By Mauro Orru
Universal Music Group said it expects to achieve high revenue and earnings growth through the end of 2028 as the record label behind Taylor Swift, Billie Eilish and Ariana Grande bets on subscriptions and its expanding network of partnerships.
The world's largest music company set financial targets as part of its Capital Markets Day event in London and is forecasting a compound annual growth rate for revenue at constant currencies of more than 7%, with subscription revenue growing 8% to 10%.
Investors have long banked on subscriptions and streaming services to generate sales for the record label. Such services boomed at the height of the pandemic as listeners turned to digital platforms to enjoy their favorite artists when Covid-19 restrictions brought live concerts to a standstill. However, growth has cooled in recent years.
Universal's targets underscore confidence from management that subscriptions will continue to drive revenue growth for the longer term despite recent setbacks.
The company in July shed roughly $13.25 billion in market value after subscriptions and streaming services revenue came in well below what analysts had expected in the second quarter, marking Universal's biggest single-day share slump since the group went public in late 2021.
Universal said it would also leverage its growing patchwork of alliances to bolster revenue, earnings and free cash flow generation in coming years. Adjusted earnings before interest, taxes, depreciation and amortization--Universal's preferred measure of profitability--are expected to grow more than 10% at constant currencies through the end of 2028, while the group's free cash flow conversion rate before investing activity should range between 60% and 70%.
The company last month signed an expanded multi-year global agreement allowing music from its artists and songwriters to be shared across Meta Platforms' networks, including Facebook, Instagram, Messenger, Horizon, Threads and WhatsApp.
That deal expanded monetization opportunities for Universal Music artists and songwriters with short-form video and licensed music for WhatsApp, and came months after another deal with TikTok that saw Universal Music artists and their songs return to the popular video-sharing app after months of disagreements over pay.
Write to Mauro Orru at mauro.orru@wsj.com
(END) Dow Jones Newswires
September 17, 2024 03:56 ET (07:56 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments