In June this year, nine years later,Warner MusicOnce again landing on NASDAQ, under the impact of the Internet, the former five major international record companies are now only universal,Sony Group CorpWith Warner, while sales of physical albums are still declining year after year, the advent of streaming platforms seems to have given the big three record companies a shot in the arm to bring them back from the dead.
Warner Music reported revenue of $1.126 billion for the fourth quarter of fiscal 2020, with recorded music streaming revenue of $639 million, accounting for 57 per cent of total revenue. Meanwhile, recording streaming revenues from Universal Music and Sony Group Corp Music were $1.14 billion and $755 million respectively in the three months to the end of September, accounting for 67 per cent and 35 per cent of total revenue, respectively.
According to data released by analysis platform Midia Research, the global recorded music industry grew for the fifth consecutive year in 2019, growing by 11.4% to US $21.5 billion, an increase of US $2.2 billion compared with 2018. Of this total, streaming revenue reached US $11.9 billion, an increase of 24% over the same period last year, accounting for 56% of the total revenue, making it the main growth driver of the global music industry.
With year-after-year decline in physical album sales, year-after-year growth in streaming revenue, and a streaming platform eyeing covetous music rights, can the three record companies return to their former glory?
Global ranks first Warner lags behind temporarily, streaming media "epidemic" has become the "lifesaver" of three major companies.
According to the data compiled by American Stock Research based on the financial reports of various companies, the streaming revenue of Universal, Sony Group Corp and Warner has been increasing in the past two years, of which the recorded music streaming revenue of Universal reached 1.14 billion US dollars at most in the third quarter, followed by Sony Group Corp with 755 million US dollars and Warner at least 639 million US dollars.
What is interesting, however, is that the total revenue rankings of the three record companies are different. Sony Group Corp, who originally ranked second, jumped to the first place with total revenue of US $2.186 billion, while Universal ranked second with US $1.71 billion, and Warner, which was still at the bottom, ranked only US $1.126 billion.
This has a lot to do with the revenue structure of the three major record companies and the market they are in. Universal Music and Warner Music have a similar business structure, including streaming, digital downloads, music licensing and physical sales revenue. In addition to these businesses, Sony Group Corp also has a visual media and platform (VM&P) income, which is mainly composed of interactive entertainment, including mobile games and some revenue from more than just music, accounting for nearly 1/3 of the total revenue.
Of Sony Group Corp's four businesses, revenue from recorded music streaming and visual media and platforms increased by 18 per cent and 2 per cent respectively, while revenue from digital downloads and music publishing fell by 2 per cent. Warner's digital download business and music distribution business fell 1% and 2% year-on-year, which is in line with the trend of the global music market.
According to the "Global Music report: 2019 data and Analysis" released by the International Federation of the Phonographic Industry (IFPI), the revenue of the global recording industry reached US $20.2 billion in 19 years, an increase of 8.02% over the same period in 2018 and the fifth consecutive year of growth. Among them, streaming media (digital music) performed strongly, with overall streaming business revenue reaching US $11.4 billion, an increase of 23.91% over the same period in 2018 and accounting for more than half of the total revenue of the recording industry for the first time. On the other hand, the income of physical records as a whole and digital downloads and other means has shrunk year after year.
However, despite the impact of the epidemic, Universal Music's physical sales rose 14.1% year-on-year to $295 million in the third quarter, which US Stock Research believes may have a lot to do with the growth of Universal Music's vinyl records.
According to RIAA's latest mid-year report on the music industry in 2020, vinyl records in the United States grew slightly by 2.3% in the first half of 2020 compared with the same period in 2019, reaching as much as $232 million and even 80 per cent more than CD revenue. This may be attributed in part toWalmart IncThe vinyl retail launched this year.
In addition, according to Warner Music's revenue in recent quarters, although the epidemic has contributed to the development of streaming music at a certain level, it does not have a negative impact on it. The outbreak broke out in the United States around the beginning of March, while Warner's revenue fell sharply in the three months to June 30 in the third quarter of fiscal 2020, only to pick up slightly in the fourth quarter.
