UMG NINE-MONTH EARNINGS: SO FAR,
SO GOOD

UMG was once again a relatively bright spot in Vivendi’s latest earnings report. Nine-month revenues for the French parent company increased 7% year-over-year to $8.19 billion, or +1.4% on constant currency and perimeter. UMG’s nine-month revenues to 9/30 were up 12.8% in actual terms to $3.74 billion—or 2.1% from a year earlier on a constant-currency/perimeter basis.

Full-year performance for the Lucian Grainge-led Universal will be impacted pro or con by the Q4 release schedule, which will likely be paced by Justin Bieber’s Purpose, hitting tomorrow…unless some or all of the music group’s superstar wild cards—Drake, Rihanna and Kanye West—deliver their albums in time to be released before year’s end.

Here’s a breakdown of UMG’s Q3 straight from the horse’s mouth:

• Revenues of $1,276m were flat in constant currency (up 8% as reported).
• Recorded music was down largely due to “toteming” of releases and accelerated download declines; publishing up driven by higher digital and sync.
• Recorded-music revenue was down 1% in constant currency (up 7% as reported).
• YoY streaming and subscription growth (33%) couldn’t offset steeper declines in download (-14%) and physical (-9%). On the plus side, total digital revenue grew 3% in constant currency (14% as reported).
• Streaming/subscription was 51% of digital revenue, crossing the 50% threshold for the first time. (While we believe that subscription offers revenue and margin benefits in the long term, the early stages can be choppy, and it is unhelpful to look at the results of a single quarter in isolation.)
• Top sellers: New releases from The Weeknd, Dr. Dre and Dreams Come True in Japan; carryover sales on Taylor Swift.
• Biggest driver of EBITDA/margin declines was one-time items benefiting the prior year
• Excluding one-time items, the decline was driven by sales mix (higher distribution and JV sales in recorded music, more admin deals in publishing).