JPMorgan Analysts Surprised After Universal Music Loses $14 Billion

Original Post: August 2024

Around the last week of July, Universal Music Group’s subscription revenue took a plunge for their second quarter. This was their biggest drop since the company’s initial public offering, with shares down 30%. 

Price increases by Amazon and Apple Music have been cited as a possible cause for Universal’s slowdown in subscription revenue. Michael Nash (EVP, Digital Strategist for Universal) believes the decline is due to timing; the full-year impact of both major retailers’ price hikes was reflected in Universal's Q2 results.

Analysts for Barclays believe that investors who bought into UMG expected the number of people paying for music streaming services to grow by at least 10 or more percent each year.

That expected growth is why UMG's stock has been considered valuable; now there are worries the growth in paid streaming subscribers might not reach those expected levels due to the competition for new subscribers, and some believe this trend could continue into the third quarter.

UMG offers subscriptions to content creators, giving them access to a library of music and sound effects that can be used in digital content. On the other hand, a majority of digital creators already have an allowance to use popular music over their video clips anyway due to blanket licensing agreements by social media platforms. It’s a changing world; as of now, tech giants might have already secured exclusive rights to certain popular tracks or sound effects that creators want to use. 

Universal did recently enter into a new joint agreement with TikTok, offering up their golden roster of artists like Taylor Swift, BTS and Lady Gaga. The deal also addresses concerns that UMG and its artists have with generative AI.