EQUITY RESEARCH | June 13, 2022 | 5:06AM BST

Music in the Air

Music still sounds good in a macro downturn;
raising global industry forecasts
We raise our global music industry revenue forecasts following
the publication of the 2021 recorded music market figures from
IFPI to reflect a more positive view on pricing and revenue from
emerging platforms that more than offsets the near-term
potential impact of the weaker macro environment. In this
report, we also address the most recent commonly asked
questions: (i) has music streaming penetration peaked? (ii) how
is music spend affected by a macro downturn? (iii) how to size
the monetisation opportunity from emerging platforms? and
(iv) what is the outlook for catalogue spend?
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Key highlights:

· We raise our 2022/2023 global music forecasts by

7%/5% respectively, and 2030 forecasts by 10%, mainly
driven by higher streaming ARPU, revenues from emerging
platforms and physical sales. We forecast +24%/+8% growth in
2022/23, which is 3ppt lower than previously owing to the
impact of a weaker macro and Russia, while our forecast 2022-
30 CAGR is unchanged at +9%.

· For streaming, we forecast +12% CAGR 2021-30 (vs.

+11% prior), driven by volume, price and emerging platforms.
We believe music streaming will be resilient in an economic
downturn (and more so than SVOD).

· The digital distribution landscape remains

competitive with 'no winner takes all' characteristics. Spotify
is the clear leader but continues to lose share, with YouTube

f2f7b3e207d345db88c12137042c6c26
Music and Tencent Music the major share gainers.

· The 3 major record companies took share in 2021

reinforcing our view that scale is ever more important in a
digital world, although modest dilution can be expected in the
future given the rise of the long tail of artists and the revenue
mix shift towards EM.

· We expect catalogue acquisition spend to slow down in

a rising rate environment, and believe that the majors have a
significant competitive advantage in monetising their
catalogues, as highlighted by the recent example of Queen.
Lisa Yang Eric Sheridan Rod Hall, CFA
+44 20 7552-3713 +1 917 343-8683 +1 415 249-7437
[email protected] [email protected] [email protected]
Goldman Sachs International Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For
Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as
research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc.
Full list of authors inside
 Contributing Authors

Lisa Yang Eric Sheridan Rod Hall, CFA

+44 20 7552-3713 +1 917 343-8683 +1 415 249-7437
[email protected] [email protected] [email protected]
Goldman Sachs International Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC

Stephen Laszczyk Ronald Keung, CFA Lincoln Kong, CFA

+1 212 357-9225 +852 2978-0856 +852 2978-6603
[email protected] [email protected] [email protected]
Goldman Sachs & Co. LLC Goldman Sachs (Asia) L.L.C. Goldman Sachs (Asia) L.L.C.

Brett Feldman James Tate Manish Adukia, CFA

For the exclusive use of [email protected]

+1 212 902-8156 +44 20 7774-3705 +91 22 6616-9049

[email protected] [email protected] [email protected]
Goldman Sachs & Co. LLC Goldman Sachs International Goldman Sachs India SPL

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 Goldman Sachs Music in the Air

Table of Contents
PM Summary 3

Our thesis in charts 5

Global music forecasts: reflecting continued shift to streaming and return of live music 8

Music streaming in the S curve: significant growth opportunity in both DM and EM, as well as older
demographics 17

Music streaming vs SVOD comparison 22

Significant opportunity from ad funded/emerging platforms 28

Digital distribution: increased differentiation, improved pricing 35

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Record labels: majors increase market share 39

Catalogue investments marking a major shift 43

Company implications 53

Disclosure Appendix 59

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 Goldman Sachs Music in the Air

PM Summary

We raise our global music industry revenue forecasts following the publication of the
2021 recorded music market figures from IFPI to reflect a more positive view on pricing
and revenue from emerging platforms that more than offsets the near-term potential
impact of increased inflation, weaker macro and the war in Ukraine. In this report, we
also address the most recent commonly asked questions: (i) has music streaming
penetration peaked?, (ii) how is music impacted by a weaker macro?, (iii) how to size
the monetisation opportunity from emerging platforms? and (iv) what is the outlook for
future catalogue spend?

Global music forecasts raised further - We raise our 2022/2023 global music forecasts
by 7%/5% respectively, and 2030 forecasts by 10%, mainly on the back of a stronger
2021 base where revenues came 11% ahead of our expectations. Our 2022/2023
For the exclusive use of [email protected]

growth assumptions are 3ppt lower than previously, at +24%/+8% respectively, as we

reflect the impact of the weakening macro environment and lower revenues in Russia.
For recorded music, we raise our forecasts by 10%/8% in 2022/23, and by 16% in
2030, mainly driven by higher paid streaming ARPU and ad-funded streaming
assumptions as well as lower declines in physical sales. Our music publishing
forecasts increase by c.9% over 2022-30 on higher streaming, physical and performance
revenues. We increase our live music forecasts by c.5% in 2022 to reflect the
faster-than-expected recovery from the pandemic, while our forecasts beyond 2023 are
unchanged.

Streaming shows no sign of saturation - We forecast 2021-2030E streaming revenue

CAGR of +12% (from +11% prior), with volumes remaining the primary driver (we
forecast global subscriber penetration as a % of smartphone owners to reach 20% in
2030E from 11% in 2021). We take an incrementally positive view on pricing growth,
supported by the successful pricing initiatives taken in 2021 which had led to a

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stabilisation of global streaming ARPU (vs. -11% annual declines over 2017-2020) as well
as increased differentiation amongst the major streaming services. We also introduce
detailed estimates on emerging platform revenues which we expect to contribute
c.160bps of growth to global recorded music revenues over 2022-2030E. In 2022/2023,
we forecast +15%/+13% streaming revenue growth (from +18%/+15% previously) as
we incorporate the impact of a weaker macro and lower revenues from Russia.

Music still sound in a macro downturn - We expect consumer spend on music to

remain resilient in a higher inflation/ weaker macro environment. Our analysis shows
that music remains one of the most undermonetised forms of entertainment, with
spending still 40% below its historical peak, while consumption continues to grow year
after year. We compare music streaming vs. SVOD streaming in terms of pricing,
penetration, churn and usage, and overall believe that music streaming should perform
better than SVOD in a weaker macro environment, or potential recession (not our
economists’ base case).

Competition intensifies amongst major DSPs - Spotify lost 130bps of share in 2021,
although remains the clear leader with 34.4% market share globally. Amongst other

13 June 2022 3
 Goldman Sachs Music in the Air

global DSPs, YouTube Premium gained a remarkable 3ppts of market share in the last 2
years (including 60bps in 2021), while Apple Music and Amazon Music were broadly
stable in 2021. Meanwhile, Chinese players gained significant momentum in 2021 with
Tencent Music and NetEase’s market shares up 170bps/180bps respectively.

The 3 major record companies took share in 2021 (+280bps altogether), mainly led
by Sony Music (+210bps), reinforcing our view that scale is ever more important in a
digital world. However, we expect modest dilution over time given the rise of the long
tail of artists and the revenue mix shift towards EM.

Catalogue spend in focus - Recent surge in catalogue acquisition spend by the 3

majors has marked a major shift in the industry. Although strategic buyers such as UMG
argue that expected returns are well in excess of their cost of capital, catalogue
investments will likely remain a major debate until we get greater disclosure and clarity
on actual returns, or until actual spend comes down. We expect catalogue acquisition
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spend to slow down in a rising rate environment, and while returns will continue to be
questioned, we believe that the majors have a significant competitive advantage in
sourcing and monetising their catalogues, as highlighted by the recent examples of
Queen and Elton John.

Stock implications: Buy: UMG, Live Nation, NetEase. Neutral: Spotify, Believe,
Sonos. Sell: Tencent Music, Sirius XM.

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 Goldman Sachs Music in the Air

Our thesis in charts

Exhibit 1: We expect the global music industry to continue its strong rebound in 2022 (+24% yoy), driven by the recovery of live events and
healthy growth in streaming, and return to a more normalised growth rate of 7%-8% in 2023-2030
Global music market (recorded, publishing, live) breakdown (US$bn, LHS), % growth (RHS)

180 40%
34%

160
30%

24%
140

20%
120

8% 8%7% 7% 7% 7% 7% 7% 7% 10%
100 6% 6% 7%
4%
For the exclusive use of [email protected]

$bn

1% 1% 2% 0% 0%
0% 1% 0% 0% 0% 0%
0%
80 -2% -2% -1%
-3% 0%
-4%

60
-10%

40

-20%
20
-27%

0 -30%
2007

2008

2009

2010

2011
1998

1999

2000

2001

2002

2003

2004

2005

2006

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022E

2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
Recorded Music Music Publishing Live Music % change

Source: IFPI Global Music Report 2022, Music and Copyright, Company data, Goldman Sachs Global Investment Research

Exhibit 2: We forecast global paid streaming penetration to rise to Exhibit 3: ARPU stabilised in 2021 for the first time in 5 years;

f2f7b3e207d345db88c12137042c6c26
20% in 2030 from 11% in 2021 expect 1% decline pa going forward as improved pricing is offset
Streaming penetration by market (as % of smartphone users), 2011-30E by dilution from EM
Paid streaming ARPU - Global, DM and EM

$60
60%
$50

50%
$40

40% $30

30% $20

$10
20%

$0
10%
2023E

2024E

2026E

2028E
2015

2016

2017

2018

2019

2020

2021

2022E

2025E

2027E

2029E

2030E

0%
DM EM Global
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

2023E

2026E

2028E

2030E
2022E

2024E
2025E

2027E

2029E

Total DM USA UK Germany

Japan Total EM China Global
Sweden Norway Denmark Finland

Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

13 June 2022 5
 Goldman Sachs Music in the Air

Exhibit 4: Recorded music revenues have not been correlated to Exhibit 5: ...and spend on music (as % of entertainment spend) is
consumer spending historically... still 40% below historical peak
Global Recorded Music revenues, consumer spending and Music revenue as a % of entertainment spend (LHS) and % of nominal
entertainment spending, 1998-2021 spend (RHS)

20% 9.00% 0.35%

15% 8.00%
0.30%
10% 7.00%

0.25%
5% 6.00%

0% 5.00%
0.20%

-5% 4.00%
0.15%
-10% 3.00%

-15% 2.00% 0.10%

2028E

2030E
2022E

2024E

2026E
1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020
Consumer spending Entertainment spending Recorded Music revenue % of entertainment spend (LHS) % of nominal spend (RHS)
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Source: Goldman Sachs Global Investment Research, Euromonitor Source: Euromonitor, Goldman Sachs Global Investment Research

Exhibit 6: Paid music penetration has further room to grow in DM, Exhibit 7: Paid music streaming accounts for c.70% of music
especially when compared to SVOD listening time, compared to <30% for SVOD
SVOD and music streaming penetration as % of addressable markets, For an average subscriber, paid music/SVOD streaming as a share of
US total music/video consumption

100% 80%
90%
70%
80%
60%
70%
60% 50%

50% 40%
40%
30%
30%
20%
20%
10% 10%
0% 0%
2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E Paid streaming as a % of total music SVOD as a % of total video consumption for
SVOD Music consumption for an average subscriber an average subscriber

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Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research Source: IFPI ‘Music Consumer Study’ 2021, BPI, Goldman Sachs Global Investment Research

Exhibit 8: In the US, SVOD prices have been rising... Exhibit 9: ... whilst music streaming prices have remained flat; only
SVOD monthly subscription prices ($), US Spotify Family Plan was raised in 2021
Music monthly subscription prices ($), US

$18 $18
$16 $16
$14 $14
$12
$12
$10
$10
$8
$8
$6
$4 $6

$2 $4

$0 $2
2014 2015 2016 2017 2018 2019 2020 2021 Current
$0
Netflix Standard Amazon Prime (includes Video) 2014 2015 2016 2017 2018 2019 2020 2021 Current

Disney Plus ESPN+ Spotify, Apple and Amazon Music Standard Spotify Family
Hulu Apple and Amazon Music Family Spotify, Apple and Amazon Music Student

Source: Company data, Data compiled by Goldman Sachs Global Investment Research Source: Company data, Data compiled by Goldman Sachs Global Investment Research

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 Goldman Sachs Music in the Air

Exhibit 10: We estimate social media/ short form video contributes Exhibit 11: We expect emerging platform revenues will represent
c.60% of emerging platform revenue 40% of ad-funded streaming revenues by 2030
Estimated breakdown of music industry emerging platform revenue by Breakdown of global ad-funded streaming by type, US$bn
company/type, 2021 (GSe)

Podcast TikTok 18
6% 13%
16
Gaming 14
19% YouTube Shorts
9% 12
10
Snapchat Spotlight 8
6%
6
Instagram Reels 4
3%
2

Facebook Peloton 0

2023E

2025E

2027E

2029E
2019

2021
2020

2022E

2024E

2026E

2028E

2030E
29% 15%

Video Spotify Pandora Emerging platforms

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Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Exhibit 12: We expect further fragmentation amongst the top DSPs Exhibit 13: The top 3 labels gained a combined 280bps of market
Streaming subscriber market share by platform, % share in 2021
Global recorded music market share

100% 40%
90%
35%
80%
70% 30%
60% 25%
50%
20%
40%
30% 15%
20% 10%
10%
5%
0%
2022E

2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
2017

2018

2021
2019

2020

0%
2014 2015 2016 2017 2018 2019 2020 2021

Spotify Apple Music YouTube Music Tencent Music NetEase Others UMG Sony WMG Believe Other Independents

f2f7b3e207d345db88c12137042c6c26
Source: Company data, Goldman Sachs Global Investment Research Source: Company data, IFPI Global Music Report 2022

Exhibit 14: Queen’s “Greatest Hits” and Elton John’s “Diamonds” Exhibit 15: ...with royalties more than tripling for Queen Ltd
saw a major boost in consumption/ revenue following the release following the film release and remaining elevated the year after
of their biopics... Queen Productions Ltd revenues, royalties and pre-tax profit, £mn
Year-end chart: Billboard Top 200 Albums

80 72.8
2017 2018 2019 2020 2021
71.5
0
70
20
60
40
60 50 42.0
41.7
80 40
"Rocketman" 32.7
100 released in 21.9
May 2019
30
120 21.3
18.6 19.2
140 "Bohemian 20
12.3 11.8
Rhapsody" 7.7
160
released in Oct 10 4.9
180 2018
0
200 FY16 FY17 FY18 FY19 FY20

Greatest Hits (Queen) Diamonds (Elton John) Revenues Royalties Pre-tax profit

Source: Billboard, Data compiled by Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

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 Goldman Sachs Music in the Air

Global music forecasts: reflecting continued shift to streaming and return

of live music

We revisit our global music industry model following the publication of the 2021
recorded music market figures from IFPI, reflecting latest trends and datapoints and
incorporating the near-term potential impact of increased inflation, weaker macro and
the war in Ukraine.

