Music Stocks
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News that Concord plans to buy Round Hill Music Royalty Fund for $1.15 per share sent Round Hill shares soaring 64.4% on Friday (Sept. 8), from $0.6875 to $1.13 per share. They finished the week up 62.6%, leading all music stocks by a wide margin.
The deal, which must be approved by at least 75% of Round Hill’s shareholders at the company’s Oct. 18 general meeting, values the rights in the fund at nearly $469 million. On March 6, an independent valuation from Citron Cooperman put Round Hill’s economic net asset value at $519.6 million, according to the company’s 2022 annual report. That puts Concord’s bid at a 9.7% discount to economic NAV — a vast improvement from the 46% discount the stock had been trading at before the deal was announced.
Round Hill competitor Hipgnosis Songs Fund was also a beneficiary of Concord’s announcement. Shares of Hipgnosis rose 15.7% to 0.923 pounds ($1.15) on Friday, bringing the stock’s one-week gain to 16.8%. Hipgnosis shares have been trading at a steep discount to the company’s net asset value — a measure of the company’s catalog, less liabilities — and hadn’t closed above 0.923 pounds since Sept. 27, 2022. The fact that Concord found a buyer at a price close to its NAV could have signaled to Hipgnosis investors that its shares should be trading closer to its NAV. Some Hipgnosis investors may have also believed that, like the Concord deal, Hipgnosis could also find a suitor that would bid close to the NAV.
Round Hill and Hipgnosis were — by far — the biggest gainers of the week. Overall, the 21-stock Billboard Global Music Index dropped 0.8% to 1,348.41. Year-to-date, the index has gained 15.5%.
No other music stocks had a double-digit gain, and just six others finished the week in positive territory. Twelve stocks lost ground this week and one stock, music streamer Anghami, was unchanged. French music streamer Deezer gained 6.8% and was probably helped by its announcement of a partnership with Universal Music Group to adopt a new system for calculating streaming royalties. Universal Music Group shares improved 3.8% to 23.52 euros ($25.20).
Stocks were down around the world this week. In the United States, the S&P 500 fell 1.3% and the Nasdaq composite dropped 1.9%. South Korea’s KOSPI composite index lost 0.6%. In the United Kingdom, the FTSE 100 was a bright spot with a slight 0.2% gain.
With the help of Round Hill and Hipgnosis, the eight stocks in the record labels and publishing category on the Billboard Global Music Index had an average gain of 10.3%. The other categories saw losses; four live music stocks had a 0.9% average decline, six streaming stocks dropped an average of 3.9% and three radio stocks had a 4.7% average decline.
LiveOne shares fell 10.4% on Friday following the company’s spin-off of its PodcastOne segment on the Nasdaq exchange. That brought its shares’ one-week loss to 21.8%. LiveOne distributed about 19% of PodcastOne shares to LiveOne shareholders of record as of Sept. 5, but the podcast company’s trading debut got off to a rocky start on Friday. Trading under the ticker PODC, shares of PodcastOne owner and operater Courtside Group fell 45.1% to $4.39 from a starting price of $8 per share.
Spotify led a group of high-flying streaming stocks this week by gaining 14.8% to $157.54 per share, increasing its market capitalization by nearly $4 billion to $30.7 billion. The world’s largest streaming company, which boasted 220 million subscribers as of June 30, has clawed back nearly all its losses since its share price dropped 14% […]
Live music companies’ stocks fell an average of 4.4% on this week’s Billboard Global Music Index despite their optimism about sustained consumer spending and healthy revenue and ticket sales in the second half of the year. While Live Nation shares rose 0.5% to $84.79, the other promoters and ticketing companies in the index had down weeks: Madison Square Garden Entertainment fell 2.7%, CTS Eventim dropped 5.7% and Sphere Entertainment Co. plunged 9.6%.
