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The Sphere venue in Las Vegas isn’t turning a profit, but it’s doing enough to encourage investors to buy into its owner, Sphere Entertainment Co.
Shares of Sphere Entertainment gained 13.8% to $40.29 this week after the company’s quarterly earnings report released Monday (Feb. 5) showed that the state-of-the-art venue — currently capturing eyeballs ahead of the Super Bowl in Las Vegas on Sunday — took in revenue of $167.8 million and had an adjusted gain of $14 million (adjusted to certain items including $117 million of non-cash impairment related to the company’s failed bid to open a Sphere in London).
Sphere Entertainment was the top-performing music stock in a week when music stocks soared to new heights, with the 20-company Billboard Global Music Index gaining 3% to land at a record 1,636.43. While the numbers of winners and losers were even at 10 stocks apiece, most of the index’s most valuable companies posted gains this week. Tencent Music Entertainment rose 6.7% to $9.67, Live Nation improved 1.5% to $89.53 and Universal Music Group gained 1.2% to 27.41 euros ($29.55).
Spotify, another of the index’s largest companies, gained 8.2% to $240.77 after its earnings results on Tuesday (Feb. 6) showed its subscriber number grew to 236 million, up 10 million in the quarter, and that revenue grew 16% to 3.67 billion euros ($4.05 billion). The share price reached its highest mark since December 2021 as investors discovered a renewed faith in Spotify following its decision to cut 17% of its workforce in December. Spotify has always had a good product. Now, there is a growing feeling it can be a good business, too.
“The market is now seeing the potential of this business,” Morgan Stanley analysts wrote in a Wednesday (Feb. 7) note to investors, “as record [monthly active user] net adds and subscribers come alongside price increases and an aggressive turn towards cost efficiency.” Stronger revenue growth and the potential for better margins led Morgan Stanley to raise its Spotify price target from $250 to $270.
Major indexes gained this week, too, and one reached a major threshold: The S&P 500 closed above 5,000 for the first time on Friday as it rose 1.4% to 5,026.61, while the Nasdaq composite improved 2.3% to 15,990.66, its highest level since 2021, thanks to big gains from chip maker Nvidia and e-commerce giant Amazon. In the United Kingdom, the FTSE 100 declined 0.6% to 7,572.58. South Korea’s KOSPI composite index rose 0.2% to 2,620.32. China’s Shangai Composite Index jumped 5% to 2,865.90.
It was a busy week for corporate earnings reports. CTS Eventim shares rose 5.5% to 66.90 euros ($72.12) following the company’s fourth-quarter results Wednesday. The German concert promoter’s 2023 revenue reached 2.4 billion euros, up 22.5%, and earnings before interest, taxes, depreciation and amortization improved 31.9% to 501.4 million euros.
Warner Music Group (WMG) shares briefly rallied following its earnings results on Thursday — with the stock up 5.1% to $38.05 — but it finished the day down 2.5% and the week down 2.6% to $35.71. Morgan Stanley analysts remained “overweight” on WMG and kept the price target at $42. Guggenheim analysts reiterated their “buy” rating and maintained their $46 price target.
MSG Entertainment shares rose 9% to $36.81 after the company’s fiscal second-quarter earnings results were released Wednesday. The New York-based live entertainment company raised revenue guidance for its full fiscal year by 10% to a range of $930 million to $950 million. Executive chairman/CEO James Dolan attributed the strong quarter to “record results” from the Christmas Spectacular production, the long-running show featuring the Radio City Rockettes.
LiveOne shares fell 2.1% after PodcastOne reported a 22% increase in revenue in the first nine months of its fiscal year on Thursday (Feb. 8). (LiveOne spun off PodcastOne in 2023 and retained a 73% stake.) PodcastOne ranked No. 10 in Podtrac’s top publisher’s rankings and achieved a U.S. audience of 5.3 million, but its net loss increased from $3 million to $13.7 million.
On Wednesday around midnight, a new song showed up on RapCaviar, Spotify‘s premier hip-hop playlist: “All Falls Down,” Kanye West’s second hit single ever, which came out almost 20 years ago. While RapCaviar is mostly focused on new releases, it does occasionally feature throwbacks. Still, the addition felt notable, because a new release from West and Ty Dolla $ign is expected to arrive at midnight tonight and executives around the music industry are curious how streaming service gatekeepers will respond.
Will they support the renowned artist who now goes by Ye, despite the fact that his repeated antisemitism and conservative trolling has caused a widespread backlash, leading most of his prominent business partners to sever ties since 2022? Or will they just ignore the new album all together?
