Universal Music falls most in two years on subscription miss
The company’s subscription revenue growth fell short of expectations in the second quarter.
Universal Music Group's shares experienced their steepest decline since July 2024 following a shortfall in subscription revenue growth for the second quarter. Analysts had anticipated a 19.2% rise in subscription revenues, but the company's actual growth stood at 16.6% in constant currency, excluding the impact of its Downtown Music Holdings acquisition.
Barclays analyst Julien Roch criticized the company's performance, noting that it was the poorest since Q2 2024. The lapse in performance was attributed to "market share headwinds" as streaming rivals increased their prices, such as Spotify's 8% premium subscription increase and Apple Music's price hike in the United States. Universal Music reported a €610 million earnings figure (excluding Downtown), falling short of the estimated €643 million.
The company's Merchandising unit faced a 10.7% decline in revenue due to suboptimal tour schedules and product releases. Despite challenges, Universal aims to capitalize on the streaming trend through its "Streaming 2.0" strategy, designed to monetize superfans through higher-tier subscription options and deeper engagement. The company's top-performing artists in the quarter were Noah Kahan, BTS, Olivia Rodrigo, and Drake.
The label has also been proactive in addressing AI-related threats by taking legal action against unauthorized use of copyrighted material, while simultaneously exploring partnerships with AI technology firms like Nvidia and Klay Vision. Bill Ackman's €1.42 billion stake was sold following the firm's unsuccessful €56 billion takeover bid.
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