Music Stocks
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SiriusXM’s stock rose 2.6% on Tuesday (Sept. 10), the first full day of trading since it merged with Liberty Media’s tracking stock to create a single, streamlined public stock. SiriusXM said last December that it would merge its stock with Liberty SiriusXM Holdings to simplify and eliminate confusion around its multiple share classes and create […]
Music stocks were off sharply this week as global markets were roiled by worries about the health of the U.S. economy and Friday’s disappointing jobs report.
K-pop stocks suffered big declines this week as a major Korean stock market index had its biggest one-day decline ever. South Korea’s KOSPI composite index fell 8.8% on Monday as investors were gripped with fear about a U.S. recession. The market improved the following day, but the KOSPI ended the week down 4.9% to 2,544.81.
South Korean music companies were unfortunate casualties during the week of upheaval. The four main K-pop companies fell an average of 10.8% and their average year-to-date loss increased to 40.9%. HYBE fell 10.2% to 165,000 won ($123.25), bringing its year-to-date loss to 29.1%. YG Entertainment slipped 9.8% to 30,800 won ($23.01). SM Entertainment fell 10.4% to 56,300 won ($42.05). JYP Entertainment fared the worst, dipping 13.0% to 44,450 ($33.20) and bringing its year-to-date loss to 56.1%.
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The Billboard Global Music Index fell 4.8% to 1,744.64, reducing the year-to-date gain to 13.7% and marking the index’s worst week since it fell 5.1% in the week ended Feb. 24, 2023. The broader stock market had a miserable week. In the United States, the Nasdaq composite fell 5.8% and the S&P 500 slipped 4.2%. In the United Kingdom, the FTSE 100 lost 2.3%. China’s Shanghai Composite Index fell 2.7%.
Just three of the BGMI’s 20 stocks finished the week in positive territory, and two of the three winners are among the index’s smallest contributors. The top stock, Believe, which gained 3.7% to 15.06 euros ($16.69), has a float of less than 4% after a consortium led by CEO Denis Ladegaillerie acquired nearly the entire share capital.
The second-best performer, Anghami, has the smallest market capitalization of all index companies at $23 million. The Abu Dhabi-based music streamer gained 2.3% to $0.90 after announcing Thursday (Sept. 5) that its video streaming subscriptions increased 18% since the majority investment by OSN Group, owner of MENA-based video-on-demand streaming platform OSN+, in April.
Live Nation fell 5.0% to $92.81 despite two positive analyst opinions this week. BofA Securities initiated coverage of Live Nation this week with a $125 price target and a “buy” rating. Oppenheimer, which dropped its Live Nation price target from $120 to $110 in May, raised it back to $120 on Friday.
Sphere Entertainment Co. dropped 7.1% to $43.27 after Benchmark downgraded Sphere shares to “sell” with a $40 price target, well below the prior day’s $46.60 closing price. Benchmark analyst cited concerns about “scalability, high production costs, and a potentially underwhelming profitability outlook” for the $2.3 billion Las Vegas venue.
The week’s largest decline came from SiriusXM, which fell 17.0% to $2.73. On Wednesday (Sept. 4), SiriusXM and Liberty Media announced the final exchange ratio for the pending merger of SiriusXM’s and Liberty Media’s tracking stock, Liberty SiriusXM Holdings. On Monday (Sept. 9), Liberty Media will redeem each outstanding share of Liberty SiriusXM common stock for 0.8375 shares of the new SiriusXM stock. SiriusXM shareholders will receive 0.1 shares of the new SiriusXM stock, which will trade under the same SIRI ticker as the current SiriusXM stock. Following the merger, former holders of Liberty SiriusXM stock will own roughly 81% of the new shares.
The BGMI’s most valuable component, Spotify, fell 5.9% to $322.75. Another major stock on the index, Universal Music Group (UMG), dropped 3.0% to 22.93 euros ($25.42). UMG will host investors and analysts at its Capital Markets Day on Tuesday (Sept. 10).
The year-old Sphere venue quickly became a must-see attraction in Las Vegas, but some analysts don’t believe the eye-grabbing, multi-purpose venue has a viable business model. Benchmark downgraded Sphere Entertainment Co. to a “sell” rating on Tuesday (Sept. 3) with a $40 price target, sending the stock down 4.4% to $44.55. Benchmark downgraded the stock […]
HYBE shares benefitted from the company’s dismissal of Min Hee-Jin as CEO of the imprint ADOR, gaining 4.4% in a rare positive week for a stock that has fallen 21.0% in 2024.
