Universal Music Group Sees Paid Subscriptions Rise as Consumers Tune In

Universal Music Group (UMG) is seeing increased revenue from paid subscription platforms amid decreases from free, ad-supported streaming services, suggesting that consumers may increasingly be willing to pay a premium to skip the commercials.

The music giant, whose artists include everyone from Taylor Swift to Bob Dylan, shared in its third quarter 2023 financial results, reported Thursday (Oct. 26), that revenue from paid subscriptions rose 6.7% year over year, even as streaming dropped 1.4%.

On a call with analysts, Boyd Muir, CFO and executive vice president of the music company, noted that the increase in paid subscription revenue was “driven primarily by the continued solid growth in the number of subscribers,” even as it also benefitted from Apple’s and Amazon’s price increases, with more effect to be seen soon from YouTube and Spotify’s price hikes.

While in some cases, price increases may ward off subscribers, UMG argues that with music, there is plenty of room to charge more.

“These price increases…[are] a recognition of the incredibly compelling value proposition of streaming subscriptions,” Micahel Nash, the company’s executive vice president and chief digital officer, told analysts. “We have previously cited estimates that suggest that, at a cost of $0.10/hour of premium content consumed, that music subscription is dramatically underpriced with respect to for example, online video or online games or other forms of entertainment. So, we believe these pricing moves are a recognition of the compelling value proposition of music being underpriced.”

That more consumers are engaging with paid music subscriptions in spite of price increases is indeed a testament to the value of such services, given that consumers are quick to hit unsubscribe when the financial burden of their streaming memberships becomes too much to bear.

In fact, the PYMNTS Intelligence report “The One-Stop Bill Pay Playbook: Drivers of Consumers’ Bill Payment Priorities,” created in collaboration with Mastercard, which drew from a survey of more than 2,100 U.S. consumers, revealed that when people are unable to pay all their bills, streaming subscriptions are first to get cut.

As music streaming services raise their prices, there is more money to be had in the space. Spotify, for instance, recently implemented price increases, raising fees $1 to $2 per month depending on the plan, contributing to the streaming service’s first profitable quarter in a year and a half.

Meanwhile, the slight decline in revenue from ad-supported streaming suggests a shift in consumers’ perception of the value of music access.

UMG continues to push for greater streaming payouts from leading platforms. CEO Lucian Grainge noted that the company is “frustrated” with the progress from major players in the space in regard to making the payment structures more “artist centric.”

Additionally, UMG is also looking to drive subscription revenue not only from music listeners but also from more musicians, turning its focus not only to artists on its labels but to creators seeking resources. The company’s subsidiary Universal Music Publishing Group recently launched a content library subscription offering claims-free music and sound effects.

“I think that is an important, interesting market segment for us to address, and our production music company has been very creative and innovative and looking at market opportunities for their business,” Nash said.