In recent years, the music rights business has grown used to the major music companies posting double-digit YoY subscription streaming revenue growth every quarter that flies by.
Yesterday (July 27), that narrative changed somewhat, as Universal Music Group, the world’s largest music rights company, posted its Q2 2022 fiscal results (covering the three months to end of June).
First, the headline positives: Total company revenues at UMG (across recorded music, publishing, and other activities) were up by a healthy 17.3% YoY at constant currency in the quarter.
The key quarterly numbers for UMG in Q2 were as follows:
- As mentioned, UMG’s total company-wide revenues were up 17.3% YoY at constant currency to EUR €2.535 billion (USD $2.70bn);
- UMG’s total recorded music revenues were up 9.0% YoY at constant currency to €1.922bn ($2.05bn). Adding in ‘merch and other’ (€141m), this figure rises to €2.06bn ($2.20bn);
- And UMG’s total music publishing revenues were up 50.6% YoY to €476 million ($507m) – although this dramatic rise was partly driven by UMG now recognizing collection society revenue differently than it did previously.
Digging a little bit deeper into UMG’s Q2 numbers shows that, for its recorded music business, streaming subscription revenue grew by a single-digit percentage rate YoY:
- UMG’s recorded music subscription streaming Q2 revenue was up by 7.0% YoY at constant currency to €966 million ($1.03bn);
- UMG’s recorded music ad-funded/non-subscription Q2 streaming revenue was up 15.6% YoY at constant currency to €348 million ($371m).
That 7.0% uplift in recorded music subscription streaming revenue obviously looks a little smaller than the kind of streaming-growth figures we’re used to seeing from UMG.
There is a caveat: In Q2 2021 (i.e. the prior-year quarter), UMG’s subscription streaming revenues received what the firm calls a “one-time catch-up payment from a DSP” that amounted to €41 million.
With this payment discounted, UMG’s quarterly recorded music subscription streaming revenue in Q2 2022 would have grown by €164 million YoY.
As things stand, including the “one-time catch up”, UMG’s recorded music subscription streaming revenues in Q2 2022 were still up by €123 million YoY.
It’s also worth pointing out another headline here: UMG’s recorded music subscription revenue topped USD $1 billion in Q2 for only the second time in the company’s history, according to Universal’s reported (EUR) numbers converted to USD at the average quarterly rate from the European Central Bank.
(Below, MBW has mapped UMG’s reported quarterly streaming revenues in EUR, and then converted to USD at the prevailing average rate – according to the ECB – in each quarter.)
It’s a basic fact of mathematics, of course, that as UMG’s quarterly subscription streaming revenue figure grows, it gets increasingly more difficult to maintain YoY double-digit percentage growth (i.e. it’s much easier to show a high percentage growth when your ‘base’ number is small; it’s much harder when that ‘base’ number is large).
For example: UMG’s non-subscription revenues for recorded music were up 15.6% YoY in Q2 2022. But in real terms, those revenues were only up by €69 million vs the prior year.
As mentioned, UMG’s subscription revenues for recorded music were up by a smaller-sounding 7.0% YoY in Q2 2022. But in real terms, those revenues were actually up by €123 million.
Or to put it another way: UMG’s subscription streaming business is growing by about double the size, in real terms, of its ad-funded streaming business.
But percentage-wise, because it’s growing off a smaller base, the ad-funded business (+15.6% YoY) looks – on the surface – like it’s increasing faster.
UMG’s subscription streaming revenues for the half-year of H1 2022 carried a 10.0% YoY increase (on the equivalent six months of 2021) at constant currency.
In Q1 2022 alone, UMG posted a 13.4% YoY rise in subscription streaming revenues.
Elsewhere in UMG’s recorded music results for Q2: The firm’s physical revenues shot up by 17.4% YoY to €303 million ($323m), while licensing revenue (including sync) rose by 6.3% YoY.
Universal’s biggest-selling artists during Q2 2022 on the recorded music side were, in order of revenue generated: BTS, King & Prince, Rammstein, Olivia Rodrigo and INI.
Within its latest results, UMG published its EBITDA figures for the half-year to end of June (see above).
Those figures show that UMG’s company-wide EBITDA during this six-month period was €960 million ($1.05bn), equating to a margin of 20.3%.
The firm’s adjusted EBITDA during H1 2022 weighed in at €962 million, also equating to a margin of 20.3%.
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 Bank.Music Business Worldwide