Universal Music Group (UMG) got a boost from physical sales in the second quarter, but the conversation during Wednesday’s earnings call was mostly focused on streaming. Subscriptions, which accounted for more than half of total recorded music revenue, were a key factor in the company’s 8.7% revenue growth in the quarter. Even so, UMG’s streaming business is not firing on all cylinders. Ad-supported streaming continues to show weakness and UMG revealed that Facebook no longer licenses its premium videos.

CEO Lucian Grainge said the industry has entered “the next phase” of the streaming and subscription business, one characterized by collaboration with streaming companies to produce new products and allow artificial intelligence to allow artists to sing their music in different languages. “The amount of work, win-win dialogue [and] creative discussions that are going on between us is really extremely exciting,” he said. 

Here’s what else you should know about UMG’s most recent quarterly earnings and what was said on the call. 

Streaming is growing — unevenly 

Although UMG’s recorded music subscription revenue improved 6.5%, not all subscription platforms are performing equally well. CFO Boyd Muir cited a “slowdown in subscriber growth at certain platforms” while noting that Spotify, YouTube “and many regional and local platforms” continue to show healthy growth. Generally, UMG is optimistic about the overall marketplace’s ability to find new subscribers. Michael Nash, executive vp of digital strategy, said UMG’s consumer research has identified 180 million consumers from the top 19 territories “that will form the next wave of subscription adoption,” even taking into account price increases.   

“Other” streaming revenue dropped 3.9% in the quarter, which Muir attributed to a decline in ad-supported streaming and some platform-specific issues (see Facebook below). UMG warned of weak ad-supported streaming last quarter, and Muir said UMG needs to see “broad-based improvement across multiple partners and geographies over a longer timeframe before we’re ready to adopt a less cautious view.” 

Meta is no longer licensing UMG premium videos for Facebook 

Another reason for a slowdown in non-subscription streaming revenue was Facebook’s departure from music videos. “Meta had previously offered previous music videos on Facebook,” Muir explained. “This product offering was less popular with Facebook’s user base than other music products, and as a result, Meta is no longer licensing premium music videos from us. As of May of this year, Meta is now focusing instead on other areas involving music content, and we are working together to expand these areas as part of a multifaceted renewal.” Showing premium videos is not the only aspect of Meta’s licensing agreements with labels, however. As Billboard has previously reported, Meta reached a licensing deal with UMG in 2017 that allowed UMG’s repertoire in user-uploaded videos on Facebook, Instagram and Messenger. And a deal reached in 2020 allowed users to add songs from UMG’s catalog to videos on Facebook’s gaming platform.  

The noncontroversial Spotify bundle controversy 

After Spotify began offering both music and audiobooks, the company asserted it can pay a discounted “bundle” royalty rate to publishers and songwriters for premium streams. When asked about the audiobook bundle controversy on Tuesday, Spotify CEO Daniel Ek described it as a not-unusual disagreement between counterparts. “That’s the nature of all supplier and distributor relationships,” he said during the company’s earnings call. UMG had a similarly unsensational response when asked about the bundle controversy. Rather than feeling cheated out of royalties, Muir said UMG “[is] confident our revenue participation reflects the value our artists and our music is bringing to their platform.”

UMG invested 519 million euros ($562 million) in the first half of 2024 

Three transactions accounted for 450 million euros ($487 million) of investments in the first half of the year: a majority stake in Nigerian label Maven Global; an investment in Complex; and a $240 million investment in Chord Music Partners, a joint venture of KKR and Dundee Partners that owns over 60,000 copyrights. UMG spent 96 million euros ($104 million) on catalog acquisitions in the half-year, including 75 million euros ($81 million) that had been sitting in an escrow account.