The Ledger is a weekly music industry economics newsletter sent to Billboard Pro subscribers. An abridged version of the newsletter is published online.
From streaming services to concert promoters and ticket sellers, music companies reported encouraging first-quarter results that show consumers are continuing to embrace subscription services and eagerly return to live events after the lifting of COVID restrictions at the end of 2021. Share prices of the same companies tell a different story though. While music companies have seen double-digit gains in subscription growth, revenue, ticket sales and many other metrics, their stock prices are down double-digits in 2022. This is not no surprise given the state of the economy: inflation is at a 40-year high; rising interest rates pushed investors to seek value stocks and the safety of bonds; and consumers are beginning to miss credit card and car loan payments. Investors today are looking beyond simple growth to margins and profitability.
Following these results reports, Billboard highlights three factors influencing the music industry in 2022. First, the growth of subscription services is reshaping label and publisher revenues; growth may be slowing and could disappoint some investors, but it is there. Second, publishing revenues grew particularly strongly in the first quarter and contributed more to the growth of parent companies than record labels (given their relatively smaller size). Third, live music will have a strong year in 2022, which will impact not only touring artists, but also record labels selling merchandise on the road.
Subscription growth has been strong (but slowing).
Spotify’s subscriptions grew 15% to 182 million, a year-on-year increase of 24 million and 2 million more than in the fourth quarter of 2021. While second-quarter growth was below Spotify’s forecast, the company said it was above expectations for an “involuntary churn” of 1.5. million subscriptions of the company’s output from Russia were not counted. (Spotify expects to lose another 600,000 subscribers in Russia in the second quarter.)
The second quarter forecast is 6 million net new subscribers, which would take Spotify to around 188 million, up 14% from the second quarter of 2021. This would represent a lower annual subscriber gain (23 million compared to 27 million in the second quarter). of 2021) and a lower annual growth rate (14% against 20%).
Smaller streaming services posted higher growth rates in the first quarter. Even though Tencent Music Entertainment’s revenue fell 15% due to losses in social entertainment, its music subscriptions increased 31.7% to 80.2 million, a year-on-year increase of 19.3 million and a increase of 4 million compared to the fourth quarter of 2021. Anghami’s subscription revenue increased by 26% annually. over the year. Chinese music streaming service Cloud Village announces its first-quarter results on May 24.
Publishing and merchandising were higher in the revenue mix.
At Universal Music Group, recorded music accounted for 78.3% of revenue, but generated only 61% of revenue growth in the first quarter despite steep increases in subscription fees. UMG’s publishing division accounted for 17.1% of total revenue, but 26.7% of total revenue growth. Merchandising accounted for 4.9% of UMG’s total revenue and 12.3% of its revenue growth. At Warner Music Group, publishing revenue share rose to 16.7% from 15.4% a year earlier, and accounted for 30.2% of revenue growth. At Sony Music, publishing increased its share of quarterly revenue from 16.4% to 18.3%. Recorded music fell from 58% to 60% while the “visual media and platforms” division fell from 25.6% to 19.2%.
Live event businesses are experiencing double-digit growth.
At Live Nation, which claimed to have its best first quarter ever, revenue more than sixfold in the first quarter after COVID-19 restrictions were lifted. More importantly, the company expects double-digit growth this year compared to 2019, the best year for comparison as COVID impacted every quarter in 2020. Live Nation sold 70 million tickets for shows in 2022, an increase of 36% from the same point in 2020. 2019, and the number of committed shows increased by 44% through the end of April. At the same time, no-show rates don’t appear to be an issue, falling “generally in the mid-range numbers,” the company said in its earnings release.
MSG Entertainment’s entertainment revenue (live events) increased more than sixfold to $194.6 million as COVID restrictions were lifted. Minus MSG Networks, which merged with MSG Entertainment in July 2021, the company had revenue of $292.5 million, up 17% from the same period in 2019.
Vivid Seats’ first quarter sales increased 442% over the same period a year earlier. The company raised its second-quarter guidance for revenue (its reduction in total revenue) and gross order value (total value of ticket sales). Music accounted for 53.1% of revenue, compared to 31.9% the previous year. The volume of market orders increased by 589%. At Eventbrite, paid tickets in the first quarter increased 78% year over year, and net revenue per ticket increased 13.6%.
INVENTORY
Through May 20, % change over last week and year-to-date change.
Spotify (NYSE: SPOT): $107.19, +1.0%, -54.2% YTD
Universal Music Group (AS: UMG): 20.41 euros, 0%, -17.6% since the beginning of the year
Warner Music Group (Nasdaq: WMG): $29.76, +2.3%, -31.1% YTD
HYBE (KS 352820): 221,000 KRW, +2.8%, -36.7% YTD
nation live (NYSE: LYV): $89.16, -2.3%, -25.5% YTD
iHeartMedia (Nasdaq: IHRT): $12.13, -5.2%, -42.3% YTD
Cumulus Media (Nasdaq: CMLS): $12.50, -2.5%, +11.1% YTD
Tencent Music Entertainment (NYSE:TME): $4.07, -0.7%, -40.6% YTD
Composite NYSE: 15,072.58, -1.2%, -12.2% YTD
Nasdaq: 11,354.62, -3.8%, -27.4% since the beginning of the year
S&P500: 3,901.36, -3.0%, -18.1% YTD
