Universal Music Group ( UMG ) got a boost from physical sales in the second quarter, but the discussion during Wednesday's earnings call focused mostly on streaming. Subscriptions, which accounted for more than half of total recorded music revenue, were a key factor in the company's 8.7% increase in revenue in the quarter. Even so, UMG's streaming activity isn't firing on all cylinders. The ad-supported stream continues to show weakness, and UMG revealed that Facebook is no longer licensing its premium videos.
CEO Lucian Grainge said the industry has entered the “next phase” of the streaming and subscription business, one characterized by collaboration with streaming companies to produce new products and the ability of artificial intelligence to allow artists to sing their music in different languages. “The amount of work, the win-win dialogue [and] The creative conversations that happen between us are really extremely exciting,” he said.
Here's what else you need to know about UMG's latest quarterly earnings and what was said on the call.
Flow increases — uneven
Although UMG's recorded music subscription revenue improved 6.5%, not all subscription platforms are performing equally well. CFO Boyd Muir it reported a “slowdown in subscriber growth on some platforms,” while noting that Spotify, YouTube “and many regional and local platforms” continue to show healthy growth. Overall, UMG is optimistic about the market's overall ability to find new subscribers. Michael Nashdigital strategy executive, said UMG's consumer research has identified 180 million consumers from the top 19 regions “who will be the next wave of subscription adoption,” even accounting for price increases.
“Other” streaming revenue fell 3.9% in the quarter, which Muir attributed to a decline in ad-supported streaming and some platform-specific issues (see Facebook below). UMG warned of weak ad-supported streaming last quarter, and Muir said UMG needs to see “broad-based improvement across multiple partners and geographies over a longer period of time before we're ready to take a less cautious view.”
Meta no longer licenses UMG premium videos for Facebook
Another reason for the slowdown in non-subscription streaming revenue was Facebook's exit from music videos. “Meta had previously offered music videos on Facebook,” explained Muir. “This product offering was less popular with Facebook's user base than other music products, and as a result, Meta no longer licenses premium music videos from us. As of May this year, Meta is now focusing on other areas related to music content and we are working together to expand these areas as part of a multifaceted renewal.” Premium video display isn't the only aspect of Meta's licensing deals with labels, however. As Advertising sign previously reported, Meta reached a licensing deal with UMG in 2017 that allowed UMG's repertoire in user-uploaded videos on Facebook, Instagram and Messenger. And a deal reached in 2020 allowed users to add songs from UMG's catalog to videos on Facebook's gaming platform.
The uncontroversial Spotify bundle controversy
After Spotify began offering both music and audiobooks, the company claimed it could pay a reduced percentage of “bundling” royalties to publishers and songwriters for premium streams. When asked about the audiobook bundle controversy on Tuesday, Spotify's CEO Daniel Ek described it as a not unusual disagreement between the bonds. “That's the nature of all supplier and distributor relationships,” he said during the company's earnings call. UMG had a similarly unimpressive response when asked about the package controversy. Instead of feeling cheated out of rights, Muir told UMG “[is] confident that our revenue share reflects the value our artists and music bring to their platform.”
UMG invested 519 million euros ($562 million) in the first half of 2024
Three transactions accounted for 450 million euros ($487 million) of investment in the first half of the year: a majority stake in Nigerian company Maven Global; an investment in the complex; and a $240 million investment in Chord Music Partners, a joint venture of KKR and Dundee Partners that owns over 60,000 copyrights. UMG spent 96 million euros ($104 million) on catalog acquisitions in the half, including 75 million euros ($81 million) held in escrow.