Min will continue to produce music for ADOR artist NewJeans, but the label will restructure in order to separate management from production. Turbulence between HYBE and Min dates back to April when HYBE reported Min to the police for breach of trust and other allegations. The company stated that Min “deliberately led the plan to take over management control of the subsidiary” and ordered ADOR’s management to pressure HYBE into selling its shares in the subsidiary. The following month, a court blocked HYBE’s plan to dismiss Min.
The controversy has coincided with a steep decline in HYBE’s share price. HYBE was 230,500 won ($172.33) on April 19, the trading day before HYBE announced it would investigate Min, and had fallen 20.0% to 184,400 won ($137.86) by Friday (Aug. 30). But the HYBE-Min dispute isn’t the only explanation for HYBE’s sluggish stock performance. HYBE’s three main South Korean competitors—SM Entertainment, YG Entertainment and JYP Entertainment—have lost an average of 38.1% this year.
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The 20-company Billboard Global Music index rose 0.2% to 1,832.97, bringing its year-to-date gain to 19.5%. Eleven of the 20 stocks gained this week, while seven lost ground and two were unchanged. Cloud Music, the week’s top music stock, gained 5.2% to 97.70 HKD ($12.53), bringing its year-to-date increase to 8.9%. SiriusXM improved 2.8% to $3.29. Tencent Music Entertainment gained 2.0% to $10.44.
Spotify was effectively unchanged at $342.88 despite Evercore ISI raising its price target on Spotify to $460 from $420. Universal Music Group gained 1.5% to 23.63 euros ($26.14) after Exane BNP Paribas upgraded the stock to “outperform” and a raised its price target to 27.50 euros ($30.42).
While HYBE was among the week’s winners, other K-pop stocks had another off week. JYP Entertainment, purveyor of Stray Kids and TWICE, fell 1.5% to 51,100 won ($38.20). BLACKPINK’s agency YG Entertainment lost 3.8% to 34,150 won ($25.53). And SM Entertainment, home to RIIZE and Vespa, slipped 5.4% to 62,800 won ($46.95).
Stocks were mixed this week as investors await news from the U.S. Federal Reserve that it will cut interest rates in September. In the United States, the Nasdaq fell 0.9% to 17,713.62 and the S&P 500 rose 0.2% to 5,648.40. In the United Kingdom, the FTSE 100 gained 0.6% to 8,376.63. South Korea’s KOSPI composite index dropped 1.0% to 2,674.31. China’s Shanghai Composite Index fell 0.4% to 2,842.21.
The Schulhof surname first became associated with the music business when former Sony America vice chairman Mickey Schulhof led the negotiations to acquire CBS Records in the late 1980s. But his son David staked out his own territory in 2006, when, backed by Trilantic Capital Partners, he used institutional money to buy music publishing assets from songwriters as a co-founder of Evergreen Copyrights — an early player in the song catalog gold rush that would extend into the 2020s. Schulhof and his partners later sold Evergreen to BMG for $80 million in 2010. Now, after spending about a dozen years as a publishing and business development executive for various film studios — as well as a two-year stint as a managing director of G2 Investment Group, a spinoff focusing on media assets for private equity firm Guggenheim Partners — the 53-year-old Georgetown University graduate is touting music industry stocks to retail investors through his latest undertaking, MUSQ Global Music Industry ETF.
ETFs, or exchange-traded funds, are essentially hybrids of mutual and index funds that enable investors to participate in the performance of publicly traded companies without buying individual stocks. ETFs tend to focus on a specific industry or investment theme. MUSQ (pronounced “music”) is an industry index fund that lets retail investors participate in the music industry’s growth through investments in 40 to 50 mainstream company stocks, including the three major-label groups, the major digital service providers (Spotify, Amazon, Apple and Alphabet), Live Nation, SiriusXM, LiveOne and Sonos. It also includes international music companies HYBE, Alex, CTS, Believe and HIM International Music.
