Universal Music Group has held its 2024 Capital Markets Day at Abbey Road Studios in London, where the major’s leadership presented a strategic update and business outlook.
In financial targets up to 2028, UMG revealed that it expected to continue achieving high growth in revenue and adjusted EBITDA, driven in part by the continued growth in subscription revenue, accelerating superfan monetisation and an expanding partner ecosystem.
UMG is forecasting a compound annual growth rate (CAGR) in revenue of 7% through to the 2028 financial year. For subscription revenue, the major expects 8-10% CAGR and above 10% for adjusted EBITDA.
CEO & chairman Sir Lucian Grainge set out three facts about the modern industry in his presentation to investors.
1 Streaming is a quantum leap forward in music access and innovation
2 Superfandom will accelerate music industry economics
3 Music is universal
Subscription penetration is still under 50% in some of UMG’s most mature markets, while territories such as China and India are still at the early stage of subscription adoption.
UMG’s presentation to investors suggested that music subscriber growth has historically been underestimated. The forecast by 2028 is that global subscribers top one billion.
However, amid some signs of slowing subscriber and streaming growth, UMG’s leaders set out plans to increase revenue by monetising superfandom, whereby growth in average revenue per user (ARPU) would be targeted alongside subscription growth.
The major said it is “innovating and developing products and experiences to give superfans more opportunities to engage”.
Highlighting the segment of its business attributable to superfans in 2023 (merch and physical sales totaling €2.08 billion – or 18.7% of total revenue), UMG sees the economic growth potential in this area. Since 2021, the combined physical and merch revenue has increased by 19%, as the major looks to build a complementary business to streaming.
"Valuable as streaming is, it has also levelled the playing field... the deeply passionate listener pays the same price for the same access as the casual one," Sir Lucian Grainge told investors.
Sir Lucian said UMG was targeting superfans through physical collectibles and premium merchandise, as well as live and digital experiences.
Examples of personalised experiences to monetise superfans include the Rolling Stones’ virtual store and virtual merchandise with the Zedd Virtual Beat Galaxy Experience on Roblox.
In a presentation by Boyd Muir, EVP, president of operations & chief financial officer, UMG showed the “runway for future growth”. Revenue per capita from music in the US (adjusted for inflation) is only at around 50% of the peak level recorded in 1999.
UMG is confident that both established and high-potential markets have significant headroom for subscriber growth.
Even with recent price rises, the major suggested that music streaming remains significantly under-monetised, particularly ad-supported models.
According to UMG’s own research, there are around 220m consumers interested in music subscription and willing to pay at the current price – 75m in established markets and 145m in high-potential markets.
Michael Nash, EVP, chief digital officer at UMG looked at the potential for further innovation, including developing the market through artist-centric initiatives.
Product innovation includes the much-anticipated super-premium tier on Spotify, with higher quality audio and other features, which would likely set a price 50% above a standard subscription. Tencent’s Super VIP tier is even more valuable at around five times the standard cost.
According to UMG, 20% of existing subscribers are willing to pay extra for an enhanced subscription tier, which could offer high-quality audio, early access to new music and listening party invites.
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