Universal Music sinks 30% as streaming revenue declines
UNIVERSAL Music Group’s shares fell as much as 30 per cent, the biggest decline since the company’s initial public offering, after its subscription and streaming revenue growth disappointed investors.
The world’s biggest record label, which represents artists including Taylor Swift and Drake, said subscription revenue in recorded music grew 6.9 per cent in constant currency terms in the second quarter, in a statement late on Wednesday (Jul 24). That missed average estimates for a growth of 11 per cent in a Bloomberg survey of analysts.
Slowdowns in advertising revenue growth at Spotify Technology and YouTube were behind much of the weaker sales, though UMG is also running into roadblocks with social media companies that have become a key part of distributing its music, chief financial officer Boyd Muir said on a call with reporters.
Meta Platforms stopped licensing premium music videos from UMG for Facebook in May after finding they were less popular than other music products. The company’s dispute with TikTok also led to a month of lost revenue from that platform in the quarter.
While the revenue volatility may be temporary, “we expect the disappointment to weigh on sentiment” in the near term, Citi analyst Thomas Singlehurst in a note to clients..
The stock dropped 26 per cent to 20.87 euros at 11.53 am in Amsterdam trading on Thursday after earlier declining to a low of 19.93 euros.
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Universal Music’s biggest investors include billionaire hedge fund manager Bill Ackman, who holds a 10.3 per cent stake via his various Pershing Square funds. The firm’s shareholders French media company Vivendi and Bollore also took a hit from Universal Music’s earnings, with both slipping more than 9 per cent at their lows on Thursday. Spun off from Vivendi, Universal went public in Amsterdam in September 2021.
Universal Music has been pushing for platforms to compensate artists fairly and has advocated for a new streaming royalty model. The company started pulling its music from ByteDance-owned TikTok in February after talks to extend a licensing deal failed. In May, it reached a deal with TikTok that included better pay for songwriters and artists, new promotional agreements and protections against AI-generated music.
Swift, who has been on the money-spinning Eras Tour, continued to boost revenue as merchandising revenue soared 44 per cent in the quarter. Top sellers for the quarter included releases from Swift, Billie Eilish, SEVENTEEN, Morgan Wallen and Ae! group, the company said. The company’s total revenue rose for a 12th consecutive quarter since its listing to 2.93 billion euros (S$4.3 billion) from April through June, beating estimates, but that did not help the sentiment soured by concerns over its growth.
Earlier this year, it kicked off a reorganisation to generate 250 million euros in annual savings by 2026, including through job cuts. BLOOMBERG
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