The global music market (recorded, publishing and live) rebounded strongly in
2021, up 34% yoy on our estimates, driven by a strong return of live events (+200%
yoy or back to 50% of 2019 levels), the accelerated adoption of streaming (+24% yoy)
and the resurgence of physical sales (+16% yoy). As a result, recorded music and music
publishing both grew at the fastest rate since our records began, up 18.5%/17% yoy,
respectively, beating our prior expectations by 11%/12% respectively.
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We forecast global music industry revenues to grow at +24% in 2022, largely driven
by the recovery in live music (+85% yoy or back to 94% of 2019 levels), with a return to
a more normalised growth rate of +8% in 2023 and +7% CAGR 2023-2030E. Relative to
our prior forecasts published in April 2021, we raise our 2022/2023 global music
forecasts by 7%/5%, respectively, and 2030 forecasts by 10%, mainly on the back of a
stronger 2021 base where revenues came 11% ahead of our expectations. Our
2022/2023 growth assumptions are however 3ppt lower than previously, at +24%/+8%
respectively, as we reflect the impact of the weakening macro environment (c.2ppt) and
lower revenues in Russia (c.1ppt). For recorded music, we raise our forecasts by
10%/8% in 2022/23, and by 16% in 2030 on higher paid streaming ARPU and ad-funded
streaming assumptions as well as lower declines in physical sales. Our music
publishing forecasts increase by c.9% over 2022-30 on higher streaming, physical and
performance revenues. We increase our live music forecasts by c.5% in 2022 to reflect

f2f7b3e207d345db88c12137042c6c26
the faster-than-expected recovery from the pandemic, while our forecasts beyond 2023
are unchanged. We discuss these forecasts in greater detail below.

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 Goldman Sachs Music in the Air

Exhibit 16: We expect the global music industry to continue its strong rebound in 2022 (+24% yoy), driven by the recovery of live events and
healthy growth in streaming, and return to a more normalised growth rate of 7%-8% in 2023-2030
Global music market (recorded, publishing, live) breakdown (US$bn, LHS), % growth (RHS)

180 40%
34%

160
30%

24%
140

20%
120

8% 8%7% 7% 7% 7% 7% 7% 7% 10%
100 6% 6% 7%
4%
$bn

1% 1% 2% 0% 0%
0% 1% 0% 0% 0% 0%
0%
80 -2% -2% -1%
-3% 0%
For the exclusive use of [email protected]

-4%

60
-10%

40

-20%
20
-27%

0 -30%
2007

2008

2009

2010

2011
1998

1999

2000

2001

2002

2003

2004

2005

2006

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022E

2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
Recorded Music Music Publishing Live Music % change

Source: IFPI Global Music Report 2022, Music and Copyright, Company data, Goldman Sachs Global Investment Research

Exhibit 17: We raise our global music market forecasts by 7%/5% in 2022/23 on the back of a stronger 2021 base, while our 2030 forecasts
increase by 10%
New vs. old forecasts

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2021 2022E 2023E 2030E % change
New Old New Old New Old New Old 2021 2022E 2023E 2030E

Global Music Market ($bn)** $70.8 $64.0 $87.6 $81.6 $94.9 $90.7 $153.0 $139.7 11% 7% 5% 10%
Global Music Market ($bn)* $47.1 $42.2 $61.8 $57.4 $66.9 $64.0 $103.1 $95.0 12% 8% 5% 9%
Recorded Music Market ($bn)* $25.9 $23.4 $27.9 $25.4 $30.0 $27.7 $53.2 $45.7 11% 10% 8% 16%
Music Publishing Market ($bn)* $6.9 $6.2 $7.4 $6.7 $7.8 $7.2 $11.6 $10.6 12% 10% 8% 9%
Live Music Market ($bn)* $14.3 $12.7 $26.5 $25.3 $29.1 $29.1 $38.3 $38.3 13% 5% 0% 0%

Streaming
Streaming Market ($bn)** $33.0 $30.1 $37.8 $35.4 $42.7 $40.7 $89.3 $78.4 10% 7% 5% 14%
Paid Streaming Market ($bn)** $23.2 $21.1 $26.5 $24.8 $29.8 $28.2 $55.6 $52.8 10% 7% 6% 5%
Ad funded Streaming Market ($bn)** $9.8 $8.9 $11.3 $10.6 $12.9 $12.5 $33.7 $25.6 9% 7% 3% 32%
Paid Subscribers (mn) 523 527 586 609 664 696 1,260 1,277 -1% -4% -5% -1%
Developed Market (mn) 311 313 334 340 359 367 502 456 -1% -2% -2% 10%
Emerging Market (mn) 212 214 252 270 304 330 758 822 -1% -7% -8% -8%
Annual ARPU ($)** $48.5 $43.5 $47.8 $43.7 $47.7 $43.2 $45.8 $42.8 11% 9% 11% 7%

* Net revenues (i.e. record label or publisher share; total revenues from ticket sales and sponsorship for Live Music); **Gross revenues

Source: IFPI Global Music Report 2021, Music & Copyright, Company data, Goldman Sachs Global Investment Research

13 June 2022 9
 Goldman Sachs Music in the Air

Recorded Music: raising 2030 forecasts by 16% on improved pricing and

increased monetisation from emerging platforms
2021 global recorded music figures came in 11% ahead of our expectations
IFPI released its 2022 Global Music Report earlier this year, reporting a record year of
growth for the global recorded music market, up by 18.5% yoy to US$25.9bn in 2021,
which was 11% ahead of our prior expectations. The beat was mainly driven by the
stronger-than-expected paid streaming ARPU (0% yoy in 2021 vs. GSe -6% prior) and
ad-funded streaming (+26% yoy vs. GSe +12% prior), whilst physical sales grew for the
first time in >16 years (+16% yoy vs. GSe -13% prior), helped by strong growth in vinyl
sales (+58% yoy). Paid streaming users came in marginally lower than expected (523mn
vs. GSe 527mn prior), implying net adds of +89mn in 2021 vs. +93mn in 2020 and
+86mn in 2019. Overall, streaming revenue was up 24% yoy in 2021, which was 10%
ahead of our expectations and an acceleration vs. +21% in 2020. According to IFPI,
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revenues from emerging platforms such as TikTok and Instagram Reels grew +41.3%
yoy in 2021. We note however that both Spotify and YouTube outperformed the broader
ad funded streaming revenue (+26%), with advertising revenue up 62%/46%.

Elsewhere, Performance Rights grew by 4% yoy (vs. GSe +7% prior) as the segment
was still impacted by the pandemic and sync grew by 13% yoy (vs. GSe +6% prior)
helped by the resumption of film/TV productions and the strong rebound in the global
advertising market. Downloads & Other Digital continued its steady double-digit decline,
falling 12% yoy, although this was better than our forecast of -20%.

Raise Recorded Music market forecasts by c.12% over 2022-30

For 2022/23, we increase our recorded music forecasts by 10%/8% to
US$27.9bn/US$30.0bn and now expect the market to grow 8%/7% yoy
respectively (vs. 9% in both years prior). We believe the music industry will be
resilient in an economic downturn, with the slight reduction in our underlying growth

f2f7b3e207d345db88c12137042c6c26
forecast incorporating the potential negative impact from the weaker macro and a drop
in revenue from Russia. Within this, we increase our streaming revenue (record label
share) forecasts by 7%/5% to US$19.4bn/US$21.9bn in 2022/2023, implying a
deceleration to +15%/+13% growth yoy (vs. +16% /+15% prior). We assume some
slowdown in both years compared with 2021 across both paid streaming +14%/+13%
(vs. +15%/+14% prior, compared with +24% in 2021) given potentially higher churn
and/or lower gross additions and ad-funded streaming at +15%/+14% (vs. +18%/+18%
prior, compared with +26% in 2021).

Our 2030 recorded music forecasts increase by 16%, implying 2021-2030E CAGR of
8% (unchanged vs prior forecasts).

n Paid streaming: Our paid subscriber forecasts are broadly unchanged at 1.260bn
in 2030 (1.277bn prior) compared to 523mn in 2021. This is based on paid
streaming penetration (as % of smartphone population) rising to 20% in 2030
(22% prior) from 11% in 2021, with DM penetration rising to 53% in 2030 (47%
prior) from 34% in 2021, and EM penetration rising to 14% in 2030 (17% prior)
from 6% in 2021. We take an incrementally positive view on pricing growth,

13 June 2022 10
 Goldman Sachs Music in the Air

supported by the successful pricing initiatives taken in 2021 which had led to a
stabilisation of global streaming ARPU (vs. -11% annual declines over 2017-2020) as
well as increased differentiation amongst the major streaming services. We now
forecast US$45.8 in 2030 vs. US$42.8 previously on a gross basis, and US$24.3 vs.
US$22.3 previously on a net basis (i.e. record label share), based on annual
average price increases of 2-3% on a like-for-like basis in the next few years.
Overall, our paid streaming market forecasts increase by 5% in 2030 to reach
US$55.6bn/US$29.5bn (gross/net), implying 10% CAGR 2021-30 (vs. 11% prior).
n Ad-funded streaming: We raise our ad-funded streaming forecasts more
substantially by 32% in 2030 to reach US$33.7bn/US$16.5bn (gross/net), following
stronger-than-expected growth in 2021 and as we introduce detailed estimates on
emerging revenue streams from platforms such as TikTok, YouTube Shorts and
Instagram Reels. We expect emerging platforms to account for 40% of ad-funded
revenues by 2030 (from 30% in 2021) and 12% of global recorded music revenue
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(from 5% in 2021), overall contributing 160bps of growth to global recorded music

revenues over 2022-2030E.

n Physical: We turn more positive on the outlook for physical record sales given the
strong outperformance in 2021 and improving mix shift towards vinyls which has
now recorded 15 years of consecutive growth. We expect revenues to decline 7%
yoy in 2022 (-13% prior) and raise our forecasts to mid single-digit decline from low
double-digit decline per annum over the next few years.

Exhibit 18: We forecast the global recorded music market to grow 8%/7% in 2022/2023 and at a 9% CAGR
2023-2030E, led by streaming
Global Recorded Music market revenues (US$bn, LHS), % growth (RHS)

60 20%

18%

f2f7b3e207d345db88c12137042c6c26
50 15%

10%
40 9% 8% 8% 10%
9% 9% 8%8%
8% 7%
6% 9%
8% 8%

30 4%
$bn

4% 5%

0%
0%
-1%
20 0%
-2%-1% -2%
-2% -2%-3%
-3%
-5%
-5%
10 -6% -5%
-7%
-8% -7%

0 -10%
2022E
2023E
2024E
2025E
2026E
2027E
2028E
2029E
2030E
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Physical Download Other Streaming Global market growth

Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

13 June 2022 11
 Goldman Sachs Music in the Air

Exhibit 19: We forecast global paid streaming penetration to Exhibit 20: ARPU stabilised in 2021 for the first time in 5 years;
increase to 20% in 2030 (53% in developed markets and 14% in expect 1% decline pa going forward as improved pricing is offset
emerging markets) by the dilution from EM...
Streaming penetration by market (as % of smartphone users), 2012-30E Paid streaming ARPU - Global, DM and EM

$60
60%
$50

50%
$40

40% $30

30% $20

$10
20%

$0
10%

2023E

2024E

2026E

2028E
2015

2016

2017

2018

2019

2020

2021

2022E

2025E

2027E

2029E

2030E
0%
DM EM Global
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

2023E

2026E

2028E

2030E
2022E

2024E
2025E

2027E

2029E
For the exclusive use of [email protected]

Total DM USA UK Germany

Japan Total EM China Global
Sweden Norway Denmark Finland

Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

Exhibit 21: ... which broadly tracks our Spotify Premium ARPU Exhibit 22: We expect paid streaming revenue to grow at 10% CAGR
forecasts in the next few years across 2021-30E, with 16% in EM and 8% in DM...
ARPU growth yoy- Spotify & Global Paid streaming revenue growth by market (DM, EM and Global),
2021-30E

15% 18%
16%
10% 16%

14%
5%
12%
Revenue CAGR

0%
10%
10%
-5% 8%
8%
-10%
6%

f2f7b3e207d345db88c12137042c6c26
-15% 4%

-20% 2%
2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E
0%
Global ARPU Spotify DM EM Global

Source: IFPI Global Music Report 2022, Company data, Data compiled by Goldman Sachs Global Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research
Investment Research

13 June 2022 12
 Goldman Sachs Music in the Air

Exhibit 23: ... with EM to account for 28% of paid streaming revenue
by 2030E from 18% in 2021
Share of global paid streaming revenue - EM vs DM

100% 1,500
90% 18% 22%
28%
80% 1,000
70%
60% 500
50%
40% 82% 78% 0
72%
30%
120%
20%
100%
10%
0%
80% 2021 2025E 2030E

DM EM
60%
For the exclusive use of [email protected]

Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

Music Publishing: raise forecasts by c.9% over 2022-30

Similar to Recorded Music, the Music Publishing market enjoyed a record growth of
17% yoy in 2021. We raise our forecasts by c.9% over 2022-30, implying 6% CAGR
2022-30 (unchanged) to reach US$11.7bn in 2030. The changes made to our music
publishing model broadly echo those made to our recorded music forecasts given
similar growth drivers (e.g. streaming, physical sales), with publishing expected to
continue to grow at a slower rate than recorded music given the differences in revenue
mix (music publishing derives a greater share of its revenue from performance and sync
revenue). We also factor in the recent increase in US physical mechanical royalty
rates to 12 cent per track from 9.1, and note that there could be further upside from
regulatory changes, notably the upcoming Copyright Royalty Board ruling on
mechanical streaming rates. The CRB songwriting streaming royalty rates for 2023-27
are currently being negotiated in the US, with an agreement yet to be reached between

f2f7b3e207d345db88c12137042c6c26
digital music services and the NMPA. In October 2021, the NMPA, which is acting on
behalf of music publishers and their songwriters, proposed that the headline rate
increases to 20% from 15.1%, whilst several digital music services including Spotify
and Amazon Music proposed that the rate reverts to the 2017 rate of 10.5%. We note
that the previous CRB rulings have been positive for content owners: in 2017, the rates
paid by SiriusXM to artists and labels were increased by c.40% and in 2018 the headline
songwriting royalty rates for 2018-2022 were increased from 10.5% to 15.1%, although
the latter decision is still being appealed by major digital music services. Any further
improvement would be positive given music publishers currently receive on average a
royalty rate of 12% on our estimates under their direct deals with the major DSPs.