Sphere Entertainment shares have gained over 19% since the company turned on the external display on its state-of-the-art Las Vegas venue and showcased the potential inside the structure on July 5. The company’s second quarter results, released Tuesday, showed revenue of $129.1 million — with the Sphere contributing just $700,000 and the remainder coming from MSG Networks. Sphere’s share price rose nearly 8% to $39.58 following Tuesday’s earnings results but fell nearly 15% over the next three days. The $2.3-billion Sphere will open on Sept. 29 with a 25-date residency by U2.
iHeartMedia shares rose 6.6% for the week to close at $3.56 on Friday (Aug. 25), making the radio giant the week’s greatest gainer on the Billboard Global Music Index. However, radio companies’ struggle with weak national advertising has hurt their share prices overall in 2023. Year to date through Friday, iHeartMedia was down 41.9% and Cumulus Media had lost 41.9%. Audacy, troubled by debt on top of the soft advertising market, was de-listed by the New York Stock Exchange on May 16 and currently trades over the counter at 75 cents per share despite a reverse stock split on June 30 raising the price from 7 cents to $2.13. Audacy was removed from the Billboard Global Music Index following the de-listing.
Overall, the 21-stock Billboard Global Music Index was flat this week at 1,298.80. Ten stocks finished the week in positive territory, ten stocks lost ground and one stock, Round Hill Music Royalty Fund, was unchanged. Record labels and music publishers were the top performing sector with an average gain of 1.7% and only one company, Universal Music Group (down 0.7%), finished in negative territory. Streaming companies and radio companies suffered average weekly losses of 1.3% and 1.7%, respectively.
Year-to-date, the index has increased 11.2%, even as it’s now on its fifth straight week without a gain.
Stocks in general performed better than music stocks. In the United States, the S&P 500 gained 0.8% and the tech-heavy Nasdaq composite gained 2.3%. In the United Kingdom, the FTSE gained 1%. South Korea’s KOSPI composite index gained 0.6%.
The week’s biggest loser, streaming company Anghami, fell 17.5% to 94 cents per share. The stock traded below $1 per share from Wednesday to Friday, marking the first time since July 18 the stock has dropped below $1. On Monday, Anghami announced the sale of a convertible note worth $5 million to SRMG Ventures, a venture arm of Saudi Research and Media Group. The company plans to use the proceeds for working capital, growth and other corporate purposes.
Tencent Music Entertainment topped all music stocks this week after second-quarter earnings on Tuesday helped the company’s share price gain 7.2% to $6.53. The Chinese music streaming company, traded on both the New York Stock Exchange and the Hong Kong Stock Exchange, reported second quarter revenue of $1.01 billion (up 5.5% year over year) and net profit of $179 million (up 51.6%).
Investors tend to react positively when companies report strong subscriber numbers and TME had good news about the surging Chinese market. TME finished the quarter with 99.4 million subscribers, up 20% from the prior-year period, and for the first time its music services (QQ Music, Kuguo Music and Kuwo Music) generated more revenue than its social entertainment services (WeSing). Users’ willingness to pay for copyrighted music, whether to listen to songs or enjoy premium features, “marks a significant step along TME’s growth trajectory,” said CEO Cussion Pang during Tuesday’s earnings call.
Tencent Music Entertainment was the only music stock with a double-digit gain and one of only two stocks to finish the week in positive territory. With Round Hill Music Royalty Fund unchanged, the remaining 18 stocks in the 21-stock Billboard Global Music Index lost ground this week. The index fell 3% to 1,299.04, the fourth straight week the index declined, and has lost 10.2% of its value since peaking at 1,447.32 for the week ended July 21.
Streaming companies (Spotify, TME, Cloud Music, Anghami, Deezer) dropped by an average of 1%. Live music companies (Live Nation, MSG Entertainment, Sphere Entertainment Co., CTS Eventim) had an average decline of 3.1%. Record labels, publishers and distributors (Universal Music Group, Warner Music Group, HYBE, SM, Believe, Round Hill, Hipgnosis Songs Fund) fell an average 4.6%. Radio and satellite broadcasters (SiriusXM, iHeartMedia, Cumulus Media) dropped by an average of 5.1%.
