Universal Music Group Betting On Super Fans for Growth

Universal Music Group said on Tuesday it expects annual core profit growth of more than 10% through 2028 on higher subscription revenue, expanded partnerships, and boosted by the superfans of its artists such as Taylor Swift, BTS and Drake, according to Reuters.

At its first Capital Markets Day, held at London's Abbey Road Studios, the world's biggest music label spelled out its plans to revive slowing subscriber and streaming growth.

CEO Lucien Grainge said streaming was entering a new era that would rely on monetizing superfandom, focusing not only on subscriber growth, but also on average revenue per user (ARPU).

"Valuable as streaming is, it has also levelled the playing field... the deeply passionate listener pays the same price for the same access as the casual one," Grainge told investors.

He said the company was targeting superfans through physical collectibles, premium merchandise as well as live and digital experiences.

Grainge added that subscription penetration was still under 50% in the group's most established markets, while high potential markets such as India and China were still in early stages of subscription adoption.

The Amsterdam-listed group, which announced its financial targets through 2028 ahead of the event, also said it expects compound annual revenue growth of 7% in the period.

UMG's second-quarter results had triggered a 30% slump in its stock in late July, after subscription revenue growth slowed to 6.9% from 12.5% in the same quarter a year earlier, missing the 11.1% estimate in a company-compiled consensus cited by Barclays.

"We expect periods of acceleration and deceleration", said finance chief Boyd Muir at the Capital Markets Day, urging investors "not to overreact to modest period-to-period fluctuations", as the group implements its multi-year strategy.