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U.S. radio companies aren’t exactly struggling through post-pandemic recoveries, but economic conditions are preventing a stronger comeback.  

The earnings releases of four U.S.-based, publicly traded radio companies – iHeartMedia, Cumulus Media, Audacy and Townsquare Media – reveal an industry in flux. While the music streaming and satellite radio businesses enjoy some security from subscription-based models that can withstand economic upheaval, the radio industry depends on advertising dollars that can fluctuate greatly. Ongoing economic problems caused some advertisers to pull back in the third quarter and cloud radio’s future. 

According to Cumulus Media CEO Mary Berner, “starting in late Q2, national advertisers reduced marketing to mitigate the headwinds they face from inflationary pressures, persistent supply chain issues, finance, market turmoil and overall recession risks,” she explained during the company’s Oct. 28 earnings call. Collectively, the macroeconomic pressures resulted in a decline in broadcast revenues of roughly 5% in the third quarter, said Berner, and was the “main driver” in the company’s 2% decline in total revenue to $233.5 million. 

iHeartMedia CEO Bob Pittman lamented during the company’s Nov. 3 earnings call that the business “doesn’t have the robustness that we expected.” Still, iHeartMedia, the country’s largest radio company, landed at the high end of its revenue guidance with total revenue of $989 million, up 7% from the prior-year period. Revenue of its multi-platform group — which includes broadcast radio — was $659.0 million, up 0.1% year-over-year, with the help of political advertising. “This will be the best non-presidential political year that we’ve had,” said president, COO and CFO Rich Bressler. 

Townsquare Media’s third-quarter revenue of $120.6 million came in at the low end of its guidance range — $120 million to $127 million — and its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $30.9 million hit the midpoint of its guidance range of $30 million to $32 million. 

Audacy was hurt by advertisers’ pullback in the third quarter. Revenue dropped 3.8% to $317 million, and radio revenues dropped 6%, due to “a substantial deterioration of market conditions,” president and CEO David Field said on the company’s Tuesday (Nov. 8) earnings call. “This has obviously taken a toll on our EBITDA and [debt] leverage and has raised concerns.”

Digital remains radio companies’ growth engines. S&P Global Market Intelligence forecasts radio digital revenues to climb 4.8% next year. iHeartMedia’s digital audio segment, which includes its podcasting business, grew 23.4% year-over-year to $254 million in the third quarter. That accounted for 26% of the company’s consolidated revenue, up from 12% in the first quarter of 2020. Podcasting revenue alone accounted for $91.3 million, up 42.1% year-over-year. At Cumulus, digital revenue growth of 20% far outstripped overall revenue growth of 5% in the third quarter. Within its digital segment, podcasting revenue grew 27% year-over-year. Townsquare Media’s digital revenue increased 17%, accounting for half of total revenues, and helped the company set records for third-quarter net revenue and adjusted EBITDA.  

Radio companies have taken measures to weather financial uncertainty that will extend into 2023. Cost-cutting remains popular after companies sharply reduced expenses in 2020. IHeartMedia saved about $250 million from 2020 to 2021 — a reduction of historical annualized cost base of about 10% — and targeted an additional $75 million of annual savings this year, said Bressler. Cumulus is “on track to be more than $75 million below the 2019 baseline” of fixed costs, said Berner. Audacy added to its cash reserves by selling real estate worth $56 million in the third quarter and has plans for additional sales.  

S&P Global Market Intelligence expects radio local spot advertising to improve by 3% and national ad revenues to grow 1.5%, both down significantly from 2022 growth levels. Solomon Partners estimates 0.8% audio ad spending growth in 2023 based on major advertising agency forecasts from Dentsu, GroupM, Zenith and Magna. 

Whatever happens in 2023, radio companies are better prepared than they were for the pandemic in 2020. That downturn “was probably the swiftest and worst downturn I’ve ever lived through,” said iHeartMedia’s Pittman. “And even in that year we had positive free cash flow.” 

Still, economic pressures have weighed heavily on radio companies’ share prices. Barrington lowered its price target for iHeartMedia shares from $18 to $13 in an investor note issued Monday. iHeartMedia shares fell 15.1% over Tuesday and Wednesday, to $6.61. Year to date, iHeartMedia shares are down 68.6%. 