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Schulhof, who designed the parameters of the index — which is a passive investment vehicle — and serves as its sponsor, launched MUSQ on July 7, 2023, with $2 million in seeding from Goldman Sachs. That investment enabled the creation of about 100,000 shares in the ETF. On that first day of trading, it closed at $24.95. Today, the fund has grown to about 900,000 shares and is backed by the stocks of music companies that carry a net asset value of about $22.8 million.
On Aug. 6, MUSQ closed at $22.17 a share, a week after Schulhof talked to Billboard about his reasons for creating the fund, as well as its performance since its launch.
The MUSQ website lists you as CEO of the fund. If you are the creator and the chief executive, why doesn’t your name appear on any of the financial filings with the U.S. Securities and Exchange Commission? Jay Garrett Stevens is listed as the CEO in the annual report.
Once I owned the index, I licensed it. There are maybe a half a dozen white-label, turnkey service providers that manage and work with ETF investment trusts. In order to be listed on any of the stock exchanges, the fund has to be a trust. So I identified what I believe to be the best ETF service provider out there, Exchange Traded Concepts. If you go to their website, you’ll see they manage several billion dollars and something like 60 ETFs across all kinds of other thematic funds. Garrett is the CEO of ETC, and he is listed in all those filings like that, as are the names of [ETC’s] portfolio advisers.
Promotional materials that Schulhof handed out during MUSQ’s first day of trading.
Nina Westervelt
In that case, what is your role with the MUSQ fund?
I am the founder, sponsor, owner and CEO. I handle all marketing. I am the face for this fund. I’ve done tons of podcast interviews and things like Fintech.tv. When reporters call, I am the one talking about the results from Luminate’s midyear report, Goldman Sachs’ Music in the Air report or something Billboard may have written about. I’m also out there talking to investors, evangelizing about how the music industry is undermonetized, and cheap when it’s compared to streaming services like Netflix or Hulu.
How do your service providers work with MUSQ?
ETC is doing all the back-office work for me. They are the adviser and the trading subadviser. Here’s an analogy: If I buy a publishing catalog and outsource it to Kobalt to handle the collections, accounting and to deal with all the other back-office stuff, it’s basically the same thing. Meanwhile, VettaFi does the rebalancing of the index fund every quarter, aligning it with the eligibility requirements for the companies’ shares in the fund. I give those results to ETC.
Do you have any fiduciary responsibility for the fund?
No. What I do on a daily basis besides marketing is deal with all the compliance. I get everything cleared and [Financial Industry Regulatory Authority-approved]. And I need to get my appearances on podcasts and other media approved by compliance if I want to put them on our website.
What are the eligibility requirements for a company’s shares to be considered for inclusion in the MUSQ index?
Companies eligible for the MUSQ index either have to generate more than 50% of their revenue from music or they have to be a top five player in [music] streaming or content, live music, ticketing, technology or radio. If you look in our fund, we do have Apple, Amazon and Google, and clearly those names don’t generate more than 50% of their revenue from music, but they are among the top five players in the streaming category.
A plaque that the New York Stock Exchange presented to him on July 13, 2023, when he rang the closing bell.
Nina Westervelt
What other requirements or restrictions does MUSQ have?
No single stock can be greater than 5% of the fund’s overall holdings. It used to be 7%, but I lowered it. If a company has a good year and its stock comprises 8% of the index, it would be rebalanced at the end of the quarter. Other rules: No company can have less than a $100 million market capitalization or a daily trading liquidity of less than $500,000 per day. So those rules help give the index a good crosssection of small-cap, midcap and large-capitalization companies with liquidity. And I added a small buffer: If a company drops below $100 million in market cap, then their capitalization weight is cut in half. If the stock price continues to drop in the next quarter, it comes off the index.
Have any mainstream music industry stocks not met the requirements to be included in the index?
You may notice Deezer is not in our index. Even though it has over a $200 million market cap, it does not meet the daily trading liquidity requirement.
Have any companies been removed from the index?
IHeart was once in our fund but the stock is down 70%, so it is no longer in the index. The reverse is true if a small [music-related] company grows and now has a market cap greater than $100 million and it also has the required daily trading level of liquidity. Then it can become eligible. It has to have both ingredients.
When a big company in the index releases its financials, does it have much of an impact on the index’s share price?
