Earnings Reports
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After hosting residencies by Dead & Company and Phish, Sphere Entertainment Co. closed out its fiscal year ended June 30 with revenue of $273.4 million and a net loss of $46.6 million in the fourth quarter.
For full-year revenue, the company posted a $201-million net loss on revenue of $1.03 billion. That’s nearly double the $573.8 million revenue number in the prior year, when the Sphere venue in Las Vegas had revenue of just $2.6 million after launching late in 2023.
Following the earnings release, shares of Sphere Entertainment jumped 9.3% to $44.55 on Wednesday (Aug. 14).
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The MSG Networks division had quarterly revenue of $122.2 million, down 6.2% from the prior-year period, and annual revenue of $529.7 million, a 7% decline. MSG Networks operates two TV sports networks, MSG Network and MSG Sportsnet, and the MSG+ streaming platform.
The eye-grabbing $2.3-billion Sphere venue in Las Vegas reported revenue of $151.2 million in the latest quarter. Events such as concerts and corporate events accounted for revenue of $58.4 million. The Sphere Experience, an interactive experience combined with a showing of the film Postcard from Earth, had revenue of $74.5 million from 208 performances.
Sphere generated revenue of $489.4 million in its first three full quarters of operation. Though U2 opened its 40-date run at the end of the first fiscal quarter, the bulk of the concerts occurred in the second and third quarters. Four dates by Phish in April were followed by Dead & Co.’s 30-date residency that concluded Aug. 10.
With state-of-the-art visuals and audio, as well as the capacity to host multiple types of events, Sphere “has the potential to change the entertainment landscape for artists, guests and partners,” CEO James Dolan said during Wednesday’s earnings call. “Fully realizing that vision will take time, but we are learning every day how to optimize Sphere’s operating model.”
While its concerts have generated worldwide media attention and exposure on social media, Sphere’s financial potential depends on maximizing its utilization beyond that of a traditional venue. To that end, Dolan said the company is “making progress” toward its goal of hosting multiple events in a single day. The Sphere Experience, which includes the 50-minute film Postcard from Earth, ran on the same days as Dead & Company’s shows in July and August.
Sphere is also branching out into different types of events that take advantage of its Las Vegas location and an ability to offer dazzling visual displays on its 160,000-square-foot video screen. In June, the venue hosted its first corporate keynote event with Hewlett Packard Enterprise as well as the NHL Draft.
The content category, which includes Postcard from Earth, is another aspect of maximizing Sphere’s usage. Content generated more than $1 million in average daily ticket sales in the latest quarter, according to Dolan, and has earned more than $300 million in “high margin” revenue since debuting in October 2023.
“We are actively developing new cinematic experiences and expect to launch our next attraction in the coming weeks,” said Dolan. “We believe this expanding content library will benefit our Las Vegas business and strengthen our value proposition to new markets.”
The Eagles begin a 20-date residency at Sphere in September while Anyma will give the venue its first EDM shows in late December. Also in September, Sphere will host its first live sports event, UFC 306.
An absence of major artist activities caused revenue at K-pop company JYP Entertainment to fall 36.9% to 95.7 billion won ($69.8 million) from the same period a year ago, the company announced Tuesday (Aug. 13). Although JYP saw gains from global streaming, album sales declined 82% to 13.6 billion won ($9.9 million), and albums’ share […]
iHeartMedia’s business has been in steady decline since the beginning of 2023 but showed signs of improvement in the second quarter.
Total revenue rose 1% to $929 million, slightly above the company’s guidance, but was up just 0.1% excluding the impact of political advertising. A spike in expenses — namely operating and selling, general and administrative — contributed to a 21% decline in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
“We’re seeing sequential improvement in our revenue growth,” CEO Bob Pittman said during the earnings call on Thursday (Aug. 8). “While the marketplace continues to be dynamic — with a changing outlook on interest rates, inflation trends, global uncertainty and rapidly evolving domestic political landscape — we continue to see strong momentum in our podcast business, our digital ex-podcast business and the sequential improvement of our multi-platform groups’ year over year revenue performance.”
iHeartMedia’s digital audio segment contributed to the company’s revenue uptick. Podcast revenue improved 8.1% to $104.5 million, well below the previous quarter’s growth rates, while digital revenue excluding podcasts rose 10.3% to $181 million. Overall, digital audio revenue climbed 9.5% to $285.6 million.
