Universal Music Group racked up a strong earnings report for the second quarter of 2022, with about $2.7 billion in revenue, a growth of 17.3% in year-over-year in constant currency, a percentage gain that carries over for the entire first half of the year.
Recorded-music revenues were up 16.2% (9% in constant currency) to around $1.96 billion, with streaming subscription revenue up 14.6% to $986 million. Subscription revenue saw a boost from a “DSP catch-up payment” (possibly from the Copyright Royalty Board’s confirmation of its 2018 streaming publisher rate increase) amounting to nearly $42 million in revenue and $26 million in both EBITDA and adjusted EBITDA. Ad-supported streaming revenue was up nearly 25% to $355 million.
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Physical revenue was up a big 21.2%, driven by BTS and King & Prince; other top sellers included Rammstein, Olivia Rodrigo and INI.
Music-publishing revenue reached $486 million, up 62.5% year-over-year, or 50.6% in constant currency, thanks to a change in society accounting, up 29% over 2021.
Chairman/CEO Lucian Grainge said, “Our strong performance across diversified revenue streams is fueled by the successful partnerships we’ve formed with our artists — both new and established — in markets around the world.” He mentioned BTS, Drake, Olivia Rodrigo and Frank Zappa (whose catalog the company acquired earlier this year) and exampes of the “many different forms” the company’s partnerships can take.
He also mentioned that UMG has signed a new agreement with Facebook’s parent company Meta that expands revenue-sharing opportunities (earlier this week, Kobalt removed some 700,000 songs from Meta’s platforms).
Cost of revenues, consisting of artist and product costs, increased by 27.4% to €2,608 million in H1 2022, reflecting higher revenues and revenue mix. Cost of revenues as a percentage of revenues increased to 55.1% from 53.4% driven by higher artist costs from a greater proportion of Music Publishing revenues in H1 2022 as well as the impact of the DSP Catch-Up Payment and a previously disclosed exceptional recovery of an advance provision and release of historic royalties (the “Exceptional Recovery and Release”) in the first quarter of 2021 (with a €20 million impact) that all benefited artists costs relative to revenues in the prior year period.
Operating profit improved 11.8% year-over-year, or 6.7% in constant currency, to €765 million in H1 2022 driven by the growth in revenues. EBITDA amounted to €960 million, an increase of 16.8%, or 11.1% in constant currency, compared to H1 2021, also as a result of the growth in revenues.
EBITDA and EBITDA margin were impacted by share-based compensation of €2 million during H1 2022 and by €3 million of expenses related to UMG’s listing on Euronext Amsterdam during H1 2021. Excluding these amounts, Adjusted EBITDA for H1 2022 was €962 million, up 16.6% compared to H1 2021, or 11.0% in constant currency, driven by revenue growth. Adjusted EBITDA margin contracted 1.2pp year-over-year to 20.3%.
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