Music stocks’ decline reflected the losses seen by stocks around the world this week. Higher bond yields have helped dampen interest in equities and investors are increasingly looking for safer places to put cash. In the United States, the S&P 500 declined 2.1% and the Nasdaq composite fell 2.6%. In the United Kingdom, the FTSE 100 dropped 3.5%. South Korean’s KOSPI composite index fell 3.3%, the biggest one-week point and percentage decline since Sept. 2022, due to falling operating profits, concerns about the Chinese economy and high interest rates.
K-pop stocks were among this week’s biggest losers. Shares of YG Entertainment and JYP Entertainment, neither of which are in the index, fell 12.1% and 13.3%, respectively. HYBE shares dropped 7.3% and SM Entertainment fell 6.7%. All four K-pop companies’ share prices have made large gains this year, however. Even after this week’s declines, SM, YG and JYP have gained between 63% and 66% while HYBE shares are up 36.3%.
Boosted by K-pop’s growing popularity and artists’ return to concert stages, the four publicly traded South Korean music companies — HYBE, SM Entertainment, YG Entertainment and JYP Entertainment — posted average revenue growth of 71% in the second quarter of 2023, according to Billboard’s analysis of their recent earnings reports.
Sky-high growth rates in recent quarters have helped make the K-pop companies a wise investment in 2023: Through Wednesday (Aug. 16), the four share prices increased an average of 63.6% year to date, adding more than $4.7 billion in market capitalization cumulatively to the companies’ stocks. In contrast, stocks of the two largest standalone music companies, Universal Music Group and Warner Music Group, have gained 3.6% and lost 6%, respectively, year-to-date through Tuesday (Aug. 15).
In terms of revenue growth, the leader in the second quarter was JYP Entertainment, home to the groups Stray Kids and Twice. JYP’s revenue grew 124% to 151.7 billion won ($115.2 million), with new albums by Stray Kids, Twice and NMixx driving a 298% increase in physical sales to 74.1 billion won ($56.3 million). Republic Records, JYP’s partner in the United States, accounted for 14.5 billion won ($11 million) of physical sales, or about 20% of the total amount. Elsewhere, JYP’s concert revenue grew 44% year-over-year to a record 14.4 billion won ($10.9 million) while merchandise sales climbed 151% to 21.7 billion won ($16.5 million). Domestic streaming revenue grew 18% to 2.2 billion won ($1.7 million) while overseas streaming revenue jumped 82% to 10.3 billion won ($7.8 million).
YG Entertainment boasts the greatest share price gain among the group at 75.6% year to date. The company behind breakthrough girl group BLACKPINK, YG posted revenue of 158.3 billion won ($120.2 million) in the second quarter, up 108% from the prior-year period.
JYP Entertainment’s operating income grew 88% to 45.6 billion won ($34.6 million) but missed its 51-billion won estimate, causing the company’s share price to fall 8.2% the following day. Although its revenue grew 124% in the quarter, JYP was hurt by what it called a “temporary increase in content product costs.” As a result, its cost of goods sold rose 162% while gross margin percentage — gross profit as a percent of sales — declined 1.6 percentage points to 47.7%.
Expenses also grew faster than revenue at HYBE, where cost of sales grew 25% while sales, general and administrative expenses climbed 32%. HYBE’s operating profit declined 8% as a result, while net income improved 19% despite a 21% growth in revenue. HYBE’s share price declined just 0.9% the day after the results were released; with a 38.9% gain year-to-date, its stock boasts the lowest appreciation of the four K-pop companies.
Warner Music Group’s share price didn’t improve much this week, but its 5.6% gain nevertheless led the 21 music stocks in the Billboard Global Music Index.
