Earnings Reports
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Live Nation’s 2022 was record-breaking across basically all key metrics — revenue, concert attendance, gross transaction value and sponsorships were all at all-time highs — and the company expects 2023 to top that.
As the company reported Thursday (Feb) with its fourth quarter earnings, total revenue reached a record $16.7 billion in 2022 — up 44% from the pre-pandemic era of 2019. That growth was spread across a number of factors: more fans, more concerts, more spending per fan, higher average ticket prices and a greater number of large sponsors.
Adjusted operating income improved 49% to $1.4 billion over the year, and operating free cash flow rose nearly four-fold to $1.8 billion.
Concert revenue in 2022 was $13.49 billion, up 43.1% from 2019 and 185.8% more than 2021. Concert attendance reached 121 million fans in 2022, up 24% from 2019 and a 246% increase from 2021, a year Live Nation began to recover from the pandemic but was not yet at full strength. The concerts division put on 43,600 events in 2022, up 153.2% from 2021 and up 8.4% from 2019. Attendance for Venue Nation, the venues operated by Live Nation, reached almost 50 million.
Ticketing revenues of $2.24 billion was up 44.9% from 2019 and up 97.4% from 2021. Fee-bearing ticket volume rose 28% from 2019 to 280 million. Fee-bearing gross transaction value grew to $28 billion, up more than 50% from 2019.
The average ticket costs were higher in 2022, too. With more tickets priced dynamically to true market value, Live Nation estimates $700 million was shifted to artists (and, presumably, away from the secondary market). That said, the average entry price for tickets remained below $35 in the U.S.
Even though consumers felt the pinch of high inflation throughout 2022, music fans didn’t shy away from spending money at Live Nation concerts. Ancillary per-fan spending rose at least 20% across all venue types from 2019 levels.
Sponsorship revenue reached $968 million, up 64% from 2019 and 135% greater than 2021. Live Nation had 120 large sponsors globally, up 32% from 2019. Last year, the company added PayPal, GoPuff, Hulu and Snap as sponsors. They and other new, large sponsors accounted for 80% of sponsorship’s revenue growth in 2022.
Live Nation points to a number of leading indicators that suggest 2023 will be even stronger than 2022. As of mid-February, event-related deferred revenue — tickets sales for concerts that have not yet occurred — was up $400 million to $2.7 billion. Also through mid-February, ticket sales are up 20% and fee-bearing gross transaction value of tickets sold is up 33%.
SM Entertainment’s revenue in 2022 grew 18.7% to 848.3 billion won ($657 million at the average 2022 exchange rate) in 2022, the Korean music company announced Monday. Gross profits rose 15.4% to 297.5 billion won ($230 million), operating profit fell 3.7% to 93.9 billion won ($73 million) and operating margin dropped from 13.6% to 11.1%.
The K-pop company’s roster includes NCT Dream, NCT 127, Aespa and Red Velvet. NCT Dream had the fourth most album sales of any artist in Korea in 2022 with 4.1 million units. Red Velvet was the No. 9 artist with 2.4 million units, NCT 127 was No. 11 with 2.2 million units and Aespa was No. 13 with 1.8 million units.
In the U.S., NCT Dream reached No. 39 on Billboard’s Artist 100 chart in April 2022, while the group’s album Glitch Mode peaked at No. 50 on the Billboard 200 album chart. NCT 127’s latest album, 2 Baddies, peaked at No. 3 on the Billboard 200 in October.
Although SM Entertainment’s largest source of revenue, recorded music, declined 3.7% in 2022, gains in other parts of the business made up for the loss: Concerts jumped tenfold from a pandemic-led slowdown, licensing climbed 62.2% and appearances jumped 48.1%.
In the fourth quarter, SM Entertainment’s revenue rose 7.7% to 256.4 billion won ($188.6 million at the quarter’s average exchange rate). Operating profit rose 70.3% to 25.2 billion won ($18.5 million) and operating margin improved 9.8% from 6.8% in the prior-year period. Net profit fell 72.7% due in part to the sale of real estate in the fourth quarter of 2021 for 19.7 billion won ($14.5 million). The company also experience 7.5 billion won ($5.5 million) of foreign-currency-related loss in the quarter.