“It’s going to be complicated,” says one former Spotify employee who spoke on the condition of anonymity. “There’s going to be a difference of opinion within those places on how to handle it. Some people in leadership positions will want to be harsh on Kanye for the nasty antisemitic things he has said. There will also be another side, the hip-hop teams, who will say, ‘No, it’s Kanye, people say crazy shit all the time, plus he apologized. We don’t care. We’re playlisting because it’s Kanye.’”
A digital marketer who helps artists with streaming strategy was more skeptical. “Streaming services didn’t support ‘Vultures’ [Ye’s previous song], so I would be very shocked” if they support the rest of the album, he says. “Even though Ye did his apology, it felt like that came and went so fast.”
Reps for Spotify, Apple Music and YouTube Music did not respond to a request for comment.
Streaming services mostly avoid trying to wade into moral debates about artists’ character. One exception came when Spotify announced a new policy in 2018, writing on its blog that “in some circumstances, when an artist or creator does something that is especially harmful or hateful (for example, violence against children and sexual violence), it may affect the ways we work with or support that artist or creator.”
The backlash against this announcement was swift. Anthony “Top Dawg” Tiffith, CEO of Top Dawg Entertainment, told Billboard, “I don’t think it’s right for artists to be censored.” Others felt similarly, and a few weeks later, Spotify said “we are moving away from implementing a policy around artist conduct.”
That said, two former employees say Spotify still occasionally flexes its muscles around playlisting. When Megan Thee Stallion was shot by Tory Lanez in 2020, “his songs weren’t getting in any playlists after that,” according to a former employee. (Lanez was found guilty in court in December 2022.)
But Ye is not on trial, and he also has more than 140 Hot 100 hits to date. Many of these are still in regular rotation: His catalog has earned more than 480 million on-demand streams already this year in the U.S., according to Luminate.
Even so, his newest song sank like a stone. When Ye and Ty Dolla $ign released “Vultures” in November, it failed to crack the Hot 100, and it has amassed only around 33 million Spotify streams, a flop by Ye’s high-flying standards. (He released a video for the track “Talking/Once Again” with Ty earlier this week, but it is not yet available on streaming services.)
Two sources familiar with Ye’s search for a distribution deal say several streaming services signaled to them that they were unlikely to support new music from the star due to widespread outrage over his antisemitic comments. “For an artist as big as Kanye to release a new track and receive no major editorial placements is quite an outlier,” notes Nicki Camberg, a data journalist at the company Chartmetric, which tracks data on playlisting, social media, and streaming for artists. (“Vultures” was released through Label Engine, a distribution company owned by Create Music Group, according to identification information in YouTube’s Content Management System.)
“Vultures” has fared slightly better on the airwaves than it has on streaming services. The song has received airplay from around 30 stations, according to Mediabase. Two stations in Ye’s hometown of Chicago played the song the day it came out, and they’ve played it far more than anyone else: 199 spins so far in 2024 from WGCI and 181 from WPWX. The station that played “Vultures” third most this year, KVEG in Las Vegas, has played it 50 times.
Aside from the iHeart-owned WGCI, it’s noticeable that the stations playing “Vultures” are mostly owned by smaller radio companies, not the behemoths like iHeart, Audacy and Sirius. The track has received 2,144 spins overall, with 6.187 million audience impressions.
In the mid-2010s, radio was eclipsed by streaming services as the most important driver of listening behavior. Now a similar thing has happened to streaming services: Young fans are increasingly likely to discover music on short-form video platforms like TikTok. (Though they can’t find Universal Music Group songs there at the moment.) As a result, executives told Billboard in 2022 that “Spotify and Apple editorial playlists don’t have as much punch” as they used to.
Even on an earnings call on Thursday (Feb. 8), Warner Music Group CEO Robert Kyncl noted that “the data discovery and consumption trends” in music “are driven by the algorithms of the larger platforms and users sharing playlists with each other” — not playlists controlled by the various platforms. “The guys who do playlists had a lot of power four or five years ago,” says one longtime A&R. “Now their power is dwindling, because it doesn’t matter what they say. The kids choose at the end of the day.”
This could work to Ye’s advantage. If he’s able to luck into a viral moment, it won’t matter much whether he’s put on editorial playlists initially; listeners will find the music and play it, and the audience response will impact streaming services.
So far, “Vultures” hasn’t generated this kind of enthusiasm. “From a fan perspective, if it was going crazy and everyone was talking about it, that would push it,” the digital marketer says. “But I haven’t seen that anywhere.”
