Strong revenue growth for Universal, Believe and more in Q1

Below are some big takeaways based on the reports released thus far.

Universal’s streaming revenue growth upstaged other categories

Universal Music Group’s (UMG’s) revenues reached €2.2bn (about $2.46bn) in Q1. This represented a 16.5% increase at constant currency, driven by growth in all its revenue segments, led by recorded music streaming, which generated a 14.6% jump. Physical recorded music revenues grew by 8.7% to €237m, driven by “improvements in both CD and vinyl sales.” The biggest sellers in the category were King & Prince, Fujii Kaze, Ado, Stromae and Taylor Swift. Total recorded music revenues, which include streaming and physical sales, jumped by 11.3% to reach €1.72bn. Universal’s earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 14.1% at constant currency to €454m.

In terms of its publishing business, Universal returned €375m in revenue, representing an increase of 32.5%. Digital revenues for its publishing arm went up by 44.7% to €191m, while synch revenue grew 29.2% to €62m – mainly driven by increased income from advertising and film. In the Merchandising and Other divisions, revenue grew to €107m, up by 69.8%. UMG, however, said the figures were affected by a slight change to the company’s accounting policy.

“In prior years, these revenues were recognised when the relevant collection society notified UMG of the usage by the end customer and collectability was assured,” UMG said. “Recognition of that revenue is now based on an accrual for the best available estimate of when the usage occurs and the amount of consideration which is probable to be collected. This has affected the timing of the recognition of certain revenues across financial reporting quarters, with a benefit for the first quarter of 2022, compared to the prior year.”

Believe and Hybe show significant revenue growth

Believe and Hybe also published their latest results this week, with Believe’s total revenues jumping by 30.9% to €162.5m, which included a 30.7% spike for its premium business solutions and 33.6% for its automated solutions, which is DIY distributor TuneCore. Digital revenues climbed 35.3% in Q1 compared to the previous quarter. The group gave a geographical breakdown of the revenue generated, with the Asia Pacific and Africa region generating €40.1m in revenue, growing a significant 56.3% year-on-year. The region now contributes 24.7% of Believe’s turnover. France and Germany represented 17.5% and 15.8% of overall revenues, respectively. The Americas and Europe (apart from France and Germany), represented 14.4% and 27.7% respectively.

Last year, Believe returned €50m in Russia and Ukraine. However, the company anticipates a 30 to 40% plunge after pausing monetisation in those two markets this year, following Russia's invasion of Ukraine.

South Korean entertainment company Hybe’s Q1 revenues grew to 285 billion South Korean won ($225m), a significant 59.8% increase year-on-year. However, its monthly active users (MAUs) shrunk by 5% in Q1 compared to the previous quarter. Earlier this year, Hybe said it had generated 1.23 trillion won in 2021, a 58% increase year-on-year, after it acquired Scooter Braun’s Ithaca Holdings for about $1bn in April 2021. Another driver of revenue was its artist indirect involvement business, which generated 131 billion won. The category entails using the name of artists for advertising and branding without requiring any active participation from the musician.

Spotify exceeds expectations

Music streaming revenues saw strong growth in terms of subscribers based on Spotify’s figures, which surpassed the company’s expectations for subscribers and monthly active users (MAUs). The platform added 2 million paying subscribers quarter-on-quarter, bringing its tally to 182 million subscribers globally, albeit Spotify previously announcing it lost 1.5 million subscribers in Russia. MAUs reached 422 million, up by 16 million. However, 3 million were due to a “brief service outage that caused users to be involuntarily logged out of Spotify. As a result, we believe certain affected users created new accounts to log back in, resulting in approximately 3 million additional MAUs,” Spotify said.

Regarding revenue, the platform posted €2.67bn, up 19% year-on-year. Premium revenue grew 18% to €2.38bn, while ad-supported revenue rose by 22% to €282m. Looking ahead, the music streaming service is aiming for an additional 5 million premium subscriptions and 428 million MAUs by the end of June.

SoundCloud and TuneCore on artist payouts

SoundCloud and TuneCore also announced some important news regarding artist payouts last week. SoundCloud revealed data about its Fan-Powered Royalties system, about a year after it was launched. More than 135 000 independent artists are now getting paid through the user-centric model, which indicates a 30% uptake in artists who have signed up to monetise their music via the system on the platform. Another big claim was that independent artists are earning 60% more through Fan-Powered Royalties than they would have through the traditional pro rata model.

On the digital distribution side, TuneCore said it had surpassed $2.5bn in royalty payouts to artists since it began operating in 2006. It also said it was offering “additional ways for artists to earn money including music publishing administration service and YouTube Content ID”. TuneCore is gaining significant traction globally, with creators outside of the US representing 60% of new artists and labels due to the company’s aggressive expansion strategy. The distributor now operates in 14 countries across four continents, and its artists have racked up about 500 billion streams and 700 million downloads.