NEW YORK: Universal Music Group, the world’s largest recording label, has hit a major milestone and tipping point. According to UMG’s parent company, Vivendi, Streaming royalties accounted for 51 percent of their digital recorded music revenue in Q3 2015. Financial results issued here the other day showed streaming revenue amounted to €230 million ($248 million), which equals to 19% of total revenue and a hair over 25% of recorded music revenue.
This makes streaming a significant part of UMG’s overall business, and a majority of its digital business.
That’s a big moment, though overall, UMG’s revenue fell by 0.4 percent to €1.2 billion ($1.29 billion) at constant currency and constant perimeter, but rose 8 percent on a reported basis. Additionally, UMG’s earnings during the period before income tax and amortization fell 24.5 percent to €114 million ($123 million), at constant currency and constant perimeter.
This 51% may ultimately be a step in the right direction for UMG, it undoubtedly casts a difficult light on the big label business model. UMG obviously favors royalties from paid services like Apple Music and YouTube Red, as opposed to free, on-demand unlimited music from Spotify (which is heavily ad-supported). On the radio side, UMG has also argued for a significant rate increase from Pandora and other statutory webcasters from 2016 to 2020.
For UMG’s nine-month period, more details were provided. Total revenue across three-quarters rose 2.1 percent at constant currency and constant perimeter. On a reported basis, revenue grew 12.8 percent to €3.5 billion ($3.77 billion). Growth was driven by a 33% rise in streaming revenue and legal settlement income.
This growth in streaming has also helped publishing revenue rise 2.6 percent at constant currency and constant perimeter, with growth in other divisions over the nine month period as well.
