Monday, Aug 15, 2022 • 8min

Record labels are seeing slower growth from streaming. But growth is still growth.

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Welcome to the latest episode of Music Business Worldwide's Talking Trends, supported by Voly Music https://www.volymusic.com/ In this episode, MBW founder Tim Ingham discusses the recent quarterly results of music industry giants such as Universal Music Group, Sony Corp, Warner Music Group, and Believe. Ingham notes that Q2 2022 saw something of a consistent slowdown in streaming revenue growth for the 'Big Three' major record companies. With macro-advertising spends set to drop in the months ahead, Ingham suggests that we now may be moving into a new era for the majors when it comes to streaming growth. Says Ingham: "It looks to me like we’re seeing the first signs of a new chapter for the recorded music industry: single-digit recorded music streaming revenue rises, following years of double-digit growth across the board." The Music Business Worldwide Podcast is supported by Voly Music https://www.volymusic.com/

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Tim Ingham

00:00

Record labels are seeing slower growth from streaming than they once were, but growth is still growth. My name is Tim Ingham, the founder of Music Business worldwide and you're listening to the talking trends podcast where we dive behind the headlines to look at what's really going on in today's music industry.

Break

Tim Ingham

01:06

That got me thinking that the second half of 2022 is going to represent a new era, if you like, of decelerated revenue growth for the music industry.

01:18

I should clarify upfront that when I say the music industry, I'm referring to the music rights industry, the live music industry currently and I'll say this quietly and hopefully is looking Nyon recession proof in 2022 you might have seen MBW stat of the week the other week and that was taken from

Live Nation's

Q2 two results.

01:40

Live Nation

sold more tickets in the first half of 2022 the first six months than it sold in the all of 2019. Pre

Covid

and

Live Nation

is now stating that partly due to pent up demand post

Covid

lockdowns. 2022 is going to be, quote the biggest year in live music history.

01:60

Close quotes over in the recorded music industry. However, things aren't looking quite so record breaking. To foreshadow the numbers on that, I'll turn to

Goldman Sachs

latest music in the air report, which if you read Music Business worldwide regularly, you'll know is something of a bible for those who follow the trends of the commercial music industry.

02:21

That report released in June suggested that on a gross basis, global music subscription streaming would be up 14% 14% year on year to $26.5 billion 2022.

02:36

The same report also predicted that ad funded streaming revenues again on a gross basis would be up 15 15% a year on year to $11.3 billion in 2022. So that's two double digit revenue rises forecast in streaming by

Goldman

. Sachs 14% for subscription streaming and 15% for ad supported streaming.

03:01

But looking at the latest set of results for large scale music companies in Q2 for this year. Perhaps leads us to a less bullish forecast. I should clarify at this point. Once again,

Goldman's

numbers are on a gross basis.

03:15

They're looking at what the streaming services themselves are going to turn over in revenue in each period, not what those streaming services eventually pay out to the record companies but still listen to this. This is the one big takeaway I suppose from the last few weeks.

03:30

Looking at the major record companies, major music companies, numbers in Q 2 2022 each of

Universal

music group,

Sony's

Global music division and

Warner Music Group

, those three major music companies, they all saw single digit revenue growth in streaming year on year in the quarter.

Universal

was up, I

Believe

7.0% year on year. In terms of subscription streaming revenue in the quarter.

03:55

Sony

was up 7.9% year on year in terms of overall music streaming revenue in the quarter, and

Warner

was up 2.7% year on year. Again, in terms of overall music streaming, that subscription and adds in the quarter, all of those percentage rises are at constant currency.

04:17

Now there are some important little caveats before we move on. And the main one is that there was a one time catch up payment that was delivered to both

Warner

and

Universal

by an unnamed streaming service in calendar Q2 2021, so the year, the prior year quarter.

04:35

And without that one time catch up payment.

Universal

for example, says that its subscription streaming revenues in calendar Q2 2022. So the second quarter of this year wouldn't have been up 7.7 point 0% year on year. There have actually been up 12.1% year on year. So suddenly into that double digit, right?

04:52

But regardless if we take these numbers on the face of it, it looks to me like we're seeing the first signs of a new chapter for the recorded music industry, namely single digit recorded music streaming revenue rises. And that follows years of double digit growth across the board.

05:09

In that metric, compounding this slowdown is the wider trend in digital advertising right now in Q 2 2022 meta that's the parent of

Facebook

delivered total revenue of $28.8 billion. But that was actually down 1% year on year. The vast majority of metas revenues of course coming from advertising secondly alphabet.

05:36

That's the parent of google saw quarterly

YouTube

advertising grow by just 4.8% year on year in Q 2 to $7.3 billion. We're more used to seeing year on year growth from

YouTube

ads in the double digits and even in the 20%. So that was a bit of a shocker to see it moved down to 4.8% growth year on year in the second quarter.

05:59

Now, these slowdowns in macro digit advertising spend are being driven by what else, wider economic difficulties going on right now from inflation to rising interest rates and a general feeling that businesses will be more conservative with their cash in the second half of this year, not spending as much of it on digital advertising than they have in the past few years now, this will inevitably have its own knock on effect on the music industry.

06:28

We're already seeing it show up in music's numbers to date. So

Warner Music

group just told its investors that it witnessed a quote market related slowdown in ad supported revenue. Close quote in Q two.

06:42

Believe

the French company that works with independent artists and labels has actually upped its yearlong forecast for fy 2022 because it remains so bullish on the growth of subscription streaming. But it has however, warned investors of a softer advertising market in the second half of this year and said that that will affect its own numbers according to the I.

07:07

F. P. I. Advertising on streaming services and social media generated just under $5 billion for the global record industry in 2021. And all of that advertising revenues worth just under 1/5 of the $25.9 billion that was generated by the global record industry in total in that year.

07:28

Now, as I said at the start of this podcast, growth is still growth. The record industry's crucial year and year numbers are still all likely to be pointing in the right direction come the end of 2022. But those same year on year numbers are also likely to be smaller than the numbers we've gotten used to seeing over the past decade.

Break

Tim Ingham

08:06

If you like this episode, please subscribe to talking trends and our other podcasts by searching for Music Business worldwide on apple podcasts, Spotify, google podcasts or wherever you prefer to listen, we appreciate you spending some time with us.

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