Sony Music Revenues Improve on Streaming, Strength of Releases

Sony Music increased its annual forecast for revenue and operating income on Tuesday (Nov. 1) as it reported quarterly revenues were up 5.9% on the strength of its subscription streaming income and chart-topping hits.

Releases from artists including Beyoncé, Harry Styles, Future and Doja Cat helped Sony dominate Spotify’s Top Songs Global chart, with an average of 48 out of top 100 coming from the music major’s artists so far this year, executives said. That is up from an average of 36 songs in 2021.

Total Sony Music revenues rose 5.9% year-over-year to $2.58 billion (¥359.3 billion) for the second fiscal quarter ending Sept. 30. Operating income rose 23.9% to $570 million (¥78.7 billion) over the same period compared to a year ago.

Recorded music revenue rose 14.2% to $1.62 billion (¥224 billion). Within that segment, streaming for recorded music revenues rose 6.8% (in US dollars), physical revenues declined 4.2% (in US dollars) and “other” revenues, which includes sync licensing, merchandise and touring revenues, rose 33.4% (in US dollars) as the industry rebounded from a pandemic-led slowdown.

Publishing revenues overall rose 24% in US dollars. The visual media and platforms segment’s revenues declined 9% due to a softening in the Japanese company’s anime business.

Sony Music’s parent company believes the risk of a global economic slowdown is increasing due to rising tensions with China, high energy costs, persistent inflation and interest rates hikes in various countries. “We are taking steps to prepare for further deterioration of the business environment in each of our businesses,” said Hiroki Totoki, Sony’s executive deputy president and chief financial officer, during the earnings call.

However, Totoki is less concerned about the prospects of its music division. Sony Corporation raised Sony Music’s revenue target for the full fiscal year by ¥90 billion yen to ¥1.37 trillion ($9.8 billion at Sony’s assumed exchange rate for the second half of the fiscal year). Executives also raised Sony Music’s operating income target by ¥35 billion to ¥265 billion ($1.9 billion at the assumed exchange rate). “Streaming is very successful and we don’t really have that much of a concern,” he said when asked by an analyst about what risks the music segment faces.

In addition, the company’s recorded music and publishing segments’ operating income benefitted from a one-time benefit of $41.2 million (¥5.7 billion) in the quarter from settlements of multiple copyright infringement lawsuits.

Volatile foreign currency markets in the quarter negatively impacted Sony’s sales and operating income, executives said, and caused a divergence in the company’s earnings as reported in Japanese yen versus the U.S. dollar. This positively impacted Sony Music’s earnings as calculated in yen – about 61% of the yen-denominated gain came from the impact of foreign exchange rates – and negatively impacted the company’s earnings when converted to dollars.

The company’s operating income margin rose 22%, or 3.3 points year-over-year, while its EBITDA margin, a key measure of company profitability, was up 26.5%, or roughly 3 points.