On Tuesday (Aug. 8), Warner Music Group (WMG) reported that its quarterly revenue increased 9% year over year in the fiscal quarter ended June 30. That was music to investors’ ears after WMG’s revenue grew just 1.7% in the previous quarter, but it wasn’t exactly a surprise: WMG executives had previously told investors that the company’s new release schedule was weighted in the back half of its fiscal year and that its financials would pick up accordingly. And a Billboard analysis of Luminate data found that the company’s U.S. market share had started to improve by early May.
Only four of the Billboard Global Music Index’s 21 stocks finished the week in positive territory. Sphere Entertainment Co., the company behind the state-of-the-art Las Vegas venue set to open in September, improved 5.5% to $39.77 and German promoter CTS Eventim gained 4.8% to 61.80 euros ($67.76). Elsewhere, Hipgnosis Songs Fund rose 3.9% to 79.8 pence ($1.01).
This was the third consecutive week the index declined in value after reaching an all-time high in the week ended July 21.
LiveOne shares dropped 4% this week despite the company raising guidance on its fiscal 2024 revenue and adjusted EBITDA. In the fiscal quarter ended June 30, the company — which is behind music streaming platform Slacker and podcast brand PodcastOne — posted revenue of $25.7 million, up 24% year over year, and adjusted EBITDA of $4.9 million, up 46% year over year.
iHeartMedia shares fell 24.9% to $3.38 this week after the company warned of continued softness in advertising. The U.S. radio giant posted second quarter revenue of $920 million, down 3.6% year over year. Other radio companies also declined. Cumulus Media fell 5.9% to $4.96, while Townsquare Media — not a member of the Billboard Global Music Index — fell 19.7% on Wednesday following the company’s second-quarter earnings results but recaptured some of the losses on Thursday and Friday to finish the week down 7.2% at $10.50.
French streaming company Deezer fell 9.4% to 2.12 euros ($2.32) this week and has lost 16% since reporting mid-year earnings on Aug. 3. The company lowered its forecast for full-year revenue growth slightly to a range of 7% to 10%, down from a more than 10% increase. Although the company’s decision to raise its price in 2022 helped its average revenue per user to increase 8.3%, its subscribers declined by 100,000 to 9.3 million from the prior-year period.
In related news, Disney shares rose 4.9% after the company’s second quarter beat earnings expectations, even as it revealed that its Disney+ subscriber count fell 7.4% to 146.1 million in the second quarter. Starting in October, Disney will raise the prices for both ad-free and ad-supported tiers of Disney+ and Hulu by at least 20%. Following the price increases, ad-free Disney+ will cost $13.99 per month and ad-free Hulu will cost $17.99 per month.
Music services have been far more hesitant than streaming video-on-demand services to raise prices. Spotify just increased its individual plan price in the United States — by $1 to $10.99 — for the first time since launching in 2011. By contrast, Hulu last raised its prices in October 2022 and has increased its the price of its ad-free tier by 39% in less than a year.
Music stocks’ decline mirrored stocks’ broad declines this week. In the United States, the S&P 500 and the Nasdaq composite fell 0.3% and 1.9%, respectively. In the United Kingdom, the FTSE 100 was down 0.5%. South Korea’s KOSPI composite index declined 0.4%. News that the U.S. producer price index, a gauge of wholesale prices, rose 3% in July — the biggest one-month gain since January — was a factor in U.S. stock prices falling Friday.
SM Entertainment’s second quarter earnings, which were announced Wednesday (Aug. 2), helped shares of the K-pop music company, home to such acts as NCT Dream and Red Velvet, gain 7.6% to 137,700 won ($105.59) this week. That made it the top performer of the 21 stocks in the Billboard Global Music Index this week. The […]
Triller, a short-form video app in the style of TikTok, is planning to sell its common stock on the New York Stock Exchange through a direct listing under the ticker “ILLR,” according to the company’s S-1 filing released Wednesday (Aug. 2). The filing did not provide a date of the direct listing.
