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HomeEntertainmentMusicWhat Recession? Music Companies Keep Growing, Despite Economic Downturn

What Recession? Music Companies Keep Growing, Despite Economic Downturn

Music firms’ quarterly leads to October and November had been a vivid spot amid a largely bleak earnings season. High inflation, rising rates of interest and the prospect of a recession introduced a triple-whammy to most sectors — notably tech and retail — however within the music business, these macroeconomic threats weren’t sufficient to dampen shopper demand and buyers’ confidence.

“While the broader economy is facing challenges, the music industry as a whole remains healthy,” says Golnar Khosrowshahi, founder and CEO of Reservoir Media, which raised its full-fiscal-year forecast by 11% for each income and adjusted earnings earlier than curiosity, tax, depreciation and amortization (EBITDA).

So what labored in music firms’ favor? In brief, extra persons are going to live shows and shopping for streaming subscriptions, and revenues from these sectors helped bolster quarterly outcomes for almost each publicly listed music firm.

Diversifiction = Fortification

The main labels, which have a chunk of the market in almost each section of the music business, all reported quarterly income good points over the third quarter final yr, starting from 16% at Warner Music Group to six% at Sony Music Entertainment. On Universal Music Group’s third-quarter name, chairman/CEO Lucian Grainge attributed the corporate’s 13.3% third-quarter income good points to UMG’s diversification technique. While ad-supported streaming income slowed considerably, solely rising 5.2% (from final yr’s 15.6% progress), licensing and different revenues rose by 30% as a result of an $84.2 million enhance in touring income from Latin American, European and Asian markets the place UMG is in that enterprise. Merchandising and different income associated to these excursions grew by over 100% to virtually $199 million. “We are better positioned to navigate the inevitable ebbs and flows of revenue of any particular business, as well as to weather any macroeconomic headwinds,” stated Grainge.

Live’s Alive Again

Live Nation Entertainment had its largest summer time live performance season ever, reporting that greater than 44 million followers attended 11,000 occasions within the third quarter, as attendance for stadium reveals tripled to almost 9 million. Companywide, Live Nation reported $6.2 billion in quarterly income, up almost 67% from the last-comparable quarter, which for it was the third quarter of 2019.

Streaming’s Still Strong

On a name with buyers, an analyst requested Sony deputy president/CFO Hiroki Totoki what dangers Sony Music Entertainment faces. His reply: “Streaming is very successful, and we don’t really have that much of a concern.” Spotify’s third-quarter outcomes verify that. Revenue rose 12% to roughly $3.2 billion at a continuing forex, on a 13% uptick in subscription income from greater than 195 million subscribers — 1 million greater than the corporate focused.

French streaming firm Deezer additionally reported double-digit income progress, though it attributed the rise partly to a one-euro value hike the corporate instituted in France earlier this yr. Deezer’s revenues rose almost 14% to $112.5 million on the Sept. 30, 2022, change charge.

Price hikes, coming at a time customers’ prices are rising throughout the spectrum, are the ultimate factor working for music business firms. After Apple stated it could elevate its commonplace particular person streaming plan value by $1 to $10.99 within the U.S. and Spotify signaled it was additionally contemplating a value enhance, main labels and different streaming firm executives all stated they count on trickle-down advantages.

It’s additionally price noting that though Totoki stated on the decision that Sony is “taking steps to prepare for further deterioration… in each of our businesses,” the corporate raised its income and working earnings targets for the complete fiscal yr by $9.8 billion and $1.9 billion, respectively (at Sony’s assumed change charge for the second half of the fiscal yr).

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