The multi-platform segment fell 3.4% to $575.9 million. Broadcast radio, the company’s largest single source of revenue, declined 0.9% to $425.5 million. Networks fell 12.8% to $106.6 million. Sponsorship and events improved 2.4% to $39.1 million.
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Looking ahead, iHeartMedia expects third-quarter revenue to increase in the mid-single digits, which would be $991 million to $1.01 billion, and adjusted EBITDA to land between $200 million and $220 million, compared to $204 million in the prior-year period. For the full year, revenue is expected to increase in the mid-single digits, which equates to roughly $3.9 billion to $3.98 billion, and adjusted EBITDA will be between $760 million to $800 million, up 9% to 15% from 2023.
“As we look at the back half of the year, our results will reflect the continuing positive impact on an ad market recovery year material upside from political advertising, as well as the benefit of our ongoing focus on cost efficiencies,” said Pittman.
While iHeartMedia eked out a small improvement in the second quarter, two other radio companies that reported earnings in the last week continued their slides. Cumulus Media revenue fell 2.5% to $205 million as its net loss grew to $27.7 million from $1.1 million in the prior-year quarter. Townsquare Media revenue fell 2.5% and adjusted EBTDA dropped 8.3%.
Warner Music Group (WMG) reported strong quarterly profit growth on Wednesday (Aug. 7) thanks to lower costs and solid revenue gains from streaming subscriptions and digital — which helped offset a drop in physical revenue due to release timing and a difficult year-ago comparison, according to the company. All of that led to a boost in the company’s stock, which had risen nearly 2% by the end of trading on Wednesday (though some of those gains were shaved on Thursday).
“Our strong subscription streaming growth in [the third quarter] was driven by the performance of our music and healthy industry trends,” Warner Music Group chief executive Robert Kyncl said in a statement. He added, “Our commitment to long-term artist development, combined with a flatter structure in recorded music, will enable us to super-serve talent and set WMG up for sustained future growth.”
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Here’s what else you should know about the third-largest music company’s latest quarterly earnings call.
A positive note on the company’s strategic reorganization
Kyncl kicked off the call by thanking outgoing leaders Max Lousada and Julie Greenwald and welcoming incoming Atlantic Music Group CEO Elliot Grainge while providing more detail on how WMG’s recently announced global structure will work.
“We’re making changes from a position of strength, and I’m happy to say that we’re firing on all cylinders across new releases, catalog, distribution and publishing,” Kyncl said. Read more about his comments here.
Strong subscription growth across streamers
Overall streaming revenue was up 5% for WMG this quarter, with recorded music streaming revenue up 8.7% — reflecting growth in subscription revenue of 7%. That was welcome news to investors: Warner’s stock spiked around 6% earlier in the trading session on Wednesday before settling at a gain of nearly 2%.
On the call, Kyncl was asked about the sources of WMG’s subscription streaming revenue after other music companies reported less stellar growth on that metric this quarter. That included Universal Music Group (UMG), which saw a 24% drop in its share price after reporting that overall streaming revenue fell 4.2%, leading UMG executive vp of digital strategy Boyd Muir to suggest that streamers like Apple Music and Amazon Music are struggling to add new subscribers.
Kyncl said WMG’s revenue mix has remained largely the same and cautioned the financial community to resist viewing Spotify as a proxy for the music industry. “It’s much more diversified [than Spotify],” Kyncl said.
WMG’s subscription streaming revenue is projected to grow in the fourth quarter, with that growth remaining “consistent across our handful of top DSPs, certainly led by subscriber growth and … price,” said CFO Bryan Castellani.
In a nod to the music industry’s handwringing over Spotify’s bundling practice, Kyncl said in opening remarks that the labels and DSPs are not “adversaries playing a zero-sum game.”
“That’s simply not the case,” Kyncl said. “We’re actively engaged with our partners around ways to drive growth for all of us. Streaming dynamics remain healthy, with plenty of headroom for subscriber growth in both established and emerging markets across multiple partners. Also, price optimization and improvements in the royalty models will provide ongoing opportunities for additional growth.”