SM Entertainment’s earnings release arrived amidst a brewing controversy over an investment in the company by its largest competitor, HYBE. In a deal finalized on Feb. 22, SM Entertainment founder Lee Soo Man sold a majority of his shares to HYBE in what SM Entertainment CFO Jang Cheol-hkuk called a “hostile takeover” that will “undermin[e] the diversity of the K-pop market.”
SM Entertainment’s vision for the company includes Korean entertainment and tech company Kakao, which announced on Feb. 9 it would acquire a 9.1% stake in SM Entertainment. As SM Entertainment laid out in a presentation released Feb. 22, Kakao’s technological capabilities could help SM Entertainment build a stronger line-up and upgrade online fan platforms. Kakao owns the music streaming service Melon.
In an open letter posted on social media on Tuesday, HYBE CEO Park Jiwon argued that together the companies have an opportunity to reach more fans and “stand shoulder-to-shoulder with the world’s major record labels.” HYBE believes it can help SM Entertainment artists in North America and prizes SM Entertainment’s infrastructure in China and Southeast Asia, regions where HYBE currently does little business.
Revenues for Madison Square Garden Entertainment (MSGE) rose 24% to $642.2 million in the second quarter, bolstered by strong consumer and corporate demand for events plus a raft of cost cuts, the company reported Thursday (Feb. 9).
Speaking for the first time since publicly announcing the company is exploring a sale of its stake in Tao Group Hospitality, MSGE CFO Dave Byrnes said that revenue growth came from broad-based demand for events, hospitality, suites, sponsorship and merchandise.
The company is also undergoing a complex restructuring to spin off its live entertainment business — which houses its namesake venue and the Rockette’s Christmas Spectacular production — from its business focused on MSG Sphere, the state-of-the-art Las Vegas venue currently under construction. The latter business would also house MSG Networks and (at least for now) Tao Group.
“We are moving swiftly and anticipate completing the spin-off by the end of March,” Byrnes said on a call to discuss the financial results.
Byrnes also said that the MSG Sphere, with its 580,000 square-foot LED exosphere (the world’s largest LED screen), is expected to open in September with an as-yet-announced artist residency and potentially an “original attraction” from a leading Hollywood director. Byrnes said they expect to announce both in the coming weeks.
It is those two types of events — artist performances and films — plus advertising, sponsorship and hospitality, that MSGE hopes will help pay for the $2.175 billion price tag of building the Sphere.
MSGE had roughly $2.01 billion in debt as of the quarter ending on Dec. 31, and about $554 million in cash on hand and restricted cash.
The company announced last quarter that it was exploring areas within the company to cut costs, including letting go of staff in areas including the MSG Networks division. The severance pay and other elements related to those job reductions led to a $13.7 million charge in the quarter.
The MSG Networks segment generated $158.9 million in revenue, 1% lower than a year ago, due to higher rights fees partially offset by increasing advertising revenues.
The company’s entertainment segment generated $356.5 million, up significantly over last year on mostly sold-out events at The Garden and a full run of the Christmas Spectacular — its first in three years due to the pandemic.
Byrnes also elaborated on the company’s decision to shop around its stake in the Tao Group, saying it was time for the company to explore the opportunity to provide a significant return to its shareholders.
MSG paid $181 million for a 62.5% interest in the hospitality group in 2017 and now owns 67% of the company.
“The bidding process is extremely robust with significant interest from multiple bidders,” Byrnes said. “We’re moving forward through the process and we’ll keep you updated as we have additional news.”
The Tao Group generated $136 million in revenue, up 16% from last year when the Omicron variant of COVID-19 dampened demand for corporate holiday parties and dining out.
Additionally, MSGE filed a request on Thursday with the New York City Department of Planning to lift the time limit on Madison Square Garden’s special operating permit, which is currently set to expire on July 24. The Garden deserves to remain where it is in perpetuity, the company said in a statement, because moving it could cost $8.5 billion in public funding and improvements to the portion of Penn Station located beneath The Garden are already proceeding without the venue needing to move.