Shares of Cumulus Media rose 8.9% following its third-quarter earnings release on Oct. 28 — although the stock gave back those gains and more over the next week and a half. As of Wednesday, Cumulus shares are down a relatively mild 38.7% year-to-date. Investors pushed up the share price 39.9% on April 14 on news of a takeover bid by a consortium led by radio veteran Jeff Warshaw. Cumulus rejected the offer and instead offered shareholders a $50 million stock repurchase program. In June, Cumulus spent $25 million to purchase 1.7 million shares, or 8.7% of outstanding Class A shares.   

Audacy shares fell 6.3% to $0.298 on Wednesday following the company’s third-quarter earnings release, bringing the year-to-date decline to 88.3%. Audacy shares were trading at $0.59 per share on Aug. 1 when the company was notified by the New York Stock Exchange that it was not in compliance with a listing standard that requires a minimum closing price of $1 over 30 consecutive trading days.  

Madison Square Garden Entertainment’s quarterly revenues surged by 36% to $401.2 million, an increase of nearly $107 million over last year, thanks to a packed calendar for its performance venues that included Harry Styles‘ 15 sold-out concerts at the company’s namesake venue in New York City.

However, those revenues were not enough to offset a total operating loss of $44 million and a 73% decline in adjusted operating income to $2.8 million, as expenses related to the return of live events and increased construction costs for MSG Sphere caused company-wide operating expenses to climb $88.1 million.

On a call with analysts on Wednesday, executives were optimistic saying that the company is moving into the lucrative holiday season– a boom time for MSG performances like Radio City Christmas Spectacular.

“This is expected to be the first full year of events at our venues since fiscal 2019,” James Dolan, executive chairman and chief executive, said. “The best months are coming up for our events business.”

Revenues from the company’s entertainment business quadrupled to $147.1 million in the first fiscal quarter of 2023, which ended Sept. 30. That is compared to $34.2 million last year.

Investors were not swayed by executives comments that the company hosted a record 1 million guests at events over the quarter. Madison Square Garden Entertainment Corp’s stock was down 10.47% to $40.43 by 11 a.m. in New York.

Executives disclosed that the cost of building MSG Sphere, the state-of-the-art venue under construction in Las Vegas, rose again to $2.75 billion from $2 billion on higher costs from inflation and global supply chain issues. The project has rougly 8-9 months of construction remaining.

Dolan briefly commented on the proposed spin-off of the company’s live entertainment and MSG Networks business. If the plan is approved, he said, the venues and networks business would be named Madison Square Garden Entertainment Corp, while the business encompassing MSG Sphere and Tao Group Hospitality, owner of TAO, Hakkasan, LAVO and Beauty & Essex, would be named MSG Sphere Corp.

MSG Entertainment’s board approved the plan in August, and it now faces review by the U.S. Securities and Exchange Commission. Under the plan, the new, publicly traded company would house MSG Entertainment’s venues — including Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre — and MSG Networks, which broadcasts five basketball and hockey teams on MSG Network and MSG+. Also in that new company would be MSG Entertainment’s sports and entertainment booking business, the Radio City Rockettes and the Christmas Spectacular production and arena license agreements with the NBA Knicks and NHL Rangers.

Executives and analysts have said the spin-off could provide investors with more clarity on the company’s many businesses and a clearer choice between the type of investment they want to make. The venues and networks businesses have long-term track records as stable revenue generators, while the Sphere and Tao Group businesses are more speculative but provide an opportunity for higher returns.

Below is a greater breakdown of the company’s earnings for the quarter.

Q1 fiscal 2023 earnings for Entertainment division:

Revenues of $147.1 million, up $112.9 million from last year

Event related revenues rose $80.6 million

Arena license agreements with MSG Sports revenues rose $18.3 million

Suite license fee revenues rose $8.4 million

Direct operating expenses rose $65.5 million to $101.8 million from last year driven by expenses from events and arena license agreements with MSG Sports.

Selling, general, administrative costs rose 11% to $103.4 million on higher employee compensation, benefits.

Operating losses totaled $75.3 million for the quarter, a 34% improvement from the year-ago period when operating losses totales $114.7 million. Adjusted operating losses totaled $44.4 million.

Q1 fiscal 2023 earnings for MSG Networks division:

Revenues fell 13% to $122.5 million from last year on $19-million-decrease in affiliation fee revenues.

Direct operating expenses rose 10% to $75.4 million, driven by $5.9 million increase in rights fees and $1.1 million increase in other programming and production costs.

Selling, general and administrative expenses fell by 63% from a year ago to $17.8 million.

Q1 fiscal 2023 earnings for Tao Group division:

Revenues rose 11% to $132.7 million, including $7.5 from new venue openings.

