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Photo Credit: Universal Music Group<\/p>\n<\/div>\n
Music What streaming plateau? After suffering a material stock price decline following a Q2 subscription-growth \u201cdeceleration,\u201d Universal Music Group (UMG) is now projecting a big expansion through the 2028 fiscal year.<\/h2>\n
The leading label laid out that decidedly bullish subscription-growth forecast during its 2024 Capital Markets Day presentation \u2013 besides emphasizing the involved numbers in a separate release for good measure.<\/p>\n
Just to recap, Universal Music Group posted<\/a> $1.65 billion (\u20ac1.48 billion) in recorded streaming revenue for Q2 2024, representing a YoY increase of 3.8%. However, the latter fell well short of the 6.9% YoY growth attached to H1 2024.<\/p>\n Additionally, within the Q2 2024 sum, ad-supported revenue slipped 4.2% YoY to $383.59 million (\u20ac343 million), and subscription revenue improved by a modest 6.5% YoY (down from 8.5% for the half-year window) to $1.27 billion (\u20ac1.14 billion).<\/p>\n As initially mentioned, UMG shares parted with over 23% of their value in the wake of the earnings report, and subsequently, the RIAA identified<\/a> a relatively small 2.7% YoY boost for domestic subscription streaming accounts in H1 2024.<\/p>\n Shifting from the concise release and to the actual Capital Markets Day 2024 presentation<\/a>, the \u201ccurrent consensus predicts\u201d north of one billion global music streaming subscribers by 2028.<\/p>\n Of course, emerging markets (dubbed \u201chigh-potential markets\u201d in the report) are contributing a sizable number of subscribers at present \u2013 potentially ushering in substantial long-term growth despite comparatively small per-account revenue contributions at present.<\/p>\n How, then, does UMG intend to make its 8-10% subscription CAGR forecast a reality? Beginning with the obvious, the major label is anticipating subscriber additions in both established and rising markets.<\/p>\n As of last year, the \u201cpaid music subscriber penetration rate\u201d stood at only 42% in the U.S., 38% in the U.K.<\/a>, 22% in Japan, 10% in Italy<\/a>, and 13% in both Brazil<\/a> and China<\/a>, per the report.<\/p>\n Stated bluntly, it\u2019s unclear whether subscription holdouts in the U.S. and elsewhere, having resisted paying at smaller monthly costs thus far, will finally be inspired to begin coughing up for on-demand music access should prices keep rising. The availability of free music options via Spotify, YouTube, and several others, at least in their current form, is worth bearing in mind on this front as well.<\/p>\n Enter the next component of UMG\u2019s streaming vision: \u201cbetter monetization of ad-supported tiers and family plans.\u201d Time will tell whether \u201cbetter monetization\u201d on freemium accounts refers to taking a page out of video streaming services\u2019 book by charging listeners a fee for access<\/a>. At the risk of diving too far into the multifaceted subject, the move could affect subscription growth attributable to free-account conversions.<\/p>\n Lastly, long-discussed superfan monetization \u2013 a \u201csuper-premium tier with enhanced artist\/fan engagement\u201d \u2013 is likewise part of UMG\u2019s streaming strategy. While it remains to be seen exactly what related efforts will entail, Universal Music is leaning into<\/a> Hybe\u2019s WeVerse, and Spotify has already confirmed<\/a> a \u201cDeluxe\u201d tier.<\/p>\n<\/section><\/div>\nIn spite of these points, Universal Music is evidently still banking on a continued streaming buildout \u2013 to the tune of a targeted 8-10% compound annual growth rate, reported in constant currency, specifically for subscriptions through the 2028 fiscal year.<\/h4>\n
Expectedly, \u201cprice increases in line with consumer value and inflation\u201d are also part of UMG\u2019s streaming-growth gameplan. That objective might appear to contradict the subscriber-expansion goal at a glance.<\/h4>\n