The MBW Overview is the place we intention our microscope in the direction of among the music biz’s largest current goings-on. This time, we flip our gaze to Spotify and Common Music Teams, and their respective valuations on the inventory market. The MBW Overview is supported by Instrumental.
The market cap valuations of two gorillas of the trendy music rights trade – Common Music Group and Spotify – are intriguingly shut proper now.
UMG, a listed firm in Amsterdam, is at present stretching out forward, price round $7 billion greater than Daniel Ek‘s firm.
But a month in the past, this wasn’t the case: In response to yCharts, Spotify has misplaced over $13 billion in worth on the NYSE prior to now month alone, falling under Common’s valuation within the course of.
This all leads us to a festive big-money query: Which of those two music giants will finish 2021 with the title of the world’s most precious?
Within the inexperienced nook is Spotify, which weighed in at a market cap worth of USD $43.83 billion at shut of buying and selling on Friday (December 3).
Within the blue nook is Common Music Group, which went public on the Amsterdam Euronext in September.
UMG at present has a market cap worth (on the time of writing, on December 6) of EUR €45.23 billion – equal at present trade charges to USD $51.07 billion.
With lower than a month left of 2021, who will win the race to be topped the year-end king of music on the markets?
Making issues slightly lower than sure on that rating is the truth that a fast gust of well-liked information about both firm might push their market caps up or down considerably.
Final week, for instance, Spotify turned mired in a dangerous story associated to recordings of stand-up comedy on its platform.
The digital platform took down a raft of recordings from comedians together with Kevin Hart, Jim Gaffigan, and Robin Williams over the Thanksgiving weekend.
After that occurred, Spoken Giants, an organization which administers royalty assortment for comedians, claimed that SPOT did so as a result of they “know they don’t have all of the rights in place to serve this content material”.
That is the pickle Spotify finds itself in: these comedy royalty assortment firms – together with Spoken Giants and Jeff Value’s Phrase Collections – look like legally entitled to gather payouts for a comedians’ underlying written / literary work, along with that comic’s reside recordings.
Questions are actually being raised over whether or not Spotify had the required licenses relating to the underlying / literary works of comedians (the equal of a mechanical proper to a songwriter/writer).
Including to the enjoyable: Spoken Giants and Phrase Collections are unregulated within the US, in contrast to their music equivalents – ASCAP and BMI. Because of this the comedy rights admin firms might probably negotiate a US royalty charge direct with Spotify, as an alternative of getting to restrict themselves (like ASCAP and BMI) to charges decided by Consent Decrees and their affiliated charge courts.
This sort of topical information affect on share costs apart, it’s additionally price trying on the laborious numbers to see how Spotify and Common are shaping up as we head in the direction of the tip of the yr.
Right here’s how each Spotify and Common fared in Q3 (to finish of September), and what they’re forecasting for his or her efficiency within the ultimate quarter (This autumn) of 2021:
By most metrics, Spotify did nicely final quarter (Q3).
In response to SPOT’s monetary outcomes for Q3 2021, printed October 27, the platform hit the mid-to-upper finish of its steerage for each whole Month-to-month Energetic Customers (MAUs) and whole Premium subscribers.
Spotify’s world Premium Subscriber base grew 19% year-on-year to 172 million within the quarter, and its world Month-to-month Energetic Customers, (MAUs), in the meantime, grew 19% year-on-year to 381m in Q3.
One notably robust end result, nonetheless, was SPOT’s ad-supported income determine, which was up by 75% year-on-year, hitting €323 million ($374m) in Q3.
Chatting with analysts on the corporate’s incomes name final week, Spotify CEO Daniel Ek reiterated his previously-made declare that advertisements will turn out to be “be the second massive income driver for the way forward for our enterprise” and famous that “2021 will mark the primary time we are going to surpass €1 billion in advert income”.
Driving this advert income increase for Spotify is its multi-million greenback podcast technique. Ek instructed analysts final week that “Pleasure from advertisers for the podcast trade has elevated considerably during the last yr, and we’re forward of our plans for podcast monetization”.
Spotify can also be doubling down on video podcasts, which it rolled out to pick out customers final yr and extra broadly to podcast creators in October.
In response to Daniel Ek, talking to Bloomberg lately, “video advertisements are priced greater than audio advertisements on the present second”, which signifies that as Spotify customers begin seeing extra video podcasts on the platform, Spotify will begin seeing much more promoting income roll in throughout This autumn and into 2022.
That is excellent news for buyers after all, and if SPOT hits the higher finish of its This autumn steerage of 400-407 million MAUs and 177-181 million Premium Subscribers, the corporate ought to see a wholesome uptick to its share worth and market cap worth when it subsequent publishes its monetary outcomes.
Common Music Group
Common in the meantime, additionally posted robust quarterly outcomes for Q3.
After itemizing on the Euronext Amsterdam Inventory Trade on September 21 with a gap valuation of $54.3 billion, in its first set of quarterly outcomes as a publicly traded firm, UMG reported revenues (throughout recorded music, publishing and extra) of €2.153 billion (approx. $2.5bn at present trade charges) for the three months to finish of September (Q3)
That was up 17.4% YoY at fixed foreign money, and up by 6.5% on the €2.022 billion revenues UMG posted within the prior quarter (Q2).
In the meantime, recorded music streaming revenues had been up 15.2% YoY at fixed foreign money in Q3, reaching €1.131 billion within the quarter.
Talking on the corporate’s very first earnings name as a publicly traded entity, Chairman an CEO Sir Lucian Grainge instructed analysts that “We really feel that these numbers converse for themselves”. Trying to the long run, Grainge added that “we imagine there may be unprecedented alternative for additional development”.
One of many highlights of UMG’s newest outcomes was its EBITDA (earnings earlier than curiosity, taxes, and depreciation), which is a key measure of profitability at UMG.
The corporate’s total adjusted EBITDA in Q3 – throughout all of its divisions, together with recorded music, publishing and others – was €461 million (approx $535m), up 20.7% YoY.
UMG’s adjusted EBITDA within the first 9 months of 2021 was €1.286 billion – a revenue margin of 21.5%.
As lately identified by MBW, if in This autumn, Common can repeat or higher the €461 million adjusted EBITDA it posted in Q3, the corporate’s annual adjusted EBITDA throughout all 12 months of 2021 will (at present trade charges), simply handle to creep over the USD $2 billion mark.
The MBW Overview is supported by Instrumental, one of many music trade’s main development groups for impartial artists. Instrumental makes use of knowledge science to establish the quickest rising impartial artists on the planet after which provide funding, premium distribution and advertising help to take them to the subsequent stage, with out taking their rights.Music Enterprise Worldwide