Universal Music Group Had Revenue of $3.2 Billion in Q3, a Gain of 4.3% Year-Over-Year
Written by djfrosty on October 31, 2024
Strong subscription revenue, improved margins and successful new releases by Sabrina Carpenter, Chappell Roan and Post Malone helped Universal Music Group (UMG) post revenue of 2.87 billion euros ($3.16 billion) in the third quarter, up 4.3% year-over-year (4.9% at constant currency).
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) reached 621 million euros ($683 million), up 8.2% from the prior-year period. The Amsterdam-based company’s adjusted EBITDA margin improved to 21.6% from 21.1% in the prior-year quarter and was helped by cost savings from the organizational redesign announced in February and lower A&R and marketing costs, CFO Boyd Muir said during Thursday’s (Oct. 31) earnings call.
If not for a one-time gain in the prior-year quarter, the revenue growth rate would have been 7.6% and adjusted EBITDA growth would have improved to 10.8%. Last year, Universal Music Publishing Grou (UMPG) recognized the accrual of a catch-up payment from the Copyright Royalty Board (CRB) Phonorecords III ruling. That resulted in revenue of 53 million euros ($58 million) and added 11 million euros ($12 million) to UMPG’s adjusted EBITDA.
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UMG had a typically strong quarter of chart-topping new releases. CEO Lucian Grainge noted during the call that Carpenter’s album Short n’ Sweet, released on Aug. 23, went to No. 1 in 15 countries and topped the Billboard 200 albums chart in the U.S. for four non-consecutive weeks. Elsewhere, Roan’s The Rise and Fall of a Midwest Princess topped Billboard’s Album Sales Chart in September, while Malone’s latest album, F-1 Trillion, debuted at No. 1 on the Billboard 200 and also summited the Top Country Albums chart. Island also has a top 10 hit song in the U.K. with Gigi Perez’s “Sailor Song,” which peaked at No. 28 in the U.S.
The recorded music division improved 5.4% to 2.15 billion euros ($2.36 billion) on the strength of a 7.6% improvement in subscription revenue. Other streaming revenue, however, dropped 0.8% (up 0.3% at constant currency) to 354 million euros ($389 million). Physical sales dropped 2% to 288 million euros ($317 million) while licensing revenue jumped 20.4% to 325 million euros ($357 million). Subscription growth was negatively affected by “just over a percentage point” from “ongoing challenges” in the home fitness subscription market and the departure of the record label 10K Projects to Warner Music Group, said Muir. Lower CD sales in Japan were partially offset by strong vinyl sales, he added, especially in the U.S.
Muir affirmed UMG’s previously announced guidance of an 8% to 10% compound annual growth rate for recorded music subscription revenue through 2028. UMG may not always hit that target range in any given quarter, however, and Muir reminded listeners that the fourth quarter marks one year since a Spotify price increase that has helped UMG — and other record labels — experience a surge in year-over-year subscription growth.
UMPG improved 1.8% (2.2.% at constant currency) to 500 million euros ($550 million). Excluding the CRB accrual, publishing revenue was up 22.4% (22.9% at constant currency). Digital revenue grew 0.3% to 295 million euros ($324 million), synchronization royalties jumped 18.5% to 64 million euros ($70 million) and mechanical revenue climbed 12% to 28 million euros ($31 million). Performance royalties fell 4.7% to 101 million euros ($111 million).
UMG’s Bravado merchandise division had revenue of 237 million euros ($261 million), up 4.4% from the prior-year period. The company attributed the growth to stronger direct-to-consumer sales and higher touring merchandise sales. In the U.S., Bravado benefitted from the touring activity of such artists as Slipknot, Imagine Dragons, Nicki Minaj, blink-182 and Malone, according to Muir.