Earnings call transcript: Universal Music Group Q1 2025 reports strong revenue growth

Universal Music Group (UMG) reported its financial results for the first quarter of 2025, showcasing a robust performance with total revenue climbing 9.5% year-over-year to 2.9 billion euros. The company’s adjusted EBITDA rose by 10% to 661 million euros, maintaining a steady margin of 22.8%. According to InvestingPro data, UMG currently trades at a P/E ratio of 23x and shows a healthy dividend yield of 2.04%. The stock closed at $28.51, sitting comfortably above its 52-week low of $22.72 but below its high of $33.62.

Key Takeaways

• Total revenue increased by 9.5% to 2.9 billion euros.
• Adjusted EBITDA grew by 10%, with a margin holding at 22.8%.
• Recorded music revenue rose 10.3%, while merchandising revenue declined by 5%.
• Stock price decreased slightly by 0.08% post-earnings.

Company Performance

Universal Music Group demonstrated strong performance in Q1 2025, driven by significant growth in recorded music and music publishing revenues. The company faced a decline in merchandising revenue, which was offset by gains in other areas. UMG’s strategic focus on digital innovation and expansion in international markets contributed to its robust financial results.

Financial Highlights

• Revenue: 2.9 billion euros, up 9.5% year-over-year
• Adjusted EBITDA: 661 million euros, up 10%
• Adjusted EBITDA margin: 22.8%, unchanged
• Recorded music revenue: Up 10.3%
• Music publishing revenue: Up 9.5%
• Merchandising revenue: Down 5%

Outlook & Guidance

UMG anticipates continued revenue growth driven by an expected 8-10% compound annual growth rate in subscription revenue through 2028. The company projects subscriber volume and average revenue per user (ARPU) to equally contribute to this growth. However, a potential 2% foreign exchange headwind for 2025 could impact results.

Executive Commentary

UMG’s CEO, Lucian Grainge, emphasized the enduring value of music, stating, "Music is one of the least expensive forms of entertainment, and nothing provides more comfort in times of uncertainty and anxiety than music." Chief Digital Officer Michael Nash highlighted the company’s engagement with digital service providers, noting, "We’re deeply engaged with all of our key partners, including Spotify on this category of opportunity."

Risks and Challenges

• Potential foreign exchange headwinds impacting revenue.
• Decline in merchandising revenue could affect future financial performance.
• Economic uncertainties may influence consumer spending on entertainment.
• Competition in the digital music space remains intense.

UMG’s strategic initiatives and market leadership position it well for future growth, despite the challenges ahead. The company’s focus on innovation and expansion into emerging markets continues to drive its success in the global music industry. InvestingPro has identified several key strengths, including the company’s ability to sufficiently cover interest payments and operation with moderate debt levels. For deeper insights into UMG’s financial health and growth prospects, including additional ProTips and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.

Full transcript - Universal Music Group NV (UMG) Q1 2025:

Nadia, Conference Operator: Evening, and welcome to Universal Music Group’s First Quarter Earnings Call for the period ended 03/31/2025. My name is Nadia, and I’ll be your conference operator today. Your speakers for today’s call will be Solution Grange, Chairman and CEO of Universal Music Group and Boyd Muir, COO and CFO. They will be joined during Q and A by Michael Nash, Executive Vice President and Chief Digital Officer.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. As a reminder, this call is being recorded. Please also let me remind you that management’s commentary and responses to questions on today’s call may include forward looking statements, which by their nature are uncertain and outside of the company’s control. Although these forward looking statements are based on management’s current expectations and beliefs, actual results may vary in a material way.

For a discussion of some of the factors that could cause actual results to differ from expected results, please see the Risk Factors section of UMG’s twenty twenty four Annual Report, which is available on the Investor Relations page of UMG’s website at universamusic.com. Management’s commentary will also refer to non IFRS measures on today’s call. Reconciliations are available in the press release on the Investor Relations page of UMG’s website. Thank you. Salucian, you may begin your conference.

Lucian Grainge, Chairman and CEO, Universal Music Group: Thank you for joining us on Universal Music Group’s earnings call for the first quarter of twenty twenty five. I’m pleased to report to you today that financially, commercially and strategically, the year is off to a very strong start. In a few minutes, Boyd will dive into the numbers with you, but the headline is revenue is up 9.5% and adjusted EBITDA is up 10%. In addition, during the quarter, we’ve continued to make progress on our key strategic initiatives, the global expansion of our business, the market adoption of our responsible AI initiatives and the advancement of Streaming two point zero. In particular, with regard to Streaming two point zero, our win win partnership approach to our work with the DSPs is already producing meaningful results.

