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The Ledger: Music Stocks Have Fallen Almost Two-Times the Market — Largely Because of One Company 

Spotify accounted for 36% of Billboard's Global Music Index's year-to-date value decrease.

The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.

So far this year, music stocks — as tracked by Billboard’s new Global Music Index — have dropped 44.2% as of Oct. 5, far outpacing the declines elsewhere in the market. For comparison, over that same time span, the New York Stock Exchange composite index fell 16.9%, the S&P 500 fell 20.6% and the tech-heavy Nasdaq sank 28.7%.  

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One company, Spotify — one of the largest companies in the index — represents a sizable chunk of that decline. The streaming giant accounted for 36% of the Global Music Index’s year-to-date value decline, despite accounting for just 18.3% of the index’s value. It used to be the world’s most valuable music company. Now, with Spotify’s shares down 60.9% through Oct. 5, Universal Music Group is the largest music company by market capitalization and the Global Music Index’s largest component. In fact, UMG’s market capitalization of $34 billion is nearly twice that of Spotify’s $17.6 billion.  

Another company to have an outsized impact on the Global Music Index’s decline in 2022 is HYBE. The South Korean company accounted for 7.7% of the Index’s year-to-date decline, but just 2.8% of its total value as of Oct. 5. HYBE’s share price plummeted 24.9% on June 15 after its largest artist, BTS, announced it was going on hiatus. Even though other HYBE K-pop artists, such as Tomorrow X Together and Enhypen, have performed well since the announcement, HYBE’s share price fell another 6.2% to KRW 130,000 by Oct. 5.  

HYBE shows the inherent danger in a company relying heavily on any one artist. On Friday (Oct. 7), amid concerns that BTS members could soon face mandatory enlistment in the South Korean military, HYBE’s share closed at KRW 123,000, down 6.1%, and fell as low as KRW 121,000. That’s a new all-time low, 71.3% below the all-time high of KRW 421,500 set on Nov. 17, 2021. In contrast, shares of SM Entertainment, whose acts include SuperM and NCT 127, the other K-pop company in the Global Music Index, have fallen only 9.8% in 2022.  

To be sure, each of the 20 stocks in the Global Music Index has fallen in value in 2022. Rising interest rates and inflation have caused investors to seek safety elsewhere and place greater importance on profitability rather than growth. Streaming stocks – of all stripes – have fared especially poorly this year. Shares of Netflix — which is not included in the Global Music Index — are down 60.7% year-to-date through Oct. 5, almost equal to Spotify’s 60.9% decline.  

Two other music streaming companies on the Global Music Index have fallen precipitously in 2022, too: Abu Dhabi-based Anghami is down 74.8% and Paris-based Deezer is off 41.8%. Note that neither Anghami nor Deezer has been publicly traded since Jan. 1. In both cases, Billboard used the Dec. 31, 2021, share prices of the special purpose acquisition vehicles they merged with earlier this year. Both are also trading well below the prices on their first day of trading as Anghami and Deezer, respectively.  

Other companies that loom large in the Global Music Index have fared relatively well and tempered Spotify’s sharper decline. SiriusXM, which dropped only 6% year to date, was worth 7.1% of the Index and accounted for just 0.6% of its decline. UMG shares have fallen 23.4% through Oct. 5, and while that’s worse than the S&P 500’s 20.6% drop it’s still better than the Nasdaq’s 28.7% shortfall.