The direct listing — not an initial public offering, or IPO — will not have an underwriter that assumes the financial risk of selling the listed shares to institutional investors. Popularized by Spotify in 2018, a direct listing avoids the IPO’s road show and book-building process that establishes an initial selling price. Triller will not receive any proceeds from shares offered in the direct listing by its shareholders.
While TikTok had an estimated $9.4 billion in revenue in 2022 and is becoming an important source of royalties for record labels and music publishers, Triller is a far smaller affair. In the first quarter of 2023, the self-described “artificial intelligence powered technology platform” had revenue of $9.1 million and a net loss of $28.8 million. In calendar 2022, Triller had a net loss of $195.6 million on revenue of $47.7 million.
The S-1 paints a picture of a financially troubled company with numerous outstanding issues. Triller had just $2.2 million of cash and cash equivalents as of March 31. The company’s S-1 warns that Triller has incurred losses each year since its inception — not unusual for a high-growth tech startup — and has an accumulated deficit of $1.29 billion. Triller may incur additional costs related to outstanding litigation with Universal Music Publishing Group, as one example, and admits to not being in compliance with the payment obligations of “a significant number” of its music licensing contracts and “overdue on payments” to vendors that provide Triller with engineering, marketing and legal services, among other parties.
The S-1 also reveals that Triller entered into a confidential settlement agreement with Sony Music Entertainment on July 21, 2023, that requires it to make payments to SME for a breach of contract lawsuit brought by SME in 2022. On May 16, Triller was ordered to pay SME nearly $4.6 million. The settlement provided Triller with a payment plan. With 15 days of the direct listing, Triller will be obligated to pay SME under the settlement agreement.
Triller will have two classes of common stock: a Class A common stock with one vote per share and Class B common stock with ten votes per share. Upon completion of the reorganization, Proxima Media and Bobby Sarnevesht, Triller’s founding partners, will own about 15.4% of Triller’s common stock and have 60.6% of the company’s total voting power. In addition to Proxima Media, the other shareholders with greater than a 5% share of outstanding common stock are Paul Posner, CEO of Carnegie Technologies, and Tsai Ming Hsing. As of March 31, Triller had 282,017,038 shares of Class A common stock and 46,651,382 shares of our Class B common stock outstanding.
Triller claims to have over 550 million user accounts and had over 2.4 million creators as of March 31 — almost 100,000 more than it had two years earlier. It built its user base with acquisitions such as its 2021 purchase of Verzuz, the livestream platform created by of Swizz Beats and Timbaland that shot to fame during the pandemic. Swizz Beatz and Timbaland filed a $28 million lawsuit against Triller in August 2022 over unpaid monies promised in the deal. That lawsuit was settled out of court one month later.
Radio companies, suffering from sluggish radio advertising and underwhelming stock prices, might be starting to see the light. B Riley Securities analyst Daniel Day expects national advertising to pick up in the second half of 2023. That hint of optimism, along with Cumulus Media’s better-than-expected second-quarter earnings released Friday, sent radio stock prices soaring over the last few days.
Cumulus’s net revenue of $210.1 million was down 11% year over year and 25% below the same quarter in pre-pandemic 2019, the company announced Friday. Earnings before interest, taxes, depreciation and amortization (EBITDA) of $30.7 million was down 32.6% from the prior-year period, but was helped by wringing out $12 million of cost reductions. Revenue was in line with the company’s expectations while EBITDA exceeded expectations. Adjusted EBTIDA of $28.7 million was 32% above the estimate of Noble Capital Markets analysts.
That was good news for some investors. Shares of Cumulus climbed 14.5% to $5.54 on Friday and rose another 14.4% to $6.34 on Monday. Even after Cumulus gave back some of those gains on Tuesday (Aug. 1) and dropped 11.7% to $5.60, its share price was more than 2.5 times above the 52-week low of $2.57 from May 9. On Monday, B Riley upped its Cumulus price target from $10 to $11 — implying 96% upside from Tuesday’s closing price — and maintained its “buy” rating.
