Common Music Group on Thursday reported its fifth-straight quarter of income features since its public spinoff from Vivendi final 12 months, rising income 13.3% as its many, diverse enterprise divisions helped offset slow-downs in areas delicate to international financial uncertainty.
On a name with analysts, UMG chairman and chief govt Lucian Grainge attributed the corporate’s robust quarter — coming amid a downturn within the promoting market — to its diversification technique. Over Grainge’s 17-years on the helm, UMG has constructed dominant positions in a number of geographic markets and throughout almost each main section in music, making it much less prone to “the inevitable ebbs and flows in income of any specific enterprise,” he stated.
That helped UMG offset a slowdown in ad-supported streaming revenues, which have been hampered by firms spending much less amid fears of a recession. Advert-supported streaming revenues for the quarter grew by 5.2% in fixed forex in comparison with the third quarter final 12 months. That’s a slowdown from the second quarter this 12 months when ad-supported revenues grew by 15.6% in fixed forex in comparison with second quarter 2021.
“We famous we might not be proof against a downturn within the promoting market, which is certainly what occurred,” Grainge stated on the decision discussing the corporate’s earnings for the third quarter, which ended Sept. 30. “The slower development within the third quarter in ad-supported streaming income was offset by development in so many different areas of our enterprise. From subscription to licensing, stay touring to merchandising, to continued development all through music publishing.”
Subscription revenues grew by 8.7% from a 12 months in the past in fixed forex — a measure UMG makes use of to strip out fluctuations in overseas trade markets. UMG chief monetary officer Boyd Muir stated subscriber development among the many digital streaming suppliers stays wholesome and “now we have not seen any indicators of financial associated slowdowns.”
Licensing and different income grew by 30.2% in fixed forex because of the restoration of stay touring in sure European, Latin American and Asian markets the place UMG is concerned in that enterprise. Merchandising and different income grew by over 100% in fixed forex in comparison with the 12 months in the past quarter, additionally helped by development in touring.
The corporate noticed an $80 million enhance in touring revenues within the quarter in comparison with final 12 months from high promoting acts like BTS, BLACKPINK, Ado, INI and Morgan Wallen, executives stated.
Whereas a big contributor to the corporate’s quarter, touring earns UMG a decrease revenue margin in comparison with its different companies, Muir stated.
“As I’ve talked about earlier than, that’s a really low-margin enterprise — let’s name it, the 8% to 10% type of space,” Muir stated. “Nonetheless, it’s an extremely vital a part of our enterprise. And it implies that we will really join the fan with the artists. So it’s of accelerating significance to us as we handle the necessities of the tremendous followers.”
Trying to the following quarter, the executives stated to anticipate the corporate’s adjusted EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortization) margin, a intently watched metric of profitability, to be flat for the 12 months at round 20.8%.
The corporate’s inventory worth closed down 5.61% on Friday (Oct. 28).