Record Labels

Universal Music Group Is Still Growing in the Pandemic: Third-Quarter Earnings Breakdown

Universal Music Group logo.
Courtesy of UMG

Universal Music Group logo.

UMG posted $2.14 billion in revenue from July to September, boosting its profits 3.1% over last year.

Universal Music Group (UMG) keeps growing, even in the face of a pandemic that has the rest of the world in recession.

From July to September, the year's third quarter, the company posted 1.86 billion euros ($2.14 billion) in revenue -- a 3.1% increase over the same period in 2019, when revenue totaled 1.8 billion euros ($2.01 billion).

Parent company Vivendi also said it will continue to sell additional minority interest stakes in UMG. That would include -- but is not limited to -- an additional 10% acquisition reportedly in the works by Tencent, which would give the Chinese internet company a total 20% stake in UMG before the end of the year. As part of its initial deal to buy a 10% stake in UMG, Tencent negotiated the option to buy another 10% stake at the same price, which at the time gave UMG a 30 billion euros valuation.

And there’s even more good news for Vivendi investors, as UMG’s parent says it plans to hold a public stock offering for the leading music company sometime in 2022. At this point it's unclear how much Vivendi will sell, but it's possible it will take the same route as Access Industries did when it took Warner Music Group public earlier this year, creating two classes of stock and retaining control of the company by keeping the stock with all the voting power for itself.

Here's a breakdown of UMG's third quarter earnings report:

- For the third quarter of 2020, recorded music and publishing revenues were both up. But merchandising and other income streams were hit hard.
- Recorded music brought in 1.48 billion euros ($1.71 billion) -- a 7.6% increase over the 1.376 billion euros ($1.54 billion) from the same period last year. While UMG is managing to post revenue increases in the current tough environment, that growth is well below 20.4% surge the recorded music operation 2019 performance enjoyed over 2018’s 1.16 billion euros.
- Publishing brought in 303 million euros ($349 million) -- a 3.4% increase over the 293 million euros ($327.6 million) from the same period last year.
- Merchandise fell nearly in half to 74 million euros ($85 million) -- down from 136 million euros ($152 million) in the same period last year.

(In constant currency and perimeter, those increases respectively are 6.1% for UMG, 11% for recorded music and 6.2% for publishing.)

Within recorded music, digital grew 14.1% to 1.08 billion euros ($1.28 billion) from 945 million euros ($1.12 billion) compared to the same quarter last year. And physical was up too!

- Streaming was up 18.52% to 992 million euros ($1.14 billion) from the same period last year, when that channel totaled 837 million euros ($935.8 million).
- Downloads fell to 86 million euros ($99.16 million) from 108 million euros ($120.7 million).
- Surprisingly, physical sales grew 11.3% to 256 million euros ($295.2 million) from the prior year’s third quarter when it was 230 million euros ($257 million).
- As a percentage of recorded music revenue, that breaks down to 72.8% digital (67% from streaming and 5.8% from downloads), 17.3% physical and 9.9% from licensing and other.

Streaming continues to save record labels during the economic downturn as audio streams count in the U.S. is up to 681 billion as of the week ending Oct. 15, up nearly 19% over last year's with 579 billion streams. Sources say that even Spotify's U.S. ad-supported tier has begun to bounce back after a dismal April and May revenue wise.

The company said its best sellers so far this year include The Weeknd, Billie Eilish, King & Prince, Post Malone and BTS.

UMG's 2020 year-to-date results:

Over the year's first nine months, UMG posted 5.31 billion euros ($5.91 billion) in overall revenue. That's a 5.1% increase over the 5.06 billion ($5.7 billion) it posted over the same period last year.
- Recorded music brought in 4.252 billion euros ($4.73 billion) -- a 7% increase over the 3.97 billion euros ($4.48 billion) from the same period last year. But that’s only slightly more than one-third the 21% pace recorded in 2019 over 2018’s revenue of 3.28 billion euros.
- Music publishing tallied 876 million euros ($975 million) -- a 15.3% increase over the 760 million euros ($857 million) from the same period last year.
- Merchandising and other generated 195 million euros ($217 million) -- a 42.3% decline from 338 million euros ($381 million) from the same period last year.

Within recorded music specifically, digital accounted for 73.6% of revenue with $3.13 billion euros ($3.484 billion) -- a nearly 15% increase over the prior year’s 2.72 billion euros ($3.07 billion) nine-month total.
- Streaming earned 2.81 billion euros ($3.12 billion).
- Downloads earned 324 million euros ($360.6 million).
- Physical fell 9.6% to 604 million euros ($672.3 million) from 668 million euros ($753.5 million).
- Licensing and other income tallied 195 billion euros ($217 million) -- a 42.3% decrease from 338 million euros ($381.26 million).

As a percentage of revenue, streaming has comprised 66%, downloads 7.6%, physical 14.2% and licensing and other 12.2%.

UMG's results also break down recorded music revenue by geography over the nine month period:
- North America accounted for 2.123 billion euros ($2.36 billion) -- an 11.85% increase from the 1.898 billion euros ($2.14 billion) from the same period last year.
- Europe accounted for 1.23 billion ($1.37 billion) -- a 2.7% increase over the 1.2 billion euros ($1.35 billion) from the same period last year.
- Asia grew to 578 million euros ($643.2 million) -- a 3.2% increase over the 560 million euros ($631.7 million) from the same period last year.
- Latin America tallied 136 million euros ($151.4 million) -- a 2.3% increase over the 133 million euros ($150 million) from the same period last year.
- The rest of the world garnered 184 million euros ($204.8 million) -- up slightly over the 182 million euros ($205.3 million) from the same period last year.

UMG expects upcoming best sellers for the fourth quarter to include releases from Andrea Bocelli, Ariana Grande, Chris Stapleton, Sam Smith, Shawn Mendes, Calogero, Dadju, IZ One, Koba LaD, Louane, Rea Garvey, Tokyo Incidents and Sfera Ebbasta.

The currency translation used in this story are one euro to $1.153 for the three month period, and one euro to $1.1113 for the nine-month period; while for 2019 the currency exchange cited by Vivendi was one euro to $1.118 for the three-month period and one euro to $1.128 for the nine-month period.

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