Our 9.3% growth in subscription revenue this quarter is geographically diversified between developed and high potential markets and well represented across our partner portfolio. In fact, we had double digit revenue growth from four of our major DSP partners, underscoring the health and breadth of our subscription ecosystem. By geography, UMG subscription revenue grew at double digit rates in top developed music markets where subscription is still at an earlier stage such as Japan and Germany. In addition, we saw double digit growth in large population markets where digital music consumption is booming such as China and Mexico. These four markets are each among UMG’s top 10 markets for subscription revenue and illustrate the progress of our global expansion initiatives.

You’ll recall that in March, approximately six weeks ago, we discussed these strategic objectives in detail. So today, I’d like to focus mainly on our core competency, the development and marketing of our artists and their music. It’s the very reason that UMG stands alone as a category of one, that is as the most successful music company in history. As I take you through a number of our quarter’s many outstanding commercial successes, I’d like you to take note of how they occur in all parts of the world, in many languages, cultures and across a wide variety of genres. These achievements by both our new artists and our established ones are also an indication of how our talented and experienced executives maximize the underlying health, broad diversity and enduring longevity of our entire roster.

Let’s start with The U. S. For the first quarter, we had seven of the top 10 albums with Kendrick Lamar’s GNX at number one. Of the industry’s five best selling album debuts, in the quarter, UMG had all five with The Weeknd’s Hurry Up Tomorrow at number one. In March, Morgan Wallen reached a monumental US chart milestone.

His latest studio album, One Thing at a Time, collected its hundredth week in the top 10 on the Billboard two hundred chart. He is the only solo artist in history with an album that has stayed in the top 10 for at least a hundred weeks. His new album, I’m the problem, is coming in May. Playboy Carta’s third studio album, Music, has spent three weeks in The US at number one, making it the best selling rap debut this year. The album is also the seventh biggest album debut in Spotify’s history with more than half the streams coming from outside The US.

A total of 31 of Playboy Carty songs hit The US hot 100 chart, making him only the third artist along with fellow UMD artist Taylor Swift and Morgan Wollam to capture at least 30 spots on the Hot 100 simultaneously. Drake’s collaborative project with Party Next Door debuted at number one in The U. S. Now having had 14 chart topping albums on the Billboard two hundred, Drake has tied Jay Z and Taylor Swift for the most albums by a solo artist in the entire chart’s history. Lady Gaga’s album Mayhem debuted at number one in The US as well as in The UK and 15 other countries.

Her recent headlining set at Coachella received extraordinary critical acclaim As new fans are discovering her genius and longtime fans are reengaging, there’s been a huge uptick in her streaming numbers. She recently commenced on her first arena tour since 02/2018. The tour’s already sold out, proving yet again why Lady Gaga is a once in a generation pop icon. We also had another stellar quarter in The UK. There, UMG had six of the top 10 albums with Sabrina Carpenter at number one and Sam Fender at number two.

We also had eight of the top 10 singles with Lola Young’s Messi at number one. UMG artists held the number one spot on The UK chart for 11 of the quarter’s thirteen weeks, and we also had nine of the top 10 artists with Taylor Swift, Sabrina Carpenter, Sam Fender, The Weeknd, Kendrick Lamar, Lady Gaga, Billie Eilish, Drake, and Chapel Roan. The world’s second largest music market by revenue is Japan. This past quarter in Japan, in an incredible display of the range of great artists who grace our labels, UMG swept all the main categories of the thirty ninth Annual Gold Disc Award. Japanese Artist of the Year, Mrs.

Green Apple Western Artist of the Year, of course, Taylor Swift Best Asian Artist, seventeen. Japanese New Artist of the Year, A Group. And the Western New Artist of the Year was the last dinner party, an astonishing result to say the least, of which we’re very proud. Our tremendous success in Japan is especially gratifying because it highlights not only the regional strength of our artist rosters, but also the deep experience and wide expertise of our local management teams. Just a few more words while I can about Mrs.

