There is an age-old debate in the media world: Who is king in the entertainment industry? Content or distribution?
In the music industry, the market seems to have responded strongly to that question in 2022, with Spotify, the world’s largest music streaming subscription platform, worth significantly less than the major music rights holders.
At the close of the New York Stock Exchange today (December 30), the last trading day of the year, Spotify’s stock price was USD $78.95equivalent to market capitalization $15.26 billion.
This is significantly below the market cap of Warner Music Group (WMG), which has been trading on the NASDAQ since summer 2020.
WMG’s share price at the close of trading today was $35.02equivalent to the public market capitalization $18.03 billionit’s almost $3 billion Greater than Spotify’s equivalent open market value.
But perhaps Spotify’s most troubling comparison comes from Universal Music Group, music’s largest global rights holder.
UMG today closed its 2022 trading on Amsterdam Euronext. €22.51 stock price equivalent to the market capitalization of Euro 40.82 billion Euro.
At current exchange rates, Universal’s euro market cap is worth US$43.7 billion.
In other words, UMG’s current public rating is worth nearly 3 times That of Spotify.
Spotify vs. Universal and Warner: Big Differences in 2022
This is a far cry from a year ago when MBW asked “Universal vs. Spotify: Which of the two giants of music deserves more at the end of 2021?”
As of December 6, 2021, Spotify and UMG’s valuations were very close, making UMG worth it. EUR 45.2 billion EUR Amsterdam Euronext and the value of Spotify US$44.44 billion at the New York Stock Exchange.
On the same day (December 6, 2021), the market capitalization of Warner Music Group on NASDAQ was US$21.46 billion… less than half that of Spotify.
The situation looks very different today. This has mostly to do with the performance of Universal’s and Warner’s stocks in the second half of 2022.
Amid macroeconomic turmoil, shares in Universal Music Group’s Euronext fell to 8.0%, from €24.47 at the close of Euronext on 4 January €22.51 today.
At some point in 2022, this single-digit percentage decline appeared to become even steeper.As recently as October 11, UMG’s share price was €17.25is down nearly a third from the company’s opening price in January.
However, in the past two months, UMG’s stock price has risen and jumped tremendously. 30.5% The October 11th low is below today’s value.
The story of this rapid stock recovery is also reflected in Warner.
Warner Music Group’s share price opened at this year’s closing price on the NASDAQ. US$42.95 January 3rd.The numbers crashed by $22.35 At the end of October 10th – Down 48% beginning of the year vs.
But after that October 10th low, WMG’s share price surged, as did Universal’s. $35.02,that is 57% vs. its October 10 low.
As a result, WMG’s calendar-year share price decline in 2022, like Universal’s, is far less severe than some expected and 18.5%.
With Spotify, it’s a completely different story.
SPOT kicked off with 2022 stock prices $244.16 at the New York Stock Exchange.At the end of today (December 30), the stock price will be YTD 67.7%.
Unlike Universal and Warner, Spotify’s investors didn’t see a boost in the second half of 2022. SPOT stock price hits all-time low $72.36 It hasn’t recovered much since December 15th.
In fact, Spotify’s stock price (and market cap) has continued to stagnate after a sharp drop in the first half of 2022 (see below).
Frankly: Spotify’s stock price ($78.95) is now worth close to $1. Fifth Equivalent value ($364.59) when Spotify peaked in value in February 2021.
Do you get excited?
What puzzles some in the music industry about SPOT’s stock price decline is that Spotify had a great year in 2022 according to a number of key performance indicators (KPIs).
This is especially true given the macroeconomic climate that many feared would undermine the growth of music streaming subscriptions around the world.
At the end of Q3 2022, Spotify counted its global subscriber net additions for this calendar year. 15 millionAt the same time in 2021, the number of additional subscribers for Spotify’s calendar year will be 17 million.
(Likewise, these numbers are about the same. In April 2022, Spotify announced it had disconnected. 1.5 million Russian subscribers in the first quarter after the invasion of Ukraine.it expected further losses 600,000 subscribers in Q2 territories).
What’s more, Spotify’s subscription revenue actually increased in 2022, thanks to timely price increases. Faster More than in previous years, despite the obvious macroeconomic headwinds.
For the first nine months of 2022 (through the end of September), Spotify’s accounting figures show that the company will: EUR 7.53 billion EUR From Premium Subscription – Up 1.37 billion euros Year-over-year (vs same 9 months in 2021).
In the first nine months of 2021, Spotify will 6.17 billion euros From Premium Subs – Up €917 million Year-over-year (see below).
So, despite this performance, why is the market blaming Spotify’s stock price so harshly? In a nutshell: margins.
Spotify’s gross margin in Q3 2022 is 24.7%lacks company-specific guidance 25.2%SPOT’s quarterly operating loss for the third quarter was €228 millionyear-to-date operating loss (9 months to end-September) is ; €428 million.
Spotify’s music industry performance in 2022 has been impressive, adding more premium subscribers than expected and generating more subscription revenue growth than it recently managed. memory.
That’s good news for companies like Universal Music Group and Warner Music Group, whose valuations will benefit greatly from continued recovery in the recession-hit music subscription market in 2022. received.
But Spotify’s investors want improved margins from streamers…and, in addition to some big bets on podcasting in recent years, Spotify’s biggest consistent expense is the music industry’s right I am fully aware that it is a royalty check to be paid to the owner.
The stage is set for the next 12 interesting months.global music business