Universal Music generated $2.93bn in Q2 – boosted by sales from superstars like Taylor Swift and King & Prince

Yesterday, the world’s biggest subscription music streaming service, Spotify, announced its Q2 results.

Today, it’s the turn of the world’s largest music rights company, Universal Music Group, whose financial results for the three months to the end of June and the first half of the year were published after the close of the Euronext in Amsterdam on Wednesday (July 26).

The headline figure from UMG’s Q2 results: the music company generated revenues of EUR €2.697 billion (USD $2.93bn) during the quarter across all of its divisions (including recorded music, publishing and more). That Q2 revenue figure was up 8.8% YoY at constant currency.

Amongst the other key highlights in UMG’s Q2 were a 13% jump in the company’s subscription streaming revenues, and 12.1% growth in its ‘Merchandising and Other’ revenue segment.

RECORDED MUSIC

Universal’s overall recorded music revenues for Q2 2023 (including streaming plus physical etc.) were €2.080 billion ($2.26bn), up 10.9% YoY at constant currency (see below).

Within the Recorded Music segment, UMG’s ‘Subscription and streaming revenues’ (including ad-supported and subscription streaming revenues) grew 11% YoY at constant currency to €1.426 billion ($1.55bn) in Q2.

Breaking down UMG’s recorded music streaming figure for Q2 further reveals that the company’s subscription streaming revenues specifically grew 13% YoY at constant currency to €1.068 billion ($1.16bn).

UMG says that this result was “driven primarily by the growth in global subscribers as well as the impact of price increases at certain platforms”.

Evidence of that global subscriber growth arrived yesterday in Spotify’s own Q2 results, in which the platform reported that it added 10 million Premium subscribers to end the quarter on 220 million paying subs.

In terms of price increases at major streaming platforms, Amazon Music in January raised its standard individual Amazon Music Unlimited monthly subscription price from $9.99 to $10.99 in the US, and Apple Music raised its subscription price by $1 to $10.99 per month in October 2022.

Spotify announced this week that its flagship Premium service will also increase by $1 to $10.99 in the US. SPOT’s leadership noted yesterday that the “full benefit of the price increase” won’t be seen until in Q4.

Boyd Muir, UMG’s EVP, CFO and President of Operations offered a similar timeline on UMG’s earnings call. “The reality is you’re not really going to see anything coming through until Q4 and then into 2024,” he said.

Meanwhile, Universal’s ad-supported recorded music streaming revenue was up 5.3% YoY at constant currency (see above) to €358 million ($389.75m) in Q2. UMG notes that it delivered this result, “as certain platforms and countries grew, but the performance of the broader advertising industry was mixed”.

Within Universal’s recorded music business, physical revenues grew 11.3% at constant currency, driven by strong CD sales in Japan, particularly from King & Prince, and improvements in vinyl sales, to €326 million ($354.91m).

Speaking on the company’s earnings call on Wednesday, Sir Lucian Grainge noted that King & Prince was the top-selling artist in Japan for the first half of the year.

Elsewhere, UMG’s License and other revenue grew 16.1% at constant currency to €267 million ($290.68m), as a result of improvements in neighboring rights, brand promotion and income from live events.

“We are an artist-centric company.”

Sir Lucian Grainge

UMG’s top sellers across the quarter included releases from King & Prince, Morgan Wallen, SEVENTEEN, Taylor Swift, and Stray Kids, while top sellers in the prior-year quarter included BTS, King & Prince, Rammstein, Olivia Rodrigo and INI.

Speaking on UMG’s earnings call on Wednesday, Sir Lucian Grainge said that, UMG is “an artist-centric company” and that its “consistently stellar performance is directly attributable to the deep and sustaining partnerships we’ve formed with our artists”.

He added: “These partnerships with both established artists and new ones are in place throughout the world in developed music markets, and ones with high growth potential as well.”

MUSIC PUBLISHING

Elsewhere, Universal’s Music Publishing division, Universal Music Publishing Group, generated revenues of €464 million ($505.15m) in Q2 2023, down 0.6% YoY at constant currency (see below).