13 June 2022 13
 Goldman Sachs Music in the Air

Exhibit 24: We estimate the Music Publishing market to grow by 7%/6% in 2022/2023 after +17% last year
Global Music Publishing market revenues (US$bn) and % growth

$12 20%

17%

$10 15%

12%

10%
$8 10%

6% 7%
6% 6% 6% 6% 6% 6%
5% 6% 6%
5%
$6 4% 5%
4%
3% 3%
3% 2% 2% 2%
For the exclusive use of [email protected]

$4 0%
-2%

$2 -4% -4% -5%

$0 -10%
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022E

2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
Physical mechanical Digital mechanical Performance royalties Sync Other % change

Source: Music & Copyright, OMDIA, Company data, Goldman Sachs Global Investment Research

Live Music: faster-than-expected recovery and long-term outlook remains

intact

f2f7b3e207d345db88c12137042c6c26
Live music, having been one of the most resilient parts of the music industry in the past
two decades, was by far the most severely impacted segment during the COVID-19
pandemic due to the cancellation of almost all live events in most geographies. The
industry has rebounded quickly, with estimated revenues of US$14.3bn in 2021 based
on the trends reported by various industry players such as Live Nation and CTS Eventim,
13% ahead of our prior expectations and representing 200% yoy growth - reaching 50%
of 2019 levels. In 2022, we expect the strong rebound to continue (+85% yoy) as we
believe consumers will be eager to get back to concerts and festivals and now believe
revenues will reach 94% of 2019 levels (vs. 90% previously). We expect Live music to
remain an attractive market with a steady growth outlook (GSe +4% 2023-30 CAGR),
noting that the segment has also been relatively resilient during times of recession.

13 June 2022 14
 Goldman Sachs Music in the Air

Exhibit 25: US concert spending growth outpaced PCE growth by 3.6x

during recessions and by 1.7x in non-recessions
US consumer spending growth during recessions vs. non-recessions,
2000-16
For the exclusive use of [email protected]

PCE: Personal Consumption Expenditure Price Index

Source: US Bureau of Economic Analysis, Goldman Sachs Global Investment Research

The major labels have a relatively low exposure to live music and mainly through their
merchandising division and though live performance royalties. Similarly, we forecast
UMG’s merchandising revenue (we estimate around half is related to touring) to grow
strongly by 50% in 2022 following +27.4% in 2021, exceeding its 2019 levels by the end
of this year. This will likely have a dilutive impact on gross margins this year, with UMG
management disclosing 8-10% gross margin for touring compared to c.25% for DTC
and 15-18% for retail.

Exhibit 26: We expect live music revenues to reach close to 2019 levels in 2022
Global Live Music market (US$bn)

$45

$40
2023-30: 4% CAGR
$35 2022:

f2f7b3e207d345db88c12137042c6c26
85% yoy
$30 2007-19: 5% CAGR growth
$25
2021:
$20 200%
yoy
$15 growth

$10 2020:
-83%
$5 decline

$0
2024E

2026E
2022E

2023E

2025E

2027E

2028E

2029E

2030E
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Global Live Music Revenue (sponsorship + ticket sales) Old estimates (as of May 2020)

Source: PWC, Goldman Sachs Global Investment Research

13 June 2022 15
 Goldman Sachs Music in the Air

Exhibit 27: Live music-related revenue fell sharply for both UMG Exhibit 28: Touring-related activity is the lowest-margin business
and WMG in 2020 before recovering strongly in 2021 within UMG’s merchandising business
Live music-related revenue for UMG and WMG, US$mn UMG merchandising gross margin, 2021

700 30%

600 c.25%
25%
500
20%
400
15-18%
300 15%

200
10% 8-10%
100

0 5%
2016 2017 2018 2019 2020 2021

UMG WMG 0%
Touring DTC Retail

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
For the exclusive use of [email protected]

Data from the IFPI Global Music Report 2022 was used to create material in this report.
All statements using IFPI data represent Goldman Sachs’ interpretation of data,
research opinion or viewpoints published as part of the IFPI Global Music Report 2022,
and have not been reviewed by IFPI. Each IFPI publication speaks as of its original
publication date (and not as of the date of this report.)

We would like to thank Stefani Spasenoska and Leonardo Faleri for their contribution to
this report.

f2f7b3e207d345db88c12137042c6c26

13 June 2022 16
 Goldman Sachs Music in the Air

Music streaming in the S curve: significant growth opportunity in both DM

and EM, as well as older demographics

Paid streaming has grown into a c.US$12bn market (record label share) from just
US$2bn in 2015 (as per IFPI), accounting for 47% of global recorded music revenue in
2021. The surge in paid streaming revenue has been mostly driven by volumes so far,
with the number of subscribers reaching 523mn in 2021, implying 11% penetration as
% of smartphone users. We note however a wide range of penetration rates globally,
with Scandi the most penetrated market at 56% on our estimates, US at 38%, UK at
35%, Germany at 30%, France at 25% and Japan at 21%. Within EM, we estimate paid
streaming penetration in China was 8%, Brazil 12% although India was still only 1%. We
assume that penetration in DM and EM will catch up with the most mature markets
within DM and EM respectively by 2030, with DM rising to 53% in 2030 from 34% in
For the exclusive use of [email protected]

2021 and EM rising to 14% in 2030 from 6% in 2021, resulting in global penetration rate
of 20% in 2030E from 11% in 2021.

Exhibit 29: Our 20% global paid streaming penetration estimate in

2030 is based on 53% penetration in developed markets and 14%
penetration in emerging markets
Streaming penetration by market (as % of smartphone users), 2011-30E

60%

50%

40%

30%

20%

10%

f2f7b3e207d345db88c12137042c6c26
0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

2023E

2026E

2028E

2030E
2022E

2024E
2025E

2027E

2029E

Total DM USA UK Germany

Japan Total EM China Global
Sweden Norway Denmark Finland

Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

We believe developed markets are yet to reach the plateau on the S-curve. We
estimate DM average penetration reached 34% in 2021, still way below our estimate of
56% for Scandinavia (Sweden, Norway, Denmark) which is the earliest adopter of paid
music streaming services and the most mature market globally. That said, we do find a
meaningful inverse relationship between streaming revenue growth and the absolute
level of penetration across various developed music markets. Taking the example of
Sweden, where Spotify launched at the end of 2006, the paid streaming market saw its
growth rates decelerate sharply from +55%/+30% in 2012/2013 to +11% in 2014/15 as
paid penetration reached nearly 40% by 2015. It then grew consistently in the mid single
digit percentage rate per annum between 2016-2020, and accelerated to +10% in 2021
helped by price increases that year, implying that paid penetration continued to rise

13 June 2022 17
 Goldman Sachs Music in the Air

gradually to reach 58% in 2021. According to IFPI, across the whole Nordic region, the
number of subscribers continued to grow in 2021 by 6% yoy, while paid streaming
revenue increased 11% yoy. While we assume DM streaming revenue growth will
gradually decelerate in the coming years, we believe that absolute penetration in DM
will catch up with that of the Nordics over time and reach 53% in 2030. We expect 63%
of the paid streaming revenue growth by 2026E to come from developed markets, in
line with comments by UMG that they expect 60% of the growth opportunity in
subscription streaming to come from the top 12 developed markets.

Exhibit 30: We believe that developed markets are yet to reach the Exhibit 31: There is an inverse relationship between streaming
plateau on the S curve and will catch up with the Nordics by 2030 revenue growth and level of streaming penetration across different
Streaming penetration by developed markets (as % of smartphone developed markets
users), 2007-30E Music streaming penetration vs streaming revenue growth yoy, 2016-21

60% 120%

50%

Streaming revenue growth (%)

100%
For the exclusive use of [email protected]

40%
80%
30%
60%
20%
40%
10%
20%
0%
2022E
2023E
2024E
2025E
2026E
2027E
2028E
2029E
2030E
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

0%
0% 10% 20% 30% 40% 50% 60%
Music Streaming Penetration (%)
USA UK Germany
France Nordics DM Average USA UK Germany France Nordics

Source: IFPI Global Music Report 2022, YouGov, Data compiled by Goldman Sachs Global Source: IFPI Global Music Report 2022, Data compiled by Goldman Sachs Global Investment
Investment Research Research

Exhibit 32: The Swedish paid streaming market was consistently

growing by mid single digit pa over 2016-2020 with growth
accelerating to +10% in 2021 helped by price rises that year
Paid streaming market growth in Sweden (% yoy)

f2f7b3e207d345db88c12137042c6c26
60%

50%

40%

30%

20%

10%

0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Sweden

Source: IFPI

We believe emerging markets are still in the early growth stage of the S-curve and
present a significant growth opportunity for paid music subscriptions. We forecast
penetration to rise to 14% in 2030 from 6% in 2021, as device penetration improves
and free users are converted to paid subscription. We were particularly encouraged by
the accelerated momentum seen in a market like China which became the 6th largest
music market in 2021, up from 12th in 2016. Tencent Music and NetEase in China

13 June 2022 18
 Goldman Sachs Music in the Air

posted a combined net adds of +33mn in 2021, up from +23mn in 2020 and +17mn in
2019, leading to an increase in paid penetration as % of smartphone users to 8% in
2021 from 4% in 2019 and <1% in 2016 (11% of internet users in 2021 from 6% in
2019). We see a huge opportunity in India in the long run, a market that has attracted a
number of competing music streaming services (JioSaavn, Gaana, Airtel Wynk, Spotify,
Amazon Music, Youtube Music etc.) and that counts 200mn MAUs (Monthly Active
Users) but with only a paid penetration of 1% on our estimates in 2021. However, we
note that telecom operators in India provide free music streaming services (through
their captive apps; in most cases ad-free) to a large proportion of their subscriber base
as a retention strategy, resulting in high competitive intensity for independent paid
music streaming platforms. The Middle East and North Africa (MENA) was the
fastest-growing region in 2021, up 35% yoy, with the market doubling in size in just two
years to US$85.3mn. In particular, we believe that Africa presents a significant
opportunity over time as device penetration and broadband infrastructure improve, and
For the exclusive use of [email protected]

the middle class expands. Boomplay, Africa’s leading music streaming service, counts
>60mn active users and has been expanding its catalogue rapidly.

Exhibit 33: China continued to grow strongly in 2021, driven by paid Exhibit 34: Paid penetration in China has accelerated in recent
streaming years
China recorded music revenue (US$mn, LHS), % growth (RHS) Paid music penetration, China

1,200 80% 30%

70%
1,000 67%
25%
60%
800
50% 20%
600 37% 30% 40%
15%
17% 30%
400
20% 10%
200
10%
5%
0 0%
2017 2018 2019 2020 2021
0%
2022E

2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
2013

2014

2017

2018

2019
2012

2015

2016

2020

2021

Subscription streaming Ad-supported streaming

Other Performance rights
Penetration as % Internet users Penetration as % smartphones

f2f7b3e207d345db88c12137042c6c26
% change

Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

Exhibit 35: India is still largely dominated by ad-funded streaming Exhibit 36: Brazil’s recorded music revenue growth has been
and growth reaccelerated in 2021 accelerating over the past few years
India recorded music revenue (US$mn, LHS), % growth (RHS) Brazil recorded music revenue (US$mn, LHS), % growth (RHS)

250 30% 450 32% 35%

400 30%
25% 25% 26%
200 350
20%
25%
20% 300
150 18% 16% 20%
250 16%
15%
200 15%
100 6%
10% 150
10%
50 100
5% 5%
50
0 0% 0 0%
2017 2018 2019 2020 2021 2017 2018 2019 2020 2021

Subscription streaming Ad-supported streaming Subscription streaming Ad-supported streaming

Other Performance rights Other Performance rights
% change % change

Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

13 June 2022 19
 Goldman Sachs Music in the Air

Exhibit 37: Emerging markets accounted for 10% of total revenues in

the top 20 markets in 2021, up from 5% in 2016
Top 20 recorded music markets in 2016 and 2021, $mn
2016 2021
Ranking
Country Revenue Country Revenue
1 USA 5247 USA 9835
2 Japan 2811 Japan 3117
3 Germany 1343 UK 1810
4 UK 1200 Germany 1596
5 France 910 France 1132
6 Canada 384 China 1059
7 Australia 364 South Korea 808
8 South Korea 339 Canada 584
9 Italy 261 Australia 474
10 Brazil 251 Italy 393
11 Netherlands 247 Brazil 391
12 China 216 Netherlands 369
13 Spain 194 Russia 328
14 Sweden 194 Spain 306
For the exclusive use of [email protected]

15 Norway 134 Mexico 285

16 Mexico 127 Sweden 242
17 Switzerland 125 India 219
18 Belgium 123 Switzerland 200
19 India 115 Norway 169
20 Denmark 111 Belgium 167

Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

Looking at streaming adoption by age cohorts, we see significant opportunity to

increase penetration amongst older demographics. Adoption of music streaming
services, and even paid streaming services, is highest for the younger age groups, with
over 65% of 16-24 years olds in the UK using paid streaming services, compared to
45% of 35-44 year olds and less than 35% for 45-54 year olds. The conversion of free to
paid users is the highest amongst 25-34 at 2.29x, dropping to 1.63x and 1.79x for 35-44
and 45-54 year olds, respectively. We see an opportunity for increased adoption and
improved conversion from free to paid amongst older age groups, especially as younger

f2f7b3e207d345db88c12137042c6c26
age cohorts who are heavy users of paid streaming services grow older, and as DSPs
adapt their marketing strategies to target older demographics.