Warner Music Group’s net revenues fell nearly 8% to $1.48 billion, despite growth in streaming revenues and its music publishing business, as the company suffered from a tough comparison to the year-ago quarter, it reported on Thursday.
WMG reported net profits declined by 34% to $124 million compared to the year ago period when the company reported $188 million in net income. This quarter, which ended Dec. 31, 2022, had one fewer week than the quarter ending Dec. 31, 2021, which resulted in outsized earnings in the year-ago period.
Executives said that beneath those headline figures, the company saw a 9% growth in music publishing revenue, 13.2% in music publishing streaming revenue and 11% increase in operating income.
“The foundations of this company are strong, and our addressable market is continuously growing,” Warner’s new CEO Robert Kyncl said in a statement. “Music’s value, power, and ubiquity are among the many reasons I decided to join WMG and lead the next phase of our evolution. As we navigate a challenging business environment, we expect to have a strong release schedule in the second half of 2023 while managing our costs throughout.”
The company’s music publishing division contained most of the quarter’s highlights, with revenues up 9.2%, or 14.2% in constant currency, driven by increases in digital and performance revenue. Digital revenue increased by 12%, or 15.5% in constant currency, and streaming revenue increased 13.2%, or 16.8% in constant currency, on growing streaming and timing of new digital deals, the company said. Digital revenue now represents 59.6% of total music publishing revenue, up from 58.1% last year. Performance revenue increased thanks to continued growth from the hospitality industry, concerts and live events, while mechanical revenue was flat. Synchronization revenue declined on lower commercial licensing activity in the U.S.
In the recorded music division, revenue fell 10.6%, or 5.6% in constant currency, on lower digital, physical and artist services and expanded rights revenue. While streaming revenue was down 6.7% in the quarter, when adjusted for the impact of the extra week in 2021, WMG said recorded music’s streaming revenue was up half a percent, impacted by al ighter release schedule and a slowdown in ad-supported revenue due to macroeconomic conditions.
WMG revenue fell 7.8%, or 2.7% in constant currency, compared to the year ago quarter, which had an extra week
Digital revenue decreased 5%, 0.9% in constant currency
Streaming revenue decreased 4%
Music publishing revenue increased 9.2%, or 14.2% in constant currency
Music publishing streaming revenue grew 13.2%, or 16.8% in constant currency
Recorded music streaming revenue decreased 6.7%, or 2.6% in constant currency, on a lighter release schedule impacted by the fewer number of weeks in the quarter
Net income was $124 million this quarter, down 34% from $188 million one year ago
Adjusted net income of $110 million was down 51% from $223 million in the year ago quarter
Apple on Thursday posted its first quarterly revenue drop in nearly four years after pandemic-driven restrictions on its China factories curtailed sales of the latest iPhone during the holiday season. The company’s sales of $117 billion for the October-December period represented a 5% decline from the same time in the previous year, a deeper downturn than analysts had projected.
Despite the downturn — which marks Apple’s first year-over-year decrease in quarterly revenue since the January-March period in 2019 when sales also slipped 5% — the company’s Apple Services division actually set a new revenue record. The company said that combined, Apple TV+, Apple Music, Apple Arcade and others generated $20.8 billion for the three months ending Dec. 31, up from up from $19.5 billion a year earlier. Apple said that it now has more than 935 million paid subscriptions across its services, up from more than 900 million paid subscriptions reported in the previous quarter.
Apple’s profit also eroded during the past quarter, even though the Cupertino, California, company remained a pillar of prosperity. Earnings totaled $30 billion, or $1.88 per share, a 13 decrease from the same time in the previous year. Those results also missed a target of $1.94 per share set by analysts polled by FactSet Research.
Investors reacted to the letdown by initially driving down Apple’s stock by nearly 5% in Thursday’s extended trading. But management remarks made during a conference call with analysts raised hopes that Apple’s disappointing performance may have been a mere hiccup, paring the decrease in the company’s shares to less than 1%.
Apple’s rare stumble came against a backdrop of renewed investor optimism about tech’s outlook for this year, helping to spur a 17% increase in the sector’s bellwether Nasdaq composite index so far this year.
