It’s an old debate in the media: Who’s the king of the entertainment industry – content or distribution?
In the music industry, the market seems to have given a resounding answer to that question in 2022, with Spotify — the world’s largest streaming music subscription platform — found its value significantly less than that of the major music rights holders.
Closing trading on the New York Stock Exchange today (December 30), the last trading day of the year, Spotify stock price stood at USD $78.95equivalent to the market capitalization of 15.26 billion USD.
This figure is significantly lower than the market capitalization of Warner Music Corporation (WMG), that transacted on NASDAQ as of summer 2020.
WMG stock price at the end of today’s session stood at $35.02equivalent to the mass market capitalization of 18.03 billion USD. That’s almost 3 billion USD greater than Spotify’s equivalent mass market value.
Perhaps the hardest comparison for Spotify, though, comes from music’s biggest global copyright holder – Popular music group.
UMG closed its 2022 transaction today on Amsterdam Euronext with one €22.51 stock price, equivalent to the market capitalization of 40.82 billion euros.
At current exchange rates, Universal’s EUR market cap is worth 43.70 billion USD.
In other words, UMG’s current public valuation is worth almost three times by Spotify.
Spotify vs Universal and Warner: the big difference in 2022
All this is a far cry from a year ago this month, when MBW asked: ‘Universal vs. Spotify: Which two music giants will be worth more by the end of 2021?’
On December 6, 2021, Spotify and UMG’s valuations are very close, with UMG’s value 45.20 billion EUR on Amsterdam Euronext and Spotify value 44.44 billion USD on the NYSE.
On the same date (December 6, 2021), the market capitalization of Warner Music Group on NASDAQ was 21.46 billion USD… less than half that of Spotify.
Things look very different today – and that has mostly to do with Universal and Warner’s stock performance in the second half of 2022.
Amid macroeconomic uncertainty, Universal Music Group’s share price is above Euronext decrease in this calendar year by 8.0%, are from €24.47 when Euronext closes on January 4th €22.51 today.
That single-digit percentage drop, at some point in 2022, looks set to be much deeper: Most recently on October 11, UMG is trading at a share price of €17.25down nearly a third from the company’s opening stock price in January of this year.
However, in the past two months, the share price of UMG has increased sharply, skyrocketing 30.5% compared to the October 11 low of what it is today.
This story of rapid stock price recovery has been reflected at Warner.
Warner Music Group’s stock price kicks off this year’s NASDAQ by closing at USD $42.95 on January 3. That number has dropped $22.35 at the end of October 10 – reduced 48% compared to the beginning of the year.
Since that October 10 bottom, however, WMG’s stock price, like Universal’s, has rebounded sharply: By the end of 2022 at a level $35.02it is restored by 57% from the low point on October 10.
As a result, WMG’s calendar-year share price decline in 2022 – like Universal’s – is far less severe than some might have predicted, falling 18.5%.
Spotify difference
It’s a very different story at Spotify.
SPOT starts in 2022 with a stock price of $244.16 on the NYSE. Closing today (December 30), that stock’s price fell about 67.7% compared to the beginning of the year.
Unlike Universal and Warner, no hitch for Spotify investors in the second half of 2022: SPOT’s stock price hits an all-time low of $72.36 on December 15 and has not recovered much since.
Indeed, after a massive drop in value in the first half of 2022, Spotify’s share price (and market capitalization) has continued to fall to flat levels (see below).
To put it bluntly: Right now, Spotify’s share price ($78.95) is worth almost Thursday worth the same ($364.59) when Spotify’s value peaks in February 2021.
increasingly stressed?
What might confuse some in the music industry when it comes to SPOT’s stock price drop is that according to many of its Key Performance Indicators (KPIs), Spotify has had an impressive 2022.
That’s especially true considering the macroeconomic environment that many fear will hurt growth in music streaming subscriptions globally.
At the end of Q3 2022, Spotify calculated its global net subscriber count for this calendar year as 15 millions. In the same period in 2021, Spotify’s calendar year additional subscribers stood at 17 million won.
(Like-for-like, those numbers will be roughly the same: In April 2022, Spotify said it had disconnected. 1.5 million won subscribers in Russia in Q1 after the country’s invasion of Ukraine; it is expected to take more 600,000 won subscribers in the territory in Q2.)
Furthermore, thanks to some timely price increaseSpotify’s subscription revenue in 2022 has really grown faster compared to previous years, despite obvious macroeconomic difficulties.
During the first nine months of 2022 (to the end of September), according to Spotify’s financial data, the company generated €7.53 billion from premium subscription – increase by €1.37 billion annually (compared to the same period of nine months in 2021).
In the first 9 months of 2021, Spotify created €6.17 billion from premium subscription – increase by €917 million annually (see below).
So why is the market punishing Spotify’s stock price so heavily despite this performance? In a word: Escrow.
by Spotify Gross profit margin in the third quarter of 2022 stood at 24.7%lack of company’s own guidance on 25.2%. SPOT quarterly operating loss in Q3 at €228 million; Its YTD operating loss (during the 9 months to the end of September) was at €428 million.
So there’s a commercial seesaw as we move into the New Year: Spotify’s music performance in 2022 is an impressive feat, adding more premium subscribers than many expected. wait – and generate more subscription revenue growth than it has seen in recent times. memory.
This is great news for companies like Universal Music Group and Warner Music Group, whose valuations have benefited greatly from the continued recovery of the music subscription market during the recession. economic recession in 2022.
Still, Spotify investors want to see improved returns from streamers… and they’re well aware that, in addition to some big bet on podcasting in recent yearsIts biggest consistent expense remains the royalties it divides among copyright holders in the music industry.
The stage is set for an exciting 12 months ahead.Global Music Business
