Universal Music Group banks $2 billion. Taylor Swift is involved in this

UMG - Music Shore

Universal Music Group continues to outpace the other majors with revenue rising to €1.8 billion ($2.012 billion), a 15.7% constant currency increase over the €1.495 billion ($1.733 billion) during the company’s third quarter ended Sept. 30. All three operations — recorded music, music publishing and merchandising — contributed to that performance.

Recorded music posted €1.376 billion ($1.538 billion) a 13.3% constant currency increase increase over the 1.161 billion ($1.345 billion) garnered in the third quarter of 2018; while music publishing continues to outperform with revenue growing 8.3% on a constant currency basis to €293 million ($327.6 million) from €263 million ($304.8 million), while its merch operations took in €136 million ($152 million), a whopping 82.4% increase over the €73 million ($84.6 million) that segment produced in the year earlier corresponding period — thanks in large part to the company’s acquisition of Epic Rights in January 2019.

Taylor Swift’s Lover was cited as a big-ticket item, selling 700,000 copies in the U.S. while the company noted. Post Malone’s Hollywood’s Bleeding had the biggest streaming week for an album in the United States in 2019, with over 365 million on-demand audio streams. Further, the company said that “UMG has had the five biggest United States debut sales weeks for albums this year with Taylor Swift, Post Malone, Jonas Brothers’ Happiness Begins, Ariana Grande’s Thank U, Next and Billie Eilish’s When We All Fall Asleep Where Do We Go?

(In announcing its financial results Vivendi reported that it had a euro to dollar conversion rate of one euro to $1.118 for the third quarter; and for the nine-month period one euro to $1.159 and those rates are used in this story. While Billboard above has used the constant currency numbers given by Vivendi, the rest of this story will use actual percentages.)

Breaking out recorded music by format and income streams, the digital formats of streaming and downloads total €945 million ($1.056.4 billion), up 21.5% from the €778 million ($901.7 million) produced in 2018’s third quarter. Within that, streaming grew to €837 million ($935.8 million), up 26.4% from the €662 million ($767.3 million) tallied in the year earlier period, while downloads fell only 6.9% to €108 million ($120.7 million) from €116 million (134.4 million).

In terms of physical formats, UMG grew 18.6% to €230 million ($257.1 million) from €194 million ($224.85 million), no doubt helped by Taylor Swift’s Lover, which it says it sold over 700,000 CD copies of in the U.S. alone. Licensing also grew to €201 million ($224.7 million) from €189 million ($219 million), a 14.6% increase. As percentages of recorded music that breaks out to 68.7% digital, of which 60.8% is streaming and 7.8% is downloads; 16.7% physical and 14.6% from licensing.

Looking at the nine-month period, UMG revenue grew 22.7% to €5.06 billion ($6.06 billion), of which €3.972 billion ($4.758 billion) was from recorded music; €760 million ($910.5 million) from publishing and €338 million ($404.9 million) came from its merch division.

Universal Music Publishing Group is well on its way to a $1 billion year with its revenues up 12.6% from the €675 million it garnered in the first nine months of 2018; while Bravado is having a banner year with revenues of €338 million ($404.9 million) up early 88% from the €180 million ($203 million) it had in the year earlier period.

The recorded music produced revenues of €3.972 billion means that segments posted a 21% increase over the €3.3282 billion ($3.7 billion) accumulated in the year earlier nine-month period.

In addition to Eilish, Malone and Swift, the company also cited the revenue increase to new releases from Ariana Grande, the Japanese band King & Prince, the A Star Is Born soundtrack and the Queen catalog.

Breaking out recorded music, digital totaled €2.724 billion ($3.263 billion) a 23.7% increase over the €2.2 billion ($2.484 billion) in the nine-month corresponding period in 2018. Within digital, download accounted for 8.1% of revenue at €320 million ($383.4 million) down 9.3% from the €353 million ($398.1 million) last year; while streaming, which now comprises 60.5% of recorded music revenue, was up a whopping 30% to €2.4 billion ($2.88 billion) from €1.85 billion ($2.09 billion).

The remaining 31% of revenue came from physical at 16.8% with sales totaling €668 million, an 18.7% increase over €563 billion ($635 million) the format had in the first nine months of 2019; and licensing comprised 14.6% of revenue with its revenue rising to €580 million ($694.84 million) from €517 million (583.18 million): a 12.2% increase.

This is the first quarterly report since Vivendi announced in August that it was selling a 10% share of UMG to Chinese conglomerate Tencent Holdings Limited for $3.3 billion. Vivendi said the due diligence process for the deal should be completed in the coming weeks. The investment would value UMG at $33 billion — or 32 times earnings before interest, taxes, depreciation and amortization (EBITDA), based on its 2018 figures — and would come with the right to purchase an additional 10% stake later.

The company added in its earnings report that it is pursuing options to sell an additional minority stake to other partners, “some of whom have already expressed an interest in investing at a similar price level,” they said. Vivendi previously stated its desire to sell up to half of the company and confirmed in July it had hired an investment bank to advise on a transaction.

Looking ahead, UMG said it has a fourth quarter release slate that includes Kanye West, Lady Antebellum, Shawn Mendes, Sting, the Who, and Bocelli among others.