Universal Music Group reported better than expected Q1 2022 earnings thanks to growth in subscription and streaming revenue.
UMG says it expects a continuation of the boom in music streaming, led by its strength across artists, geographical regions, and formats. “Top sellers for the quarter included releases from Disney’s ‘Encanto’ soundtrack, King & Prince, The Weeknd, Fujii Kaze and Ado,” UMG says in its press release.
First-quarter revenue rose 22% year over year to $2.3 billion. Streaming income is up 25% in the same quarter, while subscription income is up 18.3%. In addition to subscription revenue from Spotify and Apple Music, UMG has also struck new revenue-share deals. Both YouTube and TikTok have these deals, but the terms are not public.
UMG’s growth this quarter continues its reported 19% rise in full-year core earnings for 2021. “If you look at subscription and streaming revenue, it continues to grow very well,” adds CFO Boyd Muir. Streaming subscriptions account for roughly half of UMG’s sales. Since the mid-2010s, consumers have adopted paid music streaming subscriptions as their preferred method of music consumption.
“We see a long runway ahead for subscriber penetration, and also for continued growth in advertising monetization,” Muir adds. He forecasts a strong 2022 for UMG and says the company will work to improve margins and grow revenues into the high single digits in the medium term.
UMG went public in September 2021 after being spun out from France’s Vivendi. The stock is listed on the Euronext Amsterdam Stock Exchange. Vivendi now owns just 10% of UMG, while a Tencent-led consortium owns at least 20%. The company’s earnings reports since going public highlight just how important music streaming is to its growth strategy.
There’s an increasing focus on TikTok and YouTube as avenues of growth. Both sites tend to attract a younger crowd who admit to using the social media sites as music discovery far more than something like listening to playlists on Spotify or Apple Music.