Exhibit 38: Over 65% of 16-24 years olds use paid streaming, Exhibit 39: ... and 16-24 year olds spend nearly 2x as much time
compared to 45% amongst 35-44 year olds and less than 35% for streaming music as the average population
45-54 year olds... Average music listening time on paid streaming services by age group
Music penetration by age group in 2021, UK (hours per week), UK

70%
9

60% 8

7
50%
6
40%
5 4.5

30% 4

3
20%
2
10%
1

0% 0
16-24 25-34 35-44 45-54 55+ Average 16-24 25-34 35-44 45-54 55-64
CD LP MP3 Tracks MP3 Albums Paid Streaming Free Streaming Music Video

Source: ERA, BPI Source: IFPI ‘Music Consumer Study’ 2021, BPI

13 June 2022 20
 Goldman Sachs Music in the Air

Exhibit 40: The conversion of free to paid music streaming services Exhibit 41: Similarly in the US, paid streaming consumption is
is highest amongst 25-34 year olds skewed towards younger age groups and we see an opportunity for
Ratio of paid to free subscribers by age group in 2021, UK increased adoption amongst older demographics
Breakdown of music listeners who use paid streaming services by age,
US

2.5
2.29
Age 65+ 38% Age 35-44, 64%

2.0
1.79 Age 55-64 44%
1.63
1.47 Age 45-54 57%
1.5

1.01 Age 35-44 64%

1.0
Age 25-34 64%

0.5
Age 18-24 72%

0.0 Age 13-17 73%

16-24 25-34 35-44 45-54 55+
0% 10% 20% 30% 40% 50% 60% 70% 80%
For the exclusive use of [email protected]

Source: ERA, BPI Source: Luminate

Exhibit 42: We see an opportunity for older age group streaming

consumption to increase in Japan, France, Germany and UK
Global music listeners who use a streaming service to listen to music in a
typical week by generation
Gen Z Millennials Gen X Boomers
(Ages 13-23) (Ages 24-39) (Ages 40-55) Ages (56-74)
US 99% 98% 96% 89%
UK 77% 79% 67% 41%
Germany 83% 78% 59% 37%
France 84% 68% 53% 37%
Italy 77% 76% 59% 40%
Japan 89% 70% 51% 34%
Spain 82% 78% 74% 57%
Brazil 87% 89% 73% 63%
Mexico 83% 87% 81% 75%
Colombia 84% 88% 76% 69%

f2f7b3e207d345db88c12137042c6c26
Chile 91% 92% 78% 72%
Argentina 87% 89% 77% 58%
Gen Z: born 1998-2008; Millennials: born 1982-1997; Gen X: born 1966-1981; Boomers: born
1947-1965

Source: Luminate

13 June 2022 21
 Goldman Sachs Music in the Air

Music streaming vs SVOD comparison

We see limited read across from recent weaker SVOD data

Netflix, the world’s largest SVOD service, reported earlier this year a decline in paid
subscribers (-200k vs. consensus +2.5mn) in 1Q22 for the first time in a decade and
guided to a continued decline of -2.0mn in 2Q22 (vs. consensus +2.4mn). The company
highlighted the higher levels of market penetration and heightened competition as the
main headwinds (see our analysts’ take here). Recent data from Kantar also showed
that 1.5mn consumers in the UK cancelled their SVOD subscription in the first 3 months
of 2022, with a third of those citing money saving as the reason for cancelling. This has
sparked a wave of concerns over the saturation risk and the impact of the macro
economic environment on music streaming services.
For the exclusive use of [email protected]

Overall, we believe that the SVOD and music streaming markets are fundamentally
different, limiting the potential read across from the recent weaker SVOD data for
music. For example, Spotify has reported premium subscribers and revenues broadly in
line with market expectations so far this year, with 5mn of net adds targeted for 2Q22
(see our analysts’ take here). At its 2022 Investor day, Spotify outlined its target to
achieve 20%+ revenue growth over the long term driven by continued subscriber
growth (with further penetration in developed and developing markets) aided by new
ARPU initiatives as well as advertising growth (with new product offerings).

1) Music subscriptions offer a more compelling value proposition than SVOD in our
view
More repeat listening of songs and playlists... We believe music streaming services
offer a compelling value proposition for customers given (i) the entire global content
library can be accessed easily on just one platform and (ii) the depth of the catalogue,

f2f7b3e207d345db88c12137042c6c26
where favourite songs can be downloaded and playlists curated for repeat listening. This
contrasts with video streaming, where the content offering is fragmented and
consumers tend to flip in search for fresh content.

Music streaming account for a greater % of time spent listening to music ... Paid
music streaming represents 25% of total music consumption currently in the UK, whilst
SVOD accounts for 19% of total video consumption, with the average user typically
subscribing to multiple SVOD services. Adjusted for penetration, however, i.e. for an
average subscriber in the UK, paid music streaming would account for around 70% of
music listening time, compared to less than 30% for SVOD.

As such, music streaming services tends to be stickier than SVOD services, with
UMG noting that leading music streaming services only experience low single-digit
monthly churn compared to 45% semiannual churn for SVOD services, over half of
which is related to programming variance.

13 June 2022 22
 Goldman Sachs Music in the Air

Exhibit 43: Globally, average music listening time has increased Exhibit 44: ... with a similar increase in music listening time seen in
steadily since 2018 to 18.4 hours per week in 2021... the UK
Average music listening time (hours per week), global Average music listening time (hours per week), UK

18.5 17.8

18.4 17.6
18.3 17.4
18.2
17.2
18.1 18.5
17
18 18.4
16.8
17.9 18.3
16.6
17.8 18.2

17.7 16.418.1

17.6 16.2 18

17.5 1617.9
2018 2019 2021 2019 2021
17.8

Source: IFPI ‘Music Consumer Study’ 2021 Source: IFPI ‘Music Consumer Study’ 2021, BPI
For the exclusive use of [email protected]

Exhibit 45: Paid streaming represents a larger share of total music Exhibit 46: ...and when adjusted for penetration, paid music
consumption, compared to SVOD’s share of total video streaming accounts for c.70% of music listening time, compared to
consumption... less than 30% for SVOD
Paid music streaming as a share of total music consumption vs. SVOD For an average subscriber, paid music streaming as a share of total
as a share of total video consumption, UK music consumption vs. SVOD as a share of total video consumption, UK

30.0% 80%

70%
25.0%
60%

20.0% 50%

40%
15.0%
30%

10.0% 20%

10%
5.0%
0%
Paid streaming as a % of total music SVOD as a % of total video consumption for
0.0%
consumption for an average subscriber an average subscriber
Paid streaming as a % of total music consumption SVOD as a % of total video consumption

f2f7b3e207d345db88c12137042c6c26
Source: IFPI ‘Music Consumer Study’ 2021, BPI, Ofcom Source: IFPI ‘Music Consumer Study’ 2021, BPI, Ofcom

Exhibit 47: Almost 40% of SVOD users are subscribed to 2 or more

SVOD platforms
The % of population with 1, 2 or 3+ SVOD subscriptions, UK

40%

35% 33.8%

30%

25%

20%

15% 12.8%
10.3%
10%

5%

0%
1 2 3+

Source: BPI, AudienceNet/Audiomonitor

13 June 2022 23
 Goldman Sachs Music in the Air

Music subscriptions are priced attractively relative to other entertainment

subscriptions, while the standard plan price has been the same for over a decade.
In real terms, prices have actually decreased (e.g. the £9.99 individual Premium price in
the UK today is worth the equivalent of £7.60 back in 2008). By contrast, Netflix has
increased its standard Premium price by 67%/78% in the US/UK since 2014.

Exhibit 48: The price of a standard music streaming subscription in Exhibit 49: In the US, the monthly subscription price for SVOD
the US is lower than many other entertainment subscriptions services has been rising...
Monthly price of various entertainment subscription offerings in the US SVOD monthly subscription prices ($), US

$35
$18
$16
$14

$12.99 $17 $12

$14.95 $14.99 $14.99
$12.99 $11.99
$9.99 $9.99 $9.99 $9.99 $9.99 $9.99 $10.99 $9.99 $10
$7.99 $8.99
$5 $4.99 $5 $8
$6
Apple Music (Standard…

Twitch Prime
Audible (Premium plan)
Deezer (Standard plan)

Apple TV+

Amazon Prime Video

Apple Arcade

Google Play Pass

Scribd

CBS All Access

HBO Max
Sling TV

Apple News+
Spotify (Standard plan)

Kindle Unlimited

Hulu+
Netflix (Standard plan)

Disney+

NY Times (Digital)
Youtube Premium

Wall Street Journal (Digital)

$4
For the exclusive use of [email protected]

$2
$0
2014 2015 2016 2017 2018 2019 2020 2021 Current

Netflix Standard Amazon Prime (includes Video)

Disney Plus ESPN+
Hulu

Music Books Video Gaming News

Standard subscription i.e. excluding promotional periods, as of May 2022 Source: Company data, Data compiled by Goldman Sachs Global Investment Research
Source: Company data, Data compiled by Goldman Sachs Global Investment Research

Exhibit 50: ... whilst the only price increase by a major music Exhibit 51: In the US, Spotify’s Family subscription price was raised
streaming service was for the Spotify Family plan in 2021 for the first time in 2021, while Netflix has increased its Premium
Music monthly subscription prices ($), US plan price by 67% since 2014...
Spotify Family vs. Netflix Premium price ($), US

$18 $25
$16
$14 $20
$12

f2f7b3e207d345db88c12137042c6c26
$10 $15

$8
$6 $10

$4
$2 $5

$0
2014 2015 2016 2017 2018 2019 2020 2021 Current $0
2014 2015 2016 2017 2018 2019 2020 2021 Current
Spotify, Apple and Amazon Music Standard Spotify Family
Apple and Amazon Music Family Spotify, Apple and Amazon Music Student Netflix Premium Spotify Family

Source: Company data, Data compiled by Goldman Sachs Global Investment Research Source: Company data, Data compiled by Goldman Sachs Global Investment Research

13 June 2022 24
 Goldman Sachs Music in the Air

Exhibit 52: Spotify’s standard subscription is 55% cheaper than Exhibit 53: Similarly Spotify raised its Family subscription price for
Netflix in the US the first time in the UK in 2021, while Netflix has increased its
US standard plan price ($)- Netflix, Spotify Premium plan price by 78% since 2014
Spotify Family vs. Netflix Premium price (£), UK

$18 £25

$16

$14 £20

$12
£15
$10

$8
£10
$6

$4 £5
$2

$0 £0
2013 2014 2015 2016 2017 2018 2019 2020 2021 Current 2014 2015 2016 2017 2018 2019 2020 2021 Current

Netflix Standard Spotify Standard Netflix Premium Spotify Family

For the exclusive use of [email protected]

Source: Company data, Data compiled by Goldman Sachs Global Investment Research Source: Company data, Data compiled by Goldman Sachs Global Investment Research

Exhibit 54: The real value of the £9.99 monthly subscription has gone
down to £7.60 in 2008 prices in the UK
Spotify Standard price in real terms since 2008 (£), UK

£12

£10

£8

£6

£4

£2

£0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

f2f7b3e207d345db88c12137042c6c26
Source: Company data, Data compiled by Goldman Sachs Global Investment Research, Bank of
England

2) Paid music streaming penetration is lower than SVOD penetration

As shown in Exhibit 55, paid music penetration in the US and UK was almost half that of
SVOD in 2021. We note that the denominator being used is % of smartphone owners
for music subscriptions, and % of households for SVOD. Even adjusted for the family
plans (around 20% of total subscriptions), music penetration would still be much lower
than SVOD. Furthermore, if we were to compare music vs SVOD penetration as % of
addressable markets (i.e. adjusted for family plans), we note that in the US last year,
penetration of paid music would be 47% compared to 84% for SVOD. Based on our
subscriber forecasts, we believe music penetration as % of addressable markets will
reach 60% by 2030 in the US, still well below current SVOD levels.

13 June 2022 25
 Goldman Sachs Music in the Air

Exhibit 55: Music streaming penetration still has significant room to Exhibit 56: ... even when looking at music streaming penetration as
grow when compared to SVOD... % of addressable markets
Music vs SVOD penetration, 2021 SVOD and music streaming penetration as % of addressable markets,
US

90% 100%

80% 90%

70% 80%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20% 20%
10% 10%
0% 0%
UK US 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E

SVOD Music SVOD Music

For the exclusive use of [email protected]

Music streaming penetration as % of smartphones; SVOD penetration as % of households with Source: IFPI Global Music Report 2022, SNL Kagan, Company data, Goldman Sachs Global
at least one subscription
Investment Research
Source: IFPI Global Music Report 2022, BARB

Exhibit 57: The average time spent watching SVOD per week in the
UK almost doubled in 2020, driven by mobility restrictions during
COVID-19, while we believe music listening time benefitted less from
the pandemic
Average time spent on SVOD services (hours per week), UK

8 7.6

3.8
4

f2f7b3e207d345db88c12137042c6c26
1

2019 2020

Source: Ofcom

3) Consumers spend 40% less on music (as % of their entertainment spend) today than in
1998
Recorded music revenues have shown a low correlation with GDP in the past, as most
recently highlighted by the COVID crisis where paid subscription revenues grew by over
18% yoy globally in 2020 (despite time spent listening to music initially falling due to the
drop in in-car/commute listening). Meanwhile, we note that recorded music spend as %
of total entertainment spend and as % of GDP remains over 40% below the peak levels
in 1998, despite the strong recovery seen in recent years. This supports our belief that
any price increases can be passed onto consumers with minimal churn.

13 June 2022 26
 Goldman Sachs Music in the Air

Exhibit 58: Global recorded music revenues have not had a Exhibit 59: Music revenue as a % of entertainment spend remains
meaningful relationship with consumer spending over the past 2 well below the 1998 peak
decades Entertainment includes: Recreational and Cultural Services,
Global Recorded Music revenues, consumer spending and Newspapers, Magazines, Books and Stationery
entertainment spending, 1998-2021

20% 9.00% 0.35%

15% 8.00%
0.30%
10% 7.00%

0.25%
5% 6.00%

0% 5.00%
0.20%

-5% 4.00%
0.15%
-10% 3.00%

-15% 2.00% 0.10%

2028E

2030E
2022E

2024E

2026E
1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020
Consumer spending Entertainment spending Recorded Music revenue % of entertainment spend (LHS) % of nominal spend (RHS)
For the exclusive use of [email protected]

Source: Goldman Sachs Global Investment Research, Euromonitor Source: Euromonitor, Goldman Sachs Global Investment Research

Exhibit 60: Our forecasts imply that recorded music revenue as % of

GDP will remain >50% below its historical peak
Global music revenues as % of global nominal GDP

0.20%

0.18%

0.16%

0.14%

0.12%

0.10%

0.08%

0.06%

0.04%
1998

2024E
2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022E

2026E

f2f7b3e207d345db88c12137042c6c26
Source: IMF, Goldman Sachs Global Investment Research

13 June 2022 27
 Goldman Sachs Music in the Air

Significant opportunity from ad funded/emerging platforms

While the traditional on-demand subscription model continues to dominate much of the
growth in the music industry, we believe advancements in technology and the further
digitisation of industries will further increase the pervasiveness of music and create new
monetisation opportunities. New licensing revenues from short-form videos, connected
fitness, gaming and podcasts have increased significantly in recent years and already
contributed 5% of global recorded music revenues in 2021 on our estimates. As shown
in Exhibit 61, we introduce detailed estimates on these new revenue streams within our
ad-funded streaming forecasts (excluding Peloton which is part of subscription
streaming). Overall, we expect emerging platforms to account for 40% of ad-funded
revenues by 2030 (from 30% in 2021) and 12% of global recorded music revenue (from
5% in 2021), overall contributing c.160bps of growth to global recorded music revenues
For the exclusive use of [email protected]

over 2022-2030E. Within this, we estimate c.60% of emerging platform revenues in the
music industry last year came from short-form video and/or social media, which includes
TikTok, YouTube Shorts, Instagram Reels and Snapchat Spotlight. Furthermore, these
new platforms are also becoming important avenues to amplify artists and set cultural
trends, contributing to increase the efficiency of A&R and marketing spend for the
record labels.