But now Wall Street seems likely to reassess things in light of Apple’s latest results and ongoing worries about a potential recession in the wake of rising interest rates aimed at tamping down inflation, said Investing.com analyst Jesse Cohen.
With Google also disclosing a year-over-year quarterly decline in its digital ad sales on Thursday alongside Apple’s disappointing performance, Cohen said it’s clear there are “several challenges the tech sector faces amid the current economic climate of slowing growth and elevated inflation.”
Despite the quarterly downturn in its fortunes. Apple hasn’t signaled any intention to resort to mass layoffs — a stark contrast to its peers in technology. Industry giants Alphabet, Microsoft, Amazon and Meta Platforms have announced plans to jettison more than a combined 50,000 employees as they adjust to revenue slowdowns or downturns caused by people’s lessening dependence on the digital realm as the pandemic has eased.
“We manage for the long term,” Apple CEO Tim Cook told analysts during the conference call. “We invest in innovation and people.”
Cook had tried to brace investors for tougher sledding in late October when he warned of “increasingly difficult economic conditions” heading into the holiday season. Then, just a few days later, Apple cautioned that China’s attempts to clamp down on the spread of COVID was affecting its production lines and would prevent meeting all the demand for the premium iPhone 14 models during the holidays.
That contributed to an 8% decrease in iPhone sales from the previous year to $65.8 billion in the most recent quarter.
Cook indicated Apple’s supply headaches are now over, assuring analysts that “production is now back where we want it to be.”
In another positive sign, Apple also disclosed that it now has more than 2 billion iPhones, iPads, Macs and other devices in active use for the first time. That is likely to help Apple sell more digital subscriptions and ads, helping to fuel long-term revenue growth.
SiriusXM reported its full-year 2022 revenue grew by 4% to $9 billion on Thursday, as increased numbers of streaming subscribers helped the company hit its financial targets for the year.
While key metrics like earnings before interest, taxes, depreciation and amortization (EBITDA) were up 2% at $2.8 billion, executives struck a cautious tone on a call with investors, saying they expect softness in the year ahead.
“We broadly anticipate a softer first half (of 2023) in terms of revenue, EBITDA, and subscriber growth as compared to the back half of the year,” SiriusXM chief executive Jennifer Witz said on the call. “We are not issuing subscriber guidance at this time, although we anticipate we’ll see modestly negative self-pay net adds for the year as economic and demand uncertainty persists, auto sales remain soft, and we moderate marketing spend for our streaming service early in the year ahead of planned product improvements late in 2023.”
SiruisXM reported net income of $365 million in the fourth quarter ending Dec. 31, up from $318 million the year prior. EBITDA for the quarter rose 10% to $742 million. The company reported 348,000 net new self-pay subscribers for the year.
The company said late last year it would embark on a broad effort to cut costs, as it invests in the back-end technology and user-friendliness of its SiriusXM app. Updating the app’s infrastructure so that the company can bring new products to the app quickly is a key part of the company’s growth strategy.
In a memo to staff last year, Witz said the company will be looking at all ways to trim costs, including possible job cuts, as it weighs how to handle macroeconomic challenges like declining advertising budgets and auto manufacturer delays.
Spotify’s share price rose 12.7% to $112.71 on Tuesday (Jan. 31) following the company’s earnings release for 2022’s fourth quarter earlier in the day.
Now with a market capitalization of $21.8 billion, Spotify has more than overcome the investor exodus following its underwhelming third-quarter earnings results. After delivering a weaker-than-expected gross margin on Oct. 25, Spotify’s share price fell 13% to $84.42 and bottomed out at $69.29 on Nov. 4. Tuesday’s closing price marked a 62.7% improvement in fewer than three months.
Investors want Spotify to continue adding subscribers while improving its margins. Tuesday’s earnings results delivered on both fronts. Its fourth-quarter subscriber growth of 10 million handily beat guidance of 7 million, giving the company 205 million subscribers globally. The company’s monthly active user base of 489 million was 10 million ahead of guidance.
In the fourth quarter, Spotify’s gross margin of 25.3% was 80 basis points — eight-tenths of a percentage point — above guidance “due primarily to lower podcast spend along with broad-based favorability in our core music business,” said CFO Paul Vogel during Tuesday’s earnings call.
