🔵 About that Universal Music share dive...

Is this why Believe is so keen to go back into private ownership?

Hi there -

One sizeable news story that occurred just before I jetted off to Spain for a holiday was Universal’s fairly catastrophic share dive, which occurred after the company announced its latest financial results.

The share price has recovered a little, but as you can see from this Year To Date view taken this afternoon, the drop remains fairly grim in the wider context:

So what happened? After all, Universal actually announced pretty solid results, amounting to their twelfth consecutive quarter of revenue growth.

In short, the company reported slower growth across streaming services, and less growth equals less revenue for rights holders like Universal. Consequently, investors were shaken and hence the share price tumbling.

Really though, I think this all highlights what I feel is a growing schism around the endless greed of investors and the realities of the music industry - or, in fact, any industry.

Broadly, investors want continual, aggressive growth for a publicly-listed company so as to increase its share value. Growth is good, but it is never endless; at some point things slow down, not least because there is only a finite number of people on the planet to sell to.

Wall St and the markets, it appears, struggle with this, and Universal’s predicament is a fine case in point. The company remains healthy and profitable, but due to forces effectively beyond its control (i.e. the growth of streaming), the company is now viewed as a weaker investment.

Also worth noting is that the expectations set around what investors expected Universal to see all came from the investors themselves. Goldman Sachs, for example, published a report earlier in the year suggesting that year-on-year growth in paid streaming would be around 12%. Ergo, when Universal confirmed that it was more like 6%, the news could only be received negatively.

One might argue the investors set themselves up for their own fall here.

This brought to mind the current state of the US economy, and the recent stock market tumble that occurred across markets worldwide. The fall was caused by the grim state of the US jobs market at present, which is viewed as a big indicator of economic stability.

Herein lies the irony though: if job growth was down in the US, it was surely influenced heavily by the last 18 months or so of persistent, “efficiency” job cuts across all of the biggest companies in tech and beyond. It is a list so long that TechCrunch now has a running page detailing them all.

You have companies laying off staff all over the place in order to create greater margins and generally increase profit. For a while, that pleases investors until the wider impact of that is announced, at which point the entire market takes a dive.

As you can see then, the problem appears to be this friction between the endless desire for more from investors (more growth! more profit! more margin!) and the realities of any business in a capitalist market.

This had me wondering if this was behind the decision to de-list indie giant Believe and take it back into private ownership. Tellingly, Denis Ladegaillerie remarked that Believe’s time as a publicly-traded company “also helped us understand how investors view the music market.” He has yet to make any statement (that I have seen) beyond that, but I couldn’t help but view that comment alone as a suggestion that Believe’s ambitions and those of investors on the stock markets are somehow misaligned.

For now then, Universal’s share price has yet to recover. Really though, I feel this is all just an insight into the dynamics and demands of Wall St and the public stock markets. This sense that everything has to grow endlessly just doesn’t feel tenable, and without correction, I suspect we will only see this pattern emerge time and again.

Have a great evening,

D.

🎶 listening to this “Dub Techno: All Hail The Hiss” playlist on Spotify. I made this, drawing from an academic paper (about the orphic nature of dub techno, no less) which listed fifty songs in this genre that make heavy use of hiss, crackle and background ambience. It’s great music to work to, and even better music to walk around town to. Wonderful stuff.

📺 watching “X-MEN - 1950's Super Panavision 70”. As the tide continues to turn against generative AI, up pops something like this, which I’d argue is truly quite stunning: an AI-generated 50s trailer rendering the X-Men into kitsch 50s futurism. It is a visual feast - take a look and you’ll see what I mean.

🤖 playing with Holofit, a way to use your exercise bike, rowing machine or cross trainer in VR. Yes, you read that right. You basically fit a gizmo to (in my case) the crankshaft of my exercise bike, and from that you can use the bike to cycle through insane other worlds, or even just other places on the planet, Google Earth style. Sounds bonkers, but is actually pretty cool.

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Stories worth reading from the Music Industry:

Meta signs new agreement with UMG – with new WhatsApp integration

UMG’s music is thus now licensed for use in WhatsApp, “unlocking new value for UMG artists and songwriters in the future.” How that value may be unlocked in blunt financial terms also remains to be seen. The deal also means that Meta and UMG will work together to snuff out “unauthorized AI-generated content that could affect artists and songwriters”, and short-form video is a focus too: “the new agreement expands monetization opportunities for UMG, and its artists and songwriters, even further with short form video.”