Celebrating Brat summer and the Benson boon
From the “pop sensation of the summer” — Kyncl’s description of Charli XCX’s album Brat — to Benson Boone, whom Kyncl called the “breakout star of the year,” the former YouTube exec appeared pleased with Warner’s recent and upcoming slate of music releases.
“So far in 2024, WMG has more new artists debuting on the Spotify Global Top 10 than any other music company,” Kyncl said, highlighting “homegrown successes” like Benson Boone, Teddy Swims and Artemas, the English-Cypriot singer-songwriter signed to 10K Projects.
Streaming’s catalog “halo effect“
When Twenty One Pilots released their latest album, Clancy, the band’s entire body of work benefitted, with streams more than doubling during the first week after the album’s release. That’s “the beauty of streaming,” Kyncl said on the call. “Newly released hits have a halo effect on the rest of an artists’ catalog.”
While loyal fan bases can drive an uptick in an artist’s catalog streams after a new hit’s release, Kyncl added that WMG can amplify and extend that halo effect, transforming hits into “evergreen, deep catalog.”
Warner Music Group’s stock was up around 3% Wednesday (Aug. 7) as investors optimistically received its fiscal third-quarter earnings report, which showed that streaming revenue continues to grow for the third-largest major music company.
On a call discussing the company’s earnings, Warner Music Group (WMG) CEO Robert Kyncl answered questions and shared his perspective on Spotify’s bundling controversy; discussed what WMG is doing to get more mileage out of its catalog; and shared a broad update on the company’s previously-announced $200 million cost savings/reinvestment plan — while remaining mum on the more recent executive restructure that’s been reverberating through the music industry since last week.
See below for three major takeaways from the call.
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Bundling is not inherently bad
Overall streaming revenue was up 5% for Warner this quarter, with recorded music streaming revenue up 8.7% — reflecting growth in subscription revenue of 7%. While that was welcome news to investors, the subject of Spotify’s contentious decision to bundle music and audiobooks — allowing them to qualify for the lower mechanical royalty rate reserved for bundles under the Copyright Royalty Board’s (CRB) Phonorecords IV agreement — did not go unmentioned. But in his opening remarks and later, during a Q&A period with analysts, Kyncl said the company derives its streaming earnings from a diversity of partners and appeared to tamp down talk of the controversy that erupted over the bundling policy.
“I know that investor attention has recently been focused on the dynamics between labels and DSPs, with some speculating that we’re adversaries playing a zero-sum game. That’s simply not the case,” Kyncl said. “We’re actively engaged with our partners around ways to drive growth for all of us. Streaming dynamics remain healthy … with plenty of headroom for subscriber growth in both established and emerging markets … across multiple partners. Also, price optimization and improvements in the royalty models will provide ongoing opportunities for additional growth.”
Kyncl went on to note that bundling, which could result in lower payments to songwriters, has been used in other industries, like TV, for the purpose of market expansion. “The job of wholesalers like the music companies is to ensure that the sanctity of our pricing are in line with each other. You can expect us to pursue that strategy,” Kyncl said. “As it relates to CRB, I don’t see it as something that will persist in the long term.”
Radio silence on executive restructuring
WMG executives did not directly discuss the internal restructuring plans made public last week, which led longtime co-leader of Atlantic Records and Atlantic Music Group chairman/CEO Julie Greenwald to announce she was stepping down on Tuesday (Aug. 6). During his opening remarks, Kyncl did highlight the “commercially and creatively … successful” partnership between WMG and 10K Projects — whose CEO/founder Elliot Grainge has been picked to succeed Greenwald — by noting English-Cypriot singer-songwriter Artemas’ single “I Like The Way You Kiss Me,” which reached No. 1 on Billboard‘s Global Excl. U.S. chart in April.
However, Kyncl did share details about a restructuring plan he mentioned on WMG’s last earnings call, which included selling the entertainment websites Uproxx and HipHopDX — with the overall goal to increase investment in music, technology and new skill sets and deliver $200 million in savings by the end of fiscal 2025.
