Stat Of The Week: COVID-19 is hurting Universal Music Group’s revenues – but proving its profitability

 Stat Of The Week: COVID-19 is hurting Universal Music Group’s revenues – but proving its profitability


MBW’s Stat Of The Week is a brand new collection wherein we present why a single knowledge level deserves the eye of the worldwide music trade. Stat Of the Week is supported by Cinq Music Group, a technology-driven report label, distribution, and rights administration firm.

Universal Music Group should battle laborious to develop its revenues within the second half of 2020.

That’s one apparent deduction from the agency’s Q2 (and half-year) outcomes, as issued by majority-parent Vivendi yesterday (July 30).

In half-year phrases, Universal had a fairly first rate run: In the six months to finish of June, the agency’s recorded music revenues had been up 3.7% in natural phrases (to €2.77bn / $3.03bn), largely because of a 12.4% rise in streaming revenues (to €1.81bn / $1.98bn).

Publishing was up 21.2% to €573m ($626m) in the identical H1 2020 interval – boosted by a one-off digital royalty declare – whereas UMG’s complete enterprise (data plus publishing, merch and many others.) noticed revenues rise 3.5% to €3.46bn ($3.78bn) within the half-year interval.

These weren’t the double-digit rises we’re used to seeing from UMG, but contemplating present world circumstances, they’re spectacular nonetheless.

In Q2 (the three months to finish of June), nonetheless, UMG confronted a harsher set of circumstances.

Thanks to the COVID-19 pandemic – and the linked quarantines/lockdowns the world over – UMG’s complete recorded music gross sales dropped 4.5% YoY within the quarter, regardless of streaming revenues rising 8.5%.

Quarterly recorded bodily gross sales declined by a painful 39%, down to simply €152m ($165m); merch gross sales fared even worse, down 61.8% to €51m ($55m).

That left revenues throughout UMG’s general enterprise (data plus publishing, merch and many others.) down 4.7% YoY in Q2, at €1.69bn ($1.83bn).

Clearly, the widespread closures of bodily retail shops worldwide (plus the cessation of the worldwide touring circuit) had a considerably deleterious impact on UMG’s gross sales within the quarter.

So too, it seems, did UMG’s personal quieter-than-usual launch schedule.

Vivendi revealed yesterday that UMG’s greatest promoting artist initiatives globally within the first half of 2020 had been, so as: (i) Billie Eilish; (ii) The Weeknd; (iii) Justin Bieber; (iv) King & Prince; and (v) Eminem.

What unites all of those artists? None of them launched a studio album in Q2 2020. (Eminem’s chart-topping Music To Be Murdered By was launched in January; The Weeknd’s After Hours arrived in March.)

Vivendi says that Universal’s different greatest sellers in H1 2020 had been Lil Baby (who launched his newest album in February) and Post Malone (whose final album, Hollywood’s Bleeding, was a 2019 launch).

There had been some main Q2 releases from Universal (for instance: Blame It On Baby by DaBaby in April, Lady Gaga’s Chromatica in May) but, similar to the remainder of the blockbuster report enterprise, it was a noticeably mild slate.

So had been there any brilliant spots for UMG amid the aberration of its COVID-hit Q2 interval?

Yes. It’s our Stat Of The Week – and it’ll most likely notably please Tencent.

It an indicator of Universal’s sturdy underlying (i.e. catalog) enterprise shining by means of… even when the corporate isn’t working at full capability.

MBW’s Stat Of The Week: Despite – and partly as a result of – Universal’s comparatively quiet operations in Q2, the corporate’s Operating Profit within the first half of 2020 grew to €597m ($652m). That was up 17.7% year-on-year on an natural foundation, representing an working revenue margin of 17.3% versus 15.4% within the prior 12 months.

Vivendi provides away two revenue figures for Universal Music Group each six months (but not each quarter): the corporate’s Operating Profit, and its EBITA (Earnings earlier than curiosity, taxes, and amortization).

The latter determine takes under consideration exec share-based compensation, restructuring costs and particular objects.

In the primary six months of 2020, says Vivendi, Universal’s working revenue grew by €96m year-on-year (+17.7%) to €597m ($652m). Its EBITA rose by €86m (+16.6%), to €567m ($619m).

Meanwhile, UMG’s complete prices (ie. internet income minus working revenue) rose solely barely, up from €2.76bn within the first half of final 12 months to €2.88bn in H1 2020.

These figures will probably be of particular curiosity to Tencent Holdings and the consortium it leads, which already owns 10% of UMG, as a result of it provides a clearer-than-usual image of Universal’s root profitability past the noise of its extra typical frontline launch rhythm.

This is particularly necessary once you keep in mind that Tencent is presently mulling whether or not to amass an extra 10% in Universal, taking its complete stake to 20%. The Chinese big (and the backers of its consortium) have till early 2021 to make that call.

The different factor it tells us: Universal’s speedy transition right into a streaming-led firm has largely protected it from the worst of the pandemic’s business headwinds. In Q2 2020, greater than two thirds (65.5%) of Universal’s recorded music revenues got here from streaming. In flip, streaming contributed practically six occasions the revenues UMG generated from bodily gross sales.

Despite the profitability upsides to a quieter quarter, UMG Chairman and CEO Sir Lucian Grainge received’t be eager on a extra muted launch slate lasting too lengthy.

Grainge and his label heads would little doubt somewhat Universal was again firing on all cylinders – releasing extra blockbuster data, breaking extra blockbuster artists… and producing extra blockbuster revenues.

With that in thoughts, one suspects that Taylor Swift – whose history-making new LP, Folklore, is currently driving UMG’s Q3 performance forward – is notably in style amongst Universal’s most senior executives proper now.

Cinq Music Group’s repertoire has won Grammy awards, dozens of Gold and Platinum RIAA certifications, and numerous No.1 chart positions on a variety of Billboard charts. Its repertoire includes heavyweights such as Bad Bunny, Janet Jackson, Daddy Yankee, T.I., Sean Kingston, Anuel, and hundreds more.Music Business Worldwide


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