Green Apple, the Japanese artist of the year. At the moment, the band has 18 different singles on Billboard’s Japan Hot 100, including the number one. They also celebrated their tenth anniversary with visual displays at a number of landmarks around Tokyo along with the takeover of Universal Music retail store. I could go on and on, but I think it should be very clear by now why, as I said, I’m so proud to be relaying all these accomplishments. There are so many of them to be proud of.

Standing still, resting on our laurels and looking back is never an option for us. To stay on the cutting edge of artist development and marketing and to continue to be the leading home for artists worldwide, we relentlessly reexamine and adjust our organizational structure wherever and whenever it is necessary to do. As you know, last year, we reorganized our East And West Coast operations from a position of strength. The result, at year end, our flagship U. S.

Label groups, Republic Collective and Intascope, Geffen, A and M and Capital were respectively the number one and number two labels in The U. S. Similarly, given the increasing global force of country music, we’re reorganizing our operations in Nashville and once again doing so from a position of strength. UMG is the industry market share leader in country music according to Luminate. Over the last two weeks, we’ve announced two major strategic steps in our country music operations.

First, we relaunched the Nashville based label Lost Highway Records with new management team and an ambitious creative vision. And secondly, last week, UMG Nashville was rebranded Music Corporation of America, also under new leadership with a strong strategic vision. We’re convinced these transformations will ensure that UMG continues to lead the vital and growing community of country music inhibitors. Before I turn it over to Boyd for the financials, let me close by saying I’m incredibly excited by our strong start to this year. Despite the economic uncertainty in the world, we remain confident not only in our performance, but in the resiliency of our global business.

Having been at this all of my career, I’ve navigated our organization through various periods of macroeconomic uncertainty. One thing that is for certain is that throughout these periods, each time I’ve witnessed how music remains vital, financially sticky, and critical to culture. Although company or sector is completely immune from market volatility, time and time again, we’ve demonstrated our ability to embrace disruptive forces and transform them into opportunities that ultimately lead to another wave of growth. Over the years, we’ve evolved our business into one characterized by predictable, high quality, recurring revenue with attractive margins and enormous upside in both established markets and those with the potential for high growth. Even more fundamentally, music is one of the least expensive forms of entertainment, and nothing provides more comfort in times of uncertainty and anxiety than music.

To quote Dylan, it’s a shelter from the storm. And in that sense, when it comes to music, we’ve built the largest and strongest shelter there is. Boyd, over to you. Thank you.

Boyd Muir, COO and CFO, Universal Music Group: Thank you, Lucian. As Lucien indicated, 2025 is off to a strong start. The figures are laid out in the press release, but let me provide some additional color. I’d remind you that any growth rates we discuss today will be in constant currency. Total revenue in the quarter grew 9.5% year over year to €2,900,000,000 with growth in recorded music and music publishing.

The broad based nature of the growth continues to underpin our confidence about the health and sustainability of our business. In looking at the segments, recorded music revenue grew 10.3% with strong growth in subscription, physical and in licensing and other revenue. Subscription revenue grew 9.3% driven primarily by growth in the number of subscribers and to a much lesser extent helped by certain price increases. Year over year subscription revenue growth accelerated compared to the fourth quarter, partly due to improved global subscriber and revenue growth on several platforms. This improvement was supported by growth in higher ARPU subs in key established markets, The U.

S. And Japan, and also better conversion of free users to paid in key emerging markets such as China. In addition, revenue from fitness platforms was stable this quarter. Ad supported streaming revenue was largely flat, up 0.3% in constant currency. The marginal improvement in year over year growth was a result of an easier comp against two of the months where we were off platform with TikTok in early twenty twenty four.

Looking through this, underlying trends were similar as growth continued to be challenged by the shift to short form consumption, which is not yet adequately monetized, but also encouragingly improved conversion to premium subscribers in China. In Q2, we will comp against one lost month of TikTok revenue and we’ll begin to anniversary the loss of the Meta premium music video license. Physical sales were strong, up 15% year over year, driven by vinyl growth in The U. S. And in Europe.

Many of our top overall sellers this quarter had healthy physical sales, including Kendrick Lamar, Sabrina Carpenter and Lady Gaga among others. Even with a strong release slate, we continue to expect physical revenue to be largely flat for the year against a challenging two year comp. License and other revenues grew meaningfully this quarter driven by particularly strong live income in certain markets in Europe as well as by growth in synchronization income. Turning to music publishing, revenue grew 9.5% over the prior year quarter. This result was driven by 17% growth in digital revenue, thanks to continued growth in streaming and subscription activity.