According to research institutionsNielsenThis is due to the fact that the growth of music streaming in the US music market has slowed to 13.8 per cent from 20.4 per cent year-on-year in March, due to a reduction in commuting and gym time since mid-March, according to the Music/MRC Data report. It was precisely because Warner Music's streaming revenue accounted for almost half of its total revenue and other businesses declined that it was hit hard in the third quarter.
So, can streaming media keep the big three record companies alive?
Affected by the epidemic, Warner's profitability has weakened, and its high reliance on streaming media platforms may be a hidden danger.
The answer is no.
Among the three major record companies, Warner Music is listed on NASDAQ independently, and Sony Group Corp Music belongs to a subsidiary of Sony Group Corp Group. Although Universal Music is rumored to be listed independently in 2022, it is currently a subsidiary of Vidiwang, which is listed in France. It is difficult to find more complete information to analyze the profitability of the three companies.
But according to previous reports from Music Voice, Universal Music's annual EBITDA in fiscal 18 was $1.17 billion, compared with $1.28 billion for Sony Group Corp Music and $554 million for Warner Music. The profitability of the three companies is not weak, of which the most profitable is Sony Group Corp Music, which ranks second in market share.
According to Warner Music's financial results for the past two years, the net loss in the fourth quarter of fiscal 2020 turned to profit from the previous quarter, and the year-on-year decline narrowed. Warner Music posted a net loss of $470 million for the fiscal year ended September 30, 2020, compared with a net profit of $258 million last year, down 282% from a year earlier. It can be said that success is also streaming, failure is also streaming.
Although the revenue of the three major record companies has increased a lot in recent years through music streaming platforms such as spotify, it is not a long-term solution to rely on other platforms. On the one hand, according to the forecast of data agency stastista, the growth rate of global streaming music revenue will gradually decline from 2018 to 2023, while the negative growth of music download services will continue.
(the picture is from stastista)
On the other hand, with spotify,AmazonThe leading streaming media platform complained about the high music content royalties, and even jointly submitted formal protest documents to oppose streaming media royalties, and even did a lot of actions to get rid of the restraint of the three major record companies. Want to incubate their own original music through the platform traffic pool, which undoubtedly violates the interests of record companies, because once the streaming media platform has the ability to produce its own unique music content The advantages of the big three record companies and their right to speak on copyright will undoubtedly be weakened.
Judging from the proportion of streaming media in the total revenue of the three companies in the third quarter, Sony Group Corp is least affected by streaming media by relying on its unique game advantages, but it is not without layout or even greater ambition. After the epidemic led to a decline in music revenue, planning to acquire streaming media platforms is likely to take "traffic" and "platform" into their own hands.
Warner Music is the first of the three companies to lay out streaming media, not only with spotify,Tencent MusicWe have also acquired media brands such as UPROXX to enhance our content production and distribution capabilities on platforms such as short videos. In 2018, we acquired Sodatone, an algorithm platform that combines streaming, social and tour data, as well as Spinnin' Records, one of the world's leading independent electronic music companies, Songkick, a live music ticketing company, and EMP, an e-commerce provider of audio and entertainment goods. But for now, it doesn't seem to have much effect on revenue.
Conclusion
Generally speaking, the impact of the epidemic on the world's three major record giants is not small, in the case of low sales of physical records, attaching importance to investment in streaming media also brings new hope to the record giants. It's just that for now, many technology giants Amazon.Com Inc,AppleSpotify pays more and more attention to music streaming, and it is still inconclusive whether the traditional record giants can compete with them or not. But according to the current trend, streaming media is likely to become the focus of the layout of record giants Warner, Sony Group Corp and Universal Music. Who can use streaming media to break through may be the key to the subsequent growth of their market capitalization.
Source of this article: American Stock Research Society, reprint please indicate copyright