The trends could portend good news for other radio companies. On Monday, shares of iHeartMedia rose 12.4% to $4.73. Even after dropping 3.2% to $4.58 on Tuesday, iHeartMedia’s stock stood at more than double its 52-week low of $2.21 set on May 26. iHeartMedia will report second-quarter earnings on Aug. 8.
For Cumulus, the quarter was all about optimizing what it can control while mitigating the downside of what it cannot control, said president and CEO Mary Lerner during Friday’s earnings call. “This proven skill set is serving us well as we make the best of the current tough ad environment,” said Lerner.
Cumulus cut $5 million of fixed costs, repurchased $5.7 million of its common stock in the second quarter, bringing the total repurchases to $39 million, and retired about $32 million of bonds at an average discount of 26%. It also announced the sale of WDRQ-FM for $10 million that is expected to close this quarter. Digital revenue of $37.5 million was down just 0.7% from the prior-year period. Cumulus’ digital marketing services businesses were up 21% year over year while its podcast audience was up 19%.
What Cumulus cannot control is the willingness of brands to buy advertising. A weak national advertising environment since late 2022 “remained the main factor driving a decline in total revenue,” said Frank Lopez-Balboa, Cumulus executive vp, treasurer and chief financial officer. Local spot advertising revenue — which accounts for 80% of Cumulus’s total stock revenue — was down 7% while soft national advertising caused total broadcast radio revenue to fall 16.5%.
Shares of SiriusXM soared 49.1% this week due to a “short squeeze” related to a trading strategy involving its parent company, Liberty Media. The stock rose 49.1% to $7.08, turning an 18.7% year-to-date loss into a 21.2% year-to-date gain.
On Thursday (July 22), SiriusXM shares increased 42.3% as 128 million shares were traded — about 6.7 times the average daily trading volume. The price fell 9.3% on Friday to close at $7.08 as trading volume reached 132.9 million shares.
As an article at Barron’s explained, SiriusXM, a heavily shorted stock, has benefitted from investors taking a long position in Liberty SiriusXM Group — a tracking that includes SiriusXM — and a short position in SiriusXM. (A short position is a bet that a stock price will decline. A long position is a bet the stock price will increase.) Those positions would benefit if Liberty SiriusXM Group, viewed as an inexpensive alternative to SiriusXM, was able to narrow the gap to SiriusXM. But SiriusXM shares have risen in recent months, turning the short into a losing bet.
Investors who short a stock must buy back borrowed shares to cover their short position. When a stock has a small public float — as SiriusXM does — demand for a limited number of available shares can drive up the price. This isn’t happening just with SiriusXM: Heavily shorted stocks helped the stock market rally in the first half of the year. “As expected, shorts are getting squeezed in these losing trades and we are seeing short covering in these stocks — helping drive stock prices even higher alongside the momentum long buying we are seeing in these stocks,” Ihor Dusaniwsky, managing director of S3 Partners, told Yahoo Finance last week.
SiriusXM was — by far — the best-performing music stock this week, as the Billboard Global Music Index rose 6.8% to 1,447.32, bringing the year-to-date gain to 23.9%. Eight of the index’s 21 stocks were in negative territory, one was unchanged and 12 stocks posted gains this week.
French music streamer Deezer boasted the week’s second-biggest improvement after gaining 10.3% to 2.58 euros ($2.87). On Thursday, the company announced it had renewed its partnership with telecom company Orange, which will continue to drive customer acquisition in its home market. Under the new partnership, Deezer and Orange will offer new customers six free months of Deezer Premium.
Live music companies also had a good week. Shares of Sphere Entertainment Co. gained another 8.9%. German concert promoter CTS Eventim improved 6.9%. And Live Nation shares rose 2.5% after Oppenheimer initiated coverage of the company with a $110 price target, suggesting the stock has a 14% upside from its $96.84 closing price on Friday.