👆🏻Hot take: one angle being under-reported here is that this deal also covers Threads, which in turn begs the question: if rights holders get nothing from the use of music and music video on X/Twitter, should we not be collectively looking to encourage more use of Threads, which does (assuming further deals will be made between Meta and the other majors, Merlin, etc…)

Capitalizing on superfans, SoundCloud ventures into merch with SoundCloud Store

“Superfandom and willingness to pay is as old a role as there is in music. Think about all the different examples of this – merch and live [events]. Even in a download environment, 80% of the revenues were driven by 20% of the fans,” Seton said. SoundCloud’s new store is designed to cater specifically to these superfans. The SoundCloud Store will allow a select group of Next Pro artists to create and sell exclusive merchandise directly to their followers.

👆🏻Hot take: I have mixed feelings on this. Given the amazing work SoundCloud has done in helping artists connect with fans, it feels a little odd to then have SoundCloud-owned ecommerce brought into the mix. That being said, a counterpoint is that 1) this is a selective store, not a free-for-all, and 2) if I can message my biggest fans on SoundCloud, I can just point them to my store anyway.

Spotify co-founder cashes out $85.8m in stock after streamer posts record profit… as songwriters brace for $150m royalty cut this year

According to Spotify’s latest annual report, Lorentzon was the third-largest shareholder in Spotify at the end of 2023, with 10.9% of outstanding shares, behind SPOT co-founder/CEO Daniel Ek (15.6%) and Edinburgh-based investment firm Baillie Gifford (12.0%). Lorentzon’s sale this week represents only a small percentage of his total share ownership. The 21,476,145 SPOT shares he owned at the end of 2023 would be worth around $7 billion based on the company’s share price at market close on Thursday (July 25).

👆🏻Hot take: OK so I’m not a Spotify fan, but this ongoing, slow cashing out does suggest that most of the original founders are now thinking share prices might have peaked.

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Notable news from the world of tech:

US considers breaking up Google after illegal monopoly ruling, reports say

Neil Chilson, former chief technologist for the FTC, said talk of breaking up Google was “total wishcasting”. “Nothing in Judge Mehta’s rather standard antitrust approach suggests a breakup is a plausible remedy. A breakup wouldn’t address the core conduct that the court found problematic: exclusive contracts for default placements,” he said. Shortly after the judge made his ruling, the competing search engine DuckDuckGo proposed banning those exclusive agreements.

👆🏻Hot take: I tend to agree with this view that breaking up Google won’t address the core issues here. A more nuanced approach is surely required that fixes the market as a whole and not just Google.

Kamala’s tech ties: what is Harris’s relationship with Silicon Valley?

Some of these donors have arrived to Harris’s campaign with their own policies to promote, most notably Hoffman and Diller’s demands to fire Federal Trade Commission (FTC) chair Lina Khan. The FTC under Khan has taken an aggressive stance toward regulating big tech, pursuing cases against Microsoft and Amazon, which has rankled the industry.

👆🏻Hot take: I’d argue this is mildly concerning, proving as it does that irrespective of who gets into power, Big Tech might well have enough influence to ensure its own position remains fortified.

Ad Execs Speak Out: Musk’s Lawsuit Makes ExTwitter Even Less Appealing

Joseph Teaside, head of tech at media analyst Enders Analysis, said: “Advertisers just don’t want the drama… “[They] have already left in droves as X has been overrun by bots, racists and pornography since the Musk takeover. Some have stuck around or come back, tempted by low CPMs, but scandal after scandal is convincing large advertisers that it’s just not worth the hassle.”

👆🏻Hot take: Musk may think a lawsuit might fix his issues here, but one read of this article will confirm otherwise. It’s quite simple: advertisers don’t want to spend money aligning themselves to the cesspool that X has become.

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Looking for something else to read? Here you go:

As an ex-Twitter boss, I have a way to grab Elon Musk’s attention. If he keeps stirring unrest, get an arrest warrant

It cannot be right that Musk can sow discord without personal risk. He’s a jetsetter: perhaps fear of unexpected detention will concentrate his mind

👆🏻Hot take: I admit I agree with this POV. Why should Musk (or indeed anyone) be allowed to camp out on social media, spreading hate and disinformation, and not be held responsible for that?

Mozart and the digital twin for music

Siemens has a new model for experiments with sound

👆🏻Hot take: I’m curious to hear this in action. It’s basically a much better means to model the sonic response of physical spaces (previously done using impulse recordings) but could prove interesting in certain use cases.

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