The world’s biggest music label, Universal Music Group, lost around A$22.95 billion of its value on Thursday after it reported weaker than anticipated streaming and subscription revenue for the second quarter of this year.

At one point, shares of the Netherlands-based music giant fell 30 per cent – its sharpest single-day decline ever – before recovering slightly to close at EUR21.7 (A$36.01) which was still 23.54 per cent lower than the previous day’s closing.

UMG’s second-quarter subscription revenue growth slowed to 6.9 per cent from 12.5 per cent in the first quarter, missing the 11.1 per cent estimate by Barclays.

“The speed and quantum of the slowdown in subscription revenues caught the company and analysts by surprise,” JPMorgan analysts said in a note.

Music streaming revenue dropped 3.9 per cent to EUR343 million (A$569.25 million), as opposed to a Visible Alpha estimate of EUR387 million (A$642.27 million).

Person recording music [Image: sourced from Unsplash]

UMG’s major shareholder Vivendi said that the dramatic fall in the music label’s share price was an “overreaction”. “Vivendi suffered the consequences of the market’s overreaction to UMG’s earnings,” Vivendi chief executive officer Arnaud de Puyfontaine told reporters on a call. “The fundamentals of UMG are good and we remain serene as a shareholder.”

His optimism may be backed by the music group reporting that its revenue rose 9.6 per cent year-over-year, bringing in EUR2.93 billion (A$4.38 billion) over the last quarter. It is the 12th consecutive quarter where its revenue increased since it listed.

Social media companies became a key part of distributing its music, UMG’s chief financial officer Boyd Muir told reporters on a call. Meta Platforms stopped licensing premium music videos from UMG for Facebook in May after concluding they were less popular than other music products. Also, UMG’s dispute with TikTok led to a month of lost revenue in the last quarter. In May, it agreed a deal with TikTok for better pay for songwriters and artists, new promotional agreements and protections against AI-generated music.

Universal Music Group is the label behind some of the music industry’s biggest names including Taylor Swift, Drake and Billie Eilish.

Merchandising revenue increased 44 per cent in the quarter, with Swift, Eilish, Seventeen, Morgan Wallen and Ae, driving that revenue. Swift brought her Eras tour to Australia earlier this year.

Another revenue stream that showed a significant 14.4 per cent jump was its physical records sales most likely due to the resurgence of popularity of vinyl and CDs.

In June, Universal Music Group along with Sony Music and Warner Records decided to initiate lawsuits against AI startups accusing them of copyright infringement and of unauthorised use of their material to train AI models. The Recording Industry Association of America (RIAA) has initiated lawsuits against Suno and Udio and wants to establish that there is “nothing that exempts AI technology from copyright law or that excuses AI companies from playing by the rules.”