Performance revenue saw a timing related decline against a particularly difficult comp as Q1 twenty twenty four performance revenue was up 28%. Moving on to merchandising, as expected merchandising revenue declined 5%. Direct to consumer income continued to exhibit healthy growth, but this was more than offset by a difficult comp in touring merch sales due to the timing of tours. Now turning to adjusted EBITDA. Adjusted EBITDA grew 10% in the quarter to €661,000,000 driven by the revenue growth.

Adjusted EBITDA excludes non cash share based compensation expenses of EUR 58,000,000 during the first quarter of twenty twenty five compared to EUR 101,000,000 in the first quarter of twenty twenty four. Adjusted EBIT margin was flat at 22.8%. The flat margin reflects the benefits of cost savings and operating leverage, but offset by the negative impact of revenue and repertoire mix resulting from strong growth in physical revenue, outsized growth in low margin live income within our licensing and other revenue line and the incremental administration revenues of music publishing catalogs such as Chord. Next quarter, we look forward to updating you on our implementation plans for Phase two of our strategic organizational redesign. As planned, Phase II will include another €125,000,000 of cost savings to bring the total amount of the program to €250,000,000 Overall, 2025 is off to a strong start and our focus on our key strategic initiatives positions us to achieve our midterm financial objectives.

Lucien, Michael and I would now be happy to take your questions. Operator, please open the line for Q and A.

Nadia, Conference Operator: You. first question goes to Ed Young of Morgan Stanley. Ed, please go ahead.

Ed Young, Analyst, Morgan Stanley: Thank you very much for taking my questions. The first is on subscription revenue where you’ve clearly delivered a very good acceleration this quarter. And your commentary there was about how that’s quite broad based across geographies. You also appeared to allude to better performance across a broader range of DSPs. I just wanted to check that’s how you meant it, I.

E, that’s something that they then may well enjoy with a bit of momentum into the following quarters or whether I was reading too much into that particular comment. And then the second one, there was commentary from Spotify today about super premium tiers saying that they are seeing but also need good cooperation from a range of stakeholders. It’s not just in your hands or their hands. So I just wondered if perhaps in the context of your Streaming two point zero framework, whether it’s something you expect to see in the sort of near term or if it’s something towards the end of the time line that you’ve spoken about? Some idea of the time line that might be delivered on based on the partnership you have with those DSPs.

Thank you.

Boyd Muir, COO and CFO, Universal Music Group: Ed, it’s Boyd. No, I don’t think you heard wrong regarding, as you would say, the acceleration in subscription revenue over Q2. The growth was across several platforms. And we also saw growth in the higher ARPU subs in key markets, namely The U. S.

And in Japan. But I think also worth just calling out that what we did see was better conversion of free users into paid subscription in key emerging markets, but in particular, China. So a broad based growth, which was pleasing. I don’t know, Michael, if you want to add anything to that or just move to the second question.

Michael Nash, Executive Vice President and Chief Digital Officer, Universal Music Group: Well, maybe just as a bit of additional elaboration to your first question, Ed. Obviously, we can’t disclose the performance of specific partners, but we’d also note that we had double digit revenue growth from three of our top five subscription partners. And Lucien talked about four of our significant subscription partners, four of our top 10, but three of our top five had double digit growth, and there was high single digit growth from another top five partner. So again, our subscription revenue growth was very well diversified in the quarter. And I would just note as background here, in terms of the big picture, remember that last month, the IAPI Global Music report logged year over year subscription subscriber growth of over 10% with more than seven fifty million subscribers worldwide at the end of twenty twenty four.

And that obviously strongly supports the growth outlook we presented at Capital Markets Day. We see from our proprietary research and from industry data strong support for our forecast that global subscribers are going to exceed 1,000,000,000 by 2028. So when we’re talking about the growth that we’re seeing in terms of key geographies and across services, very consistent developments with what we talked about on Capital Markets Day and with what industry data is indicating about overall growth in the market. Then with respect to your second question regarding update on super premium tiers and how we see that rolling out. We’re deeply engaged with all of our key partners, including Spotify on this category of opportunity, And we’re very encouraged by the direction of all those conversations.

