Universal Music Surpasses Revenue Expectations Amid Industry Concerns

Universal Music Group (UMG) has achieved revenue growth that exceeded expectations for the fourth quarter of 2024, countering worries in the industry about a slowdown in music streaming.

As the largest record label in the world, UMG reported a total revenue of €3.44 billion (approximately A$5.7 billion), marking a 7.9% increase at constant currency. This figure notably surpassed the predictions made by analysts, who had estimated revenue at €3.27 billion.

The revenue derived from subscriptions and streaming services increased by 5.6%, reaching €1.60 billion (around A$2.64 billion). This growth rate outperformed analysts' expectations, which forecasted a 4.1% increase; however, it represented a decrease from the previous quarter's growth rate of 6.2%.

Focusing on subscription services, UMG saw a significant 9% rise in revenue, with figures reaching €1.23 billion (approximately A$2.03 billion). This surge was driven by an increase in the number of paid subscribers. In contrast, ad-supported streaming revenue fell by 4.1% to €375 million (about A$619 million) as listeners shifted from premium video platforms to short-form content services that tend to yield less revenue.

To address these trends, Universal is implementing its 'Streaming 2.0' strategy, which aims to convert users of ad-supported services into premium subscribers to maximize revenue potential. Additionally, the company is exploring new opportunities in areas such as fan engagement, merchandising, and branding to stimulate further growth.

Apart from digital streams, Universal also recorded a 3.4% rise in physical sales, which include CDs and vinyl records, totaling €458 million (about A$751 million).

The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) surged to €799 million (approximately A$1.31 billion), exceeding analysts' predictions of €721.4 million and achieving a profit margin of 23.2%. For the entire year, UMG reported a net profit of €2.09 billion (around A$3.43 billion), a notable increase from €1.26 billion (about A$2.07 billion) in 2023.

UMG is targeting annual revenue growth of more than 7% through 2028. Recently, the company expanded its partnership with Amazon Music to enhance artist support and tackle the challenges posed by AI-generated content. They also signed a multi-year distribution deal with Spotify, which includes new pricing tiers.

Furthermore, Universal is preparing for a share sale in the U.S. by September 15, complying with an agreement with billionaire investor Bill Ackman's Pershing Square, which plans to sell $500 million (approximately A$820 million) worth of shares in the company.

music, revenue, streaming