UMG’s Stock Up 11% On Revenue Boost From Streaming Price Hikes

Universal Music Group’s stock closed up 11% on Thursday, one day after the company reported it saw a 10.6% rise in recorded music subscription revenues in the second quarter thanks to higher streaming subscription prices.

UMG’s stock closed at €24.21 ($26.63) on Thursday, up 11% from the prior day’s close. The world’s largest music company’s stock is up 4.88% so far this year.

Spotify, YouTube Music, Apple Music, Amazon Music and other streaming services have raised the price of some of their most popular subscriptions over the past year. UMG, which was the first major label to report quarterly earnings on Wednesday, said it is beginning to see the benefits of those higher prices.

UMG’s subscription revenue within its recorded music division rose 10.6% to €1.07 billion ($1.16 billion), compared to streaming revenue from other sources rising by just 2.9% to €358 million ($398 million).

While price hikes for subscriptions to Apple and Amazon’s streaming services have already started to filter into music company’s accounts, the across-the-board price increases Spotify introduced in 52 markets on Monday will not begin to be felt by consumers until September. Music rights holders like UMG may start reporting the benefits of those price hikes some time next year.

When it does, it could push UMG’s consensus earnings before interest, taxes, depreciation and assets (EBITDA) up by as much as 4.7% to €2.641 billion ($2.91 billion) in 2024, according to Goldman Sachs analyst Eric Sheridan.

“For 2024, we forecast an acceleration in paid streaming revenue growth to 13.0% where we have baked in c.3% price increase per year in developed markets in our music Industry forecasts,” Sheridan wrote in a note published July 24. “Consensus currently expects a deceleration to 10.6%.”