Spotify’s licensing deals with record labels and publishers give it little room for improvement on recorded music margins, which were 28% in 2021. Podcasting, however, gives Spotify an opportunity to attract advertising dollars with meaningfully better margins. During a June 2022 presentation to investors, Spotify executives said they expect podcast margins to reach 30-35% within three to five years and 40-50% further in the future.
Just last week, investors were shown a new commitment to cost-cutting when Spotify announced on Jan. 23 that it would lay off 6% of its global headcount. Among the departures — though technically not part of the layoffs — was chief content officer Dawn Ostroff, the engineer of the company’s strategy to build its podcast business by attracting marquee names such as Joe Rogan, Kim Kardashian and Barack and Michelle Obama. Her exit could signal an end to an era of expensive content deals that helped make Spotify the most popular podcast platform in many markets.
For the first quarter of 2023, Spotify forecasts 3.1 billion euros ($3.37 billion) of total revenue and gross margins of roughly 25% excluding severance charges, and an operating loss of 194 million euros ($211 million), including 35 million euros to 45 million euros ($38 million to $49 million) in severance charges.
“Gross margins and operating expenses are expected to improve throughout the year,” said Vogel, adding that first-quarter margins will be the low point for 2023 because “some of the investments we made in the back half of [2022] is still slightly impacting Q1.” In addition, with the recent 6% reduction in headcount, “we see our operating expenses growing slower with a material improvement in our operating loss compared with 2022,” he added.
Spotify ended 2022 with 205 million subscribers, annual revenue of 11.7 billion euros ($12.4 billion) — up 21% from 2021 — and an acknowledgment that “things change” regarding the company’s bold investment in podcasting and its recent “tightening” of spending.
“In hindsight I probably got a little carried away and over invested relative to the uncertainty we saw shaping up in the market,” said CEO Daniel Ek in an earnings call with investors on Tuesday (Jan. 31). “So we are shifting to tightening our spend and becoming more efficient.”
Ek added that “it was the right call to invest and I would do it again” because it set the company apart from competitors, but the souring macro economic environment requires them to pull back. “To be clear this doesn’t mean we are changing our strategy,” he asserted.
The company spent hundreds of millions of dollars acquiring exclusive rights to podcast programming (see: Joe Rogan, Prince Harry and others) and startups, but in recent months began eliminating some original shows and trimming staff at its Parcast and Gimlet studios. Earlier this month, Spotify announced it would shed 6% of its workforce, roughly 600 employees. It also canceled numerous shows that it had been promoting on its separate Spotify Live app.
“You go for growth first and then you seek efficiency,” Ek said.
Elsewhere in the call, the company laid out its fourth-quarter results, with revenue of 3.166 billion euros ($3.38 billion), representing 18% growth year-over-year. Subscription revenue was 2.7 billion euros ($2.88 billion) of that tally, a 18% increase year over year. Advertising revenue was 449 million euros ($479 million), up 14% year over year. Its user base grew to 205 premium subscribers, up from 195 million in Q3, and 295 million free (ad-supported) users, up from 273 million. Total monthly active users (MAUs) have hit the 489 million mark, up from 456 million last quarter.
Average revenue per user was 4.55 euros ($4.85) in the fourth quarter, down slightly from 4.63 euros ($4.94) in the third quarter. Excluding the impact of the foreign exchange market, Spotify attributed the change to a “product and market mix.”
Spotify’s gross margin of 25.3% — 80 basis points above guidance, the company said — was slightly better than the 24.7% registered in the third quarter but still a full percentage point below the 26.5% in the prior-year period. The company attributed the change to “lower investment spending and broad-based music favorability.”
Spotify reported an operating loss of 231 million euros ($246 million), up from 228 million euros in Q3 and a 7 million euro loss back in Q4 2021. A slew of higher personnel costs due to headcount growth — that has since been halted (except for internships) — and higher advertising costs, as well as currency movements, was cited for the rise in losses during the quarter. The company also said that its business has more than 3.4 billion euros ($3.6 billion) in liquidity and that its free cash flow was actually in the negative in the quarter — by 73 million euros — but that for the full year the company ended with 21 million euros ($22 million).