Direct operating expenses rose 25% to $76.6 million driven by a $7.9-million-increase in employee compensation and related benefits.

Food and bevereage costs rose $4.1 milion on inflation, new venue openings

Wasserman Media Group received an investment from private equity firm Providence Equity Partners that will provide capital for the talent agency’s growth initiatives and buy out two existing Wasserman investors, RedBird Capital Partners and Madrone Capital Partners. Financial terms of the deal were not disclosed.

Wasserman’s founder, chairman and CEO, Casey Wasserman, who continues to own a controlling ownership stake, said in a statement “there is no better partner to help us accelerate and scale this purpose-driven model than Providence. Their long relationship with our executive management group plus their extensive experience and established investment approach across the sports, media and entertainment sectors, and a shared commitment to culture will help accelerate the next phase of Wasserman’s expansion.”

Providence Equity Partners has experience in the music and entertainment space. In 2019, the firm created a $650 million investment platform — Tempo Music Investments — with Warner Music Group to invest in music publishing and recorded music catalogs. With interest rates rising in 2022, however, Providence is shopping its stake in Tempo and wants out of the music catalog market, according to reports.

Wasserman is a natural fit for Providence’s numerous investments in the live entertainment space. Providence has a portfolio of music festivals through its Superstruct Entertainment division, including International Concert Service, organizers of the Wacken Open Air metal festival, Dutch promoter ID&T, and Advanced Music SL, which operates Spanish music festival Sónar. Providence also owns majority stakes of U.S.-based music instrument retailer Sweetwater and U.K.-based Ambassador Theatre Group, which owns and operates 58 venues in the U.S. and Europe. Providence also owns a stake in Sofar Sounds through its investment in The Chernin Group.

Scott Marimow, managing director at Providence, complimented Wasserman’s “client-first approach” and influence in sports and music talent representation. “Wasserman is a natural fit with our firm, and we look forward to partnering with Casey and the entire Wasserman team to help fuel the Company’s next phase of growth and success,” he said in a statement.

“Wasserman has the potential to set the bar for the future of talent representation and brand and marketing consultancy,” said Davis Noell, senior managing director and co-head of North America at Providence, in a statement. “With our strong existing relationship, similar cultures and shared passion for media, sports, and entertainment, we are pleased to have reached this agreement to partner together.”

Wasserman became a powerhouse in music through its acquisitions of Paradigm’s North American live music roster in 2021 and U.K. live music business in April from Platinum Equity. Artists on the Wasserman roster include Coldplay, Kenny Chesney, Billie Eilish, Imagine Dragons, The Lumineers, Dave Matthews Band, Janelle Monáe, Kacey Musgraves, Old Dominion, Phish, Ed Sheeran, Lorde, Sturgill Simpson, Black Pumas, Brandi Carlile, Tyler Childers, Kaytranada, Normani, Run the Jewels, Tash Sultana, Diplo, DJ Snake, Flume, Jack Harlow, ODESZA and Skrillex.

Even with BTS on hiatus, the band’s label and agency HYBE grew revenues 445.5 billion KRW ($308.7 at the Sept. 30 exchange rate) from July to September — up 30.6% from the year-prior period, according to the company’s third-quarter earnings report released Thursday. But compared to second-quarter revenue of 512.2 billion KRW ($354.9 million), revenue was down 13%.

The “artist direct-involvement” segments of the business showed mixed results in the quarter. Music sales of 129.2 billion KRW ($89.5 million) were 0.4% year-over-year and 38.7% lower than the previous quarter. Concert revenue of 47.2 billion KRW ($32.7 million) was a vast improvement over zero in the third quarter of 2021 but lower than the first and second quarters. Revenues from ads, appearances and management fell 11.7% year-over-year to 29.8 billion KRW ($20.2 million).

HYBE saw better performance from its “artist indirect-involvement” segments that are less dependent on the timing of music releases and tour dates. Merchandising and licensing revenue grew 49.5% year-over-year to 144.7 billion KRW ($100.3 million). Contents revenue climbed 22.9% to 107.2 billion KRW ($74.3 million). And fan club revenue improved 27.5% to 17.3 billion KRW ($12 million). 

Though the first nine months of the year, HYBE’s revenue improved 55.7% year-over-year to 1.24 trillion KRW ($859.2 million) and its operating profit increased 59.% to 185.9 billion KRW ($128.8 million). Operating margin improved from 14.6% to 15%. 

