The Ledger: In Strong 2022, Advertising Is Rare Weakness For Music Biz

The Ledger is a weekly newsletter about the economics of the music industry sent to Billboard Pro subscribers. An abridged version of the newsletter is published online.

With a handful of music companies’ quarterly earnings announcements now in the books, the outlook for the second half of the year appears strong almost across the board. However, there is one area of ​​weakness: online advertising.

On Wednesday, French music company Believe raised its guidance for fiscal 2022, but warned in its investor presentation that organic growth will slow in the second half “as the advertising-funded streaming activities should be affected by rising inflation and economic uncertainty.”

Spotify also pointed to some weakening in advertising. “In terms of advertising, we saw some softening in trends over the last two weeks of June,” the CFO said Paul Vogel during the company’s July 27 earnings call.” But with that as context,” he noted, “we still expect solid growth in Q3, albeit slower than we might have anticipated earlier this year.”

Advertising is not expected to fall off a cliff, and Spotify can mitigate any advertising blandness by improving ad load. “We think there is enough room to expand [ad engagement] over time,” Vogel said. Spotify is already benefiting from favorable listening trends. Over time, as people spend less time listening to broadcast radio, Spotify believes the opportunity for online audio ads will improve. Advertising will be a “massive ” category, said Spotify CEO Daniel Ek.

Weakness in online advertising can be seen elsewhere in the technology market. Alphabet CFO Ruth Porat pointed to “uncertainty in the global economic environment” after the company’s Q2 missed expectations for revenue, YouTube revenue, Google Cloud revenue and earnings per share. Likewise, social media company Snap underperformed expectations in the second quarter, citing advertising weakness. Snap declined to provide guidance for the third quarter.

Advertising and other economic turbulence have caused many companies to hire fewer employees. Alphabet, Snap, Meta and Spotify are among the many tech companies to reduce their hiring growth rates. Music streaming platform SoundCloud isn’t just slowing down its hiring growth— it plans to lay off about 20% of its global workforce due to “the challenging economic climate and headwinds in the financial markets,” CEO Michael Weissman wrote in an email to employees this week.

On the whole, however, the outlook for the second half of 2022 is positive. This is especially true in live music, where artists are again on tour and fans’ expenses are high. Thursday concert promoter Live Nation said it sold more tickets for concerts this year than it did in all of 2019. “For the 2023 tours, we’ve put on sale so far,” the CEO said Michael Rapinoe“all signs continue to point to strong fan demand.”

“Even with an unclear macroeconomic environment, we continue to see strong secular growth in the music industry,” Reservoir Media CEO Golnar Khosrowshahi said during Friday’s (Aug. 5) earnings call. “We see expanded opportunities emerging day after day, including news of how stocks are consuming music through video games and social media platforms — recession or not.”

Spotify is optimistic about subscriber and monthly active user growth until the end of the year. Its third-quarter guidance is 6 million to 194 million subscribers, and new MAUs are up 17 million to 450 million. Spotify hasn’t provided guidance for the fourth quarter, but Vogel said Spotify is “progressing pretty well” through the end of the year.


Through August 5, the % change over the last week, and the year-to-date change.

Universal Music Group (AS: UMG): 21.45 euros, -2.8%, -13.4% YTD
Spotify (NYSE: SPOT ): $118.73, +5.1%, -49.3% YTD
Warner Music Group (Nasdaq: WMG): $31.50, +5.0%, -27.0% YTD​​​​
HYPE (KS 352820): KRW 175,000, -0.3%, -49.9% YTD
Live Nation (NYSE: LYV ): $96.76, +2.9%, -19.2% YTD​​​​
iHeartMedia (Nasdaq: IHRT): $8.80, +17.6%, -58.2% YTD​​​​
SiriusXM (Nasdaq: SIRI): $6.58, -1.5%, +3.6% YTD​​​​​​​​
Deezer (PA: DEEZR ): €4.64, +25.4%, -22.7% YTD

NYSE Composite: 15,273.23, -0.4%, -11.0% YTD
Nasdaq: 12,657.55, +2.2%, -19.1% YTD​​​​​​​​
S&P 500: 4,145.19, +0.4%, -13.0% YTD

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