Exhibit 61: We estimate c.60% of emerging platform revenue in the Exhibit 62: ... and that emerging platform revenues will represent
music industry in 2021 came from short form video/social media... almost 40% of ad-funded streaming revenues by 2030...
Estimated breakdown of music industry emerging platform revenue by Breakdown of global ad-funded streaming by type, US$bn
company/type, 2021 (GSe)

Podcast TikTok 18
6% 13%
16
Gaming 14
19% YouTube Shorts
9% 12
10
Snapchat Spotlight 8
6%

f2f7b3e207d345db88c12137042c6c26
6
Instagram Reels 4
3%
2

Facebook Peloton 0
2023E

2025E

2027E

2029E
2019

2021
2020

2022E

2024E

2026E

2028E

2030E
29% 15%

Video Spotify Pandora Emerging platforms

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

13 June 2022 28
 Goldman Sachs Music in the Air

Exhibit 63: ...as emerging platform revenues grow faster than other Exhibit 64: Meanwhile, music video streaming (mainly YouTube)
types of ad-funded streaming revenues has doubled to 7% of global recorded music revenues in 2021, from
Growth rates on ad-funded streaming revenues, % c.3.5% in 2016
Music video streaming as % of global recorded music revenues, 2016-21

60% 8%

50% 7%

6%
40%

5%
30%
4%
20%
3%
10%
2%
0%
2020

2021

2022E

2023E

2024E

2025E

2028E

2029E

2030E
2026E

2027E 1%
-10%
0%
Emerging platforms Pandora Spotify Video 2016 2017 2018 2019 2020 2021
For the exclusive use of [email protected]

Source: Company data, Goldman Sachs Global Investment Research Source: IFPI Global Music Report 2022, Goldman Sachs Global Investment Research

Short-form video
Music is a core component of short-form video platforms like TikTok or Triller (an
American short-form video app launched in 2015). Since its launch in 2017, TikTok has
reportedly been downloaded more than 3.6bn times (source: SensorTower as of May
2022), and has acquired a global reach of more than 1.2bn monthly active users at the
start of this year (source: Business of Apps). Monthly downloads peaked at 120mn in
March 2020 and have remained constant at around 60mn per month since July 2020. In
the UK, in spite of a highly competitive social media market, TikTok is the leading app in
terms of popularity, with 5.6 hours per week spent on the platform on average. Music
plays an important role on TikTok, where on average music is central to 3.9 hours of the
5.6 hours per week of videos watched on the platform, according to the IFPI Music
Consumer Study 2021. Moreover, last year TikTok consolidated its status as a significant
source of music discovery for fans, as a 2021 AudienceNet/Audiomonitor survey

f2f7b3e207d345db88c12137042c6c26
highlighted that more than a third of respondents that finds out a song on TikTok then
goes to listen to that specific track on a streaming service.

13 June 2022 29
 Goldman Sachs Music in the Air

Exhibit 65: 83.4% of respondents reported they listen to music Exhibit 66: TikTok has experienced exponential increases in MAUs,
weekly, with over half doing so via social media downloads and revenues over the past few years, representing a
AudienceNet/Audiomonitor 2021 survey: responses to doing activity significant revenue opportunity for labels
weekly TikTok MAUs, downloads and revenues (mn)

100% 5000
90% 83.4%
80% 4500
70% 4000
60% 53.2%
50% 3500
40%
30% 3000
20% 2500
10%
0% 2000

Watch e-sports
View social media content

Play sports/exercise

Listen to podcasts

Watch gaming live streams

Watch terrestrial TV

Watch/listen to music (all

Play video games

Listen to music (radio,

content on social media

Watch movies on streaming

Watch/listen to music
phone, laptop, CD)

1500
1000
methods)

platforms

500
0
2017 2018 2019 2020 2021

MAUs Downloads Revenue ($)

For the exclusive use of [email protected]

Source: AudienceNet/Audiomonitor, BPI Source: Business of Apps, Sensor Tower, Data compiled by Goldman Sachs Global Investment
Research

Exhibit 67: TikTok is the most popular short form video platform, Exhibit 68: ...and music is central to 70% of videos on TikTok
although the market has a growing number of competitors... Videos where music is central on TikTok, %
Time spent on platform (hours per week)

0.0 1.0 2.0 3.0 4.0 5.0 6.0

TikTok 5.6
3.9

Snap/Snapchat 4.7
1.8
30%
Shorts (Youtube) 3.6
2.2

2.8 Videos where

Triller music is central,
1.9
70%
Reels (Instagram) 2.8
1.7

Moments (Twitter) 2.3

1.7

Total Videos where music is central

f2f7b3e207d345db88c12137042c6c26
Source: IFPI ‘Music Consumer Study’ 2021 Source: IFPI ‘Music Consumer Study’ 2021

Exhibit 69: TikTok’s downloads have remained resilient after the Exhibit 70: TikTok’s global users broke the 1 billion barrier for the
pandemic, stabilizing at c.60mn per month first time in 2021
Monthly app downloads globally for short-form video - iOS + Android TikTok global users (mn)
(mn)

140 1,400
1,212
120
1,200
100
1,000
80

60 800
689
40
600 508
20
400
0 271
200
55
0
TikTok Jan-18 Dec-18 Dec-19 Dec-20 Jan-22

Source: Sensor Tower Source: Business of Apps

13 June 2022 30
 Goldman Sachs Music in the Air

Video Games / Metaverse

Video gaming has surged since the onset of the pandemic, with data from Verizon
indicating US video game usage during peak hours increased by 75% during the first
lockdown and the growth has remained solid even after the 2020 boom, as the number
of monthly video game players globally reached a record 3.24bn in 2021, up from
approximately 2.77bn in 2020 (source: Statista). Moreover, as video games (from
complex multi-player games to basic smartphone gaming apps) increasingly involve
complex story lines with audio, visual and sensory components, we believe that video
game makers will need access to robust libraries of music to achieve their artistic goals.
Last year, we saw several examples of increasing innovative partnerships between the
music industry and the gaming industry, which also happens to be new use cases of the
metaverse such as: i) Warner Music Group partnership with The Sandbox, a
decentralized gaming platform, in order to create “the first music-themed world” within
The Sandbox gaming metaverse, ii) Fortnite’s collaborations with artists Marshmello and
For the exclusive use of [email protected]

Travis Scott to present immersive virtual concerts and iii) Twitch’s new strategic
partnership with the independent label agency Merlin and renewal of its agreement with
Universal Music Group.

Exhibit 71: In spite of the recent drop, activity from Twitch users Exhibit 72: Over a quarter of adults aged 16 or over watched a
remained well above pre-pandemic levels music livestream in LTM
Twitch average viewers (mn) Livestream engagement (%)

3,500
24.0 60%
25
3,000 20.7 50%
19.2 0% 5% 10% 15% 20% 25% 30% 35%
20 40%
2,500 16.1
14.8 30%
Total 26.1%
2,962 15
2,000 2,767
2,491 20% 16-24 32.2%
2,330
1,500
10 10%
2,081
1,000 25-34 27.6%
0%
5
500 -10% 35-44 28.7%
0 0 -20%
3Q21 4Q21 1Q22 2Q22 3Q22
Jan-20

Jun-20

Jan-21

Jan-22
Jun-21
Mar-20

Jul-20

Mar-21

Mar-22
Feb-21

Feb-22
Feb-20

Aug-20
Sep-20

Jul-21

Sep-21

May-22
Apr-20
May-20

Oct-20

Apr-21
May-21

Aug-21

Oct-21

Apr-22
Nov-20
Dec-20

Nov-21
Dec-21

45-54 25.3%
onthly workout per sub

f2f7b3e207d345db88c12137042c6c26
55-64 17.6%
Average Viewers Sequential Growth

Source: Company data, Goldman Sachs Global Investment Research Source: IFPI Music Consumer Study 2021, Data compiled by Goldman Sachs Global Investment
Research

13 June 2022 31
 Goldman Sachs Music in the Air

Exhibit 73: Examples of music-related virtual experiences & collaborations on Roblox, Fornite & Minecraft
Date Announced Platform Category Name
Feb-19 Fortnite Concert DJ Marshmello
Apr-20 Minecraft Concert Nether Meant
Apr-20 Fortnite Concert Travis Scott
May-20 Minecraft Music festival Block by Blockwest
Sep-20 Roblox Music Ava's Launch Party
Nov-20 Fortnite Concert Lil Nas X
Apr-21 Minecraft Education/Music College Green
May-21 Roblox Music Zara Launch Party
Jul-21 Roblox Music Sony
Aug-21 Roblox Music KSI launch party
Aug-21 Fortnite Music tour The Rift Tour FT. Ariana Grande
Aug-21 Fortnite Concert J Balvin
Sep-21 Roblox Concert 21 Pilots
Sep-21 Roblox Concert (Qishu) Launch Party
For the exclusive use of [email protected]

Sep-21 Roblox Concert Listening Parties

Oct-21 Roblox Music festival Electric Daisy Concert
Oct-21 Fortnite Concert Soundwave
Nov-21 Roblox Concert Verder Concert

Source: Company reports, Goldman Sachs Global Investment Research

Connected Fitness
Lifestyle and fitness companies like Peloton, Equinox, Orange Theory, Barry’s and Soul
Cycle all utilise music to a large degree in their business models. We see connected
fitness, and boutique fitness classes more broadly, as a growth opportunity for music
labels. For instance, Peloton downloads increased >5x during the peak of the pandemic
and as of April 2022 were still c.45% higher than pre pandemic in April 2019. In addition,
connected fitness subscriptions on Peloton continued their sequential increase even
after COVID-19 lockdowns, as in the three months ending March 2022 the number
reached a record 2.96mn, up from 2.77mn in the prior quarter. Average monthly

f2f7b3e207d345db88c12137042c6c26
workouts per subscriber were 20.7 in the January-March 2022 period, up from 14.8 in
the previous quarter and well above the 13.9 reported in the same period in 2019. We
estimate Peloton currently pays around US$230mn in annual fees (c.20% of Peloton’s
subscription revenue) to the recorded music industry with the potential to grow
significantly over time as the business model matures.

13 June 2022 32
 Goldman Sachs Music in the Air

Exhibit 74: Despite the recent dip, Peloton downloads remain Exhibit 75: Connected fitness subscriptions maintained their steady
higher than pre-COVID levels growth after the pandemic demand boom
Monthly app downloads globally for fitness - iOS + Android (mn) Peloton’s connected fitness subscriptions and average monthly workout
per subscriber (mn; FY ending June)

0.6 3,500 30

0.5 3,000 24.0

23.5 25
20.7
0.4 2,500 19.6 19.2
20
16.6 19.4
16.1
0.3 2,000 14.8
13.9 2,962 15
12 11.4 11.4 2,767
0.2 1,500 2,491
9.7 2,330
8.9
10
1,000 2,081
0.1 1,667
1,334 5
500 1,091
0 712 886
277 362 457 511 563
Jul-19

Jul-20

Jul-21
Jan-19

Jan-20

Jan-22
Mar-19

Jan-21
Mar-20

Mar-21

Mar-22
Sep-19

Sep-20

Sep-21
May-19

May-20

Nov-20

May-21

Nov-21
Nov-19

0 0
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22

Peloton Connected fitness subscriptions Avg monthly workout per sub

For the exclusive use of [email protected]

Source: Sensor Tower Source: Company data, Data compiled by Goldman Sachs Global Investment Research

Podcasts
Recently, long-form audio has been a focus for DSPs, particularly Spotify which has
invested over US$1bn in its podcast portfolio as of January 2022. Out of this,
US$600mn was spent on US podcast-related acquisitions in the trailing 12 months to
February 2020 (source: Statista). The company increased its podcast offering by 4.6mn
(number of podcasts available on the platform) between December 2019 to March 2022,
up 53% yoy. In addition, during its 1Q22 results call, Spotify highlighted that the podcast
share of overall consumption hours on the platform reached all-time record levels during
the quarter, driven by strong growth in Latin America and Asia. In terms of podcast
MAUs, Spotify saw record numbers in the quarter ending March 2022, with the
company disclosing podcast MAUs grew double-digits and at a rate higher than total
Spotify MAUs.

f2f7b3e207d345db88c12137042c6c26
According to the Interactive Advertising Bureau (IAB), podcast ad revenues increased to
US$1.4bn (+72% yoy) in 2021 and the advertising podcast sector is expected to exceed
US$2bn in 2022 and US$4bn by 2024. The rise in the popularity of podcasts is due to
the improved and more targeted advertising available to users on the back of the
increasing use of automation solutions which enables them to provide better
authenticity of messaging in combination with the improved scalability and flexibility of
automated buying. As such, we believe podcasts could present incremental revenue
opportunities for music content owners through the development of music-themed
podcasts.

13 June 2022 33
 Goldman Sachs Music in the Air

Exhibit 76: Spotify’s podcast offering increased significantly since Exhibit 77: Ad revenue from podcasts comes from a diversified
December 2019 range of sectors
Number of podcasts offered, mn Podcast ad revenue share by sector, %

5 30%
4.6
5 25%
20%
4
15%
4
6.6x 10%
3 5%
3 2.2 0%

Telco

Restaurants

Other
B2B
CPG

Travel
Healthcare
Retail (Direct-to-

Retail (Direct-to-

Automotive
Financial Services

Arts, Entertainment,

Professional Services
2

Consumer)

Consumer)
Media
2

1 0.7
1

0
Dec-19 Dec-20 Mar-22 2020 2021

Source: Company data, Data compiled by Goldman Sachs Global Investment Research Source: Interactive Advertising Bureau, Data compiled by Goldman Sachs Global Investment
For the exclusive use of [email protected]

Research

f2f7b3e207d345db88c12137042c6c26

13 June 2022 34
 Goldman Sachs Music in the Air

Digital distribution: increased differentiation, improved pricing

In 2021, the music streaming landscape remained dominated by a handful of large

global/regional players, exhibiting “no winner takes all” characteristics. Looking forward,
we anticipate differentiation and segmentation between the major players to increase,
as they each focus on their relative strengths, helping drive improved pricing in the
industry. For instance, Apple Music is focused on iOS users, bundles with other Apple
products and sound quality; Spotify is positioning itself as the leading audio streaming
service (music and podcasts) and appeals to younger audiences; YouTube is focused on
increasing monetisation in ad-supported and cross-marketing YouTube Music, and
Amazon Music is a beneficiary of the increased adoption of smart speakers.

Spotify remains the clear leader with 180mn paid users globally implying 34.4% market
share. Its share loss however accelerated in 2021 despite its expansion into 85 new
For the exclusive use of [email protected]

markets, down 130bp yoy compared to -70bp in 2020 and -120bp in 2019. The company
has reported solid revenues and subscriber figures broadly in line with market
expectations so far this year (see our analysts’ take here), guiding to 187mn paid users
at the end of 2Q22, implying 5mn of net adds.