Despite the impressive growth, HYBE is facing a dilemma. The company is without its biggest artist, BTS, after members went on hiatus earlier this year and will soon face mandatory military service in Korea. Losing its cash cow — until “around 2025,” according to an Oct. 17 letter to shareholders from CEO Park Ji-won — leaves Hybe with a tricky balancing act: In the absence of BTS new music and tours, the company must make up the difference with individual members’ solo projects and a slate of successful and up-and-coming artists. With only a retrospective album, Proof, and no concert dates since April, BTS will still account for 60-65% of HYBE’s 2023 revenue, Park said during the earnings call. The remaining 35-40% of revenue will come from a growing roster of young artists and Ithaca Holdings, which HYBE acquired in 2021. 

In recent years, HYBE has diversified to reduce its reliance on BTS and build a more stable portfolio of companies and artists. Through its nine record labels in Korea, Japan and the U.S., HYBE has built a diversified roster that “helps us avoid a risk of concentrating on a certain country, a certain genre, and allows us to flexibly respond to the changing external situations and trends, thereby reducing the overall business risk,” said CFO Lee Kyung-Joon.

Ithica Holdings added both recorded music catalog (through Big Machine Label Group) and artist management clients (through SB Projects). Its founder, Scooter Braun, is now co-CEO of HYBE America. When asked by an analyst what synergies Ithaca provides more than a year after the merger, Park pointed to the newfound ease and efficiency of launching projects in the U.S. under Braun and co-CEO Lenzo Yoon. Also, Ithaca’s U.S. artists will join HYBE’s WeVerse social media platform in 2023, Park added, and HYBE is pursuing opportunities for the businesses of Ithaca artists Justin Bieber (Drew House) and Ariana Grande (R.E.M. Beauty) in Asia. 

In Korea, HYBE’s roster includes such up-and-coming artists as Le Sserafim, released through its Source Music imprint, whose first two albums have surpassed a combined 1 million units sold. NewJeans, released through HYBE’s ADOR imprint, has cumulative sales of 620,000 of its debut, self-titled EP released in August. Outside of Korea, HYBE is taking its model for discovering and developing new artists to the world’s two largest music markets. In Japan, HYBE Labels Japan is prepping the December launch of &Team, a nine-person, multinational boy band. In the U.S., HYBE has a joint venture with Universal Music Group’s Geffen Records and is developing a global girl group.

Hybe’s plan for global growth goes beyond its growing artist roster. A broad strategy termed by Park as “expansion through cooperation across boundaries” includes mergers and acquisitions, joint ventures, equity investments and partnerships. “In order to expand the multi-label strategy, we’re considering various partnerships and investments with labels, catalog companies and talent management companies in overseas markets such as the U.S. and Japan, thereby strengthening our music I.P. portfolio,” Park said. “Through this approach, we except that greater synergies will be created with our superior solutions capability on concerts, merchandising and content to deliver greater results.” 

But in the short term, HYBE doesn’t have a quick solution for replacing BTS, and Park warned that declining BTS revenue — namely lost concert revenue — will put pressure on HYBE’s margins in 2023. That should change as groups such as Seventeen and Tomorrow X Together gain popularity and perform in larger venues. Compared to BTS, those artists’ margins are “not very different from the margin of BTS — other than concert revenue,” he said. “Therefore, as these groups continue to grow, I believe that margin will improve accordingly…starting from 2024.”

With HYBE’s share price down 64.9% year to date, mostly due to BTS’s hiatus, the company is considering additional ways to improve shareholder return, including share buybacks and dividends. Park said the company will reveal more about those plans in early 2023. 

Live Nation set records for concert revenue and ticket sales in the third quarter of 2022 as the touring industry continued its recovery from the COVID-19 pandemic. Third-quarter revenues were $6.2 billion, 66.8% greater than the same period in 2019, while adjusted operating income increased 45% to $621 million, the company announced Thursday (Nov. 3).  

“Fans around the world continue prioritizing their spend on live events, particularly concerts,” said president and CEO Michael Rapino in a statement. “Despite varying economic headwinds including inflation, we have not seen any pullback in demand, as on-sales, on-site spending, advertising and all other operating metrics continue showing strong year-on-year growth.” 

The concerts division tallied its highest-ever quarterly attendance with 44 million fans at 11,000 events that generated $5 billion of revenue and $281 million of adjusted operating income (AOI), up 67% and 44%, respectively, from the same period in 2019. Demand was strong across all types of venues and markets. Stadium attendance tripled to almost 9 million as many top artists, including Bad Bunny (the highest grossing Latin tour in Boxscore history), Red Hot Chili Peppers and The Weeknd, took advantage of strong fan demand by performing the larger venues.  

