Universal Music stock suffers major setback, streaming and subscription revenue falls

Universal Music Group has suffered one of its biggest setbacks today as its stock fell by 24 percent. The company has revealed that it actually earns much less from streaming and subscription services than was previously estimated. That was a drop of $16 billion, equivalent to about Rs 1600 crore in Indian currency, in market value for the group behind artists as big as Taylor Swift, Drake, Adele, and Billie Eilish.

It's due to its average results in streaming and subscription revenues. Subscription income rose 6.9 percent year-on-year, excluding foreign exchange, or FX, in the second quarter. Compare this to 12.5% in the first quarter. Streaming revenue saw a 3.9% decline in the third quarter, a sharp reversal from the 10.3% growth recorded in Q1. That was blamed on the slowdown in growth at key ad-based platform partners, accompanied by a drop on some of those platforms related to the timing of deal renewals.

Also in May, UMG ended its deal with Meta Platforms, which was licensing premium music videos to Facebook. It also lost a month of revenue while hammering out a new licensing agreement with TikTok amid a very public battle in July. Boyd Muir, UMG's vice president and chief financial officer, said the year-over-year decline in subscription growth was partly due to the timing of price increases by its partners.

UMG's partners include audio streaming giants such as Spotify (SPOT), Amazon Music (AMZN) and Apple Music (AAPL). "The second factor impacting our subscription revenue growth this quarter is a slowdown in subscriber growth on certain platforms," ​​Muir said. This is happening when the overall subscription marketplace is experiencing significant growth in subscribers globally. They have seen a slowdown in adding new subscribers.'