Apple Music regained momentum last year, maintaining its market share at 17.4%
(-10bp yoy) on our estimates, having conceded over 290bp share across 2019-2020. We
believe that this has been driven by increased marketing efforts around the service,
particularly around improved sound quality features on the platform following the launch
of spatial and lossless audio at no extra cost in June 2021, as well as the success of the
Apple One bundled product. We note that Apple Music reduced its three-month trial
period earlier this year for new subscribers to one month in a number of major markets
including the US, Canada, Australia, UK and Japan amongst other, marking the first
reduction since the launch of the service in 2015 and bringing the duration in line with
Spotify. According to 9to5 Mac, this change presents an attempt by Apple to convert its

f2f7b3e207d345db88c12137042c6c26
customers into paying subscribers quicker as it is reportedly taking some share from
Spotify currently. Apple however still offers extended trials of up to 6 months for new
customers who take one of the Apple Music bundles with an eligible audio product (e.g.
Beats, Airpods etc).

YouTube Music was the major share gainer outside of China with 61mn paid accounts
on our estimates, from 48mn in 2020, implying 60bp of share gain to 11.7%. YouTube
reported >50mn YouTube Music/Premium accounts in September 2021, driven by
particularly strong growth in emerging markets and younger users.

Amazon Music maintained market share at 6.3% with 33mn paid accounts on our
estimates. In April 2022, Amazon Music raised prices for its Unlimited Music
subscription for Prime members across some of its major markets including the US, the
UK and Canada (+13% for the individual plan to US$8.99pm from US$7.99pm or to
US$89 from US$79 for customers with an annual Prime subscription and +25% for the
single-device plan), while the price of Unlimited Music without Prime remained
unchanged. Amazon was previously offering a discount on Unlimited Music to its Prime
customers so the price increases (effectively removing the prior discount) did not

13 June 2022 35
 Goldman Sachs Music in the Air

benefit music companies such as UMG or Sony Music.

Within China, the pace of net additions accelerated for Tencent Music and NetEase,
with these services recording the largest global share gains of 170bp/180bp to
14.6%/5.5% respectively in 2021. We believe this was largely driven by increased
marketing and improving the conversion of users to the paid service via offering price
discounts. In 2021, Tencent Music and NetEase Cloud ARPU declined by 5%/20% yoy,
and on a comparative basis are 27%/21% of Spotify’s level, down from 28%/25% in
2020.

The long tail of smaller streaming services has been consolidating in recent years
to c.250 globally from 400 in 2015. We estimate that these services lost c.300bp of
share in 2021, given rising competition from Apple Music and Spotify which have
expanded into 52 and 82 new markets over the last 2 years, respectively, as well as
from the increased success of YouTube Premium. Within the mix, we note growing
For the exclusive use of [email protected]

momentum for emerging regional streaming services such as Boomplay and Resso. For
instance, Boomplay, Africa’s leading music streaming service, counts >60mn MAUs
and has been expanding its catalogue rapidly (now has over 65mn tracks), having signed
new licensing agreements with UMG and Merlin covering 47 countries across Africa
(from 7 and 11 previously) in 2021. Resso, ByteDance’s streaming platform in India and
Indonesia, has experienced rapid growth in these markets despite the crowded
competitive landscape. We see notably a significant long-term streaming
opportunity within India, as device penetration and broadband infrastructure improves
especially outside the major cities. Resso had 168mn total installs on the App Store and
Google Play as of the end of April 2022 despite only launching in March 2020, according
to data from Sensor Tower.

Looking ahead, we expect Spotify to lose c.30bps of share in 2022 to 34.1% and retain
its clear leadership over time with 26.0% share of subs in 2030. We forecast Apple
Music will fall to 3rd place over time with its share gradually eroding to 14.5% in 2030.

f2f7b3e207d345db88c12137042c6c26
We forecast Tencent Music’s share to rise the most (+440bp vs. 2021) to 19.0% by
2030 and become the second-largest player globally. Outside of China, we believe
YouTube Music will be the largest share taker (+220bp vs. 2021) reaching 13.9% by
2030, driven by successful cross promotion and conversion from its ad funded service.
We expect Amazon Music to slightly increase market share, with the platform driving
net adds through its bundle offerings and increased smart speaker listening. Amongst
the long tail of smaller players, we expect further consolidation with share decreasing by
>200bp to c.5% in 2030.

13 June 2022 36
 Goldman Sachs Music in the Air

Exhibit 78: We expect further fragmentation amongst the top DSPs but consolidation within the long tail
Streaming subscriber market share by platform, %

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%
For the exclusive use of [email protected]

0%

2022E

2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
2017

2018

2019

2020

2021
Spotify Apple Music YouTube Music Tencent Music NetEase Others

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 79: We expect Spotify to remain the clear leader, with YouTube Music and Tencent Music the main
share gainers
Streaming subscribers by platform (in millions)

1,400

1,200

1,000

800

600

f2f7b3e207d345db88c12137042c6c26
400

200

0
2022E

2023E

2024E

2025E

2026E

2027E

2028E

2029E

2030E
2017

2018

2019

2020

2021

Spotify Apple Music YouTube Music Tencent Music Amazon Music NetEase Other players

Source: Company data, Goldman Sachs Global Investment Research

13 June 2022 37
 Goldman Sachs Music in the Air

Exhibit 80: Spotify’s monthly app downloads have picked up since Exhibit 81: Emerging regional players such as Resso and Gaana
mid 2021, while Amazon Music has remained resilient have seen strong growth in app downloads over the last few
Monthly app downloads globally - Android + iOS (mn) months
Monthly app downloads globally - Android + iOS (mn)

35 14

30 12

10
25
8
20
6
15
4
10
2
5
0

Jan-19

Jan-20

Jan-21

Jan-22
Mar-19

Jul-19

Mar-20

Jul-20

Mar-21

Jul-21

Mar-22
Sep-20

Sep-21
Sep-19
May-19

May-20
Nov-19

May-21

Nov-21
Nov-20
0

Deezer Tidal
150% Boomplay Resso
Spotify Amazon Music Youtube Music Gaana Tencent Music (QQ Music, KuGou, Kuwo)
125% NetEase Melon
For the exclusive use of [email protected]

Source: SensorTower Source: SensorTower

f2f7b3e207d345db88c12137042c6c26

13 June 2022 38
 Goldman Sachs Music in the Air

Record labels: majors increase market share

Top 3 labels consolidate their leadership

Whilst the music industry continues to go through significant changes, with the
democratisation of music enabling the rise of the DIY and independent artists, we
believe that record labels continue to play an essential and integral role in the discovery
and development of recording artists and the related marketing, promotion, distribution,
sale and licensing of music created by such recording artists given their scale, global
reach and strong relationships with TV/movie producers and advertising agencies. Our
analysis of market share data shows that the major labels’ market shares have been
broadly stable since 2015. In 2021, we calculate a share gain of 280bps, reversing
the 190bp share loss in 2020. We note that this measures labels’ share of owned and
distributed music, with the contribution from music distributed on behalf of independent
For the exclusive use of [email protected]

labels likely to have increased over the period.

UMG was the largest record company in 2021, with market share up 10bp yoy to
31.2%, and has remained broadly at that level since 2019. Sony was the major gainer
with a 210bp increase in 2021 to 22.7%, reversing the negative momentum of the
previous 7 years, although these market share swings have been partly driven by
differences and changes in accounting for distributed content. WMG also gained
market share, up 60bp to 18.4% in 2021, partly reversing a sharp 150bp decline in
2020; WMG had been gaining share across 2015-2019. Believe, an independent label,
continued solid market share gains of 30bp yoy to 2.6%, up from 1.5% in 2018.

Within the streaming market, the top 3 majors gained 150bp market share in 2021
to 73%, which is higher than their share of global recorded music (72%). Previously
however, their market share declined from 89% in 2015 to 72% in 2020, which we
believe was mainly the result of (i) the majors being early adopters of streaming, with

f2f7b3e207d345db88c12137042c6c26
their share eroding over time as competitors caught up, (ii) growing contribution of EM
to the global streaming market and (iii) growing amount of content on streaming
platforms (60,000 songs were uploaded every day on Spotify in 2021 or nearly 1 song
per second, up from 40,000 songs in 2019). At the same time, however, the sheer
volume of music being released on digital music services is making it harder for artists
to stand out and get noticed, highlighting the crucial role of major record labels. For
instance, only 1,040 artists generated over US$1mn in royalties on Spotify in 2021, with
the implied share as a % of total content creators on Spotify going down to 0.009% in
2021 from 0.015% in 2017.

Despite the strong performance last year, going forward we believe that the
majors could see some modest share erosion, mainly driven by: (i) the surge in music
streams volume led by the rise of entry-level and mid-tier artists and (ii) EM growth
continuing to outpace that of DM. We estimate the majors’ market share in EM is about
half their market share in DM. This will not drive a major change in industry
dynamics, however, in our view, with the majors likely to remain by far the
dominant players given their existing scale and infrastructure as well as the strength
and depth of their catalogues, while we note that they have been investing more

13 June 2022 39
 Goldman Sachs Music in the Air

aggressively into indies & local artists, particularly in EM.

As a result, we do not foresee a major change in royalty rates (52% on average) in the
medium term given the competitive dynamics in the recorded music and streaming
market as discussed above. We believe record labels will have a vested interest in
keeping a minimum level of competitive tension among platforms. Over time, we
believe major labels’ artist discovery, curation, and marketing capabilities and high
market share concentrations should allow them to defend the status quo in future
negotiations.

Exhibit 82: The top 3 labels accounted for 72.2% of the recorded Exhibit 83: The top 3 labels gained a combined 280bps of market
music market share in 2021
Global recorded music market shares, 2021 Global recorded music market share

40%

35%
For the exclusive use of [email protected]

30%
Others
28% UMG 25%
31%
20%

15%

10%
WMG 5%
18%
Sony
23% 0%
2014 2015 2016 2017 2018 2019 2020 2021

UMG Sony WMG Believe Other Independents

Source: Company data, Goldman Sachs Global Investment Research, IFPI Global Music Report Source: Company data, Goldman Sachs Global Investment Research, IFPI Global Music Report
2022 2022

Exhibit 84: The top 3 majors accounted for 73% of global streaming Exhibit 85: The majors’ average streaming revenue growth has
revenues in 2021, up 150bp yoy outpaced Spotify’s revenue growth since 1Q21, having lagged in
Global streaming market share previous years
Streaming revenue growth for the 3 majors (average) vs. Spotify and
Spotify’s cost of revenue growth yoy

f2f7b3e207d345db88c12137042c6c26
10.0%
40%
50%
45%
35% 5.0% 40%
30% 35%
30%
25% 0.0%
2015 25%
20% 20%
15%
15%
10%
10% 5%
5% 0%
4Q20
1Q21
2Q21
3Q21
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20

4Q21
1Q22

0%
2015 2016 2017 2018 2019 2020 2021 Average label streaming organic growth
Spotify COR growth
UMG SMG WMG Believe Other Independents
Spotify constant fx revenue growth

Source: Company data, Goldman Sachs Global Investment Research, IFPI Global Music Report Source: Company data, Goldman Sachs Global Investment Research
2022

13 June 2022 40
 Goldman Sachs Music in the Air

Exhibit 86: The majors accounted for 65% share of streams on Spotify’s Global Top 50 chart, increasing to
90% when excluding Bad Bunny’s new album; Sony Music is the major share gainer so far this year
Spotify Global Top 50 playlist market share as of May 30, 2022
Including Bad Bunny's new album 'Un Verano Sin Ti'

Spotify’s Global Top 50 playlist

Market Share %
Labels # of Streams # of Artists
# of Streams # of Artists
UMG 17,742,954 7 13% 14%
Sony 60,988,302 23 44% 46%
WMG 11,035,222 4 8% 8%
Others 48,187,237 16 35% 32%

Excluding Bad Bunny's new album 'Un Verano Sin Ti'

Spotify’s Global Top 50 playlist

Market Share %
Labels # of Streams # of Artists
# of Streams # of Artists
UMG 17,742,954 7 18% 19%
For the exclusive use of [email protected]

Sony 60,988,302 23 61% 62%

WMG 11,035,222 4 11% 11%
Others 9,700,257 3 10% 8%

Source: Spotify, Data compiled by Goldman Sachs Global Investment Research

Exhibit 87: The democratisation of music with the growth of Exhibit 88: ... but the share of artists generating over US$1mn is only
streaming has enabled many more artists to generate income from 0.009% and has been decreasing since 2017
their work outside of touring... Number of artists generating $50k, $100k or $1mn in royalties as a % of
Number of artists generating $10k, $100k, $1mn or $5mn in royalties on total number of content creators on Spotify
Spotify

60,000 0.90%
52,600 0.78%
0.80%
50,000
0.70%

40,000 0.60%

0.50% 0.48%
30,000
23,400 0.40%

20,000 0.30%
0.14%

f2f7b3e207d345db88c12137042c6c26
9,500 0.20%
10,000
4,300 0.09% 0.015% 0.0017%
0.10%
1,040 130 0.009% 0.0012%
460 50
0 0.00%
>$10k in royalties >$100k in royalties >$1mn in royalties >$5mn in royalties >$10k in royalties >$100k in royalties >$1mn in royalties >$5mn in royalties

2017 2021 2017 2021

Source: Spotify, Data compiled by Goldman Sachs Global Investment Research Number of content creators: 3mn in 2017, 11mn in 2021

Source: Spotify, Data compiled by Goldman Sachs Global Investment Research

13 June 2022 41
 Goldman Sachs Music in the Air

Top 3 publishers lost share in 2021

Similar to record labels, we believe music publishing companies will continue to play an
important role in the promotion, placement, marketing and administration of musical
compositions of which they own/share the rights with songwriters, particularly given the
complexity and fragmentation of the songwriting royalty collection systems around the
world. Here, we believe the top 3 publishers will also retain their leading position given
the strength of their catalogues, which is extremely difficult to replicate. While leading
independent publisher BMG has significantly expanded its catalogue (owned/and or
distributed) in recent years to 3mn songs, representing as many songs as UMGP and
twice as many as Warner Chappell, we calculate that BMG generates 3x less revenue
per song than the two major publishers.