“The majority of changes have already been implemented,” Kyncl said. “We are laying a strong foundation to accelerate our progress and yield greater value over time. We made improvements to our royalty systems and the tools used to identify unclaimed revenue, we overhauled our global supply chain, unlocking our ability to scale our third-party distribution business, and we’ve transformed our proprietary tools that identify fan trends while building new ways to engage with super fans.”
Catalog optimization is a major priority
One area where Kyncl is investing in technology is through a project he says is aimed at increasing the “performance of catalog…across all of our DSPs.”
Speaking of recent spikes in streaming for artists in Warner’s “deep” catalog — like Joni Mitchell and Tracy Chapman — as well as “shallow” catalog like Ed Sheeran, Kyncl said generating continued digital success stories for those acts is a top priority.
“We have a project on this across our technology and business teams to move down the entire catalog and make sure it’s properly optimized for streaming and on every large DSP,” he said on the call. “All of this augments our marketing campaigns against catalog which we have done in the past and continue to do and we’re applying more and more frontline focus on catalog.”
The music business is seeing the results of doing more with less.
The slew of earnings reports over the past two weeks have revealed that companies achieved better margins and greater profitability — even in cases with lower revenue or disappointing growth in some areas. And nearly all these companies share one important thing in common that boosted their latest earnings results: layoffs.
Universal Music Group’s share price fell 24% the day after its second-quarter earnings showed recorded music subscription growth had slowed to 6.9%, down from 12.5% in the prior-year period. Investors are interested in music companies because streaming has transformed the industry, bringing growth in the wake of falling CD and download sales and opening new markets around the world. So, when the industry’s most attractive revenue stream stumbles, investors are going to take notice.
But despite the hiccup that wreaked havoc on its share price, many of UMG’s financial metrics showed the company is headed in the right direction. Revenue grew a hearty 9.6%; adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 11.3%; and adjusted earnings per share rose to 0.44 euros ($0.47), up from 0.42 euros ($0.45) a year earlier. Setting aside the main reason investors want to own UMG shares — the global music subscription business — UMG’s earnings had a lot of positives, some of which undoubtedly had to do with the layoffs that occurred in February. According to the company’s 2023 investor presentation, that round of job cuts is expected to save 75 million euros ($81 million) in 2024 alone.
In other earnings news, Spotify — which cut roughly a quarter of its global workforce in three rounds of layoffs in 2023 — had an incredible turnaround in the second quarter, posting an operating income of 266 million euros ($286 million) — a 513 million-euro ($552 million) improvement from the second quarter of 2023. Despite the much smaller staff, the streaming giant’s revenue grew 19.8% to 3.81 billion euros ($4.1 billion) while its gross margin rose to 29.2% from 24.1%. Spotify’s share price jumped 12% after the release and had almost increased another 2% through Thursday (Aug. 1).
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Spotify’s latest layoffs in December, which affected 17% of its staff, attracted criticism —“Spotify is screwed,” Wired proclaimed — but they made a large and immediate impact. In the second quarter, total operating expenses dropped 16.5% as every component had a double-digit decline (general and administrative expenses were down 23%, sales and marketing fell 16.3%, and research and development expenses dropped 16.5%). When Spotify announced the staff cuts, CEO Daniel Ek admitted the scope of the layoffs would feel “surprisingly large” but was steadfast in the need to become “relentlessly resourceful.” At the time, he said, “We still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact.”
Recent staff cuts also appear to have benefitted SiriusXM, which laid off 8% of its workforce in 2023 and another 3% of its headcount in February. Though the satellite radio giant’s share price fell 6.4% on Thursday after the company announced it lost 173,000 satellite radio subscribers and 41,000 Pandora subscribers in the second quarter, net profit grew 1.9% to $316 million even as revenue fell 3% to $2.18 billion. Thanks to its cost-cutting efforts, general and administrative expenses dropped 31% and engineering, design and development costs fell 14.5%.
Not all companies reporting earnings over the last two weeks had to lay off workers to improve their margins. French music streamer Deezer, citing improved cost control and margin improvement through more favorable terms with record labels, improved its first-half adjusted EBITDA by 8 million euros ($8.7 million). The company also raised its target for full-year adjusted EBITDA by 5 million euros ($5.4 million).
