Just last week, prominent music industry analyst William Packer of BNP Paribas Exane upgraded shares of Universal Music Group for the second time in a year.
As a vote of confidence in UMG’s future value, packaging machine Raising his stock rating from “neutral” arrive”Outperform”.
The news comes just days after we reported that Bill Ackman expressed confidence in the long-term prospects of Universal Music Group (UMG). Pershing Square Holdings, Inc., Owns approx. 10% Equity Interest in UMG.
Now, there’s more positive news for the global recorded music industry. Fitch Ratings, One of the “big three” credit rating agencies in the United States, Designated UMG competitor Warner Music Group The first long-term Issuer Default Rating (IDR) wasblood brain barrier‘.
According to the rating system guidelines Fitch The website’s IDR rating is blood brain barrier That’s good news for companies that get ratings.
Fitch wrote in a research report released on Wednesday (September 4) that WMG’s rating “reflects the[s] Its leading position in the music entertainment industry is driven by its broad portfolio of music assets and diversified revenue base.”
The rating also takes into account “the company’s modest leverage and strong free cash flow (FCF) generation, balanced by the inherent volatility of its hit-driven recorded music segment,” the report added.
Fitch said its outlook for WMG also includes expectations for “continued growth in paid music streaming, expansion into emerging markets, and new monetization opportunities from new platforms and loyal super fans.”
With William Packer’s upgrade on UMG stock, Pershing Square’s positive view on Universal Pictures, and Fitch Ratings’ BBB rating on Warner Music Group, the timing couldn’t be better for the global music industry.
In recent days, the Recording Industry Association of America has released data showing a steady slowdown in subscription growth in the U.S. market, raising questions about the future of the U.S. subscription streaming market.
Industry revenues in world’s largest recorded music market only grow 4% annual increase through the first six months of 2024, according to RIAA data. The total number of streaming subscription accounts in the U.S. only grew Annual increase of 2.7% during the same period.
As we’ve noted in our reporting over the past few days, the U.S. may be the world’s largest recorded music market, but its growth rates are not reflective of all other markets around the world, especially fast-growing emerging markets where paid streaming There is still a lot of room for adoption.
For example, in Brazil, streaming accounts for 99% Domestic recorded music market conditions, data published by local trade bodies professional music Following last week’s pessimism caused by RIAA data, this week has given the global industry reason to celebrate.
Recorded music industry revenue grows in Brazil 21% annual increase In the first half of 2024, it will reach $257 million (R$ 1.442 billion) During this period, according to data released by local trade bodies, Professional music”.
The country’s recorded music business generates 1.43 billion reais ($255 million) Since streaming in the first half of 2024, An increase of 21.1% compared with the same period last year.
Of this number, subscription streaming contributed 995 million reais ($177 million)up Annual increase of 28.4%while ad-supported streaming platforms contributed R$436 million (US$78 million)up An increase of 6.6% compared with the same period last year.
Indeed, in explaining its decision to give Warner Music Group a BBB rating this week, Fitch noted that “the global music industry has strong growth potential, including continued adoption of paid streaming services, digital service provider (DSP) price increases, growing Wait for the opportunities that come with it.
Fitch added that it “believes [WMG] We are well-positioned to take advantage of emerging market opportunities”.
The rating agency added: “Although major record labels have signed licensing rights with platforms such as Meta and TikTok, Fitch believes there is still considerable risk of unlicensed use of music by emerging platforms such as short videos, sports, games and live streaming. value gap”.
Another key reason for Fitch’s confidence not only in Warner Music Group but in music rights as a whole is what it sees as the “continued relevance of the major labels”
Fitch said, “Music streaming and digital media platforms have created a crowded environment by democratizing music discovery and promotion.
“Nonetheless, Fitch believes large players like WMG are uniquely positioned due to their global scale, differentiated platforms and expertise.”
Fitch also cited WMG’s “consistent capital allocation,” saying “WMG prioritizes investments for growth and delivering shareholder returns through dividends and active capital structure management.”
Fitch said it “expects WMG to grow through organic investments and strategic acquisitions to expand music rights, geographic coverage and services.”
One such investment came in July, when Warner Music Group acquired a minority stake in Brazil’s Sua Música, which operates a UGC music platform and services business covering digital distribution, artist management and publishing.
Warner said in a July 17 press release that Sua Música “will be an important partner in its strategy” to “expand its presence in all regions of the Brazilian market, strengthening its presence in regional music, local partnerships authority on the subject and share expertise in discovering new music.” Creating the sound of the catalog of the future”.
Chief Executive Officer, Warner Music Group Robert Kinkel has previously expressed his desire to grow WMG’s Exists in the so-called “middle class” artist market.global music business