Ticketmaster also had a record-breaking quarter by delivering its highest fee-bearing gross transacted value of $7.3 Billion, a 62% increase from the same period in 2019. Ticketing revenue was $343 million, up 96.7% year-over-year and 36.8% greater than the same period in 2019. Ticketing’s AOI of $163.2 million was 5% lower year-over-year but 28.2% above the third quarter of 2019.   

Ticketmaster has made headlines because some artists — namely Bruce Springsteen and Blink-182 — opted for dynamic pricing that charged more for the best seats. The practice may frustrate some fans, but Live Nation expects to transfer over $550 million to artists through higher primary ticket prices — value that might otherwise have been captured on the secondary ticketing market.  

Sponsorship and advertising revenue was up 59.4% to $343 million on the strength of Live Nation’s festivals and Ticketmaster platform integration. The high-margin segment’s AOI of $226.2 million was 103.4% better year-over-year and 69.8% higher than the same period in 2019. Confirmed sponsorship revenue for 2023 is up 30% over the same period a year ago.  

Through September, ancillary fan spending at U.S. amphitheaters was up 30%. “The consistent theme is that fans are eager to enhance their experience, as we continue elevating our hospitality operations and provide more premium options,” said Rapino. 

Looking ahead, the busy touring season will continue into 2023 and consumer demand appears to be holding strong despite widespread fears of an upcoming recession and tightening budgets due to persistent inflation. “Ticket sales for shows in 2023 are pacing even stronger than they were heading into 2022, up double-digits year-over-year, excluding sales from rescheduled shows,” said Rapino. Through the third quarter, Ticketmaster sold over 115 million, up 37% from the same period in 2019. 

Live Nation’s share price rose 4.6% to $79.90 in after-hours trading on Thursday following the earnings release.

Financial metrics 

Total revenue: $6.2 billion, up 63.TK% from 2019 

Adjusted operating income: $621 million, up 45% from 2019 

Concert revenue: $5.29 billion, up 66.8% from 2019 

Ticketing revenue: $531.6 million, up 36.8% from 2019 

Sponsorship and advertising: $343 million, up 59.4% from 2019 

Fan metrics 

North America concerts; 8,261, up 14% from 2019 

International concerts: 2,958, up 57.4% from 2019  

North American fans: 29.1 million, up 27.7% from 2019 

International fans: 15.2 million, up 71.9% from 2019 

Fee-bearing tickets: 73.4 million, up 32.7% from 2019 

The long-term potential of music streaming has had a growing influence on the price investors will pay for an artist or songwriter’s catalog. That’s according to a new paper titled How Streaming Has Impacted the Value of Music by Larry Miller, clinical professor and director of the music business program at New York University’s Steinhardt School of Culture, Education and Human Development. 

Miller, with the help of graduate students Felipe Garrido and Matt Palermo, found that streaming revenues were positively correlated with the multiples paid for music catalogs. Here, the term multiple refers to the acquisition price as a multiple of net publisher share (NPS), a publishing catalog’s annual royalties; or net label share (NLS), a recording catalog’s annual royalties. From 2011 to 2021, the average catalog multiple increased from 8.6 to 20.7, according to data provided by Shot Tower Capital. In that time span, streaming went from virtually nothing to 65% of global recorded music revenue, according to IFPI. Miller found that 61.5% of the value of the average NPS multiple in 2021 came from streaming revenues paid to music publishers. By contrast, just 5% of the NPS multiple came from streaming in 2011.

Importantly, Miller found that investors’ expectations for future streaming growth were also positively correlated with NPS multiples. For those calculations, Miller and his team used MIDiA Research’s forecasts for global music publishing revenue from 2018 to 2021 and transaction data from Shot Tower Capital. When MIDiA’s forecast for four-year cumulative average growth rate was higher — due to heightened assumptions about the streaming market’s growth potential — the average NPS multiple was higher, too.  

The correlation between expectations and valuations cuts to the heart of the surge in catalog investments over the last decade. Although acquisitions are usually discussed in terms of a simple multiple — upwards of 29.5 times NPS for Bob Dylan and 30 times NPS for Bruce Springsteen, but lower for the average artist — the purchase price reflects the buyers’ belief about the catalog’s ability to generate royalties in the coming years. In mathematical terms, a catalog’s valuation is the present value of expected future cash flows. Experts such as Citron Cooperman and FTI Consulting value catalogs using financial models that forecast future royalties based on songs’ historical performance and industry-wide growth trends.  

