The Taylor Swift effect doesn’t really apply to her record label on the stock market

(BFM Bourse) – The success of the American singer, who completes a series of four concerts in Paris this Saturday, is dizzying. But ultimately it does not weigh that much in the income of his record company Universal Music Group, listed in Amsterdam.

Unless you have been living in a cave (and even then), you certainly know that the 34-year-old American singer, Taylor Swift, released a new album on April 19. America’s Little Bride is also completing a series of four concert dates in Paris this Saturday.

Much has been written about the economic impact and immense popularity of the “love story” or “bad blood” singer. The repercussions of his concerts on consumption were, for example, mentioned by the president of the Federal Reserve (Fed) of New York, John Williams.

More recently, the bus transport company Flixbus noted a recent increase in activity linked to the singer’s Parisian concerts. Regular guest of BFM Bourse, Alexandre Baradez, of IG France, estimated that the graphics processor manufacturer Nvidia was the “Taylor Swift of the Stock Exchange”.

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A racing car for the UMG team

This shows the influence of the young American who belongs to the Universal Music Group (UMG) stable. The former subsidiary of Vivendi, listed since the end of 2021, had in fact bought Republic Records in 2000, the label under which Taylor Swift has published her records since 2018.

For UMG, having the Pennsylvania singer in its ranks is certainly important, if only in terms of notoriety. But from a purely financial and stock market point of view, the singer’s impressive activity does not seem to make rain or shine at the record company.

Since the release of the singer’s album, “The Tortured Poets Department”, on April 19, UMG shares have certainly gained 7%

. But this increase happened in small steps. And the strongest increase over a single session (+3.6%) on May 3 was mainly explained by first quarter results above expectations, noted Deutsche Bank, with in particular a gross operating profit (Ebitda) exceeding 4% the consensus. It is therefore difficult to see any impact from the release of the singer’s album, which according to data from Luminate (Nielsen) cited by Reuters, would have generated 2.6 million album sales (on-demand streaming included). ), during its first week.

In reality, Taylor Swift’s financial importance for UMG, while not negligible, is not stratospheric either. Bank of America devoted a whole note to the subject at the end of April. According to her, Taylor Swift has an impact but only to a certain extent.

A limited weight in income

UMG does not disclose in its annual reports the weight of different artists on its income. However, in its IPO prospectus, the musical group wrote the following.

“UMG does not rely on a single artist, or a small number of artists, to generate revenue in any given year. In fact, no artist accounted for more than 1%, and all 50 “The first artists represented only 23% of UMG’s turnover for recorded music in 2020”, she underlined. In its latest annual report, that of 2023, the group just specifies that the “top 50” now represents 24% of its revenues.

Cautiously, Bank of America estimates that Taylor Swift does not represent more than “2% to 3%” of Universal Music Group’s revenues.

Beyond revenues, the American establishment explains that Taylor Swift boosts the group’s finances less than other artists. “Her profitability is probably lower than that of other UMG artists, because it is understood that she is the owner of her ‘master recordings’ (original recordings, Editor’s note) and that she is therefore entitled to a larger share of royalties “, explains Bank of America.

“It also tends to be over-represented on physical media, where UMG’s margins are typically lower. For example, in 2022, the album ‘Midnights’ accounted for 0.2% of overall audio streaming volume in the United States. United, but 1.8% of all physical sales,” continues Bank of America.

Ultimately, Taylor Swift’s new album will hardly shake up the situation at UMG, according to the bank.

“The impact on streaming growth and overall annual results (of UMG) should be minimal,” Bank of America said. “We consider this to be a strong point in history (UMG stock market editor’s note)”: it is “less and less focused on hits and less dependent on a single artist than perceived, this which justifies a re-rating (an appreciation of stock market multiples)”, argues the American establishment.