Slowing growth in subscription streaming sent Universal Music Group’s share price down 23.5% following the company’s second-quarter earnings report on Wednesday (July 24). 

On Thursday (July 25), UMG shares dropped as far as 19.93 euros ($21.61), 29.8% below Wednesday’s closing price, before closing at 21.70 euros ($23.53) – a 23.5% decline that erased 12.2 billion euros ($13.25 billion) from UMG’s market capitalization.  

Investors were reacting to a marked slowdown in streaming revenue in UMG’s recorded music division: In the second quarter, music subscription revenue grew 6.9%. That was down from 12.5% in the prior-year quarter, while overall streaming revenue grew 4.1% compared to 11% a year earlier.  Non-subscription streaming revenue dropped 4.2% after growing 2.9% in the prior-year quarter. 

Analysts had expected far better. Barclays, for example, forecasted overall streaming growth of 10.5% and subscription growth of 11.0%. Guggenheim had forecast subscription growth of 11.3%.  

During Wednesday’s earnings call, Michael Nash, UMG’s executive vp of digital strategy, singled out Spotify, YouTube and “local and regional” platforms for continuing to add subscribers. Apple Music and Amazon Music were conspicuously not mentioned, leading some analysts to believe those platforms are struggling to add new subscribers. “Other larger partners have been less successful at driving global adoption,” said Nash, “and there’s been some slowdown in terms of subscriber additions there.” 

Despite the streaming slowdown, UMG managed to improve both top-line revenue and margins. Overall revenue grew 8.7% to 2.93 billion euros ($3.16 billion). As a percentage of revenue, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved to 22.1% from 21.9% in the prior-year period. Physical music sales grew 14.4% and merchandise sales jumped 43.7%. Analysts were far more concerned about the change in streaming, however, and seemed less concerned about improvements in lower-margin physical and merchandising that tend to naturally fluctuate based on new release and touring activity.  

Many analysts lowered their price targets following Wednesday’s results, albeit by smaller margins than investors dropped the share price on Thursday. Guggenheim dropped UMG by 14% to 27.50 euros ($29.82). Barclays lowered its price target by 12% to 26.00 euros ($28.20). Citi lowered UMG by 7.8% to 29.50 euros ($28.20). And Kepler Cheuvreux reduced its price target 3.5% to 27.00 euros ($29.28).