By Mauro Orru
The record label behind Taylor Swift, Billie Eilish and Ariana Grande is betting on streaming subscriptions, superfans and partnerships as it forecasts higher revenue and earnings growth through the end of 2028.
Universal Music Group executives laid out a vision for the future of music streaming Tuesday in which more customers pay for premium ad-free streaming, audio services continue to attract new subscribers globally and superfans pay more for special features like early access to new music or high-resolution audio and fan experiences.
The world's largest music company forecast a compound annual growth rate for revenue at constant currencies of more than 7% through 2028, with subscription revenue growing 8% to 10%. It stressed the importance of growing the number of people paying for music streaming subscriptions as well as the money made per customer as the market matures.
Investors have long banked on subscriptions and streaming services to generate sales for the record label. Music streaming boomed at the height of the pandemic when live events shut down and listeners stuck at home turned to streaming services for entertainment, but growth has since cooled.
Universal Music in July shed roughly $13.25 billion in market value after subscriptions and streaming services revenue came in 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. Shares fell 1% Tuesday.
Executives said they are working on initiatives with a range of companies from Spotify to Google's YouTube, Amazon.com and Apple to help spur growth.
New subscribers are likely to come from converting customers in ad-supported tiers to premium subscriptions to boost the average revenue per user, turning satellite radio listeners to audio streaming subscribers, and getting audiobook listeners to pay for music streaming services, the company said.
Universal executives said they are working to expand artists' reach across social media, vidoegaming and fitness services in addition to seeking new ways for its musicians to connect with fans through high-end merchandise collaborations, listening parties and other offerings.
The company last month signed an expanded multiyear 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.
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.
Write to Mauro Orru at mauro.orru@wsj.com
(END) Dow Jones Newswires
September 17, 2024 11:47 ET (15:47 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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