Ariana Grande brought the cozy holiday energy in her 2014 “Santa Tell Me” music video, but turns out, the clip was originally supposed to go in a very different direction. Explore Explore See latest videos, charts and news See latest videos, charts and news In the latest episode of Spotify‘s Billions Club on Tuesday (Feb. 6), […]
As she gears up to release her latest album, Ariana Grande is taking a trip down memory lane. In the latest episode of Spotify‘s Billions Club on Tuesday (Feb. 6), the 30-year-old pop star reflected on the stories behind all 14 of her hits that earned a billion streams on the platform — the most of any female artist in history — and got emotional about the years of work she’s put in to get to the place she is now.
To celebrate the singer’s historic accomplishment, Spotify arranged for plaques representing each of Grande’s billions-streamed songs to be set up in her recording space at Jungle City Studios. While sorting through the plaques, the “Yes, And?” vocalist joked about her “Bang Bang” collaboration with Jessie J and Nicki Minaj — “Bang bang into the room, profound lyricism” — and praised her past duet partners, Lady Gaga and The Weeknd, for their respective roles in the streaming prowesses of “Rain On Me” and “Save Your Tears.”
The Victorious alum also shared a funny memory about the music video for her flagship Christmas song, 2014’s “Santa Tell Me.” “It was a backup video,” she revealed, laughing. “In the original video, I was in weird Christmas lingerie and I was hitting Santa with a cane pole. I was like, ‘That is the right vibe for this song, believe you me.’ And the label was like, ‘Hey, honey … I don’t think we can use this.’”
The “Positions” singer will next release music on March 8 with Eternal Sunshine, her highly anticipated seventh album. She’s already dropped its lead single, “Yes, And?,” which debuted at No. 1 on the Billboard Hot 100, but has since confirmed she will not share any other songs from the album ahead of the LP’s arrival.
“I’m excited ’cause I also feel like I haven’t even really started,” Grande concluded in the Spotify clip. “I’m so, so grateful and I can’t wait for you to hear what’s next. I must go finish it now.”
Sharing the Billions Club video on Instagram, the Grammy winner wrote that “filming this little episode was such a sweet little commemoration and gratitude meltdown, if you will.” She went on, saying that she didn’t anticipate getting emotional during filming, “but it really, truly hit me! so much of my life has been spent doing this, with and for you all. so many little pieces of my life are stowed away all snug in these little, silly songs forever…”
“you aren’t just listeners but you are people that i feel so held by and appreciate deeply,” she added, addressing her fans. “the most special part of all is experiencing so much beautiful human connection (this is a lot / too much / sorry).. i’m so thankful for the memories we have made over the years and the goodness and sense of home we have found in each other! i remind myself of this when i need it most.”
Watch Grande’s Billions Club episode with Spotify below.
Spotify’s revenues for 2023 grew 16% year over year, reaching 3.67 billion euros ($4.05 billion), as a surge in both monthly active users (up 23% to 602 million) and premium subscribers (up 15% to 236 million) beat expectations. After a third quarter in which the streaming company turned a profit for the first time in […]
K-pop is having amazing charts and sales success and selling out large venues around the world, but the South Korean companies behind those artists are off to a terrible start in 2024.
Through Friday (Feb. 2), four K-pop stocks — HYBE, SM Entertainment, JYP Entertainment and YG Entertainment — have fallen an average of 17% year to date. HYBE, home to BTS and its members’ various solo projects, has had the best performance with a 12% decline, while JYP Entertainment is the worst of the group with a 24.1% loss. Elsewhere, YG Entertainment has lost 14.7% and SM Entertainment is down 17.4%. Korean stocks in general have gotten off to a much better start: Through Feb. 2, the KOSPI composite index of Korean companies increased 5.5%.
Investors may feel K-pop’s finances are less than reliable after news broke this week that Kakao Corp. is auditing SM Entertainment’s financial practices following its acquisition of a 40% equity stake in 2023, according to reports out of South Korea. Kakao’s audio committee is investigating “the appropriateness of investment decisions made by SM management without holding prior consultations with Kakao,” a Kakao official told The Korea Times. For the time being, Kakao is only auditing SM Entertainment’s books, not overhauling its management or considering selling its shares. Amidst heavy media coverage in Korea, Kakao went as far as to issue a statement on Monday (Jan. 29) to dispel rumors it will sell its stake in SM.
