Recorded music is faring better than the concert business amid the coronavirus — but it’s hardly immune.
Over the past few years, labels and music publishers have once again become a hot investment — see Warner Music Group’s initial public offering in June or Tencent’s purchase of 10% of Universal Music Group, which valued UMG at a dizzying 30 billion euros ($35.2 billion at current exchange rates) — partly because streaming revenue is expected to continue soaring over the next decade as new markets embrace the format. Even amid the coronavirus pandemic, with the live business temporarily shuttered, Spotify revenue grew 13.3% to 1.9 billion euros ($2.2 billion), according to second-quarter earnings that were released July 29.
The three major labels aren’t faring as well. UMG, WMG and Sony Music each suffered second-quarter drops in revenue compared with the same period last year, according to their recent earnings reports: UMG was down 3.8%, WMG declined 4.5%, and Sony Music dropped 13.1%. And although their recorded-music revenue from streaming grew — Sony’s rose 3.6% compared with the same time period in 2019, while WMG’s and UMG’s were up 9.1% and 9.2%, respectively — they didn’t post the double-digit increases that investors have grown accustomed to. Consumers are streaming more music at home, on gaming consoles and smart speakers, and more of them are buying subscriptions even amid a bad economy — Spotify added 8 million subscribers in the second quarter, the most in a year. So why aren’t music companies seeing those gains?