Universal Music Group Makes $2.8 Billion with 6% Revenue Increase; Executives Discuss TikTok Agreement

Universal Music Group, one of the leading names in the music industry, has reported impressive financial results for the first quarter of 2024. Boosted by paid music subscriptions and a strong performance from its music publishing division, the company generated revenue of 2.59 billion euros ($2.8 billion), marking a 5.8% increase (7.9% at constant currency) over the prior-year quarter. This is indeed a significant achievement in the competitive landscape of the music business.

CFO Boyd Muir highlighted that UMG’s margins saw an improvement from the previous year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 13.2% to 591 million euros ($640 million). The adjusted EBITDA margin also grew to 22.8%, up 1.5 percentage points from the first quarter of 2023. These numbers reflect the company’s strong financial performance and strategic initiatives.

One notable development was the new licensing deal with TikTok, announced by UMG just before the quarterly earnings release. While executives did not disclose specific details of the agreement, they emphasized that it provides fair value relative to other short-form video platforms. This deal is seen as a significant improvement from the previous one and is expected to have a positive impact on UMG’s revenue streams.

Moreover, each of UMG’s divisions – recorded music, music publishing, and merchandise – showed improvements in the first quarter. This broad-based growth is a testament to the company’s diversified portfolio and its ability to adapt to changing market trends. With a focus on long-term sustainability, UMG is well-positioned for continued success in the music industry.

Subscription services played a vital role in driving UMG’s performance in the quarter. Recorded-music subscription revenue grew by 10.7% to 1.12 billion euros ($1.2 billion), accounting for a significant portion of the company’s total revenue. Subscriber growth was identified as the primary driver behind the year-over-year growth rates, showcasing the importance of digital streaming platforms in today’s music landscape.

While total streaming revenue experienced a slower growth rate, UMG remains optimistic about the potential for ad-supported streaming platforms. The company is encouraged by recent improvements but remains cautious until there is a consistent and broad-based improvement across all partners and geographies. This approach reflects UMG’s strategic focus on sustainable growth in the digital music space.

Total recorded-music revenues grew by 3.4% to 1.99 billion euros ($2.15 billion) in the first quarter. Notable artists such as Taylor Swift, Noah Kahan, Morgan Wallen, Ariana Grande, and Olivia Rodrigo contributed to the company’s top sellers. Physical revenue saw a decline, primarily due to strong physical sales in Japan in the prior-year quarter. However, UMG’s licensing and other revenue streams remain robust, indicating a diverse revenue portfolio.

Music publishing revenue witnessed a substantial increase of 16.7% to 496 million euros ($537 million), driven by digital revenue growth. Performance revenue also showed a significant uptick, offsetting a decline in synch revenue. These results highlight the importance of music publishing in UMG’s overall revenue strategy.

Merchandising revenue grew by 6.5% (7.5% at constant currency) to 114 million euros ($123 million) in the first quarter. While touring merchandise sales increased, direct-to-consumer and retail sales saw a slight decline. This diversification in revenue streams reflects UMG’s commitment to exploring new avenues for growth in the music business.

Looking ahead, UMG remains focused on realizing cost savings and operational efficiencies. The company is on track to achieve 75 million euros ($80 million) in cost savings in 2024, following a recent organizational redesign and restructuring. By creating label operations on the coasts under the leadership of experienced executives, UMG aims to streamline its operations and drive long-term value for its stakeholders.