Yes. The share price is based on the net asset value, but earnings do have an impact. Spotify right now has an average weight of about 3.4% in our fund, so it’s a top 10 holding. The stock crushed earnings in July, and year to date it’s up almost 70%, so that’s going to have a greater weight this quarter because it delivered stellar results. Other stocks like Believe and Tencent are posting positive returns that will have an impact on the weighting. But no single name can be greater than 5% of the fund. MUSQ pricing has been pretty stable during the past year [ranging from a high of $25.82 on July 31, 2023, to a low of $22.17 on Aug. 5, 2024].
This signed copy of Dr. Dre’s The Chronic is a souvenir from Schulhof’s first music industry internship with Jimmy Iovine at Interscope. Dre’s inscription: “Join the Chronic Patrol and take the hit of the bomb shit! Stay up.”
Nina Westervelt
What happens when the stocks in the index aren’t doing well?
MUSQ is a highly diversified, uncorrelated fund. So when the markets are tanking, MUSQ is not tanking. Also, we’re not a meme play in any way. This is really designed to capture the growth and accurately track the global music industry. We view this as a long-term growth investment for investors.
Does MUSQ consist entirely of equity investments, or do you buy fixed-income instruments from these companies too?
They are all equities.
You say your fund is diversified by music industry sector, geography and genre.
The index has labels and music publishers that supply content, it has companies in the concert business, it has technology stocks, and those companies are diversified by genre. Also, the index is diversified across many countries. Today, it looks like 49% is U.S., 21% is Korean, 11% is Japan. If you go to the index page on our website, it will give you a breakdown. Internationally, we’ve got some exciting companies: Tencent in China, CTS Eventim in Germany, Hipgnosis in the U.K., Believe in France. And then we’ve got 10 or 11 K-pop stocks like Genie Music Corp and Cocoa, [and] the two biggest streaming companies in South Korea, HYBE and YG Entertainment. We have companies like Cloud Music and Avex in Japan and Amuse, one of the biggest content companies in Taiwan.
Does having international companies make the index more attractive to investors?
All the international companies in this fund trade in local currencies. You would have to open up local accounts to trade them, and that costs fees. MUSQ creates a very liquid, convenient and portable way for investors to have access to all these exciting companies.
Guitar that Bruce Springsteen autographed for Schulhof when they met after a show on the 1996 Ghost of Tom Joad tour.
Nina Westervelt
How did you do on Hipgnosis?
Hipgnosis was 2.3% weight in our fund and because Blackstone is taking it private, it is up 42%, so we made money on it.
Your fund has grown from $2 million in assets to over $20 million in assets. What’s the next goal?
To reach $25 million. A lot of financial firms have that as a minimum before they offer it to their customer. Beyond that, it’s $50 million. If the MUSQ fund gets to that point, it would have hundreds of thousands of financial advisers offering it as an investment option.
CTS Eventim shares finished the week up 5.3% after the company sounded upbeat about the second half of 2024 in its Thursday (Aug. 22) earnings release.
Based on its performance in the first half of the year, the German promoter and ticket seller expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) “to grow significantly” in the latter half of the year. Second-quarter adjusted EBITDA improved 23.3% to 110.0 million euros ($118.4 million) with the help of the June acquisition of See Tickets from Vivendi.
CTS Eventim is among the best-performing music stocks of 2024, having gained 34.5% year to date. That gain outstrips fellow promoter Live Nation (up 25.0%) and lags behind only Believe (up 43.3%), Sphere Entertainment Co. (up 47.3%) and Spotify (up 82.3%).
Trending on Billboard
As well as CTS Eventim fared this week, three other music companies had larger gains. iHeartMedia jumped 19.0% to $1.42, continuing its tendency to rise and fall in the absence of any market-moving news or financial releases. SiriusXM rose 6.7% to $3.00, perhaps assisted by news the company signed Gen Z podcaster Alex Cooper (Call Her Daddy) in a move that could help bring a younger audience to its new streaming app. HYBE improved 6.1% to 166,400 won ($125.60).
Chinese music streamer Cloud Music gained 1.4% to 91.60 HKD ($11.75) after the company posted revenue of 4.07 billion RMB ($571 million), up 4.1%, in the first half of 2024, it announced Thursday (Aug. 22). Like the leading Chinese music streamer, Tencent Music Entertainment, Cloud Music has two segments that are headed in opposite directions. Music subscription revenue grew 26.6% to 2.56 billion RMB while social entertainment and other revenue fell 19.9% to 1.51 billion RMB ($212 million).