Financial Metrics (Q4 2022 vs. Q4 2021)
Revenue: 3.166 billion euros ($3.38 billion), up 18% year over year from 2.689 billion euros
Gross margin: 25.3%, compared to 26.5% the prior-year quarter
Operating loss: 231 million euros, up from a 7-million euros loss
Free cash flow: 73 million euros, down from 103 million euros
Listener Metrics (Q4 2022 vs. Q3 2022)
Paid subscribers: 205 million, up 5% from 195 million in Q3
Ad-supported listeners: 295 million, up 8% from 273 million in Q3
Total monthly active users (MAUs): 489 million, up 7% from 456 million in Q3
Average revenue per subscriber: 4.55 euros, up from 4.63 euros in Q3
Q1 2023 Guidance
Revenue: 3.1 billion euros
Subscribers: 207 million
MAUs: 500 million
Gross margin: 24.9%
Operating loss: 194 million
SoundCloud Holdings GmbH and its subsidiaries reported revenue in 2021 of 230.7 million euros ($273 million at the average exchange rate in 2021 of 1.18308), up 19% from the prior year, according to audited financial statements published by the privately held company in Germany on Tuesday (Dec. 13).
SoundCloud, which originally gained popularity for its embeddable streaming widget, has a unique business model that mixes tools for music creators and listening for fans. Fan revenue — from advertising and subscriptions — improved 16.6% to 143.3 million euros ($170 million), or 62.2% of total revenue, down from 63.5% in 2020. Revenue from subscribers grew 20% year over year and exceeded internal expectations, according to the financial statements. Advertising revenue was in line with expectations, with 12% year-over-year growth.
Revenues from creator tools grew 23.7% to 87.3 million euros ($103 million) and increased to 37.8% of total revenue, up from 36.5% in 2020. The company attributed the improvement to the number of artists that chose to self-release music through the platform to take advantage of organic growth at major DSPs such as Spotify, as well as improving monetization of platforms such as Meta, TikTok and Twitch.
Founded in 2007, SoundCloud originally gained popularity through its ubiquitous, embeddable music player. It eventually launched a subscription streaming service, SoundCloud Go, in 2016, but did not rank in the top eight music subscriptions in the second quarter of 2022, according to figures released on Dec. 7 by MIDiA Research. Deezer was the eighth-largest subscription service with 9.5 million subscribers and a 1.5% global share. Spotify had the largest share with 30.5%, equal to 187.8 million subscribers. SoundCloud’s financial statements did not reveal the number of subscribers to its streaming service.
Unlike its peers, though, SoundCloud has always been a unique destination for artists to connect with listeners. The platform offers SoundCloud Next Pro, a service that allows artists to upload tracks to the platform and distribute them to other streaming services as well as pitch music to SiriusXM, which owns a minority stake in SoundCloud following a $75 million investment in 2020. A 2019 acquisition of Repost Network, an artist rights management and distribution platform, provides SoundCloud with a subscription product that offers creative services such as promotion and marketing.
In January 2022, SoundCloud added a third business segment, called roster, to connect fans and artists. Roster provides support services for emerging and developing artists. Its launch coincided with the announcement of a joint venture with artist management firm Solid Foundation Management to “identify, invest in, and foster the careers of artists featured.”
Gross profit margin — defined as gross profit as a percent of revenue — improved 12% to 35.4% on the strength of growth in subscriptions. Content costs — mainly royalties paid to record labels, publishers and independent artists — totaled 120.8 million euros ($143 million), up 14.1% from 105.9 million euros ($125 million) in 2020. As a percent of fan revenue, content costs declined to 84.2% from 86.1% in the prior year.
Despite the improved gross margin, operating loss deepened to 21.1 million euros (-$25 million) from 15.4 million euros (-$18 million) in 2020. SoundCloud increased its marketing spending 69.7% and made “significant investments” in headcount to help “propel the company into its next phase of growth.” Although Russia’s invasion of Ukraine has created uncertainties and disrupted supply chains, it has had a limited impact on SoundCloud’s financials, as direct business with partners in Russia accounted for only 0.5% of its annual revenues.