Interest rates also impacted what investors were willing to pay for catalogs. Miller found that increases in U.S. Treasury Bond interest rates were negatively correlated with NPS multiples. In other words, when debt became more expensive, catalogs were worth less to buyers. Again, the value of a catalog is the sum of its expected future royalties discounted — divided by a discount rate — to a present value. If the cost of debt increases by two percentage points, the discount rate will increase by an equal amount. And the higher the discount rate, the lower the present value.  

Miller is careful to point out that his analysis is “a look in the rear-view mirror” that shouldn’t be used to forecast future values. “But it is certainly useful to understand where we’ve come from,” he says. The paper was commissioned by the Digital Music Association (DiMA), a trade group that represents member companies Amazon, Apple Music, Google/YouTube, Spotify and Pandora. Miller says DiMA neither took part in the analysis nor had a role in writing the paper.  

Not only has streaming created revenue growth for labels and publishers, the nature of streaming royalties — steady royalties from recurring subscription fees — has also made music more attractive to investors. To comfortably earn a return for investors, you need “predictability to the cash flow,” Denise Coletta, senior vp at City National Bank, told Miller. Compared to purchases of CDs and downloads, streaming delivers consistent royalties — even during a pandemic when some other segments of the music industry faltered. “Streaming has certainly led to much better transparency over the past 10 years, which has helped support the rationale associated with these multiples,” she added.

Music streaming services have had an undeniable impact on the music business over the last decade. As streaming boomed, record labels and publishers escaped the doldrums of the download era and now routinely post double-digit revenue growth. That momentum reignited investors’ interest in music as an asset class. In recent years, major financial players such as KKR, BlackRock and Blackstone have poured money into funds that purchase music catalogs as long-term investments — mostly because of streaming. 

Streaming has also changed music’s life cycle in a way that’s attractive to investors. In the past, an album would make money quickly and fade quickly as fewer people made trips to the cash register. Now, the loss of streaming activity — called the decay rate — is much milder because streams represent repeated listening. That has allowed songs and albums to remain popular longer and changed the way labels market and promote new releases by putting less of a focus on the first few weeks of release.

Miller cites a 2017 article by Will Page, then Spotify’s director of economics, that argued the definition of catalog — a song or album 18 months or older — had become “antiquated” in the streaming era. Purchases tend to happen early in a song or album’s life cycle. On streaming platforms, however, songs can earn royalties more consistently and for longer periods. Page’s analysis showed that Imagine Dragons’ album Night Visions had 177% more streams in its first 18 months as a catalog title than during its 18 months as a current release. The album’s sales, on the other hand, fell 33% in the later 18-month period.

For this paper, Miller recreated Page’s work by comparing the performance of 500 “high-impacting albums” released in 2018 over two, 18-month periods using U.S. streaming data from Luminate. About 5% of those albums performed better in their second 18-month period than their first 18 months of release and 97 of the 500 titles declined less than 25% in the second 18-month period.  

“The story here is we had been used to records peaking in the initial year of release,” says Miller. “It’s not just that 5.2% did better in the second 18 months. But the number of records that are declining, they are declining less than we had seen in previous years.” 

SiriusXM’s profits fell in the third quarter from a year ago on higher expenses and lower profits from Pandora, but overal revenues rose thanks to SiriusXM subscriber growth, the satellite radio company reported on Tuesday.

Sirius XM Holdings Inc. reported net income fell to $247 million, or earnings per diluted share of $0.06, in the quarter ending Sept. 30, 2022, from $343 million, or $0.08, during the third quarter last year. In its Pandora and off-platform segment, gross profits fell 12% on lower subscriber revenue and higher costs from investments in podcast content, the company said in its earnings release.

Revenues rose 3.6% to $2.28 billion from $2.198 billion in the third quarter 2021, while adjusted EBITDA was $720 million for the quarter, roughly flat year-over-year. The company reiterated that it expects full year revenues of $9 billion, with an adjusted EBIDTA of $2.8 billion.

Total operating expenses rose by more than 15% to $1.813 billion in the quarter on increased subscriber acquisition costs, marketing, sales and general administrative expenses.

Subscriber acquisition costs rose 21% to $86 million due to higher equipment installations by automakers, executives said. That and along with investments and other expenses caused the company’s free cash flow to fall 44% from a year ago to $329 million.