An unusually large majority of music stocks posted gains this week. The Billboard Global Music Index gained 2.7% to 1,829.18, bringing its year-to-date increase to 19.2%. Of the 20 stocks on the index, 17 were gainers and just three lost ground. Three radio companies (iHeartMedia, Cumulus Media and SiriusXM) led the way with an average gain of 8.8%. Multi-sector companies (including Universal Music Group, Warner Music Group and HYBE) rose an average of 3.4%. Live music companies had an average gain of 3.0%.
Streaming companies fell by an average of 0.2%. In fact, all three companies in the red this week were music streamers: Deezer (down 0.5%), Tencent Music Entertainment (down 2.8%) and Anghami (down 3.3%). Spotify, the index’s largest component, gained 1.5% to $337.38.
Stocks were up in the U.S. on positive economic news. After U.S. Federal Reserve chair Jerome Powell suggested on Friday (Aug. 23) it would soon cut interest rates, both the S&P 500 and Nasdaq finished the week up 1.4%. In South Korea, where trading was closed by the time the Federal Reserve statement made news, the KOSPI composite index rose 0.2% to 2,701.69. Likewise, China’s Shanghai Composite Index fell 0.9% to 2,854.37. In the United Kingdom, the FTSE 100 rose 0.2% to 8,327.78.
Sphere Entertainment Co. shares spiked 22.3% this week after the company’s fiscal fourth-quarter earnings on Wednesday (Aug. 14) showed that the Las Vegas venue brought in $151 million in the quarter and $489 million in its first three full quarters of operation. Total revenue of $273 million — a figure that includes MSG Networks — was in line with analyst estimates while earnings per share beat estimates.
During Wednesday’s earnings call, CEO James Dolan said the company is learning how to get the most out of the $2.3 billion venue with not just concerts but corporate and sporting events and Sphere’s current cash cow, motion pictures. “Our plan for Sphere is to create widespread demand for our offerings and drive utilization far in excess of traditional venues,” Dolan said.
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After hosting residencies by U2, Phish and Dead & Company, Sphere will begin a string of concerts by the Eagles from September to November and will host its first EDM events in December with Italian producer Anyma. Dolan didn’t provide specifics about additional residencies but said to expect an artist in “the country category” in 2025.
LiveOne’s shares rose 16.3% this week after the Los Angeles-based music streamer announced its fiscal first-quarter earnings on Tuesday (Aug. 13). A 29% increase in paid members, to 653,000, helped revenue improve 19% to $33.1 million from $27.8 million in the year-ago period. Adjusted earnings before interest, taxes, depreciation and amortization jumped 31% to $2.9 million.
The 20-company Billboard Global Music Index (BGMI) fell 0.7% to 1,780.54 despite most of the stocks gaining and the market enjoying one of its best weeks of 2024 thanks to a host of positive news. Driven by stronger-than-expected retail sales data on Thursday (Aug. 15) and encouraging inflation news earlier in the week, the tech-heavy Nasdaq rose 5.3% to 17,631.72 and the S&P 500 finished its best week of the year, gaining 3.9% to 5,524.25.
The BGMI’s largest companies fell in the middle of the pack. Live Nation shares were up 3.2% to $95.18 and Universal Music Group rose 0.9% to 22.35 euros ($24.66). Among the losers were Warner Music Group, down 0.4% to $28.22, and Spotify, down 0.7% to $337.38.
Stock gains were seen globally. In the United Kingdom, the FTSE 100 rose 1.8% to 8,311.41. South Korea’s KOSPI composite index jumped 4.2% to 2,697.20. China’s Shanghai Composite Index edged up 0.6% to 2,879.43.
Tencent Music Entertainment (TME) dropped 18.8% this week following its second-quarter earnings release on Tuesday (Aug. 13). TME revenues were 1.7% lower as gains in music were overshadowed by losses in social entertainment. Despite the sharp decline, TME shares are still up 16.9% year-to-date.
TME’s latest quarterly results weren’t unlike those that preceded it, with strong music subscription growth at music apps QQ Music, Kugou Music and Kuwo Music helping offset a decline at its karaoke business. While music average revenue per user grew 10% and TME finished the quarter with 117 million music subscribers, the company’s weak guidance on future subscriber growth likely caused its share price to fall.
