Has Streaming Peaked? What Universal’s Stock Crash Means For Music

Universal Music stocks dived yesterday after a disappointing investor update sent jitters across markets. The stock, which is listed on European markets, closed 25% lower, the worst one-day fall since it was listed in 2021.

With stock markets ever-focused on growth, recorded music has had a good run, with massive subscription growth driven by COVID, but that growth has recently slowed. On Thursday the world’s largest record company posted second quarter revenue of 3.29 billion euros (or around $5.41 billion AUD), but it is the underlying data that has analysts worried.

Subscription revenue grew just 6.7% for the year, which was well below expectations of 9.3%. Universal had flagged an expected increase from the first quarter slowdown of 7.9%, so the further deterioration was the kind of surprise markets did not take too well.

Streaming is still expected to improve in the second half of the year, but investors have lost patience, marking the stock down 40% in the last year. The company recently announced a share buy-back, funded in part by the sale of half of its 3% stake in Spotify. Warner shares went out in sympathy yesterday, dropping 5.7% while the impact on Sony was cushioned by its wrap-up in larger Sony Corporation of which music is just a small part.

Why Are Investors Spooked?

Underlying investor concern is over whether we’re seeing a peaking of streaming revenues. The recorded market has gone “all in” on streaming after it largely replaced losses from digital piracy. Streaming revenues changed the market equation from having big hits that drove fans to record stores into driving up market share to claim a larger share of the streaming pie.

The downside of this strategy is that recorded music companies have largely washed their hands of pie-growing in exchange for growth in catalogue acquisitions to fuel market share growth. Those catalogue acquisitions have been priced in at market assumptions of a much higher ceiling of streaming adoption, so while the slowing growth in streaming revenue may simply be a blip, labels will need to look at other ways of fuelling investor-pleasing growth.

Are They Running Out Of Options?

With their current strategies, labels have two ways of growing: either streaming revenues increase through price rises or increased numbers of people subscribing, or they increase their market share. There are still good arguments that streaming penetration has a long way to go. While in most parts of the world usage is high, there are pockets where paid conversion is low and technology adoption is increasing. India, Sub-Saharan Africa and the Middle East and North Africa are all seeing annual adoption rates of 15–25%, with the challenge in those regions to convert users to paid accounts. As emerging economies, the pricing structures are far lower than in developed countries, creating far less revenue per person, although the massive populations still represent an opportunity.

The other way to squeeze revenue is increasing prices. When it started, Spotify offered an $11.99 entry point in Australia, but this has crept up since 2023, currently sitting at $15.99, representing a 33% increase in just three years. It’s worth noting that audiobooks and podcasts were added during that time, so while consumers are paying more, labels are not necessarily the full beneficiaries. Apple Music has similarly increased its base from $11.99 to $14.99, a 25% increase.

Can They Grow Market Share?

As the streaming market matured, the land grab began with catalogue music representing over 70% of revenues. In what was supposed to be the great leveller, digital music has in fact been a boon for multinationals, with the three majors accounting for more than 70% of recorded music revenue—and when their distribution subsidiaries are added in, some estimates have that north of 80%.

With regulators already wary of market power, large shifts in share from where the labels currently are will be difficult. Acquisition targets are now likely to be region by region, with labels like BMG / Concord likely to now be too large to acquire without raising the ire of competition rules. Labels like Beggars, Secretly Group, Domino, Big Loud, etc. may well be juicy targets, but individually their market shares will not move the dial significantly.

Here in Australia, there’s very little left to prey on, but there are still a few potential targets. With Gyro recently selling to US distributor Too Lost (itself a potential target), the major targets still in play would be Jaddan Comerford’s Unified & Community Music, Matt Gudinski’s Mushroom, Sebastian and Michael Chase’s MGM Distribution, Jamie Raeburn’s Sweat It Out, and Michael Chugg and Andrew Stone’s Chugg Music.

In last week’s ARIA chart, just 6% of singles were distributed by someone other than a major and just 10% of albums, suggesting that at least in this territory, rapid growth will need to come from something other than acquisitions.

So Where To Now?

Even if this growth slowing is a short-term issue before emerging markets catch up, there IS a ceiling and one that labels have to grapple with. In the “old” recorded model of sales rather than subscriptions, there was an incentive for labels to invest more in new content to grow the pie. If you convinced the average Australian who used to buy 2.66 CDs per year in the late 90s to purchase three or four by engaging them with an artist, that was significant growth. Now? You can make them love more artists, but you’re still getting a share of that same single streaming subscription.

It’s a conundrum that labels will need to grapple with. The only way forward is to create a diversified revenue mix, but that MAY mean finding streams that don’t have the same passive environment that streaming has driven us to in 2026.