Since the end of the period covered by these financial statements, SoundCloud announced in August its plans to lay off 20% of its workforce due to “a significant company transformation and the challenging and economic and financial environment,” a spokesperson told Billboard at the time. The company had an average of 451 employees in 2021, up from 392 in 2020, with growth spread across its technology, business and operations segments.
SoundCloud expects slower growth in 2022 due to inflation and other macroeconomic trends that could stifle consumer spending levels. It expects gross profit “to grow slightly” with a similar or higher gross margin as in 2021. Free cash flow from operations is expected to be “slightly negative” in 2022.
It also believes it has opportunities to find acquisition targets. In April, it acquired Musiio, an artificial intelligence and machine learning company, for approximately $7 million cash and an undisclosed amount of equity, according to the financial release. SoundCloud believes Musiio allows it to “further leverage its vast data to identify what’s next in music trends and talent” and create playlisting tools for the music industry.
Music companies’ quarterly results in October and November were a bright spot amid a mostly bleak earnings season. High inflation, rising interest rates and the chance of a recession presented a triple-whammy to most sectors — particularly tech and retail — but in the music industry, those macroeconomic threats weren’t enough to dampen consumer demand and investors’ confidence.
“While the broader economy is facing challenges, the music industry as a whole remains healthy,” says Golnar Khosrowshahi, founder and CEO of Reservoir Media, which raised its full-fiscal-year forecast by 11% for both revenue and adjusted earnings before interest, tax, depreciation and amortization (EBITDA).
So what worked in music companies’ favor? In short, more people are going to concerts and buying streaming subscriptions, and revenues from those sectors helped bolster quarterly results for nearly every publicly listed music company.
Diversifiction = Fortification
The major labels, which have a piece of the market in nearly every segment of the music industry, all reported quarterly revenue gains over the third quarter last year, ranging from 16% at Warner Music Group to 6% at Sony Music Entertainment. On Universal Music Group’s third-quarter call, chairman/CEO Lucian Grainge attributed the company’s 13.3% third-quarter revenue gains to UMG’s diversification strategy. While ad-supported streaming revenue slowed significantly, only growing 5.2% (from last year’s 15.6% growth), licensing and other revenues rose by 30% due to an $84.2 million increase in touring revenue from Latin American, European and Asian markets where UMG is in that business. Merchandising and other revenue related to those tours grew by over 100% to almost $199 million. “We are better positioned to navigate the inevitable ebbs and flows of revenue of any particular business, as well as to weather any macroeconomic headwinds,” said Grainge.
Live’s Alive Again
Live Nation Entertainment had its biggest summer concert season ever, reporting that more than 44 million fans attended 11,000 events in the third quarter, as attendance for stadium shows tripled to nearly 9 million. Companywide, Live Nation reported $6.2 billion in quarterly revenue, up nearly 67% from the last-comparable quarter, which for it was the third quarter of 2019.
Streaming’s Still Strong
On a call with investors, an analyst asked Sony deputy president/CFO Hiroki Totoki what risks Sony Music Entertainment faces. His reply: “Streaming is very successful, and we don’t really have that much of a concern.” Spotify’s third-quarter results confirm that. Revenue rose 12% to roughly $3.2 billion at a constant currency, on a 13% uptick in subscription revenue from more than 195 million subscribers — 1 million more than the company targeted.
French streaming company Deezer also reported double-digit revenue growth, although it attributed the increase in part to a one-euro price hike the company instituted in France earlier this year. Deezer’s revenues rose nearly 14% to $112.5 million at the Sept. 30, 2022, exchange rate.
Price hikes, coming at a time consumers’ costs are rising across the spectrum, are the final thing working for music industry companies. After Apple said it would raise its standard individual streaming plan price by $1 to $10.99 in the U.S. and Spotify signaled it was also considering a price increase, major labels and other streaming company executives all said they expect trickle-down benefits.
It’s also worth noting that although Totoki said on the call that Sony is “taking steps to prepare for further deterioration… in each of our businesses,” the company raised its revenue and operating income targets for the full fiscal year by $9.8 billion and $1.9 billion, respectively (at Sony’s assumed exchange rate for the second half of the fiscal year).