Is a music streaming slowdown upon us? Here’s what the major labels’ latest quarterly earnings reports say. Photo Credit: Mark Rohan
Universal Music Group, Sony Music Entertainment, and Warner Music Group alike have now reported their financials for Q2 2024. What do the earnings reports tell us amidst continued discussions about a potential streaming slowdown?
The question’s short answer is “quite a lot.” And the long answer reveals a lot about each company’s unique footing in the current music landscape. At the top of this landscape (at least when it comes to size) is UMG, which acknowledged in its Q2 2024 earnings report a slowdown in paid streaming growth — after which all things broke loose on UMG’s Euronext-traded stock.
That wasn’t the case for WMG and SME, with the former’s CEO, Robert Kyncl, touting “healthy industry trends” and his company’s “strong subscription streaming growth” during Wednesday’s financial update.
The comments starkly contrast those delivered by UMG execs during their company’s own earnings presentation, though characterizations and descriptors sometimes make all the difference. As a result, there’s considerable uncertainty about which direction streaming is heading overall.
Like with most subjects defined by many moving pieces, hard numbers help to paint a clearer picture here.
For Q2 2024, WMG disclosed a 5% YoY gain in recorded music streaming revenue and 7% YoY growth in recorded revenue from subscriptions themselves. (Both percentages would have been larger if not for the once-off impact of BMG’s ADA split.) Recorded digital revenue hit $882 million (up $36 million YoY), while digital publishing revenue spiked $12 million YoY to $194 million.
On the other hand, Sony Music saw recorded music streaming revenue improve 6.8% quarterly and 19.3% YoY to $1.34 billion (¥196.66 billion), per the appropriate earnings report. Additionally, publishing’s streaming growth came in at 28% quarterly and 35.8% YoY to $273.70 million (¥40.17 billion).
Finally, Universal Music reported a 3.8% YoY increase in second-quarter recorded subscriptions and streaming revenue, at $1.62 billion (€1.48 billion). Behind that sum, though, ad-supported revenue fell 4.2% YoY to $374.79 million (€343 million), with 6.5% growth for subscription streaming revenue at $1.25 billion (€1.14 billion). UMPG digital revenue jumped 17.8% YoY to $339.91 million (€311 million).
Of course, everyone prefers endless double-digit gains, which were a feature of earlier financial reports. Those double-digit streaming surges naturally pushed expectations of future earnings upward, with a booming economic backdrop fueling even more bullish projections and boosting interconnected areas like music IP valuations.
Single-digit gains are obviously less exciting and the basis for investor concern, especially when they dip below 5%.
Beyond the focus on streaming, a few other financial factors are worth noting.
First, Warner Music, the smallest of the majors, still has a long road to catching up to SME and UMG, including in terms of straight revenue. Against that backdrop, maximizing efficiency remains a key focus for Kyncl. But even when doing so fuels positive financial results relative to market peers, it’s arguably a matter of regaining lost ground rather than getting ahead.
Second, Sony Music Entertainment’s financials continue to benefit from favorable exchange rates – the lone factor cited by Sony Group execs when bumping their guidance for music operations across the remainder of the fiscal year. During 2024’s second quarter, the business identified an average exchange rate of ¥155.6 to a dollar and ¥167.6 to a euro.
Back to the streaming question: we aren’t without proof of solid ongoing streaming growth despite an uncertain economy and apparent investor concerns about paid listening’s trajectory.
As things stand, weighing all available evidence, it’s premature to declare definitively that streaming growth is already headed towards a material downturn — especially with forthcoming superfan initiatives, Spotify’s “deluxe” plan, and more.
And we’ll leave it on that high note for now.
