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What Recession? Music Companies Keep Growing, Despite Economic Downturn

Upbeat third-quarter results defied a mostly bleak earnings season for other sectors.

Music companies’ quarterly results in October and November were a bright spot amid a mostly bleak earnings season. High inflation, rising interest rates and the chance of a recession presented a triple-whammy to most sectors — particularly tech and retail — but in the music industry, those macroeconomic threats weren’t enough to dampen consumer demand and investors’ confidence.

“While the broader economy is facing challenges, the music industry as a whole remains healthy,” says Golnar Khosrowshahi, founder and CEO of Reservoir Media, which raised its full-fiscal-year forecast by 11% for both revenue and adjusted earnings before interest, tax, depreciation and amortization (EBITDA).

So what worked in music companies’ favor? In short, more people are going to concerts and buying streaming subscriptions, and revenues from those sectors helped bolster quarterly results for nearly every publicly listed music company.


Diversifiction = Fortification

The major labels, which have a piece of the market in nearly every segment of the music industry, all reported quarterly revenue gains over the third quarter last year, ranging from 16% at Warner Music Group to 6% at Sony Music Entertainment. On Universal Music Group’s third-quarter call, chairman/CEO Lucian Grainge attributed the company’s 13.3% third-quarter revenue gains to UMG’s diversification strategy. While ad-supported streaming revenue slowed significantly, only growing 5.2% (from last year’s 15.6% growth), licensing and other revenues rose by 30% due to an $84.2 million increase in touring revenue from Latin American, European and Asian markets where UMG is in that business. Merchandising and other revenue related to those tours grew by over 100% to almost $199 million. “We are better positioned to navigate the inevitable ebbs and flows of revenue of any particular business, as well as to weather any macroeconomic headwinds,” said Grainge.

Live’s Alive Again

Live Nation Entertainment had its biggest summer concert season ever, reporting that more than 44 million fans attended 11,000 events in the third quarter, as attendance for stadium shows tripled to nearly 9 million. Companywide, Live Nation reported $6.2 billion in quarterly revenue, up nearly 67% from the last-comparable quarter, which for it was the third quarter of 2019.

Streaming’s Still Strong

On a call with investors, an analyst asked Sony deputy president/CFO Hiroki Totoki what risks Sony Music Entertainment faces. His reply: “Streaming is very successful, and we don’t really have that much of a concern.” Spotify’s third-quarter results confirm that. Revenue rose 12% to roughly $3.2 billion at a constant currency, on a 13% uptick in subscription revenue from more than 195 million subscribers — 1 million more than the company targeted.

French streaming company Deezer also reported double-digit revenue growth, although it attributed the increase in part to a one-euro price hike the company instituted in France earlier this year. Deezer’s revenues rose nearly 14% to $112.5 million at the Sept. 30, 2022, exchange rate.

Price hikes, coming at a time consumers’ costs are rising across the spectrum, are the final thing working for music industry companies. After Apple said it would raise its standard individual streaming plan price by $1 to $10.99 in the U.S. and Spotify signaled it was also considering a price increase, major labels and other streaming company executives all said they expect trickle-down benefits.

It’s also worth noting that although Totoki said on the call that Sony is “taking steps to prepare for further deterioration… in each of our businesses,” the company raised its revenue and operating income targets for the full fiscal year by $9.8 billion and $1.9 billion, respectively (at Sony’s assumed exchange rate for the second half of the fiscal year).