Universal Music Group Valued at $23.5 Billion, Huge Industry Growth Predicted by Goldman Sachs Report

lucian grainge: cannes lions media person

Streaming has turned the music business into a booming industry that will lift many boats, according to a wildly optimistic new report from Goldman Sachs.

The company predicts that worldwide revenues from streaming will reach a whopping $28 billion by 2030, a 16% jump from its previous estimates, in its just-released latest installment in its “Music in the Air” series.

It also predicts paid streaming users worldwide to reach 847 million by 2030.

Along with the two largest major label groups, Universal Music Group and Sony Music Entertainment — which it pegs as collecting “55-60 percent of royalties for every piece of content that is being monetized” — the report singles out Amazon, Pandora, Tencent, Apple and, to a lesser degree, YouTube/Alphabet as top beneficiaries from this growth.

Consequently, the company raised its valuation of UMG to $23.5 billion (from around $20.1 billion), a 16% jump, and Sony’s up 12% to around $20.1 billion.

Even by the cautiously optimistic standards of the 2016 report from the International Federation of the Phonographic Industry (IFPI) — which showed the biggest year of growth since the IFPI began following the market in 1997 — those numbers are extremely enthusiastic.

IFPI reported global recorded music revenues up by 5.9 percent to $15.7 billion, of which digital income now accounts for an even 50 percent. Streaming revenue was up 60.4 percent, driven by some 112 million users of paid streaming services (that number rises to 212 million including users of ad-supported, i.e. free, services).

Those numbers are a long way from $28 billion and 847 million paying subscribers, and obviously a few things must happen before the industry can approach the sort of fiscal nirvana predicted by Goldman. Two of the most prominent issues to be addressed are that Spotify, the world’s largest streaming service, must become profitable — it reported an operating loss of some $389 million last year — and YouTube’s music streams must be more thoroughly monetized; the platform and others like it were called out by the IFPI report as the single biggest threats to continue music-industry growth.

“The value gap, [which is] the growing mismatch between the value that user upload services, such as YouTube, extract from music, and the revenue returned to those who are creating and investing in music,” the report reads.

Still, if industry growth even approaches the numbers the Goldman Sachs report predicts, it’s good news for an industry that had nothing but bad news for over 15 years.