JYP Entertainment’s 11.3% decline following its second-quarter earnings results marked the second-worst performance for BGMI stocks. The K-pop company’s revenue dropped 37% due to an 82% decline in album sales. Other K-pop companies experienced lighter declines: HYBE fell 3.4%, SM Entertainment slipped 3.8% and YG Entertainment dropped 1.3%. Those losses deepened the K-pop companies’ already significant losses in 2024. Year to date, the four South Korean companies have lost an average of 34.8% while the KOSPI composite index has gained 1.6%.
The shine on the music industry, a darling of Wall Street in recent years, appears to have lost a bit of its luster.
Record label and publisher stocks that boomed in 2023 are mostly down in 2024. Universal Music Group (UMG), riding high until two weeks ago, is down 14.0% through Thursday (Aug. 15). Warner Music Group (WMG) is off 21.0%. Reservoir Media is up 2%, although it has declined 15.0% since July 26. K-pop companies have fallen off a cliff.
Not that business is bad — far from it. But as companies released earnings results over the last couple weeks, good results have occasionally been overshadowed by a financial metric — namely, subscription growth — that either missed expectations or is headed in the wrong direction. In some cases, the results were simply disappointing.
Ever since UMG produced weaker-than-expected subscription growth in the second quarter, analysts and investors have been revisiting their forecasts, wondering if they set their expectations too high and trying to figure out if UMG’s results reflect the broader market. The company’s recorded music subscription revenue rose 6.5% in the quarter, about half of analysts’ expectations.
Although UMG executives warned against reading too much into the results from any one quarter, investors did exactly that. UMG’s share price, which had been among the better performers in its label-publisher peer group in 2024, dropped 24% in a single day despite UMG posting a 10% increase in revenue and better margins than a year earlier.
Trending on Billboard
Subscription growth isn’t the only facet of the modern music business, but it’s probably the main reason most investors bought into music companies. As Billboard wrote in March, the music business is increasingly reliant — perhaps too much so — on subscription revenue. In the U.S. in 2023, subscription revenue accounted for 59.3% of recorded music revenue, up from 57.8% in 2022 and far above 47.3% in 2018, according to the RIAA. With ad-supported streaming stagnant, subscriptions take on even greater importance.
Subscription revenue was on everybody’s mind when WMG released earnings a week later. The company’s streaming revenue didn’t show signs of UMG’s slippage, though, which suggested the reaction to UMG’s quarter may have been overblown. WMG’s recorded music subscription revenue was up 7% while ad-supported streaming revenue was unchanged. The streaming market, said CEO Robert Kyncl during the Aug. 7 earnings call, is “diverse,” “healthy’ and has more room for subscriber growth. While analysts’ opinions varied, investors seemed happy enough, as WMG’s share price gained 2% that day.
Sony Music had similarly positive streaming results in its latest fiscal quarter. Total recorded music streaming revenue improved 6%, suggesting subscription revenue exceeded 6% to compensate for a small decline in ad-supported streaming.
Often overshadowed by UMG and WMG, Reservoir Media has delivered consistent growth since going public in 2021. The company’s latest earnings results delivered more of the same: Revenue was up 8% and operating income before depreciation and amortization jumped 27%. While there was a decline in recorded music revenue, it couldn’t be attributed to a stubborn streaming market. Rather, Reservoir was riding high a year earlier from the reissue of De La Soul’s catalog, which it picked up in the 2021 acquisition of Tommy Boy Music. Even so, its share price is down 11.9% since its quarterly earnings release while the S&P 500 is up 2% over the same period.
K-pop is a different story altogether. While these South Korean companies are riding the genre’s success to aggressively expand globally through partnerships, joint ventures and acquisitions, they’re showing signs of growing pains. Year-to-date through Aug. 15, the four main K-pop companies’ share prices had dropped an average of 35.5%.
Second-quarter results explain part of the decline. Three of those K-pop companies had an average decline in net income of 84%, while the fourth saw its net profit turn into a net loss. At JYP Entertainment, home to Stray Kids and iTZY, revenue dropped 37% and net profit plummeted 95%. SM Entertainment managed a 6% increase in consolidated revenue — the main SM Entertainment segment fared far better than its subsidiaries — but net profit still dropped by 70%. HYBE’s revenue increased 6% and set a quarterly record, but its net profit slipped 86%.
