Universal Music Group (UMG), the biggest music company backing Don Jazzy’s Mavin Records, saw its stock go down by over 20% due to tough competition in the streaming business.
UMG, based in the Netherlands and representing famous artists like Taylor Swift, Drake, Justin Bieber, and Adele, watched this big drop happen right after the market opened on Thursday.
This fall came after the company didn’t do as well as expected in its streaming and subscription areas.
During a call to talk about earnings, UMG’s Vice President and CFO, Boyd Muir, said the slowdown in subscription growth was partly because of the timing of price increases by partners like Spotify, Amazon Music, and Apple Music. These price hikes helped UMG earn more money from subscriptions.
What They Said
The other reason for lower subscription growth is that some platforms are not adding new subscribers as fast, even though the overall number of people subscribing to music services is growing quickly around the world.
Muir added.
Platforms like Spotify and YouTube are still getting a lot of new subscribers, but others are not doing as well in attracting new users globally.
Muir didn’t name which platforms were slowing down but said the company is talking with all their main partners about new products.
Earlier this year, UMG started a plan to save €250 million each year by 2026, which included cutting jobs.
Some Context
Deals with social media platforms have been tricky for UMG recently. In May, UMG ended a deal with Meta Platforms, which used to license premium music videos for Facebook. UMG said these videos were not as popular on Facebook as other music content.
UMG also bought a majority stake in Mavin Global Limited, started by Don Jazzy, to offer more services in Nigeria through UMG’s network. Mavin’s artists, like Rema and Ayra Starr, are already part of UMG, being signed by U.S. labels like Republic and Interscope.
Mavin has many popular artists like Ayra Starr, Ladipoe, Johnny Drille, Crayon, Magixx, Bayanni, Boy Spyce, DJ Big N, Lifesize Teddy, and Rema.
Rema’s song “Calm Down” with Selena Gomez reached No.3 on the U.S. Billboard Hot 100. It became the biggest Afrobeats song ever and the most-watched video by an African artist on YouTube. It also was the first African-led track to cross 1 billion Spotify streams.
What to Know
UMG’s streaming revenue went down by 3.9% in the second quarter, a big change from the 10.3% growth in the first quarter. This drop was due to slower growth at key ad-based platforms and the timing of deal renewals.
On the bright side, UMG saw strong growth in merchandise sales, which went up by 44% in Q2, thanks to artists like Taylor Swift.
Other top artists in sales for the first half of 2024 were Morgan Wallen, Noah Kahan, Billie Eilish, and Ariana Grande.
In total, UMG’s revenue grew for the 12th quarter in a row to €2.93 billion ($3.18 billion), about 9% up from the previous year and beating estimates.
Adjusted EBITDA (a measure of profit) rose by more than 11% from the previous year to €649 million ($705 million).