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POWER UMG'S Q1

Universal Music Group’s Recorded Music and Music Publishing divisions drove an 11.5% spike in revenue (9.3% in constant currency) over 2022 during the first months of the year as the music giant pulled in $2.7b.

Recorded Music’s big gain was in streaming subscription revenue, which was up 12.7% year over year to $1.1b. It’s the first time the division has topped both €1b and $1b in subscription streaming in a single quarter.

Recorded Music revenue for the first quarter of 2023 was €1.923b ($2.1b), an increase of 11.7% compared to the first quarter of 2022. Overall streaming revenue rose nearly 10% to €1.33b. Physical revenue was up 32.1% to €313m.

Top sellers for the quarter included releases by Morgan Wallen, Taylor Swift, TOMORROWXTOGETHER and J-pop act King & Prince.

The quarter saw Music Publishing revenue grow 13.3% to €425m. Digital revenue jumped nearly 21%. Synchronization revenue expanded by 11.3%.

Said UMG Chairman and CEO Sir Lucian Grainge, “Our strong start to the year demonstrates our consistency in developing great artists and introducing their music to fans around the world. We look forward to building on this momentum and furthering our track record of transforming disruptive technologies into opportunities to accelerate our business for our artists, fans and shareholders.”

UMG VP, CFO and President of Operations Boyd Muir said, “With revenue up 9% and adjusted EBITDA up 13% (€522m), we’re encouraged by our first quarter and remain on track to meet our plans for the year.”

Grainge used the call with analysts to reiterate the need to redefine the business model of streaming to “appropriately reward” artists. One issue, he noted, is "the flood of content that fans neither want nor consume,” citing one streaming site’s figures estimating that 92% of all streaming music has fewer than 1,000 listeners.

The growing problem, he said, comes from AI-generated music. “The oversupply of AI-generated content came from a prior generation of AI—very poor quality with no consumer appeal. The recent explosion [in AI] has increased the content flood and created rights issues as well as trademark issues... This clearly violates artists and labels’ rights. It’s bad for artists, bad for fans, bad for platforms.”

Grainge added that “the right incentive structure” needs to be in place to get streaming platforms to reduce the “sea of noise” by eliminating unwanted and infringing content, nonetheless averring, “We do view AI as a powerful tool for our future in the service of artists." He further pointed out that UMG is a champion of AI in ways that “embrace rather than threaten creativity," insisting, "Unchecked, it poses too many dangers."

While indicating that it's too early to discuss specific AI strategies, Chief Digital Officer Michael Nash spelled out—in general terms—how UMG hopes to align with its platform partners in the 2.0 world of streaming. Research has found that 30% of subscribers fit the definition of “super fan” and that the key is to deepen the relationship and level of engagement between the artist and the super fan via unique digital goods and experiences. “Platform data is required to make modifications in the model,” Nash said. “Our sleeves are rolled up and we’re going into the details with a number of different partners.”

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