As covered by MBW earlier today (August 7), Sony’s global music rights operation posted double-digit growth for calendar Q2 (fiscal Q1) – with revenues up 11.4% YoY.
There was, however, a fly in the ointment: Sony’s recorded music streaming revenues, on a US dollar-adjusted basis, were up 5.0% YoY.
This was significantly slower streaming growth than we’ve come to expect from Sony. Examples: the firm’s recorded music streaming revenues grew by 10.6% YoY in calendar Q1 2024, by 12.3% YoY in calendar Q4 2023, and by 9.5% YoY in calendar Q3 2023.
This recorded music streaming growth slowdown at Sony was particularly notable because of Universal Music Group‘s much-discussed Q2 2024 results, as published last month.
Within those results, UMG’s overall recorded music streaming revenues (across ad-funded and subscription) were up 4.1% YoY, also a significantly smaller number than we’re used to seeing from the major music company.
(UMG’s subscription streaming revenues were up 6.9% YoY in Q2, while its ad-funded streaming revenues declined 3.9% YoY. Combined, that resulted in a 4.1% YoY rise. Sony doesn’t break down its streaming numbers into subscription and ad-funded; it only publishes a blended figure.)
Sony Corporation COO/CFO, Hiroki Totoki, has previously discussed the aim for Sony’s global recorded music business – driven by streaming – to grow at a rate of “high single digits”.
So does the 5.0% YoY rise in calendar Q2 represent something of a turning point? The moment when Sony’s streaming growth trajectory entered a new, more conservative phase?
That was the question posed to Sony Corporation management today by analyst Mikio Hirakawa from Bank of America. The response was unfazed.
Naomi Matsuoka, Sony Corporation SVP, explained that Sony had faced similar trends to Universal Music Group in the calendar Q2 quarter, with streaming price rises now fully ‘annualized’; i.e. Sony didn’t get a bump in YoY streaming growth because recent streaming service price rises showed up in the prior-year quarter.
Matsuoka also confirmed that, like Universal, Sony had seen a small YoY decline in revenues from ad-funded streaming in the quarter, (“ad streaming service revenue… is declining a bit”, she said). Obviously, this would have dragged down Sony’s total recorded music streaming revenue figure.
In addition, Matsuoka explained that, while Sony’s music streaming revenues did indeed grow by 5.0% YoY in Q2 at a US dollar-converted level, Sony Corporation had additionally calculated a more granular constant currency figure that was slightly higher.
This, she said, showed that Sony’s true YoY global recorded music streaming revenue growth in calendar Q2 was “in the 6% range”.
“Earlier we said [recorded music streaming revenues grew] 5% in dollar terms [in calendar Q2]. But if you look in constant [currency] terms, it’s higher – in the 6% range, according to our calculations. So overall, the streaming growth rate is in line with our projections.”
Naomi Matsuoka, Sony Corporation
Commented Matsuoka: “For [music] streaming… the overall growth [for calendar Q2] is in line with previous trends. It may seem as if growth is slowing. The factors behind that are for [calendar Q2], over a year ago… the prices for multiple DSPs [were raised], so the impact of that is now diminished. And [in terms of] ad streaming service revenue, that is declining a bit.
“However, earlier we said [recorded music streaming revenues grew] 5% in dollar terms. But if you look in constant [currency] terms, it’s higher – in the 6% range according to our calculations. So overall, the streaming growth rate is in line with our projections.”
(Quick explainer: typically, to reach a ‘constant currency’ figure that better reflects its global music company, Sony converts its reported financials in Yen into US dollars at the prevailing quarterly rate. It did so for calendar Q2, resulting in the 5.0% YoY recorded music streaming growth figure for the quarter, which Sony Corporation confirmed. However, as noted by Matsuoka, to get a more accurate constant currency figure – that 6% one – the company appears to have additionally used a more complex formula, one which takes into account FX in multiple territories around the world.)
“In the medium term, the [global music rights] market is expected to continue to grow at a mid-to-high single digit average annual growth rate, driven by increased ARPU and further growth in emerging markets.”
Sadahiko Hayakawa, Sony Corporation
Earlier on the call, Sony Corporation’s finance and IR head, Sadahiko Hayakawa, explained that Sony now believes the music rights market is “expected to continue to grow at a mid-to-high-single-digit average annual growth rate, driven by increased [streaming] ARPU and further growth in emerging markets”.
There was actually a double-digit growth number within Sony’s quarterly streaming results today, by the way – in the firm’s music publishing division.
Sony’s global music publishing unit saw streaming revenues up 19.6% YoY in calendar Q2 (on a USD-converted basis).
When combined, Sony’s recorded music and music publishing streaming revenues jointly reached USD $1.63 billion in calendar Q2, up 7.95% YoY.Music Business Worldwide