Universal Music Group's shares fell sharply following a report of slower-than-expected growth in its streaming subscription revenue, triggering concerns about the broader streaming market's momentum. On Friday, the company’s market valuation dropped by approximately €9 billion in European trading, with shares declining around 25 percent to a value of €26.7 billion, down from €35.6 billion the previous day. A separate estimate from one source suggested a €3 billion loss, but the more commonly cited figure reflects the extent of the selloff.
The world’s largest music group, which represents major artists such as Taylor Swift, Kendrick Lamar, The Weeknd, Drake, and Billie Eilish, posted second-quarter subscription revenue growth of 6.7 percent, falling short of market expectations and below the 7.9 percent achieved in the first quarter. This deceleration added to investor unease over a possible slowdown in the once rapidly expanding streaming sector, alongside emerging concerns about the impact of AI-generated music on the industry.
In addition to slower subscription growth, Universal Music’s earnings margin slipped to 18.5 percent from 20.5 percent a year earlier, disappointing market participants. Net profit plunged 85 percent from the prior year to €222 million, while free cash flow declined to €24 million from €163 million. Despite revenue rising 13.3 percent to €3.3 billion, boosted by the acquisition of Downtown Music and price hikes implemented by streaming platforms like Spotify and Apple, profitability pressures weighed on investor sentiment.
JPMorgan, Universal’s house broker, described the quarterly performance as “not a good quarter,” citing market share headwinds, tougher year-on-year comparisons involving one-time benefits, and weaker-than-expected pricing contributions. The investment bank noted that subscription growth lagged behind the consensus estimate of 9.3 percent.
The company’s leadership struck a cautiously optimistic tone. Chief Executive Sir Lucian Grainge emphasized Universal’s position as home to four of Spotify’s top five most popular artists last year and highlighted recent successes from performers such as Olivia Rodrigo, Noah Kahan, and South Korea’s BTS. He stated that no other entertainment company had achieved a comparable level of success and outlined plans to grow subscription revenues by converting superfans to paid tiers and bundling exclusive merchandise, content, and direct-to-fan experiences.
The stock decline also affected significant shareholders. The Bolloré family, holding nearly 30 percent of Universal Music, alongside the Vivendi Group, which owns a 10 percent stake, experienced share price drops, with Vivendi’s shares falling over 1 percent in France. Earlier this year, Universal rejected a €55 billion takeover bid from activist investor Bill Ackman’s Pershing Square Capital, which would have relocated its listing from Amsterdam to New York. Ackman subsequently sold his €1.4 billion stake in June following the failed approach.
Universal’s recent quarterly results and market reaction underline the challenges facing the music streaming industry, including growth plateauing after years of rapid expansion and the potential disruption posed by new technologies such as AI, even as the company seeks new revenue streams and strategic adjustments.