at its most recent report Music In The Air, Goldman Sachs forecasts recorded music plus publishing industry to generate $35.3 billion in 2022, up from $32.8 billion in 2021, and calls for a similar 2023 increase of 7.1%
These figures are consistent with the beliefs of Sony Group Corporation in Japan, according to an analysis of MBW. The company’s chief financial officer, Hiroki Totoki, told investors in July: “We have not changed our view that the global music market, which includes both recorded music and publishing, will grow steadily over the next few years.” coming years at a high single-digit growth rate.
However, when it comes to income from Universal Music Groupone stakeholder expects no less than double-digit growth every year, for the next 10 years (at least).
bill ackman is the founder of Pershing Square Holdings (PSH), which acquired approximately 10% of Universal Music Group for about $4 billion last year. Ackman and Pershing Square recently sent out a mid-year report to their investors, which contained some interesting and confident comments on UMG’s performance.
The report, released on June 30, said: “We believe that the growth trajectory of LMU for decades it remains undervalued by investors. With the growth in streaming penetration combined with the development of new services, platforms and business models, UMG is able to grow revenues at an annual rate of around 10% for more than a decade.”
Supporting Pershing’s forecast, the company’s report added: “Recent results from LMU support our long-term view, as year-to-date revenue and profit grew at a mid-double-digit growth rate, well above analyst expectations.”
This much is true: UMG’s revenue in the first half of 2022 was up 16.9% year-on-year, recorded music revenue was up 10.1% year-on-year in the half, publishing revenue was up 42.1% year-on-year and income from ‘merchandising and others’ increased by 67.6%.
Pershing added in his report: “High absolute levels of revenue growth, coupled with UMG’s fixed cost base, should allow UMG to significantly expand its operating margins over time, delivering very attractive earnings and growth for the foreseeable future. ”. He continued: “When viewed over several years, UMG’s revenue growth has been higher and more consistent than that of UMG. Warner Music Groupits closest pair.
“We believe music is the lowest cost, highest value form of entertainment,” the Pershing Square report said. “For a monthly fee of $10, one can listen to more than 80 million songs. “We expect music streaming to be very resilient, even in a recession environmentas consumers forgo other expenses before canceling their music subscriptions.”
And, just as he has in the past, Pershing expressed his belief that music streaming platforms have “ample room to increase prices in the coming years,” which PSH believes will “drive further growth at UMG.” ».
Pershing further praised Universal for their recent deal with Meta/Facebookin which the social media giant will share a portion of advertising revenue for Universal when its music is used in user-uploaded videos.
“We believe that the new agreement of Goal will drive UMG’s growth for years to come and represents a framework for future deals with other social media platforms,” Pershing said, potentially pointing the finger in the direction of TikTok.
“Over time, we expect revenue from social media and other emerging platforms, such as gaming and fitness, to grow faster than traditional streaming and become a more material percentage of UMG’s revenue base.”
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Universal Music Group can grow more than 10% each year – Music Industry