Santa Monica-based Universal Music Group reported a strong financial performance for the first three months of this year, appearing to be largely unscathed by the effects of the coronavirus pandemic.
The music industry giant recorded first-quarter revenues of $1.9 billion, up roughly 13% year over year.
Subscription and streaming services were the company’s strongest performing channels with revenue up 16.5% year over year, while downloads and physical music sales both declined. Top-selling new releases by Justin Bieber, Eminem and The Weeknd also played key roles in bolstering UMG’s bottom line in the quarter, according to the company.
The solid results stand in stark contrast to many segments of the entertainment industry.
Beverly Hills-based concert and events company Live Nation Entertainment Inc., for instance, has been devastated by an effective halt to all touring and live performances.
The company’s share price has been more than halved in the two months since Covid-19 began to impact the U.S. market, falling from $74.19 on Feb. 20 to $36.60 on April 20.
In a bid to cauterize its losses, Live Nation plans to cut senior executive salaries by up to 50%, and Chief Executive Michael Rapino will forgo his entire 2020 salary. The move will shave up to 20% off the Live Nation executives’ total compensation packages.
UMG is much less reliant on live revenue streams — likely sparing it a similar fate.
Despite the strong first-quarter results, equity researchers at Credit Suisse Group downgraded performance estimates for UMG in the year ahead.
In a first-quarter earnings report by UMG parent company Vivendi, analysts said music streaming services had not benefited as much from the lockdown as many had originally predicted.
Although they still forecast growth in the segment, which is UMG’s largest revenue stream, it was not enough to offset huge anticipated dives in areas such as merchandising and physical sales. They predict that by the end of the year, UMG will see a 14% drop in 2020 annual revenue.
The analysts’ long-term outlook was less gloomy, with estimates that UMG would rebound in 2021 despite continued pressure on year-over-year revenue. If that happens, the company could become even more of a cash cow for Vivendi than it is today.
At the end of March, the French media conglomerate completed the sale of a 10% minority stake in UMG to a consortium of investors led by Chinese tech giant Tencent Holdings Ltd. The sale generated over $3 billion in cash and opened the door to “the possible sale of additional minority interests in UMG,” according to a statement by Vivendi.