We estimate that the top 3 publishers lost 220bp of market share in 2021, reversing the
c.300bps market share gain in 2020, having seen share erosion across 2014-19.
For the exclusive use of [email protected]

Exhibit 89: The Top 3 Publishers commanded 60% market share in Exhibit 90: We estimate that the top 3 publishers lost 220bp of share
2021 in 2021, having gained c.300bp in 2020
Global music publishing market share, 2021

50%

45%

40%

Other 35%
Independents, UMG, 23%
26% 30%

25%

20%
BMG, 7% 15%
Sony, 25%
10%
Kobalt, 7%
5%

Warner, 12% 0%
2014 2015 2016 2017 2018 2019 2020 2021

UMG Sony WMG Independents

Source: Music & Copyright, Company data, Goldman Sachs Global Investment Research Source: Music & Copyright, OMDIA, Company data, Goldman Sachs Global Investment Research

f2f7b3e207d345db88c12137042c6c26
Exhibit 91: While leading independent publisher BMG represents Exhibit 92: ... the top 3 publishers generate far more revenue per
as many songs as UMGP and twice as many as Warner Chappell... song than BMG
Number of songs owned and/or distributed by publisher Revenue per song, 2021 (US$)

700

5mn 600

500

400
3mn 3mn

300

200
>1.4mn

100

0
Warner Chappell UMPG SMPG BMG
SMPG UMPG BMG Warner Chappell

Source: Company data, compiled by Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

13 June 2022 42
 Goldman Sachs Music in the Air

Catalogue investments marking a major shift

What has been driving the surge in catalogue acquisitions?

Music publishing catalogues have quickly gained momentum as an attractive asset class
for investors, with transactions ranging from large catalogue mergers and acquisitions
through to investment vehicles for songwriters’ shares. In 2021, the total spend on
music catalogue and rights was estimated to be US$5.05bn (source: Music Business
Worldwide), with around half of this value being spent on acquisitions of rights directly
from artists, songwriters and/or their estates. We believe that the increase in the
number and value of music catalogue acquisitions in the past few years has been driven
by the (i) shift to streaming which has further increased songs discoverability, the
revenue pool and predictability of cash flows, (ii) low interest rate environment, and (iii)
increased monetisation opportunities for catalogue songs (e.g. sync, performance and
For the exclusive use of [email protected]

emerging digital platforms), especially by major labels. Meanwhile, the availability of

music catalogues has increased as artists sought alternative revenue streams amid
pandemic-related restrictions which limited their ability to perform and tour; however,
we believe that the availability of superstar catalogues is now becoming more scarce.

n The shift to streaming provides increased revenue pools and predictable cash
flows

The rise of streaming has led to a shift in consumption towards catalogue music (i.e.
songs older than 18 months), a trend which has continued into 2021 in markets such as
the UK where catalogue’s share of audio track streams increased to 72% (vs 60.3% in
2019) and in the US where catalogue accounts for 75% of total US music consumption
(vs. 64% in 2019). A song typically goes through a product life cycle stage where sales
peak in the period of release, reach maturity (or saturation) and then enter a recession
period; however, it has potential to enter a re-growth period if discovered once again.

f2f7b3e207d345db88c12137042c6c26
Given millions of songs are now stored and readily available on a digital platform, they
become instantly searchable and discoverable regardless of their age, significantly
extending the song’s life cycle. Moreover, historical streaming data is easy to access
and verify, resulting in an improved ability to predict future cash flows by taking into
account past cash flows, music genre, age of catalogue, opportunities to improve future
monetisation and concentration of earnings.

13 June 2022 43
 Goldman Sachs Music in the Air

Exhibit 93: In the UK, catalogue’s share of audio track streams has Exhibit 94: ...and catalogue accounts for 75% of the total US music
been steadily rising to 72% in 2021... consumption across formats by volume...
Catalogue’s share of audio track streams - UK US Total Album Equivalent Consumption (mn)

80% 1000 75% 80%

Total Album Equivalent Consumpton - US

72%
900 66% 70%
70% 63% 64%
65.6%
800
60.3% 55% 55% 60%
60% 55.3% 56.5% 700
53.3%
600 50%
50%
500 40%
40% 400 30%
300
30% 20%
200
20% 100 10%

0 0%
10%
2016 2017 2018 2019 2020 2021

0% Catalogue (in mn) Current (in mn) % catalogue

2016 2017 2018 2019 2020 2021
For the exclusive use of [email protected]

Source: BPI Source: Luminate, Goldman Sachs Global Investment Research

Exhibit 95: Increased share of catalogue streams in 2021 were songs

from 2010s, which suggests that an average song today would
generate around half of its cash flows in the first 10 years
Catalogue streams by decade (2010s exclude the last 18 months)
53.7%
51.4%

60%
49.1%

50%

40%

30%
19.4%
17.7%
17.1%

20%
9.9%
9.4%

9.2%
9.2%
9.0%

8.8%

7.6%
7.4%
7.0%

4.1%
4.1%
3.7%

10%
0.7%
0.6%

0.6%

0.1%
0.1%
0.1%

0%
2010s 2000s 1990s 1980s 1970s 1960s 1950s 1940s

2019 2020 2021

f2f7b3e207d345db88c12137042c6c26
Source: BPI

n Low interest rates environment

A DCF model is typically used to value a music catalogue, with a variety of factors being
considered. In particular, the acquirer will assess the age of catalogue, length of the
rights being acquired, music genre, the opportunity to improve future monetisation and
concentration of earnings. As such, the low interest rates environment in recent years
has played a key role in driving the surge in catalogue acquisitions and valuation
multiples. Financial and strategic players have deployed significant amount of capital in
the space, pushing music publishing catalogue valuations to 18-20x (Hipgnosis’ most
recent blended acquisition multiple is 19.0x) EV/NPS, from 8-12x historically.

13 June 2022 44
 Goldman Sachs Music in the Air

Exhibit 96: Transaction multiples have markedly risen over the past Exhibit 97: ... as reflected in the evolution of Hipgnosis’ blended
3 years for music catalogue assets... catalogue acquisition multiples
Historical transaction multiples for music catalogue Based on EV/Net Publisher Share

20 19.0 20 19.0
18.3 18.0
18
16 15.0 15.6
16 14.8
12.0 14 12.8
12
12

8 10

8
4
6

4
0
Concord acquires Round Hill acquires SMG acquires EMI Hipgnosis acquires 2
Imagem (2017) Carlin (2018) (2018) Kobalt's catalogue
(2020) 0
EV/Net Publisher Share Income EV/EBITDA Sep-19 Sep-20 Jan-21 Jun-21 Dec-21

Source: Company data, Music Business Worldwide, compiled by Goldman Sachs Global Source: Company data, Data compiled by Goldman Sachs Global Investment Research
For the exclusive use of [email protected]

Investment Research

n Music catalogues have become more valuable and attractive for strategic and
financial players

The main players driving consolidation in recent years included specialist investment
companies and independent music companies (e.g. Hipgnosis Songs, Concord MG,
Round Hill, Kobalt Music Capital, Reservoir Media, Lyric Street, and Primary Wave),
often backed by large PE institutions. However, more recently, traditional record labels
have entered the space and stepped up their investments more aggressively. For
instance, UMG spent US$459mn on catalogue acquisitions in 2021, following a record
spend of US$1.1bn in 2020. Sony Music spent US$1.4bn on music acquisitions
(including Paul Simon’s catalogue) between December 2020-May 2021 and reportedly
paid US$550mn for Bruce Springsteen’s catalogue alone in December 2021 (source:
Music Business Worldwide). WMG acquired David Bowie’s publishing catalogue for
more than US$250mn in January 2022 (source: FT) and spent more than US$100mn for

f2f7b3e207d345db88c12137042c6c26
David Guetta’s recording catalogue in June 2021. Sony Music CEO recently commented
at an investor event that these deals are not a flip response to the increased activity in
the market, rather that they are being very strategic and selective in their acquisitions.

13 June 2022 45
 Goldman Sachs Music in the Air

Exhibit 98: Major music companies and IP investment companies have raised $6.4bn total funding for
catalogue acquisitions over the last 3.5 years ...

Companies Date Funding for catalog acquisitions

Raised $535mn via a senior secured notes agreement to spend on potential acquisitions of certain
WMG Nov-21
music-related assets

HarbourView/A HarbourView raised $1bn, backed by Apollo, to invest in music copyrights and other entertainment
Oct-21
pollo assets

Primary
Oaktree Capital committed $375mn to Primary Wave to support catalog acquisitions, in exchange
Wave/Oaktree Jun-21
for a minority interest
Capital

BMG/KKR Apr-21 Committed $1bn in total to spend solely on catalog, with no upper limit on capital

Hipgnosis Raised c.$426mn in 2020 and $100mn in 2021 through equity and increased revolving credit
Feb-21
Songs Fund facility from $400mn to $600mn in 2021 for potential catalog acquisitions
For the exclusive use of [email protected]

Round Hill Nov-20 Raised $291mn of funding to finance acquisitions of individual catalogs

Concord Aug-20 Raised $600mn through debt offering partially to fund acquisitions

Launched Tempo Music Investments in partnership with Providence Equity Partners - $650mn
WMG Dec-19
fund (equity and debt) focused on catalog acquisitions

Launched its IP Fund 2 to support further catalog acquisitions raising > $500mn, which followed its
Primary Wave Nov-19
first IP Fund in 2016 with > $300mn in funds

Source: Music Business Worldwide, compiled by Goldman Sachs Global Investment Research

Exhibit 99: There has been c.$700mn of disclosed catalogue

transactions 2022 YTD
Value of disclosed catalogue transactions, $bn

1.8

1.6

1.4

f2f7b3e207d345db88c12137042c6c26
1.2

1.0

0.8

0.6

0.4

0.2

0.0
2020 2021 2022 YTD

Source: Music Business Worldwide, compiled by Goldman Sachs Global Investment Research

13 June 2022 46
 Goldman Sachs Music in the Air

Exhibit 100: The value and number of (disclosed) transactions have increased significantly in the past 24 months
Date Company Catalogue Amount Details

Hipgnosis The deal gives Hipgnosis Songs Capital full control and ownership over Timerblake's
May-22 Justin Timberlake >$100mn
Songs Capital interest in 200 songs he has written and co-written during his career
SMP/Domain SMP & Domain Capital acquired another 50% (now own 100%) of the song rights for
May-22 Ashley Gorley $40mn
Capital Gorley's music
MBMG acquired 50% stake in the song interests of Bobby Gillespie, Andrew Innes and
Apr-22 BMG Primal Scream Undisclosed
Robert Young

Mar-22 UMG Nat King Cole $10-$20mn UMG acquired recording rights to c.200 songs of Nat King Cole

Hipgnosis
Mar-22 Leonard Cohen Undisclosed Hipgnosis Songs Capital acquires his songwriting catalogue
Songs Capital

Feb-22 UMG Neil Diamond Undisclosed UMG acquired Neil Dimanod's compelte song catalogue and all master recordings

Feb-22 UMG Sting $300mn UMG acquired the publishing rights to Sting's entire song catalogue

Hipgnosis
Jan-22 Kenny Chesney Undisclosed Hipgnosis acquired 80% of Kenny Chesney's recorded music royalties
Songs Capital

Jan-22 WMG David Bowie $250mn WMG acquired the global music publishing rights to David Bowie's song catalogue

Dec-21 SMG Bruce Springsteen $500-550mn Sony acquired Bruce Springsteen's masters and publishing rights

Nov-21 BMG Motley Crue $90mn BMG acquried 100% of the recordings catalog of Motley Crue

The deal includes the artist's share of her recordings, plus her music publishing writer's
Oct-21 BMG Tina Turner c.$50mn
share
For the exclusive use of [email protected]

Sep-21 Round Hill The O'Jays Undisclosed Round Hill acquired 100% of the master royalty income of 532 original recordings

Hipgnosis
Jul-21 Red Hot Chili Peppers c.$140mn Hipgnosis Songs Capital acquired 100% of the publishing rights
Songs Capital
WMG acquired David Guetta's entire recordings catalogue and agreed a deal for future
Jun-21 WMG David Guetta $100mn
recordings
Hipgnosis
May-21 Andy Wallace $11mn Hipgnosis Songs Capital acquired 100% of his Producer, Mixer and Performance rights
Songs Capital

Mar-21 SMG Paul Simon c.$250mn Sony acquired Paul Simon's entire publishing catalogue

Mar-21 Hipgnosis Carole Bayer Sager c.$8-$10mn Hipgnosis acquired the music publishing catalog (100% share)

Feb-21 Hipgnosis Andrew Watt c.$45mn Hipgnosis acquired 105 songs (100% ownership) from Andrew Watt

Jan-21 Hipgnosis Shakira Undisclosed 100% of Shakira's music publishing rights (both publishing and writer's share)

Jan-21 Hipgnosis Lindsey Buckingham Undisclosed 100% of Lindsey Buckingham's publishing rights (both publishing and writer's share)

Jan-21 KKR Ryan Tedder $200mn KKR acquired a majority stake in Ryan Tedder's music catalogue

50% of Neil Young's global copyrights and income interests (both publisher and writer's
Jan-21 Hipgnosis Neil Young $150mn
share)

Dec-20 UMG Bob Dylan $400mn Publishing rights of Bob Dylan's songwriting catalogue (around 600 copyrights)

Dec-20 Primary Wave Stevie Nicks c.$80mn Primary Wave acquired a 80% stake in Stevie Nicks' publishing catalogue

Catalogue from Kobalt 33,000 songs / cuts in songs from Kobalt, acquired at 18.3x blended acquisition multiple
Nov-20 Hipgnosis $323mn
Music Copyrights on historical income; it excludes the SONGS publishing catalogue

Sep-20 Reservoir Sorted Noise Undisclosed Reservoir acquired Sorted Noise's catalogue of masters and publishing copyrights

f2f7b3e207d345db88c12137042c6c26
Sep-20 Spirit Music Tim McGraw Undisclosed Spirit Music Group acquired a number of Tim McGraw's master recordings

Concord Music Publishing acquired the back catalogue of Imagine Dragons (writer's and
Aug-20 Concord Imagine Dragons > $100mn
co-publishing share in perpetuity, with the other co-publishing share owned by UMG)

Spirit Music Group acquired a large portion of Kara DioGuardi's publishing catalogue,
Aug-20 Spirit Music Kara DioGuardi Undisclosed
excluding future works
Young Money UMG reportedly acquired Young Money Entertainment catalogue, includings records from
Jun-20 UMG > $100mn
Entertainment Drake, Nicky Minaj, and Young Money

May-20 Reservoir Shapiro Bernstein Undisclosed Reservoir acquired Shapiro Bernstein, including > 16,000 copyrights

Concord Music Publishing bought a majority stake in Pop Publisher Pulse from Fujipacific
Jan-20 Concord Pop Publisher Pulse > $100mn
Music
Reservoir acquired Chrysalis Records, including both its music publishing and recorded
Aug-19 Reservoir Chrysalis Records Undisclosed
music operations (> 20,000 recordings)
WMG acquired the Slovakian Entertainment company Forza Music, including the former
Jul-19 WMG Forza Music Undisclosed state-run record company OPUS with a large portion of the country's music releases
produced over 1960-1990s
Warner Chappell Music acquired Gene Autry Music Group comprising of 4 publishing
May-19 WMG Gene Autry Music Group Undisclosed
companies with catalogues containing > 1,500 songs
Sony acquired the final 60% of EMI Music Publishing from an investor consortium for
Nov-18 SMG EMI $2.3bn $2.3bn. It owned 40% beforehand, 10% acquired in Jul 2018 for $287.5mn from Micheal
Jackson Estate
Marley's songs and Blue
Jan-18 Primary Wave $50mn Primary Wave acquired 80% of Island Records' share in two publishing catalogues
Mountain Music

Jan-18 Round Hill Carlin Music $240mn Round Hill acquired independent publisher Carlin Music, with > 100,000 copyrights

Dec-17 Kobalt SONGS Music Publishing $160mn Kobalt Capital acquired the catalogue of SONGS Music Publishing

Concord fully acquired Imagem Music Group, with copyrights of 250,000 works, implying
Jun-17 Concord Imagem > $500mn
multiple of c.12x on gross profit (net publisher share)
Concord merged with The Bicycle Music Company, and simultaneously raised $100mn to
Apr-15 Concord Bicycle Merger fund further growth in rights acquisitions. The combined entity owned copyrights of 60,000
songs at the time

Source: Music Business Worldwide, compiled by Goldman Sachs Global Investment Research

13 June 2022 47
 Goldman Sachs Music in the Air

What are musicians selling?

