Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Wall Street is catching up with something that has been well known inside the music industry for some time now: the streaming growth spurt is over. The sirens began to sound late last month when industry leader Universal Music revealed that streaming revenue growth had slowed considerably in the last quarter. Chief executive Lucian Grainge urged investors to focus on the long term, while chief financial officer Boyd Muir said he was “not overly concerned”. Nonetheless, the news landed with a thud, slicing UMG’s market valuation by more than 20 per cent in a single day. What is strange about the market reaction is that other warning signs have been around for more than a year. Last October, Universal Music announced a “cost savings” programme. It has laid off hundreds of staff in recent months. Way back in March of 2023, rival Warner Music laid off 4 per cent of staff, and this February it declared plans to fire another 10 per cent. Earlier this year, the chief executive of one large music company described the industry mood as “a hangover” after several years of roaring growth.Universal’s recent results were not all bad. The company behind Taylor Swift and Billie Eilish still managed to increase revenue by 9 per cent in the quarter. Ironically, the slowdown in streaming was offset by a strong showing for “physical music”, because superfans are lapping up vinyls. But Wall Street is focused on streaming, and for good reason. Revenue from streaming makes up half of Universal Music’s total business. Spotify is what saved the industry, reversing decades of industry decline. As more and more people signed up for music streaming services in the past several years, UMG and its rivals have enjoyed streaming revenue growth of 20 per cent or higher. Streaming has brought renewed interest from the world’s largest investors — the likes of Blackstone and KKR — to the music business, and made some billionaires, such as Sir Len Blavatnik, even richer. Universal’s market correction is a re-pricing of expectations for the entire industry, and probably a reasonable one. For the past several years big banks have doled out effusively optimistic projections for the music business. But Spotify is no longer new, and the market for streaming in the US has long saturated. There are many more millions of subscribers to be found across the globe, but a lot of that growth is coming from markets like India, where people pay a fraction of the price of a subscription in the West.Universal executives appeared to blame Apple and Amazon for the recent slowdown. On an earnings call, Muir said that while Spotify and YouTube Music have “continued to exhibit healthy growth . . . other large partners . . . have seen a slowdown in new subscriber additions”. Amazon’s music service, in particular has flatlined, according to sources, after receiving a boost during the pandemic.Universal and its peers are working to try and reignite growth. They have spent much of this year plotting a “superfan” offering on Spotify and other streaming platforms, that would charge the most ravenous fans more money in exchange for perks such as early access to music or merchandise. Universal hopes to roll this out this year. Universal executives believe that as much as 20 per cent of Spotify’s subscribers could sign up for this super-premium offering, which Spotify chief Daniel Ek has said could cost $17 or $18 a month — up to 50 per cent more than an existing subscription. “We are at the beginning of the next phase, part two phase of streaming and subscription,” Grainge told investors. “It’s a whole suite of products”. The sky is not falling. Music companies remain in a more desirable position than legacy television and movie studios, who are still in the midst of a painful, industry-wide restructuring. Universal has told investors it will continue to deliver “high single digit” revenue growth. On Wednesday, Warner Music reported streaming revenue growth of 5.5 per cent in the last quarter.Market corrections happen. Netflix experienced one in 2022 when it became clear that the streamer was entering a more mature stage. The stock price has since climbed back up. Grainge will be hoping for a similar turnaround. Next month, Universal Music is hosting its first investor day since going public in 2021, at the legendary Abbey Road studio in London. It is a chance for the company to convince Wall Street that the music industry can thrive in this next phase.anna.nicolaou@ft.com