The South Korean companies’ relatively small rosters and lack of diversity help explain a quarter-to-quarter shortfall. JYP Entertainment, for example, was missing its most popular artists from its second-quarter album release schedule — a problem for a K-pop label dependent on fans’ tendency to buy CDs. (albums accounted for 49% of total revenue a year earlier). With an 82% drop last quarter, albums’ share of revenue fell to just 14%.
There’s plenty of opportunity for companies to regain their luster. UMG CFO Boyd Muir insisted the company will consistently deliver high single-digit revenue growth. WMG’s Kyncl insisted that “streaming dynamics remain healthy” and the company sees “plenty of headroom for subscriber growth” globally. K-pop labels won’t go two successive quarters without priority releases to pad sales figures. Any single quarter may have a hiccup, but the long-term trend lines are still pointing in the right direction.
During a chaotic week for stock markets around the world, Universal Music Group (UMG) shares rose 3.3% to 22.15 euros ($24.20), enough to make the Amsterdam-listed company the top-performing music stock of the week.
Stocks were hammered on Monday (Aug. 5) as markets reacted to a disappointing U.S. jobs report the prior Friday (Aug. 2), leading to mounting concerns the economy could fall into a recession. The Billboard Global Music Index fell 2.0% on Monday, though it experienced a lighter decline than both the Nasdaq (down 3.4%) and the S&P 500 (down 3.0%). Investors didn’t panic, however, and markets made gains over the remainder of the week. On Friday (Aug. 9), the Nasdaq closed down 0.2% for the week while the S&P 500 broke even.
UMG received a boost on Wednesday (Aug. 7) from Warner Music Group’s quarterly earnings report — a welcome change after a second-quarter slowdown in UMG’s streaming growth so worried investors that the company’s shares fell 24% the following day. WMG’s latest earnings results, which showed that recorded music streaming revenue grew 8.7% after a few adjustments, may have convinced some UMG investors that they overreacted. In light of this new information, UMG shares jumped 6.6% to 22.74 euros ($24.85) on Wednesday. Notably, this Friday’s closing price is 14% above the lowest closing price — 21.12 euros ($23.08) — since the 24% decline occurred on July 25.
Trending on Billboard
WMG shares rose 0.3% to $28.34 this week after the company announced that quarterly revenue dropped 1% and net profit improved 14%. The third-largest major’s streaming gains satisfied some, but not all, analysts. Morgan Stanley analysts cited “lowered streaming growth outlook” in lowering their price target to $35 from $41. Guggenheim, encouraged by WMG’s subscription revenue growth acceleration and performance relative to UMG, maintained its $44 price target. JP Morgan, which sees WMG as “well positioned” to capture paid streaming adoption, left its $41 price target unchanged.
The Billboard Global Music Index, a float-adjusted measure of 20 companies’ market capitalizations, rose 3.1%, breaking a streak of four consecutive weeks with a loss. Spotify, the index’s largest component, gained 2.6% to $339.69. Tencent Music Entertainment, which will report earnings on Tuesday (Aug. 13), rose 2.8% to $12.97.
In the United Kingdom, the FTSE 100 declined 3.6% to 8,168.10. South Korea’s KOSPI composite index fell 3.3% to 2,588.43. China’s Shanghai composite index dropped 1.5% to 2,862.19.
iHeartMedia shares fell 10.7% to $1.33 following the company’s second-quarter earnings on Thursday (Aug. 8). The company reported a 1% increase in second-quarter revenue and sounded optimistic that political advertising will provide a boost to the full-year results. Both third-quarter and full-year revenue are expected to be up by mid-single digits.
Shares of radio broadcaster Townsquare Media dropped 5.8% following the company’s second-quarter results on Tuesday. Revenue fell 2.5% and net loss increased to $48.9 million from $2.7 million in the prior-year period. Its $0.14 earnings per share missed the Zacks Consensus Estimate of $0.42.
K-pop stocks were the hardest hit music stocks on Monday (Aug. 5) as global markets continued Friday’s decline in the U.S. with major selloffs. Four K-pop companies — HYBE, SM Entertainment, JYP Entertainment and YG Entertainment — fell an average of 8.8% on Monday, while a major South Korean stock index, the KOSPI composite index, […]