Reservoir Media, which reported earnings on Wednesday (July 31), similarly improved operational efficiency without layoffs. The company’s share price fell by 8.8% in the two days after it announced quarterly recorded music revenue had dropped 7%, but the company’s publishing revenue improved 15% overall revenue grew 8% and adjusted EBITDA soared 25%. While investors found reason for concern, CEO Golnar Khosrowshahi struck an optimistic note on Wednesday’s earnings call. “We’re off to a good start in fiscal 2025 and remain on track to again hit our annual targets,” she said.
In addition to cost-cutting, streaming companies are also enjoying the benefits of price increases. Not only did Spotify raise its subscriber count by 26 million in the previous 12 months, but price increases pushed average revenue per user (ARPU) up 8.2%, or 0.35 euros ($0.38), per month. Even though Deezer didn’t gain subscribers over the previous year, its ARPU rose 6% for direct subscribers and 3.5% for subscribers gained through partnerships due to price increases it instituted last year.
Of course, music companies have their share of challenges that cost-cutting can’t solve. Streamers can’t raise prices too frequently and are dealing with ongoing sluggishness in ad-supported streaming. Record labels need to re-set expectations for their subscription businesses and continue to see sluggish ad-supported streaming revenue. And music publishers are getting a pay cut from Spotify’s decision to treat its premium service like a bundle in the U.S. Considering all this, their decisions to cut costs and focus on operational efficiency couldn’t have come at a better time.
Believe turned in strong double-digit revenue growth in the first half of 2024, helped by its 2023 acquisition of Sentric Music Group but hobbled slightly by weak ad-supported streaming revenues. Revenue grew 14.1% to 474.1 million euros ($512.7) and adjusted earnings before interest, taxes, deprecation and amortization (EBITDA) improved 29.3% to 31.3 million euros ($33.8 million), the company announced Thursday (Aug. 1).
“Despite persistent market headwinds in some of our key territories, Believe continued to generate solid profitable growth during the semester,” CEO Denis Ladegaillerie said in a statement. “We pursued our strategic roadmap to build the best artist development company in the music industry, while finalizing the restructuring of our capital structure providing us with greater financial flexibility and partners who can accelerate our profitable growth story.”
The Paris-based company lowered its expectations for full-year revenue, however. Because Believe will lose the year-over-year growth benefits of streaming price increases and is “cautious” about ad-supported streaming, the company lowered its guidance for organic revenue growth to 12% from 18%. That said, it increased its guidance for full-year adjusted EBITDA margin to greater than 6.5% from the previous 6.5% figure.
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Thursday’s earnings release was Believe’s first since a consortium including Ladegaillerie acquired nearly all of the company’s shares through a tender offer that ended June 21. The consortium, which includes funds managed by TCV and EQT X, now owns 96.02% of share capital and 94.87% of voting rights. Believe continues to have a small number of minority shareholders and its stock still trades on the Euronext Paris exchange, but due to the small float, the company will release only mid-year and full-year earnings results and no longer release quarterly results.
First-half revenue grew 17.9% to 78.4 million euros ($84.8 million) in France, Believe’s home and largest market, where it claimed to have 40% of the top local singles and 30% of the top local albums during the period. Revenue dropped 1.2% to 53.5 million euros ($57.9 million) in Germany, its second-largest market. In Europe excluding France and Germany, revenue jumped 24.7% to 121.9 million euros ($131.8 million).
The Americas grew 21.8% to 73.9 million euros ($79.9 million), helped in the second quarter by the reallocation of most of Sentric Music Group’s revenues to the U.S. Believe acquired Sentric, a Liverpool-based music publishing company, in 2023 from Utopia Music. Asia/Oceana/Africa grew just 3.7% to 116.3 million euros ($125.8 million); while revenue was “slightly up” in India, it fell in some Southeast Asian markets that are heavily based on ad-supported streaming.
Believe’s Premium Solutions division, which includes its publishing, label and artist services businesses, grew revenue 13.5% to 440.9 million euros ($476.8 million) in the first half of the year. Most of that improvement came from organic growth, while Sentric accounted for 2.3 percentage points of growth. Revenue at the Automated Solutions segment, which includes digital distributor TuneCore, increased 23.4% to 33.2 million euros ($35.9 million).