In addition, SiriusXM announced its board voted to raise the quarterly cash dividend by 10%, which it will pay out later this month. The company returned $262 million in capital to stockholders in the quarter, chief financial officer Sean Sullivan said in a statement.

“We continue to drive growth and focus on a disciplined approach to cost management across our organization,” chief executive Jennifer Witz said on a call with analysts. “While near-term objectives remain top of mind, we are focused on the strategy and investments that will drive long-term value for our stockholders.”

SiriusXM third quarter financial highlights:

SiriusXM reported 32.2 million self-pay subscribers, reflecting an increase of 187,000.The total number of subscribers rose to 34.2 million, including a decline of number of 49,000 paid promotional subscribers. The company’s self-pay monthly churn rate remained at record-low levels at 1.5%.Revenue for SiriusXM rose 5% to $1.7 billion compared to last year on self-pay subscriber growth and a 6%-increase in advertising on the SiriusXM platform.Total cost of services at SiriusXM rose 3% to $665 million for the quarter from the third quarter 2021. 

Pandora and Off-Platform third quarter financial highlights:

Gross profit for Pandora and Off-Platform segment fell 12% to $173 million for the third quarter 2022, from $197 million a year ago.Pandora monthly active users fell 7% to 48.8 million compared to 52.6 million in the third quarter a year ago, and subscriber revenue declined by 2%.Pandora Plus and Pandora Premium self-pay subscribersheld flat at 6.3 million.Advertising revenue edged 1% higher to $407 million, as total ad-supported listener hours fell to 2.75 billion in the quarter compared to 2.89 billion a year ago. Podcasting and off-platform business revenues rose 37% to $123 million.The total cost of services increased by 7% driven primarily by investments in podcast content.

Universal Music Group on Thursday reported its fifth-straight quarter of revenue gains since its public spinoff from Vivendi last year, increasing revenue 13.3% as its many, varied business divisions helped offset slow-downs in areas sensitive to global economic uncertainty.
On a call with analysts, UMG chairman and chief executive Lucian Grainge attributed the company’s strong quarter — coming amid a downturn in the advertising market — to its diversification strategy. Over Grainge’s 17-years at the helm, UMG has built dominant positions in multiple geographic markets and across nearly every major segment in music, making it less susceptible to “the inevitable ebbs and flows in revenue of any particular business,” he said.

That helped UMG offset a slowdown in ad-supported streaming revenues, which have been hampered by companies spending less amid fears of a recession. Ad-supported streaming revenues for the quarter grew by 5.2% in constant currency compared to the third quarter last year. That’s a slowdown from the second quarter this year when ad-supported revenues grew by 15.6% in constant currency compared to second quarter 2021.

“We noted we would not be immune to a downturn in the advertising market, which is indeed what happened,” Grainge said on the call discussing the company’s earnings for the third quarter, which ended Sept. 30. “The slower growth in the third quarter in ad-supported streaming revenue was offset by growth in so many other areas of our business. From subscription to licensing, live touring to merchandising, to continued growth throughout music publishing.”

Subscription revenues grew by 8.7% from a year ago in constant currency — a measure UMG uses to strip out fluctuations in foreign exchange markets. UMG chief financial officer Boyd Muir said subscriber growth among the digital streaming providers remains healthy and “we have not seen any signs of economic related slowdowns.”

Licensing and other revenue grew by 30.2% in constant currency due to the recovery of live touring in certain European, Latin American and Asian markets where UMG is involved in that business. Merchandising and other revenue grew by over 100% in constant currency compared to the year ago quarter, also helped by growth in touring.

The company saw an $80 million increase in touring revenues in the quarter compared to last year from top selling acts like BTS, BLACKPINK, Ado, INI and Morgan Wallen, executives said.

While a significant contributor to the company’s quarter, touring earns UMG a lower profit margin compared to its other businesses, Muir said.

“As I’ve mentioned before, that’s a very low-margin business — let’s call it, the 8% to 10% kind of area,” Muir said. “Nevertheless, it’s an incredibly important part of our business. And it means that we can actually connect the fan with the artists. So it’s of increasing importance to us as we address the requirements of the super fans.”

Looking to the next quarter, the executives said to expect the company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin, a closely watched metric of profitability, to be flat for the year at around 20.8%.

The company’s stock price closed down 5.61% on Friday (Oct. 28).

