO of MSG Entertainment and Sphere Entertainment Co. Dolan’s pay-to-adjusted AOI ratio was 12% — about seven to eight times higher than his peers on Billboard’s list. Sphere Entertainment, which had AOI of just $22.7 million in the company’s transitional six-month period (shortened because it changed its fiscal year to the calendar year), skews the number. The Sphere venue is young and unique, and the company’s compensation committee pays executives with growth, not profit, in mind. Focusing only on the more mature MSG Entertainment, Dolan’s pay-to-AOI ratio was a still-high 4.8%.
In absolute dollars, though, music executives lagged well behind many Hollywood CEOs. Last year, then-Paramount CEO Bob Bakish grossed $87 million (including a $69 million severance package) while Netflix co-CEOs Ted Sarandos and Greg Peters earned $61.9 million and $60.3 million, respectively. David Zaslav, Warner Bros. Discovery’s president and CEO, took home $51.9 million.
But music CEOs’ pay was still comparable to some of their Hollywood peers. Netflix had EBITDA of $26.3 billion in 2024, giving Sarandos and Peters pay-to-EBITDA ratios of 0.24% and 0.23%, respectively — not much higher than most music CEOs. Warner Bros. Discovery’s Zaslav fared better, though. With adjusted EBITDA of $9 billion, Zaslav’s pay-to-adjusted EBITDA ratio was 0.58%.
It makes sense that music CEOs’ pay is comparable. Companies’ compensation committees, which set the terms by which named executive officers are paid, use peer groups to help determine that their executives’ pay is in line with the top management at similar companies. Included in iHeartMedia’s peer group were Warner Music Group, SiriusXM, Live Nation and MSG Entertainment. Warner Music Group’s peer group included Live Nation, Universal Music Group and Spotify. SiriusXM, Spotify, Universal Music Group and Warner Music Group were in Live Nation’s peer group.
Companies end up paying similarly — and handsomely — because compensation committees don’t want to underpay a CEO. As Spotify’s annual report put it, executive compensation must be adequate to “attract, engage, and retain the best executives to work for us.” Effectively, whatever eBay and Electronic Arts — both are in Spotify’s peer group — are paying its executives, Spotify will pay comparably. And what Spotify pays will influence what Warner Music Group pays. And what Warner Music Group pays will influence what Live Nation pays. And so on and so on.