We hope to be able to publicly elaborate on the collaborative plans that we’re developing later this year. But specific to Spotify’s call this morning, we were very encouraged to hear the executives there confirm on the call that with regard to higher tiers, they see great potential in them. I’m quoting here in terms of great potential. And we were also encouraged to hear them reaffirm that creating higher tiers around new offerings is something that we’re working towards. Now regarding specific timing, that obviously does depend on product engineering and platform deal making.

So the timing questions are obviously questions for the platforms. We’re not going get into confidential information about our discussions. Then just with respect to how it relates to streaming two point zero, we’d also note that we certainly agree with Spotify executives, there’s great opportunity to drive growth and increase ARPU on standard and family plans as well. And we detailed that in our outline of how we characterize streaming two point zero on Capital Markets Day. The core value proposition of music subscription is very compelling.

And as we previously noted, significantly underpriced relative to that value. Lucia, do you have anything to add there? Apparently, I sufficiently answered that question here. So why

: don’t

Lucian Grainge, Chairman and CEO, Universal Music Group: we move on to the next question?

Nadia, Conference Operator: The next question goes to James Heaney of Jefferies. James, please go ahead.

James Heaney, Analyst, Jefferies: Lucien, thanks for the question. Just be great to hear and get your perspective on what seeing in the music industry and UMG specifically during past economic downturns. It’s clear you’ve seen relative resilience, but any specifics on business performance, would be great context. Thanks.

Boyd Muir, COO and CFO, Universal Music Group: Can you

Lucian Grainge, Chairman and CEO, Universal Music Group: hear me okay? Yep. Can you hear you? Yeah. Good.

As I said earlier, I’ve been through various cycles of global economic uncertainty, and I’ve been able to navigate with the teams in throughout the world through it. Music has always proven to be incredibly resilient. It’s low cost, high engagement, and obviously a unique form of entertainment. There’s been plenty of research to back this up, specifically that when there’s been inflationary pressure and household budgets tighten, music subscriptions are and music purchase has always been resilient, and I see that. And what I’ve learned over this period is because consumption is frequent, enjoying it is frequent, whether or not in the old days, people were playing CDs or now obviously leaning in music in the cloud.

The usage is constant. It’s completely multi device, multi occasion, and it’s good value for money. And the other aspect of it, which I’ve always been passionate about and we, as a company, feel is that music improves people’s lives, and it’s inspirational. So I suppose it’s one of the other reasons why over the long term, we’re constantly so confident and bullish about our product, the music, our artists and the impact that our business and our product has region by region and genre by genre and market by market.

Michael Nash, Executive Vice President and Chief Digital Officer, Universal Music Group: If I could maybe add an additional perspective there to Lucien’s great summary in terms of music’s resilience. That resilience really isn’t happenstance. We see it as structural. Analysts have talked about music consumption being habitual, emotional, noncyclical, to Lucian’s point. And the point that I would add to that, music industry is undergoing secular digital transformation that’s tied to broader consumer technology trends.

That digital transformation is actually amplifying those resilience characteristics, convenience, personalization, revenue recurrence. Those are all things that contribute to music’s more resilient posture with respect to recession. We would note, and it was a unique circumstance in many ways, although not really in terms of sources of music industry revenue, that in 2020, while global GDP shrank, recorded music revenue actually grew by 7.4. And in terms of where the consumer mindset is very recently, there was a McKinsey study that was done very recently in the first quarter on consumer sentiment. The questions were asked regarding areas of spend that would be reduced, made the case that spending on at home entertainment, which obviously includes more than music, it also includes SVOD, but home entertainment, including music, it’s one of the least likely areas that consumers said that they would plan to cut back on.

It was the second lowest of 22 different categories in terms of plan to spend. And that’s, of course, because of those characteristics that Lucien underscored. The last point that I would make is we have very significant protection against digital revenue downside risk this year because of the various guarantees that are structured into many of our deals. So those are all perspectives to keep in mind in terms of how we see our resilience in

: the

Michael Nash, Executive Vice President and Chief Digital Officer, Universal Music Group: face of potential economic uncertainty.

Nadia, Conference Operator: The next question goes to Doug Creutz of TD Securities. Doug, please go ahead.

Doug Creutz, Analyst, TD Securities: Thanks. You had a good tailwind from FX in Q1, but I think things have sort of turned around in that regard. Can you give some sort of a sense of what kind of headwind you expect in Q2 and perhaps the balance of the year? Thank you.

