HITS Daily Double


As Wall Street’s romance with media and tech companies has come to a screeching halt this year, recorded music and publishing have combined to emerge as one of the most consistent sectors in business. Hedge funds persist in attacking available assets, regardless of interest rates. Across the board, quarterly earnings continue to soar, with UMG, Sony and WMG all expanding their revenue by double-digit percentage points.

The growth in the market has enjoyed a steep ascent since 2018. And despite a small stutter-step in 2020 at the beginning of the pandemic, the U.S. market (total activity, streaming and vinyl sales) has nearly doubled since 2018. As UMG chief Sir Lucian Grainge explained on his 5/3 earnings call, familiarity and repetition drive music consumption, proven by the recent growth in catalog streams. He lauded the music-streaming market’s stickiness and accessibility, as opposed to video-streaming users’ constant search for new and different content on various platforms.

Additionally, inflation doesn’t impact recorded music and publishing as negatively as it does other sectors. Skyrocketing production costs continue to squeeze film/TV/event production and touring, which has nonetheless rebounded beyond pre-pandemic levels. While inflation has significantly impacted every stakeholder’s piece of the pie, Live Nation on 5/5 reported its “best first quarter ever.” Expect ticket prices to finally catch up with the insatiable demand for live as prices grandfathered in from 2019 and 2020 on-sales begin to fade.

Globally, Spotify has doubled its paid subscribers since 2018. It crossed 100m premium subs in 2019 and confirmed 182m during its 4/27 earnings call. In 2018 the IFPI reported fewer than 200m worldwide paid subscribers; in its 3/22 report, the global auditor counted 523m paid subscription accounts. Over the last four years, we’ve seen the world adopt streaming music—and pay for it.

What's next for the music biz? Netflix is downsizing. Spotify has lost an incredible volume of market value (which represents the company’s ability to be profitable as a platform, not the recorded-music market).

The last two decades have proven that through continuous technological (and other) disruption, music finds a way to triumph. Now others are cashing in on its resilience.