Spotify, on the other hand, is soaring ahead of its fourth-quarter earnings report on Tuesday (Feb. 6). The music streaming giant gained 3.8% to $222.31 this week, bringing its year-to-date gain to 18.4%. Spotify shares rose 1.6% on Friday after news broke the company had signed a new distribution deal with popular podcaster Joe Rogan. Spotify will sell ads for and distribute The Joe Rogan Experience on several multiple podcast platforms, according to the Wall Street Journal. So, unlike the previous deal, Rogan’s show will not be exclusive to Spotify and will be available on YouTube and elsewhere.
Although Rogan is no longer exclusive to Spotify, the deal could be extremely lucrative. An upfront minimum guarantee and ad revenue share could be worth up to $250 million, according to the report. While Rogan has proved to be enduringly popular, Spotify kept its relationship with the comedian while maintaining distance from its previous strategy of high-priced, exclusive content deals. Call Her Daddy is no longer exclusive to Spotify, Barack and Michelle Obama departed for Amazon’s Audible, and the former royals, Prince Harry and Meghan Markle, were not renewed.
Investors’ enthusiasm for Spotify hasn’t spilled over to other music streaming companies, however. Abu Dhabi-based music streamer Anghami fell 10.1% to $0.98 this week, bringing its year-to-date decline to 5.8%. Three other music streaming companies also posted losses: France’s Deezer fell 2.3%, U.S.-based LiveOne sank 5.3% and China’s Cloud Music dropped 6.2%. Tencent Music Entertainment, China’s largest music streaming company, rose 0.4%.
The Billboard Global Music Index fell 0.4% to 1,588.68 this week as 13 of the 20 stocks posted losses and only seven stocks finished the week in positive territory. Stocks were broadly up in the United States: the Nasdaq composite gained 1.1% to 15,628.95 and the S&P 500 improved 1.4% to 4,958.61. In the United Kingdom, the FTSE 100 dropped 0.3%. South Korea’s KOSPI composite index gained 5.5%. China’s Shanghai Composite Index sank 6.1% to 2,730.15.
German concert promoter CTS Eventim was the greatest gainer this week with a 4.1% gain. Two other live entertainment companies, Sphere Entertainment Co. and MSG Entertainment, ended the week up 2.8% and 0.7%, respectively.
Among the week’s biggest losers was Hipgnosis Songs Fund, which fell 7.5% to 0.653 pounds per share. Hipgnosis fell 2.5% on Friday after news broke that Merck Mercuriadis is stepping down as CEO of the fund’s investment advisor, Hipgnosis Song Management, and will become chairman. President/COO Ben Katovsky will take over the CEO role.
At the beginning of 2024, the always-changing music business is going through rapid transformation unlike anything in the last decade. How music companies organize themselves is changing. How royalties are calculated and paid is changing. How companies engage with fans is changing. And investors have different expectations of public companies — more focus on margins, less obsession with growth.
Music companies’ earnings results for the fourth quarter of 2023 will provide insights into how companies have performed and, more importantly, what they expect to do in the future. Only one company, SiriusXM, has announced to date. Next week’s earnings releases include Spotify (Tuesday, Feb. 6), Reservoir Media (Wednesday, Feb. 7) and Warner Music Group (Thursday, Feb. 8). Universal Music Group (UMG) announces earnings on Feb. 28. Here are some things to watch for in upcoming earnings calls.
The scope of layoffs
In October, UMG executives primed investors for cost-cutting measures that would improve margins and allow for investments in growth opportunities. The result would be hundreds of layoffs, according to a Jan. 12 Bloomberg report. On Thursday, UMG revealed some details of a bi-coastal label group restructuring. But what’s missing, so far, are details on the number of layoffs and the cost savings UMG expects to get from a restructuring. UMG’s fourth-quarter earnings release on Feb. 28 will be an opportunity for analysts to ask the company to give an update on its restructuring plans. As Billboard noted last week, the music industry is seeing widespread layoffs despite continued streaming growth. Warner Music Group (WMG), Downtown Music Holdings and BMG cut jobs in 2023. Digital music companies have shrunk their head counts, too: Spotify, Amazon Music, SoundCloud, Tidal and Bandcamp went through downsizings of various sizes.
More troubles in TikTok-land?
When UMG failed to renew its licensing contract with TikTok, it made licensing to the social video platform a major topic of conversation for upcoming earnings calls. Analysts and investors should want to know how a company’s negotiations with TikTok are proceeding and whether to expect an interruption if the two sides cannot reach an agreement. TikTok and WMG reached an agreement in July 2023, but investors may want progress reports from other public companies — Reservoir Media, Believe, Sony Music — about their licensing talks.
