Universal Music Subscription Revenue Growth Shows Improvement

(Bloomberg) -- Universal Music Group NV reported an increase in subscription revenue in the third quarter, buoyed by price increases and "healthy" subscriber growth, helping the world's largest music label bounce back after two disappointing periods.

Subscription revenue jumped 19% in constant currencies, or 9.5% excluding the firm's recent acquisition of Downtown Music, to €1.42 billion.

Universal has been struggling to convince investors it can continue to increase market share and extract more money per listener, while navigating the threat from artificial intelligence. Its plan, known as Streaming 2.0, involves better monetization of so-called superfans through paid subscription tiers and opportunities for deeper engagement with their favorite artists.

"Our results show the enduring value of backing extraordinary artists, bold ideas, and the teams and technology that help bring their work to the world," Chief Executive Officer Lucian Grainge said in a statement.

The Amsterdam-listed company's share price is down 29% this year and touched a record low in September.

The sagging stock has prompted discussions about whether Universal would be better off as a private company. The label, which owns the rights to some of the world's most famous artists including Taylor Swift and Chappell Roan, has discussed going private with a few prominent Wall Street firms, Bloomberg News reported earlier this week. Apollo Global Management Inc., TPG Inc. and Blackstone Inc. were among the firms with whom management held preliminary conversations, according to people familiar with the matter.

In May, Universal rejected a complex offer from billionaire investor Bill Ackman's Pershing Square Capital Management, which proposed moving the company's listing to New York from Amsterdam. Ackman estimated that the deal would value Universal Music at about €56 billion through a combination of financial reorganization and a fresh listing venue, roughly double its current market capitalization. Ackman sold his €1.42 billion stake in the company shortly after the rejection.

The music industry has been fighting to stay ahead of the risks posed by artificial intelligence, striking deals with AI firms and taking legal action to protect their valuable catalogs. Streaming platform Spotify reported an increase in paying subscribers in the third quarter, suggesting the broader music industry is weathering the shift caused by AI.