Universal Music Group talked about how the company plans to continue to grow amid an evolving streaming landscape on Tuesday at the company's stock market day. Held at London's famous Abbey Road Studios, UMG's c-suite and various executives from Republic, Interscope, Virgin Music Group and more described how they are building a world around superstars like Taylor Swift, The Weeknd and Olivia Rodrigo and how they have launched new acts such as Afrobeats star Rema.
The crowd of mostly financial analysts and investors also got an overview of the collectibles UMG hopes superfans will open their wallets for, its discussions with Spotify about higher-priced premium subscription plans and it's new strategy to maintain streaming revenues growing at 8-10% compounded average growth rate through FY2028.
Streaming 2.0
Despite industry reports that new streaming subscribers are hard to find in developed markets and that streaming growth rates in smaller music markets like Brazil, Italy and Germany are outpacing big markets like the U.S., UMG chairman and CEO , Lucian Grainge, gave an overview of UMG's new strategy — called Streaming 2.0 — to get more revenue from streaming.
“The addressable market — both established markets and high-potential fast-growing music markets — is huge,” Grainge said, referring to streaming subscriptions. “We expect more than a billion subscribers by the end of the decade, and we're constantly asking ourselves, 'How long will it take us to get to 2 billion?'
“While streaming has delivered strong growth at UMG for over a decade, Streaming 2.0 will deliver a new era of innovation, consumer segmentation, geographic expansion and greater value through both subscribers and [average revenue per user] growth,” Grainge said.
The strategy is based in part on growing the number of streaming subscriptions in growth markets where UMG says subscribers contribute substantially to its average monthly commercial revenue per user. Fewer than half of people in established markets have streaming subscriptions, with less than 25% of the population in Japan having subscriptions, UMG's chief financial officer said Boyd Muir he said.
UMG said it also expects a new wave of subscribers in those markets to come from a second group of older listeners who are starting subscriptions and younger, digitally native music fans who are getting older and spending more on their streaming subscriptions. They also expect to target audiobook listeners and satellite radio subscribers for music streaming subscriptions.
Super premium streaming subscriptions
UMG's Streaming 2.0 strategy is also based on innovation in streaming, possibly as the development of high-definition streaming plans like what Spotify's Daniel Ek hinted at in June is on the horizon. Ek said the “delux” membership could cost about $17-$18 a month for a single account.
UMG is in advanced talks to work with Spotify to develop this higher-priced subscription plan, Muir said on Tuesday. During his presentation, UMG's Chief Digital Officer Michael Nash compared it to “another exciting” example of higher-priced subscription plans — Tencent Music Entertainment's super VIP tier, which costs five times more than the standard tier.
Muir said “a double-digit percentage” of TME's subscriber base signed up for the super VIP scheme. UMG's own research says 23% of current streaming subscribers would pay more for a “better music experience”.
Mlonely superfans
UMG executives spoke fondly of the good old days, when superfans lined up outside stores to shell out big bucks on Michael Jackson and Shania Twain CDs. The reason why? Artist devotees in previous decades spent more per capita on music, merchandise, concert tickets and collectibles than fans of the streaming era.
“Superfans, the most ardent 20-30% of all music listeners, once drove over 70% of recorded music spending,” Muir said. “Their stream is generating revenue, but not as well as in the past. This is a huge opportunity. We are seeing a dramatic increase in revenue that is complementary to spending.”
He was referring to premium music—vinyl, collectible CDs and tapes—and collectibles. UMG has seen its revenue from products sold directly to consumers through some 1,300-odd online stores grow at a compound annual growth rate of 33% in recent years.
When something like a $55 Olivia Rodrigo Stanley Cup is sold, UMG collects as much information as it can, and the buyer becomes one of the 100 million fans in what Muir referred to as “our audience.”
