Universal Music Stock Plummets More Than 23% Over Streaming ‘Deceleration’ Concerns

Universal Music Group (UMG) has seen its stock value plummet by nearly 24% after disclosing a streaming-growth “deceleration” for 2024’s second quarter.

The largest of the major labels acknowledged the relative streaming-expansion plateau in its earnings report and call for Q2, when revenue hit $3.18 billion (€2.93 billion). That figure represents a roughly 8.7% year-over-year (YoY) improvement and benefited from (slower) 6.5% YoY streaming subscription growth, for a total of $1.24 billion/€1.14 billion in the latter category.

Furthermore, Universal Music’s ad-supported recorded revenue fell 4.2% YoY to $372.09 million (€343 million), with execs chalking up the development “to a deceleration in growth at key advertising-based platform partners as well as shortfalls on certain platforms related to the timing of deal renewals.” Meta ceased licensing music videos for Facebook, they elaborated during the earnings call.

Notwithstanding the ad-supported dip, bumps in physical sales ($387.27 million/€357 million, up 9.5% YoY) as well as licensing and other ($341.68 million/€315 million, up 18% YoY) fueled recorded music growth to $2.39 billion/€2.2 billion overall. And the publishing side, for its part, brought in $554.38 million/€511 million (up 10.1% YoY) due largely to a 17.8% YoY revenue spike across digital ($337.40 million/€311 million total).

But these positives and a 44.6% YoY jump in the merchandising and other category ($246.25 million/€227 million in Q2 revenue) were unable to prevent a selloff, which caused Universal Music shares (UMG on the Euronext Amsterdam) to shed over 30% of their value.

Though UMG subsequently regained a bit of ground – shares had recovered to about $23.53 (€21.70) apiece at the time of writing – they remained just shy of 24% beneath where they stood at the prior market close.

Needless to say, this decline and the corresponding multibillion-dollar market cap falloff are far from ideal for UMG. Execs attempted to assuage shareholder concerns during the Q2 earnings call and are further poised to participate in “Capital Markets Day” on September 17th.

After emphasizing that higher-ups “do not manage the business on a quarterly basis” and aren’t “overly concerned” with quarterly results’ variations, CFO Boyd Muir dove directly into an explanation for the “deceleration in growth” for subscription revenue.

“The other factor impacting our subscription revenue growth this quarter is the slowdown in subscriber growth at certain platforms,” the exec said in part. “While Spotify, YouTube, and many regional and local platforms have continued to exhibit healthy growth in subscribers, other large partners who have been less successful in driving global adoption have seen a slowdown in new subscriber additions.”

As to subscription revenue’s longer-term growth outlook, Boyd reiterated ongoing “artist-centric initiatives,” continued superfan-monetization efforts (Warner Music is debuting a related platform later in 2024), and the perceived revenue potential of more expensive offerings like “Spotify Deluxe.”

It’ll be interesting to see the exact commercial results delivered in those areas – and, more immediately, how UMG performs generally and on the stock market during the remainder of 2024. Warner Music Group also experienced a stock-price slip following the release of UMG’s earnings, whereas Spotify cracked a record high after posting its own Q2 financials.

In the wake of SPOT’s improvement and UMG’s decrease, the streaming platform’s market cap is currently over $22 billion higher than that of today’s biggest music company.