Universal Music Group (UMG) announced on Tuesday that it expects its annual core profit to grow by more than 10 percent through 2028.
This increase is driven by higher subscription revenue, expanded partnerships, and the strong support of superfans for artists like Taylor Swift, BTS, and Drake.
During its first Capital Markets Day at London’s Abbey Road Studios, UMG outlined plans to address slowing subscriber and streaming growth. CEO Lucien Grainge stated that the streaming industry is entering a new phase that focuses on monetizing superfans. He emphasized the importance of not only increasing subscriber numbers but also raising the average revenue per user (ARPU).
“While streaming is valuable, it has leveled the playing field,” Grainge explained. “The passionate listener pays the same price for access as the casual listener.” UMG aims to target superfans by offering physical collectibles, premium merchandise, and live and digital experiences.
Grainge noted that subscription penetration is still below 50 percent in UMG’s most established markets. He pointed out that high-potential markets like India and China are still in the early stages of subscription adoption.
The Amsterdam-listed company set financial targets through 2028, projecting a compound annual revenue growth of 7 percent. This forecast exceeds the consensus outlook of 6.1 percent annual revenue growth and 8.8 percent adjusted EBITDA growth, according to ING.
UMG’s second-quarter results had previously led to a 30 percent drop in its stock value in late July. This decline followed a slowdown in subscription revenue growth, which fell to 6.9 percent from 12.5 percent in the same quarter the previous year, missing an estimate of 11.1 percent.
Finance chief Boyd Muir reassured investors at the Capital Markets Day that fluctuations in revenue are expected as UMG implements its multi-year strategy. He urged them not to overreact to minor changes in performance.
In its outlook, UMG projects annual subscription revenue growth of 8-10 percent through 2028, which is higher than the consensus estimate of 6.6 percent, as reported by ING.
Related topics:
