Wednesday, May 13, 2020

Another billion-dollar quarter for Sony Music, as streaming revenues jump 27.4% year-on-year | Music Business Worldwide

Calendar Q1 2020 was a relatively quiet period for blockbuster releases, but that didn’t stop Sony Music posting its fourth billion-dollar quarter on the bounce.

According to a fiscal announcement from parent Sony Corp today (May 13), analyzed by MBW, Sony Music saw recorded music revenues rise 13.5% year-on-year to $1.074bn in the three months to the end of March.

Within this figure, streaming revenues were up 27.4% YoY to $641.7m during calendar Q1 (Sony’s fiscal Q4) – an annual increase of $138m. Physical music revenues also rose YoY, up 10.9% to $196.3m.

Both Sony’s overall recorded music revenues (-7.2%) and streaming revenues (-4.1%) were down quarter-on-quarter versus calendar Q4 2019.

The artist ‘projects’ that generated the most revenue for New York-based Sony Music Entertainment in calendar Q1 2020 were: (i) Fine Line by Harry Styles; (ii) Various releases by Future (presumably including the hit Life Is Good feat Drake); (iii) Hot Pink by Doja Cat (pictured); (iv) JACKBOYS by JACKBOYS; (v) Ordinary Man by Ozzy Osbourne; (vi) 7 EP by Lil Nas X; and (vii) What You See Is What You Get by Luke Combs.

(All % figures here have been calculated using USD converted from Yen on a constant currency basis, using the prevailing rates in each respective period.)

Across Sony Corp’s music division – including recorded music, publishing and ‘Visual Media & Platform’ – the company estimates that the effects of COVID-19 directly resulted in just a 1% decline in consolidated operating income in the 12 months to end of March (i.e. FY 2019).

Obviously, Coronavirus lockdown only impacted a minority of the Q1 2019 period in most of the world, with a national state of emergency declared by US President Donald Trump on March 13. However, Sony Corp today gently warned investors to brace themselves for potentially harsher impact across the rest of the year.

“Around the world, but especially in the US, the release of new music is being delayed primarily due to some artists being unable to record songs and music videos,” said Sony Corp. “The impact on profitability from the delays in new music is limited at this time in the US and other countries where the proportion of music that is streamed is high. But in countries like Japan and Germany, where the proportion of music that is streamed is relatively low, CDs and other packaged media sales are decreasing due to restrictions on going outside.

“Ticket revenue, merchandising revenue and video revenue are decreasing, as concerts and other events are being postponed and cancelled in Japan and other areas. Due to a global reduction in advertising spending, revenue from advertising-supported streaming services and revenue from the licensing of music in TV commercials is decreasing. Additionally, delays in the production of motion pictures and TV shows are causing a decline in music licensing revenue.”

Sony Corp’s music publishing operation – which includes Sony/ATV (incorporating EMI Music Publishing) and Sony Music Publishing Japan – posted external quarterly revenues of $367.6m (40.065bn Yen) in calendar Q1 / fiscal Q4.

That was up 14.6% YoY at the US dollar level, a gain of $47m.

Sony’s overall music division – including recorded music, publishing and ‘Visual Media & Platform’ – posted quarterly sales of $1.908bn (207.95bn Yen) in calendar Q1 / fiscal Q4, representing a fall of 0.6% year-on-year at the US dollar level.

That decline was entirely down to a slip in sales in ‘Visual Media & Platform’ – which doesn’t reflect Sony’s performance in either recorded music or music publishing.

In the same calendar quarter (calendar Q1 2020), Sony Corp’s overall music division posted a quarterly operating profit of $278.3m (30.34bn Yen), representing a 40.9% increase on the $197.5m (21.79bn Yen) posted in the same period of the prior year.

Note: MBW has calculated Sony’s financials from Japanese Yen into US dollars at the following prevailing exchange rates in each quarter, as confirmed by Sony Corp:

  • Calendar Q1 2018: 108.4 Yen per USD
  • Calendar Q2 2018: 109.1 Yen per USD
  • Calendar Q3 2018: 111.5 Yen per USD
  • Calendar Q4 2018: 112.9 Yen per USD
  • Calendar Q1 2019: 110.3 Yen per USD
  • Calendar Q2 2019: 109.9 Yen per USD
  • Calendar Q3 2019: 107.4 Yen per USD
  • Calendar Q4 2019: 108.8 Yen per USD
  • Calendar Q1 2020: 109.0 Yen per USD

By applying these exchange figures to each applicable period, we effectively get a US-leaning constant currency picture of Sony Music’s performance.

This isn’t a perfect system; it risks overplaying Sony Music Entertainment’s global business slightly by converting a chunk of revenues from Sony Music Entertainment Japan (which would usually be straight-reported in Yen) into US dollars.

But it provides us with a cleaner reflection of the performance of New York-based Sony Music Entertainment outside of FX distortion, because the company had to convert its US currency into Yen in the first place for Sony Corp’s results. The same is true for US-based Sony/ATV, and US-based EMI Music Publishing.

MBW believes this currency exchange system is the yardstick used internally at Sony Music Entertainment’s HQ in New York.

You can see the Yen-level stats from Sony’s quarterly and annual recorded music results below:


Music Business Worldwide


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