Boyd Muir, COO and CFO, Universal Music Group: Yes. I mean just in rather than focus on the quarter, we’re envisaging about a 2% headwind for 2025.

Lucian Grainge, Chairman and CEO, Universal Music Group: Okay. I’d just like to add, there’s nothing that we can do or would do to get off track from our long term three year target. So I just wanted to add that. This is everything we do is for long term growth. And you’re seeing a lot of the things that we outlined in Capital Markets Day last September now coming to fruition.

Even on, for example, experimentation, we talked about super premium and discussion, We’re constantly experimenting. We’re experimenting with our partners. It’s one of the data points that we talked about earlier in terms of the booming markets that we’re seeing in China and Mexico, for example, and the fact that, as I stated in my comments earlier, that the bigger markets that, albeit, had less digital penetration, we’re also seeing double digit growth in them as well. So everything is connected to a long term growth path, which is minimum of what we do over a three year period. That’s how we think.

That’s how we invest. How we plan our digital deals. It’s how we we look at our relationships with our DSPs. And as I said, that we seem to get boring. We’re now beginning to see the the plans and discussions on what we set out months and months ago.

Nadia, Conference Operator: The next question goes to Michael Morris of Guggenheim. Michael, please go ahead.

: Thank you so much. I’d love to follow-up on the first analyst. Two questions, if I could. The first one on the subscription streaming growth, which is a great number, clearly another quarter within your guide your long term guide range. And yet we haven’t really seen a big prominent pricing cycle, at least not publicly from your largest DSPs.

So my question is, as you go through some of these renewals and hopefully we see a pricing cycle, is there any reason that we shouldn’t see performance above that range? Maybe some of the other things that have been tailwinds that we should be considering that become tougher comparisons as the year progresses? That would be helpful. And then secondly, there was a question on SuperFan. And there was an article earlier in the month about perhaps Ed Sheeran launching his own sort of standalone direct to consumer product outside of the DSP marketplace.

And so my question for you is, does a product like that seem to appeal to you? Or is that of interest to your artists? And how might something like that work relative to a super fan product within traditional DSP marketplace? Thank you.

Boyd Muir, COO and CFO, Universal Music Group: Heiko, don’t I your first point on subscription. Again, bank and capital markets, we set out our guidance for the period 2023 through 2028, where we said that subscription revenue would grow at an average CAGR of 8% to 10%. We did also at that time say that we envisaged that this growth would come in waves. Part of the reason for us saying that was exactly as inferred in your question. At the moment in time that there is a price increase, we would envisage that the growth rate would be higher than that range.

So we’re focused very much going back a little bit to what Lucien said is like midterm guidance over the period through 2028. So your point is well made. And again, on Capital Markets Day, we outlined Streaming two point zero. And in there, we did reference that when you look at that 8% to 10% average CAGR over the period that we expected that approximately half of that would come from ARPU growth and half of that would come from volume growth. That’s probably more appropriate to describe it as subscriber growth.

So we’ve got ARPU and subscriber growth. We are attributing approximately 50% to each of those two metrics. So and we can Michael may well talk more about the fact that Michael actually did reference this. We see increased price point in relation to not only a premium music tier, but we also see ARPU coming through increased pricing on standard tiering. In Streaming two point zero, we did mention that it is our intention to increase our wholesale prices, which we would categorize as the minimum rate per subscriber.

So when you see an announcement, which references two point zero, I think you can expect that there will be wholesale price increases embedded into those deals. So long story short, Michael, we’re really seeing here is that we’re in line for that midterm CAGR through 2028 between 810%. And you’re right to point out that it will come in waves depending on the timing of price increases throughout that period.

Michael Nash, Executive Vice President and Chief Digital Officer, Universal Music Group: Then Michael, to the second question regarding the strategy to address higher value customers and super fans and artist apps, I think that it’s important to point out that you can take two complementary approaches. We operate thousands of different artist based e comm stores, which we see as very complementary to a super premium strategy of working with the platforms to go across large subscriber bases to address higher customer value. So research certainly indicates that a portion of the fan base of the artist is much higher value, and you should address that in terms of the opportunity to develop specific products for those fans. But I think that you shouldn’t look at that approach as an alternative to what the research clearly shows is a great opportunity in terms of the scale across the subscriber bases. Our research indicates that there’s maybe a 20% target for the current subscriber base that is prime for adoption of super premium tier products.