Live Nation continued on its post-pandemic growth trajectory with another record-setting second quarter. Revenue grew 7% to a record $6.02 billion, and adjusted operating income (AOI) improved 21% to $716 million due to a 61% gain in the concerts segment’s AOI, the company announced Tuesday (July 30).
Despite occasional news about canceled tours and festivals, Live Nation’s results suggest fan demand is strong enough to meet the supply of artists on tour. Cancellation rates for North American concerts are tracking lower than they were in 2023, according to the company, and Live Nation hosted 39 million fans globally in the quarter, up 5% from the prior-year quarter. As tours shifted from stadiums to smaller venues, the total number of concerts increased 23.2% in North America and rose 19.9% overall.
Through the first six months of 2024, total revenue grew 12% to $9.8 billion and AOI improved 19% to $1.08 billion. The number of events grew 16.9% to 25,881, while the number of fans at Live Nation concerts and festivals rose 10.4% to 61.8 million.
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“We continue to see strong demand globally, with a growing variety of shows attracting both casual and diehard fans who are buying tickets at all price points, which speaks to the unique experience only live concerts can provide,” CEO Michael Rapino said in a statement.
With fewer stadium shows than the prior year, Live Nation is leaning on arenas and high-margin amphitheaters in 2024. Arena attendance was up by double digits globally, theater and club attendance rose 15% and amphitheater attendance was up about 40%. Amphitheaters in particular are good for Live Nation’s bottom line. Almost a third of Live Nation’s amphitheaters have been updated since 2022 — including with new bar designs and upgraded VIP boxes — and have produced an aggregate return of over 30%, according to the company.
In the ticketing division, revenue was up 3% to $731 million and AOI was flat at $293 million, and the quarter ranked among the company’s top five in terms of transacted and reported ticket sales. Ticketmaster sold 78 million fee-bearing tickets in the quarter, about the same as the prior-year quarter. Fee-bearing gross transaction value was even at $8.4 billion.
Sponsorships and advertising revenue grew 3% to $312 million and AOI rose 10% to $223 million. Live Nation secured a multi-year, multi-festival partnership with Coca-Cola and an extension with video streaming service Hulu to be the official streaming destination for Bonnaroo, Lollapalooza and Austin City Limits.
The latest numbers show the extent to which Live Nation has grown since the touring business returned from pandemic-era shutdowns in 2020 and 2021. Second-quarter revenue was 36% greater than the $4.43 billion the company saw in the second quarter of 2022, and AOI was 49% above Live Nation’s $480 million of AOI in the same period in 2022. What’s more, the business is considerably larger than it was before the pandemic. Second-quarter revenue and AOI were up 90.8% and 124.4%, respectively, from the same quarter in 2019.
Topline results for Q2:
Total revenue of $6.02 billion, up 7%, driven by an 8% increase in concert revenue.
Adjusted operating income of $716.2 million, up 21%, driven by a 61% increase in concerts AOI.
Total attendance rose 4.9% to 38.9 million.
The number of concerts rose 19.9% to 14,678.
French music streamer Deezer reported a nearly 15% increase in revenue for the first half of 2024 and raised a key financial target for the year, according to earnings results filed on Tuesday (July 30).
The Paris-based company generated 268 million euros ($287 million) for the six months ending June 30 — up $35 million from the year-ago period — as average revenue per user (ARPU) improved for both direct subscribers and business-to-business subscribers by 6% and 3.5%, respectively.
Deezer executives called it a strong financial performance and said the company is on track to become profitable, as it was free-cash-flow positive in the first half of the year, with around 65 million euros ($70.4 million) at the end of June.
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“These positive results are [due to] strong performance throughout Deezer,” Stu Bergen, interim CEO of Deezer, said in a statement. “Deezer occupies a distinctive position within the music ecosystem,supporting artists, songwriters and rightsholders alike through initiatives focused on transparency, fairness, and innovation.”
Available in more than 180 markets, Deezer’s roughly 10.5 million subscribers was flat from the prior quarter.
The company raised its target for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to a 10 million euro deficit, compared to Deezer’s previous expected deficit of 15 million euros for 2024, and reiterated its target to grow revenue by 10% for the year. Deezer generated 485 million euros ($525 million) of revenue in 2023, a 7.4% increase from 2022.