(UMG notes that, as previously disclosed in its Annual Consolidated Financial Statements for the year ended December 31, 2021, it adjusted its accounting policy in relation to certain revenues that are collected through societies. Of particular note, according to UMG, “the €98 million impact associated with the Change in Society Accounting in the second quarter of 2022 reflected a one-time catch-up for the receipt of higher income than was accrued at the end of 2021”.)

Excluding this one-time, prior-year benefit, Universal reports that its Music Publishing revenues grew 25.7% at constant currency, “driven by the continued growth in streaming and subscription revenue and improvement in performance income”.

For H1, Music Publishing revenue grew 4.8% at constant currency, despite the Change in Society Accounting (see below). Excluding this one-time item in the prior year, Universal’s Music Publishing revenues grew 18.5% YoY at constant currency in H1.

Within Music Publishing, Digital revenue declined 22.6% YoY at constant currency to €264 million ($287.41m) in Q2 due to the Change in Society Accounting, but was partly offset by growth in streaming and subscription revenue.

Performance revenue grew 185.3% at constant currency to €97 million ($105.60m) in Q2, due to the Change in Society Accounting that had a negative impact in the prior year “as well as better than expected receipts following the COVID recovery”, according to Universal.

Synchronization revenue grew 5.3% YoY at constant currency to €60 million ($65.32m).

Mechanical revenue was up 31.8% YoY at constant currency to €29 million ($31.57m), as a result of improvements in physical sales.

Merchandising

Universal’s Merchandising and Other revenue segment generated €157 million ($170.92m) in the second quarter of 2023, up 12.1% at constant currency, and was “driven by growth in direct-to-consumer sales and despite a decline in touring merchandise sales on lower touring activity compared to the prior-year quarter”.

Speaking on the company’s earnings call on Wednesday, Boyd Muir, UMG’s EVP, CFO and President of Operations noted that UMG saw “growth in direct-to-consumer revenue, fueled by a strong performance from Taylor Swift, more than offsetting and decline and touring revenue”.

EBITDA ETC.

In Q2 2023, UMG’s EBITDA (earnings before interest, taxes, and depreciation) rose 2.2% YoY at constant currency, to €505 million ($549.79m).

EBITDA margin was 18.7%, compared to 20% in the second quarter of 2022 (see below).

UMG notes that “as expected, EBITDA was impacted by non-cash share-based compensation expenses of €85 million ($92.53m) during the second quarter of 2023, as the Company rolled out its first global equity compensation plan, which began in the fourth quarter of 2022”.

Universal reports that, excluding the non-cash share-based compensation expense, its Adjusted EBITDA for Q2 was €590 million ($642.33m), up 19.2% at constant currency.

Adjusted EBITDA margin improved to 21.9% in Q2, compared to 20% in Q2 2022.

“As an artist-centric company, we’re not only proud of our continued strong performance, but we’re also particularly excited that it enables us to accelerate our strategy to promote a healthier streaming business.”

Sir Lucian Grainge, UMG

UMG´s Chairman and CEO Sir Lucian Grainge, said: “As an artist-centric company, we’re not only proud of our continued strong performance, but we’re also particularly excited that it enables us to accelerate our strategy to promote a healthier streaming business — one that rewards real artists and real music—and drive growth opportunities for the broader music ecosystem.”

“Our strong growth in revenues, Adjusted EBITDA and operating cash flow has enabled our continued strategic investment in the business, further driving long-term shareholder value as we continue to execute on our vision.”

Boyd Muir, UMG

Boyd Muir, UMG’s EVP, CFO and President of Operations, added: “Our strong growth in revenues, Adjusted EBITDA and operating cash flow has enabled our continued strategic investment in the business, further driving long-term shareholder value as we continue to execute on our vision.”

All references to YoY percentages in this story, whether stated as such or not, are in constant currency. All EUR-USD conversions made at the average rate of the relevant period according to the European Central BankMusic Business Worldwide