Various different configurations we’ve tested. We expect different configurations of different platforms that could be potentially priced at 100% of the current price point to get that 20% level of adoption. So you look at the level of consumer demand that exists there, we certainly want to work to capitalize on that. At the same time that we see the complementary opportunity around going after the super fan and individual artists. Now whether or not there’s a sub aggregation opportunity for a few artists that sits somewhere in between going after the entire subscriber base and going after the fans of individual artists.

I don’t see that there’s an empirical indication that that would be a priority to target. But we do have some great empirical data with respect to the super premium offer. I think it’s important to note that Tencent Music in China has very encouraging results that they’ve recently underscored on their earnings call and in subsequent commentary. Remember, China is a market historically regarded as being very resistant to paying for music. And yet Tencent Music noted on their Q4 twenty twenty four results that their super premium tier, which they called SVIP, had sequential growth in the quarter over the previous quarter.

And they said that they now are at low teens penetration of their subscriber base. So if you take that as 13% of the subscriber base of 121,000,000, that means more than 15,000,000 SVIP subscribers adopting a super premium platform. That’s after about five quarters of service because that number was through the end of twenty twenty four. And that price point for SBIP is five times the standard price point. So we’re seeing empirical data coming from the market suggesting that we’re not wrong in how we assess the scope of opportunity regarding super premium tier.

So that’s really where our emphasis is complementary to how we’re thinking about going after super fans of individual artists with e commerce.

Nadia, Conference Operator: The next question goes to Julian Roche of Barclays. Julian, please go ahead.

Julian Roche, Analyst, Barclays: Yes. Thank you for taking my question. The first one is Boyd coming back to your opening remark giving us color on subscription streaming, broad based faster growth from DSP, but you also mentioned certain price increase indicating that there were more of a benefit in Q1 than in Q4. So I was hoping you could give us some colors or numbers on the benefit of price increase comparing the two. And then the second question is on the current wave of Spotify price increase, they’ve just done Belgium, Luxembourg and The Netherlands.

And there’s Feet article saying Europe and Latin America are coming up in June. Are those the streaming two point zero deals you signed towards the back end of last year? Or that is still to come and those are more similar to the price increase in The U. S. Last year with the possibility of going back to previous price if you forgo audiobooks?

Thank you.

Boyd Muir, COO and CFO, Universal Music Group: Julien, maybe I’ll take your first question. The impact of price increases in terms of the Q1 growth in 2025 was small. The vast proportion of the growth was actually coming from subscriber growth and the shift from lower ARPU into higher ARPU geographies.

Michael Nash, Executive Vice President and Chief Digital Officer, Universal Music Group: And then Julien, with respect to the second question and just to unpack that a little bit, you referenced price increases in Benelux. We obviously can’t get into the specifics of our deals, but we are benefiting from audiobook bundled based price increases, we’ve stated earlier. In terms of the press speculation regarding new price increases, We’re not going to comment on that speculation, and we can’t get into specific deal terms. As we’ve said before and on this call, we’re very comfortable with the new Streaming two Auto deals that we’ve signed, and we see them aligning very well with our goals of driving subscriber growth and also ARPU growth to create win wins for both parties. We outlined at Capital Markets Day, how we envision Streaming two point zero playing out.

Boyd’s commented on this call. I think that we’re not going to be able to go into greater specifics and certainly not going to comment on press speculation at this point.

Lucian Grainge, Chairman and CEO, Universal Music Group: I’d just like to add that, Michael, top, that the product experimentation that we’re doing and that we’re doing with our partners, led by our artists, their consumers, fans and what we see with behavior and data, plus the progress of our regional and global initiatives that I’ve talked about in terms of what we’re seeing in China, Mexico, Japan, Germany, just our whole entire being as a global company, is providing growth and strength for all of the stakeholders, for our artists, for UMG, for the industry and obviously, specifically for the platforms. And all of this strategy is, we move in tandem with our partners, in a global and sequential way for long term growth and long term health.

Nadia, Conference Operator: The next question goes to Adrian de Saint Hilaire of Bank of America. Adrian, please go ahead.

Lucian Grainge, Chairman and CEO, Universal Music Group0: Yes. Thank you very much and good evening everyone. I’ve got a couple of questions, please. Can you elaborate a bit on the negative repertoire mix you’ve alluded to in the release? I think it’s something you’ve called out in previous quarters as well.

