With SZA's album warning sign The leader and fastest-growing market in streaming rights, Sony Music's revenue rose 16.0% to 422.1 billion yen ($2.85 billion at the period's average exchange rate) in the fiscal third quarter ended Dec. 31, the company announced on Wednesday (Feb. 14).
Other top releases for the quarter were from Travis Scott UtopiaRod Wave's NostalgiaDoja Cat's RedBlink-182's One more time…Tate McRae's Think laterHarry Styles' Harry's house and Fuerza Regida's Pa Las Baby's Y Belikeada. Some holiday classics were among Sony's top albums during the Christmas season: Mariah Carey's Merry Christmas and Phil Spector's A Christmas present for you from Phil Spector.
Streaming fueled growth in both the recorded music and music publishing sectors of the business. Paid subscriptions were a big factor in the first full quarter after Spotify raised prices in about 50 markets, including the US, in July. Favorable exchange rates accounted for about 24% of the quarter's 58.4 billion yen ($394.9 million) increase in revenue.
Its double-digit revenue growth was comparable on a percentage basis to other music companies that released earnings. In the same quarter, Warner Music Group's revenue rose 17.5% to $1.75 billion and Reservoir Media's revenue improved 19% to $35.5 million. Spotify, the world's largest single source for music rights, grew revenue 16% to 3.67 billion euros ($4.05 billion).
Sony Music's margins also improved across the board. Operating income improved 20.8% to 76.1 billion yen ($514.4 million) and adjusted operating income before depreciation rose 25.3% to 98.5 billion yen ($666.2 million) . Adjusted OIBDA margin improved nearly two percentage points to 23.3% from 21.6% in the prior quarter.
The strong quarter led Sony Music to raise its full-year guidance for the third quarter in a row. On Wednesday, the company raised forecasts for both revenue and adjusted OIBDA by 10 billion yen ($68 million) — revenue from 1.56 trillion yen ($10.37 billion at current exchange rates) to 1.57 trillion yen ($10.43 billion) and adjusted OIBDA from 350 billion yen ($2.33 billion) to 360 million yen ($2.39 billion). When the company released its financial second-quarter earnings in November, it raised its revenue guidance by 5% to 70 billion yen ($485 million) and adjusted OIBDA by 4%, or 15 billion yen ($104 million). In August, it raised its revenue forecast by 6%.
Both music divisions posted solid year-over-year gains in the quarter. Revenue from recorded music rose 19.9% to 286.5 billion yen ($1.94 billion). Streaming revenue rose 17.2 percent to 186.5 billion yen ($1.26 billion) and accounted for about 58 percent of the segment's improvement. Physical revenue gained just 1.5 percent to 31.5 billion yen ($213.2 million). The “other” category – including merchandise, live performances and licensing revenue from sync, public performance and broadcast – jumped 45.9% to 59.7 billion yen ($403.9 million).
Revenue from music publishing rose 16.1 percent to 86.1 billion yen ($582 million). Streaming revenue rose 22.4% to 50.9 billion yen ($343.9 million) and accounted for 78% of the division's profit year-on-year. The “other” category of publications rose 8% to 35.2 billion yen ($238.1 million).
Visual media and platform revenue fell 5.1 percent to 45 billion yen ($304.4 million). The segment includes mobile games, software for PC and game consoles, and software development contracts.
Financial metrics for Sony Music's fiscal third quarter ended December 31, 2023:
- Revenue of 422.1 billion yen ($2.85 billion), up 16.0% year-over-year.
- Adjusted operating income of 98.5 billion yen ($666.2 million), up 25.3% year-over-year.
- 286.5 billion yen ($1.94 million) in recorded music, up 19.9% year-on-year.
- Music publishing revenue of 86.1 billion yen ($582 million), up 16.1% year-on-year.
- Visual media and platform revenue of 45 billion yen ($304.4 million), down 5.1% year-over-year.