Last week, Deezer announced that ex-Walmart executive and consumer goods company founder Alexis Lanternier would become the streaming company’s next CEO, taking over from Bergen, who served as interim CEO after the previous CEO, Jeronimo Folgueira, left the company in February following a nearly three-year run in the role.
Lanternier co-founded and developed Branded, a digital-first consumer goods company, and was previously an executive vp at Walmart Canada.
Universal Music Group (UMG) got a boost from physical sales in the second quarter, but the conversation during Wednesday’s earnings call was mostly focused on streaming. Subscriptions, which accounted for more than half of total recorded music revenue, were a key factor in the company’s 8.7% revenue growth in the quarter. Even so, UMG’s streaming business is not firing on all cylinders. Ad-supported streaming continues to show weakness and UMG revealed that Facebook no longer licenses its premium videos.
CEO Lucian Grainge said the industry has entered “the next phase” of the streaming and subscription business, one characterized by collaboration with streaming companies to produce new products and allow artificial intelligence to allow artists to sing their music in different languages. “The amount of work, win-win dialogue [and] creative discussions that are going on between us is really extremely exciting,” he said.
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Here’s what else you should know about UMG’s most recent quarterly earnings and what was said on the call.
Streaming is growing — unevenly
Although UMG’s recorded music subscription revenue improved 6.5%, not all subscription platforms are performing equally well. CFO Boyd Muir cited a “slowdown in subscriber growth at certain platforms” while noting that Spotify, YouTube “and many regional and local platforms” continue to show healthy growth. Generally, UMG is optimistic about the overall marketplace’s ability to find new subscribers. Michael Nash, executive vp of digital strategy, said UMG’s consumer research has identified 180 million consumers from the top 19 territories “that will form the next wave of subscription adoption,” even taking into account price increases.
“Other” streaming revenue dropped 3.9% in the quarter, which Muir attributed to a decline in ad-supported streaming and some platform-specific issues (see Facebook below). UMG warned of weak ad-supported streaming last quarter, and Muir said UMG needs to see “broad-based improvement across multiple partners and geographies over a longer timeframe before we’re ready to adopt a less cautious view.”
Meta is no longer licensing UMG premium videos for Facebook
Another reason for a slowdown in non-subscription streaming revenue was Facebook’s departure from music videos. “Meta had previously offered previous music videos on Facebook,” Muir explained. “This product offering was less popular with Facebook’s user base than other music products, and as a result, Meta is no longer licensing premium music videos from us. As of May of this year, Meta is now focusing instead on other areas involving music content, and we are working together to expand these areas as part of a multifaceted renewal.” Showing premium videos is not the only aspect of Meta’s licensing agreements with labels, however. As Billboard has previously reported, Meta reached a licensing deal with UMG in 2017 that allowed UMG’s repertoire in user-uploaded videos on Facebook, Instagram and Messenger. And a deal reached in 2020 allowed users to add songs from UMG’s catalog to videos on Facebook’s gaming platform.
The noncontroversial Spotify bundle controversy
After Spotify began offering both music and audiobooks, the company asserted it can pay a discounted “bundle” royalty rate to publishers and songwriters for premium streams. When asked about the audiobook bundle controversy on Tuesday, Spotify CEO Daniel Ek described it as a not-unusual disagreement between counterparts. “That’s the nature of all supplier and distributor relationships,” he said during the company’s earnings call. UMG had a similarly unsensational response when asked about the bundle controversy. Rather than feeling cheated out of royalties, Muir said UMG “[is] confident our revenue participation reflects the value our artists and our music is bringing to their platform.”
UMG invested 519 million euros ($562 million) in the first half of 2024
Three transactions accounted for 450 million euros ($487 million) of investments in the first half of the year: a majority stake in Nigerian label Maven Global; an investment in Complex; and a $240 million investment in Chord Music Partners, a joint venture of KKR and Dundee Partners that owns over 60,000 copyrights. UMG spent 96 million euros ($104 million) on catalog acquisitions in the half-year, including 75 million euros ($81 million) that had been sitting in an escrow account.