Does that mean that you have more distribution contracts in there? And would you expect that repertoire effect to be?

Nadia, Conference Operator: We have lost connection with Adrian. Moving on to the last question from Lisa Yang of Goldman Sachs. Lisa, please go ahead.

Lucian Grainge, Chairman and CEO, Universal Music Group1: Yes. Hi, thanks for taking the question. I mean, firstly, it was it’s very encouraging to see more DSPs seeing improved performance over the quarter. I was just wondering if you’ve seen any specific initiatives that have taken by the DSPs to drive improved conversion or faster growth such as product innovation or marketing push? That’s the first question.

And secondly, on the margin dynamics in Q1, and I guess maybe that was probably also Adrian’s question, but could you quantify the benefit of the cost savings in the first quarter? I think you still have €50,000,000 left from the previous costing. How much was in Q1? And how much is left in Q2? And could you also quantify the dilution you’re seeing from the DNG distribution deals and the core deal?

That will be very helpful. Thank you.

Michael Nash, Executive Vice President and Chief Digital Officer, Universal Music Group: Lisa, thank you for your questions. Regarding your first question in terms of specific initiatives from the DSPs related to growth, I think what we’re seeing, first of all, is the broad based growth that is what we have articulated in terms of our vision of overall market expansion. We’re still relatively early on in terms of penetration of subscription to north of 5,000,000,000 now smartphone enabled population. There’s a lot of headroom right now in terms of driving adoption. I think that you are seeing as smartphone penetration grows in the emerging markets that there’s a greater opportunity to grow subscribers there and specific initiatives focused on, for example, how you use free tier for engagement and work the funnel in order to drive better conversion.

Boyd referred specifically to initiatives in a market like China, where you see strategies to convert more free subscribers into paid subscribers. For example, utilization of Paywall to secure content behind the subscription tier wall in order to drive adoption there. So there are a lot of specific developments in the markets. In terms of the platforms themselves, there’s ongoing product innovation that we see with all of the major players. There’s innovation around applications of AI in terms of the user experience.

I’m not speaking there of GenAI, but AI that enables better recommendations and drives engagement, AI that creates more sophistication in terms of how voice interaction works. And you’re also just seeing greater sophistication in terms of approaches that are taken to subscriber acquisition, the kind of blocking and tackling of v subscription services as they gain more experience, and there’s more sophistication that’s applied at a tactical level. So I think it’s the overall growth of the market and the innovation that we’re supporting at the platform level that is responsible for the fact that we saw four of our top 10 partners growing by double digits. And as articulated earlier, among the top five, three in double digits and one in high single digits.

Boyd Muir, COO and CFO, Universal Music Group: And Lisa, your second question, and I may well touch upon Adrian’s question before you get cut off, which was referencing negative repertoire mix. In terms of our margins, the margins were flat in Q1 twenty twenty five compared to Q1 twenty twenty four. But when I reference negative repertoire mix, what I’m really talking about there is a combination of things. But as a for instance, the increase in physical that you see year over kind of clearly the margins in the physical business are different from our margins on the subscription revenue. So that’s part of this here.

BMG, just referencing particular, BMG is a very small contributor just given the totality of the scale of UMG. So that really doesn’t make any real kind of emphasis in terms of the revenue mix. Cord does. Cord predominantly in terms of much more skewed towards the publishing side where we have the revenues, we administer that at an administration fee level. So what is going on there is those kind of things in terms of revenues.

With regard to the cost savings, we will be updating you the next quarter where we intend to give a fuller update on the progress. But just really to kind of emphasize what we’ve said before. We’ve completed Phase one of our organizational redesign program. In 2025, there’s €125,000,000 of run rate savings embedded into 2025. We captured €75,000,000 of that run rate in 2024.

So there’s €50,000,000 incremental cost savings embedded into our 2025 results. So I think that’s it for now and we’ll update you more fully after next quarter.

Lucian Grainge, Chairman and CEO, Universal Music Group: I’d just like to add, Boyd, that we’re on plan strategically for all of the things that we believe are important to the company and to the business and the entire ecosystem. Our blend of product, our blend of artists, our diverse regional implementation, how we’re experimenting and the progress that we’re seeing with the DSPs, even things as you’ve talked about in terms of cost savings. We continue with every tool that we have to do everything that we say that we will.

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