UMG’s decision is not without precedent: In 2008 and 2009, WMG pulled its catalog from YouTube for nine months while the two companies’ licensing negotiations were at an impasse. In 2011, Google launched an audio music streaming service, Music Beta by Google, without licenses from both Sony Music Entertainment (SME) and WMG. When Google added MP3s to its Google Music service later that year, the SME and WMG catalogs were initially absent.
The direct financial hit to UMG will be minimal since TikTok accounts for 1% of the company’s revenue, UMG stated in an open letter about the licensing talks. But because TikTok is an important promotional vehicle and a popular place to discover music, the indirect financial hit is more substantial. Investors always want to know about direct dollar impacts of a company’s moves, and they should want to understand the downsides of leaving a hit-making social platform.
How much have price increases mattered?
Music subscription prices didn’t budge for over a decade before succumbing to change in 2022 and 2023. The big fish was Spotify, which finally raised prices in the United States and other major markets in July. A higher price creates a multiplier effect on top of existing subscriber growth and will augment what would have otherwise been record quarterly revenues. The gains should come without an increase in churn: Spotify CFO Paul Vogel said during an Oct. 27 earnings call that Spotify didn’t lose any subscribers in the third quarter due to the price increase.
For record labels and publishers, a 10% price increase atop year-over-year subscriber growth stands to accelerate revenue growth. Guggenheim analysts said in a recent note to investors that they expect price increases at Spotify, YouTube and Deezer to raise UMG’s subscription revenue growth to 14.8% in the fourth quarter from 13.0% in the third quarter.
The state of the advertising business
While the subscription market has been strong, the ad-supported side of the business has struggled to keep chase. Through the first three quarters, Spotify’s ad-supported streaming revenue increased 14.9% year over year. That’s better than the 11.4% improvement in subscription revenue but well below the 22.2% and 62.1% gains in ad revenue in full-year 2022 and 2021, respectively.
Broadcast radio has fared even worse. Companies such as iHeartMedia, Cumulus Media and Audacy have blamed a slowdown in national broadcast advertising on some disappointing earnings in recent quarters.
SiriusXM provided the latest clue about broadcast advertising. “SiriusXM’s advertising revenue remains challenged,” CFO Tom Barry said during Thursday’s earnings call, “which we believe is a product of a tough broadcast advertising market.” Elsewhere, however, SiriusXM’s digital advertising improved versus 2022: Pandora had “strong growth” in its podcasting and programmatic advertising businesses, added Barry.
Some positive news in recent days shows advertising — perhaps not for broadcast businesses — is rebounding. U.S. ad spending in November was up 25% year over year, according to MediaRadar, an advertising intelligence company. The number of advertisers declined 8%, however, suggesting existing advertisers were ramping up spending.
More good news came from major ad-driven tech companies. Google’s advertising revenue in the fourth quarter increased 11% from the prior-year period, the company announced Wednesday, up from year-over-year improvements of 3.3% and 9.5% in the second and third quarters, respectively. Meta’s revenue grew 25% and its ad impressions rose 28% in the fourth quarter, the company announced Thursday.
The mission to reach superfans
Major music companies are suddenly taking a greater interest in serving superfans, those heavy-spending consumers that drive the concert and merchandise businesses but have less effect in a world of flat-rate, all-you-can-eat music subscription services. The 80-20 rule says 80% of a company’s business comes from 20% of its consumers. With music streaming, however, a $10.99-per-month service doesn’t capture a superfan’s willingness to pay more for additional value. Spotify hinted that “superfan clubs” were in the works in an announcement about the Digital Markets Act in the European Union. UMG CEO Lucian Grainge’s letter to staff in January said the company will focus on “strengthening the artist-fan relationship through superfan experiences and products.”
The problem isn’t that consumers won’t pay more money to engage with their favorite artists. The problem is no platforms have found a winning formula. Numerous previous attempts to court superfans fizzled. Drip, a platform that allowed artists to provide fans with music and other items for a recurring monthly fee, lasted from 2011 to 2016 (it relaunched a Kickstarter in 2017 but shut down in 2018). PledgeMusic shut down in 2019 amidst financial problems and allegations of improprieties. Most recently, startups’ attempts to use Web3 technologies to build superfan communities ran headfirst into the public’s sudden distrust of cryptocurrency and disinterest in NFTs. Given Spotify’s market size and resources, though, the company could make a real impact.
Ariana Grande is one of the most streamed artists in Spotify history, and she’s got the hardware to prove it. Ahead of her upcoming Billions Club episode, the 30-year-old pop star posed with her record 14 plaques from the music streaming platform, each of them representing one of her many hits. In photos shared to […]
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