French music streaming company Deezer posted revenue of 115 million euros ($112.5 million at the Sept. 30, 2022 exchange rate) in the third quarter, up 13.8% from the prior-year period (11.4% at constant currency), the company announced Thursday. Following the news, Deezer’s stock closed up 0.59% on Friday (Oct. 28).
The quarter was bolstered by a 13.8% improvement in average revenue per user (ARPU) to 3.9 euros ($3.81) from the third quarter of 2021. Deezer attributed the improvement primarily to price increases implemented in France in January 2022 — individual plans increased from 9.99 euros to 10.99 euros per month and family plans climbed from 14.99 euros to 17.99 euros per month.  

Other subscription services have followed — or likely will follow — Deezer’s lead in raising prices. Apple’s decision on Monday to raise prices on Apple Music “was extremely good news for us,” said Deezer CEO Jeronimo Folgueira during Thursday’s earnings call.

Folgueira also encouraged by comments made Tuesday by Spotify CEO Daniel Ek about possible price increases in early 2023. “We have been the first ones to raise prices very successfully and now that the competitors follow, obviously that is a good thing for the industry as a whole,” Folgueira said. “It also makes us more competitive once competitors increase prices.”

Folgueira does not expect Deezer to further raise prices in 2023 but he didn’t rule it out, either. “We always remain flexible when it comes to pricing,” he said.

Deezer’s ARPU growth was partially offset by a higher proportion of family plan subscriptions, which carry a higher price than individual plans but allow up to six subscribers per account. At the same time, Deezer saw strong business-to-consumer subscription growth in France, adding 300,000 to 3.4 million in its home markets. The ARPU gain more than compensated for a 2.5% decline in total subscribers to 9.4 million — the same number as the second quarter of 2022.  

Outside of France, Deezer’s B2C subscribers fell 15.8% year-over-year, from 2.7 million to 2.2 million, although the loss in the third quarter was a more modest 4.4%, or 100,000 subscribers. That decline was due to Deezer’s decision to focus more on a smaller number of larger markets — including France, Germany, U.S. and Brazil — and reducing unprofitable spending in elsewhere. Also, Deezer shut down its business in Russia at the end of the first quarter.  

The company expects to finish the year with about 455 million euros ($445 million) of revenue, a 14% improvement from 2021. Deezer expects to see benefits from its new partnership with media company RTL in Germany in the second half of the year. More price increases should help bolster ARPU and revenues, too. In an Oct. 4 investor presentation, Deezer revealed it plans to raise prices in the U.S. and Germany in October and Brazil in December. Additionally, Deezer will increase the price on all existing iOS users in November, which Folgueira said “willl have a substantial impact” on fourth-quarter earnings results.  

Universal Music Group said revenues rose 13.3% to 2.66 billion euros in the third quarter at constant currency, as sales from BTS, BLACKPINK and Ado helped the world’s largest record label report growth across all segments on Thursday. Without considering changes in foreign currency exchange rates, revenues were up 23.7%.

The first of the major labels to report earnings this season, UMG said recorded music revenue grew 10.1%, music publishing revenues grew 6.9% and merchandise and other revenues grew 101.1% in the third quarter ending compared to a year ago based on constant currency conversion.

“Through our innovation, global reach, and unique understanding of the evolution of the market, we are continually improving the monetization of music and music-related content, generating high-quality revenue and recurring income from more sources than ever before,” UMG Chairman and Chief Executive Sir Lucian Grainge said in a statement.

UMG’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 9.1% compared to the year ago quarter, driven by the strong increase in revenue.

Included in the revenue growth for the quarter was a 71 million euro benefit from the settlement of a copyright infringement lawsuit with an internet service provider, the company said. UMG also said the quarter included a 21 million euro hit in its music publishing division from a change in accounting policy. These factors also provided a 52 million benefit and a 7 million euro drag respectfully to the company’s EBITDA and Adjusted EBITDA for the third quarter.

Q3 Results:

Company-wide revenues rose 13.3% to $2.664 million in constant currency for the third quarter ending Sept. 30 from a year ago.Recorded Music revenues rose 10.1% to €2,060 million in constant currency.Subscription and streaming revenue grew 7.7% in constant currency, with subscription revenue up 8.7% in constant currency.Ad-supported streaming revenue grew 5.2% in constant currency.Physical revenue declined 9.6% in constant currency, which the company attributed to a weaker release schedule compared to the prior year.Downloads and other digital revenue were up 55.7% in constant currency in large part due to the settlement of the copyright infringement lawsuit.License and other revenue rose 30.2% in constant currency helped by strong touring revenues.Merchandising and other revenue of 189 million euros was up 101.1% in constant currency due to a rebound in touring-related merchandise revenue.