Each song has two copyrights - the master recording which is owned by the record labels (most often in
perpetuity) and the song composition. A songwriter can either sign a co-publishing deal, where the
copyrights belong to the publishing company, or an administration deal, where the songwriter retains
ownership of these copyrights. Most catalogue transactions have involved the songwriter rights rather
than the master recording. By also acquiring the songwriter rights, record labels often gain greater
freedom and flexibility in promoting and monetising the catalogues whilst saving c.20% in publishing
administration fees. Beyond the revenue streams being acquired on the publishing side, we believe that
there could be meaningful monetisation upside for the record label when in full control, which in turn
would drive higher publishing revenues over time.
For the exclusive use of [email protected]

Exhibit 101: Music industry value chain - record labels capture most of the value in recorded music, whilst
artists capture most of the value in live music
Illustrative Recorded and Live Music value chain

Source: Goldman Sachs Global Investment Research

f2f7b3e207d345db88c12137042c6c26

13 June 2022 48
 Goldman Sachs Music in the Air

Exhibit 102: Most of the major catalogue acquisitions were for the
publishing copyrights
Select catalogue acquisitions in 2021/22
UMG
Date Artist Amount ($mn) Publishing rights Recorded rights
Feb-22 Neil Diamond Undisclosed X X
Feb-22 Sting 300 X X
WMG
Date Artist Amount ($mn) Publishing rights Recorded rights
Jun-21 David Guetta 100 X
Jan-22 David Bowie 250 X X
Sony
Date Artist Amount ($mn) Publishing rights Recorded rights
Mar-21 Paul Simon 250 X
Dec-21 Bruce Springsteen 525 X X
Jan-22 Bob Dylan 200 X
Hipgnosis
Date Artist Amount ($mn) Publishing rights Recorded rights
Feb-21 Andrew Watt 45 X X
Jan-21 Neil Young 150 X X
Jan-21 Shakira Undisclosed X
For the exclusive use of [email protected]

Jan-21 Lindsey Buckingham Undisclosed X

BMG
Date Artist Amount ($mn) Publishing rights Recorded rights
Oct-21 Tina Turner 50 X X
Nov-21 Motley Crue 90 X
Apr-22 Primal Scream Undisclosed X
Hipgnosis Song Capital (Blackstone partnership)
Date Artist Amount ($mn) Publishing rights Recorded rights
Mar-22 Justin Timberlake 100 X
Jul-21 Red Hot Chili Peppers 140 X
Primary Wave
Date Artist Amount ($mn) Publishing rights Recorded rights
Aug-21 Prince Undisclosed X X
KKR/BMG
Date Artist Amount ($mn) Publishing rights Recorded rights
Jan-21 Ryan Tedder 200 X X

Source: Music Business Worldwide, Company data, Data compiled by Goldman Sachs Global
Investment Research

These acquisitions may be defensive but major labels are best placed to improve
monetisation

f2f7b3e207d345db88c12137042c6c26
While it is difficult to assess returns on investment given the lack of disclosure, we
believe the key to a successful catalogue acquisition depends on the ability to
successfully drive sync revenues (e.g. placement on TV commercials, movies etc.), an
area where labels and publishers have a natural competitive advantage vs. financial
players given they can leverage their existing infrastructure and scale. Particularly, major
labels have deep industry connections given their long-standing positions and expertise
in the industry, which improves their ability to monetise a catalogue:

n The majors have strong relationships with a significant number of artists and
songwriters (e.g. UMG manages >3mn recordings and c.3mn publishing
copyrights), giving the company access to potential catalogue deals earlier and more
data around the performance of the catalogue.
n The ability to better monetise catalogues through more favourable commercial
terms with DSPs, and leveraging global distribution network and vast relationships
across adjacent industries (for instance, UMPG is the publisher of choice for top film
and TV content studios, e.g. BBC, MBM, NBC, Dreamworks, HBO, StudioCanal, WB,
Disney, Lionsgate, Amazon Studios, Viacom, Paramount). Additionally, whilst major
labels continue to license catalogues to more traditional audio streaming platforms

13 June 2022 49
 Goldman Sachs Music in the Air

they are also using complementary ways by licensing music to connected fitness
platforms, such as Peloton or Apple Fitness+, or short-form video platforms like
TikTok.

n The ability to leverage existing overheads and tech platforms leading to greater
cost efficiencies, notably in collecting royalties.
n By acquiring and owning the full suite of rights (publishing + recorded), labels are
able to gain full control over the marketing and monetisation opportunities of
the catalogue. By contrast, if a label were to acquire a bundle of rights only,
approvals from the other rights owners for their use would be needed; owning
merely royalty streams would present a passive, low-return investment with limited
upside and control.
For the exclusive use of [email protected]

Two examples of successful catalogue monetisation....

Queen’s “Bohemian Rhapsody” - The song entered the Top 100 Billboard chart in 1976, after its initial
release by the band. In October 2018, the ‘Bohemian Rhapsody’ film was released and helped propel
their album “Greatest Hits” to the top 30 in 2019, having been outside the top 200 in 2017, prior to
any promotion of the film. The album has remained in the top 30 every year since the film’s release,
highlighting the sustained levels of elevated consumption of the music, as a result of being introduced to a
new audience, and has now become the most streamed classical rock song of all time surpassing 1.6bn
streams globally. The release of “Bohemian Rhapsody” resulted in Queen’s music catalogue generating
3x more royalties in FY19 vs FY18. Although royalties declined in FY20, they remained 96% higher
than prior to the film release and revenues are likely to continue to be boosted by the release in the
coming years, albeit at a decreasing rate.

Elton John’s “Diamonds” - Following the film release of “Rocketman” (in 2019), Elton John’s album
“Diamonds” climbed into the top 40 in 2019, having previously been outside the top 200 in 2017.

f2f7b3e207d345db88c12137042c6c26

13 June 2022 50
 Goldman Sachs Music in the Air

Exhibit 103: Queen’s “Greatest Hits” album featured in the 2018 Exhibit 104: Queen’s “Greatest Hits” album entered the top Rock
‘Bohemian Rhapsody’ film has remained in the Top 30 every year Album charts following the film’s release, with total sales
since, with Elton John’s “Diamonds” album following a similar continuing to rise yoy in 2021
pattern following the film release of ‘Rocketman’ Top Rock Album sales: Album + TEA + On-Demand audio streams SEA
Year-end chart: Billboard Top 200 Albums

1,000 971 k
2017 2018 2019 2020 2021
0 929 k

20 900

40 787 k
800
60 732 k 743 k 742 k
80 700
"Rocketman"
100 released in
120 May 2019 600
140 "Bohemian
Rhapsody" 500
160
released in Oct
180 2018
400
200 2019 2020 2021

Greatest Hits (Queen) Diamonds (Elton John) Greatest Hits (Queen) Diamonds (Elton John)
For the exclusive use of [email protected]

Source: Billboard, Data compiled by Goldman Sachs Global Investment Research TEA: Track equivalent albums; SEA: Streaming equivalent albums

Source: Luminate

Exhibit 105: Revenues and pre-tax profits more than tripled following
the release of “Bohemian Rhapsody” in FY19 and remained at
elevated levels the year after
Queen Productions Ltd revenues, royalties and pre-tax profit, £mn

80 72.8
71.5
70

60

50 42.0
41.7
40
32.7
21.9
30
21.3
18.6 19.2
20
12.3 11.8
10 7.7
4.9

f2f7b3e207d345db88c12137042c6c26
0
FY16 FY17 FY18 FY19 FY20

Revenues Royalties Pre-tax profit

FY ending in September; Royalties not disclosed for FY16/17

Source: Company data, Goldman Sachs Global Investment Research

We expect a slowdown in catalogue acquisitions amid rising interest rates

The low interest rate environment drove a surge in catalogue acquisition multiples.
However, in the current environment, with higher inflation driving rising interest rates,
we believe that valuations and size of transactions may start to come down.

Overall, we expect record labels to spend a lesser amount on catalogue acquisitions

compared to the past 2 years, although the magnitude of spending could vary
significantly depending on the repertoire that becomes available for sale in a given year.
For UMG, we estimate the company will deploy c.€300mn p.a. over 2022-26E from
US$1.1bn/US$459mn in 2020/2021 in catalogue investments, which compares to
Moody’s forecast of €350mn from 2023 onwards. As discussed earlier though, there
might not be as many iconic catalogues available for sale in the next 5 years, as by

13 June 2022 51
 Goldman Sachs Music in the Air

nature these assets are scarce, unless UMG decides to change its strategy and pursue
acquisitions in the new and mid-market which we view as rather unlikely. For financial
players, we believe there will continue to be a steady flow of mid-sized catalogues
available for sale and for which competition will likely remain high.

Exhibit 106: We expect spending on catalogue to come down Exhibit 107: We expect increasing interest rates from historic lows
gradually, although the magnitude of spending could vary to put downward pressure on catalogue valuations
significantly depending on the repertoire that becomes available Federal Funds rate (%)
for sale in a given year
UMG catalogue investments (€mn, LHS), as % of sales (RHS)

0 2.0% 3.0

(100) 0.0%
2.5
(200)
-2.0%
(300)
2.0
(400) -4.0%

(500) -6.0% 1.5

(600) -8.0%
For the exclusive use of [email protected]

(700) 1.0
-10.0%
(800)
0.5
(900) -12.0%

(1,000) -14.0% 0.0

2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E

Jul-19

Jul-20

Jul-21
Jan-20

Jan-21

Jan-22
Jan-19

Mar-19

May-19

Sep-19

May-21
Nov-19

Mar-20

May-20

Sep-20

Nov-20

Mar-21

Sep-21

Mar-22
Nov-21
Catalogue investments % of sales

Source: Company data, Goldman Sachs Global Investment Research Source: FRED, compiled by Goldman Sachs Global Investment Research

f2f7b3e207d345db88c12137042c6c26

13 June 2022 52
 Goldman Sachs Music in the Air

Company implications

Universal Music Group (covered by Lisa Yang, Buy; last close €21.1)
We see UMG as a major beneficiary of the growth of music streaming and new
monetisation opportunities as the world’s largest record label and second-largest music
publisher. We believe UMG posseses several competitive advantages, including its
scale, clear and consistent track record in breaking artists, the depth and breadth of its
catalogue, and its ability to spot new trends early, under the stewardship of an
experienced management team. As such, we believe UMG is well-positioned to
maintain its strong leadership position in the overall industry, delivering sustainable-top
line growth and margin expansion: we forecast a revenue CAGR of 10% and EBITDA
CAGR of 15% over 2022-26. For more details, please see our recent deep-dive here).
For the exclusive use of [email protected]

We have a Buy rating and our 12-month price target of €31.1 is based on a target 2023E
EV/EBITDA of 22.5x. Key risks: (i) slower industry growth than we expect, particularly in
streaming, (ii) increased competition for market share, (iii) artists gaining more power,
(iv) greater competition for music catalogues which could depress future cash
generation and returns, and (v) pressure from DSPs for lower royalty pay-outs/ less
favourable licensing terms.

Believe (covered by Lisa Yang, Neutral; last close €9.3)

In our view, Believe is set to benefit from several structural tailwinds including growth in
streaming, new licensing opportunities created by new technologies, and the rise of the
indies market. Believe is one of the largest independent music companies globally,
offering distribution services, Artist Services and Label & Artist Solutions to c.850,000
artists in 50+ countries. However, we see risk around the execution of its M&A strategy,
given the current macroeconomic environment, uncertainty over its Russian revenues,
and competition, particularly from the major labels investing more aggressively in local

f2f7b3e207d345db88c12137042c6c26
artists and catalogues, as well as expanding into Label & Artist Services.

We are Neutral-rated. Our 12 month price target of €14.8 is based on 30x 2023E
EV/EBITDA. Key risks include: (i) competition, particularly from the major labels, (ii)
faster/slower-than-expected industry growth, (iii) execution around international
expansion and M&A, and (iv) pressure from artists and/or DSPs seeking better terms.

Spotify (covered by Eric Sheridan, Neutral; last close $111.9)

We see Spotify as well positioned to benefit from the rising consumer adoption of
music streaming given its scale, ecosystem, content and technology. Given its focus on
growing subscribers and increasing user engagement, we expect Spotify to retain its
leadership among music streaming services, forecasting 26% share of paid subscribers
in 2030 (34% in 2021). On the ad-supported side, we see Spotify focused on developing
and enhancing its advertising tools, growing its user base, and expanding into owned
and original content via podcasts. However, the unit economics of the music product are
still predominantly captured by the music labels (not Spotify) and competition remains
heightened among global tech platforms (e.g., Apple, YouTube, Amazon) whereby

13 June 2022 53
 Goldman Sachs Music in the Air

streaming music is typically viewed as an adjacent service to their core business.

We are Neutral-rated. Our 12-month price target of $133 is based on an equal blend of:
(1) 6.0x EV/Gross Profit applied to our 2023 estimates; and (2) a 22x EV/GAAP EBITDA
multiple applied to our 2026 estimates discounted back three years at a discount rate of
12%. Key risks include: (i) a shift in the current competitive environment (impacts to
users, pricing, content costs) that would impact our current estimates, (ii) the evolution
of the podcasting product and its impact on gross/operating margins, (iii) emerging
market growth, (iv) changes in consumer habits with respect to audio entertainment,
and (v) the impact of pricing increases on the user base and financial model.

Tencent Music Entertainment (covered by Ronald Keung, Sell; last close $4.45)
We believe TME should continue to benefit from online audio expansion in China and
retain its strong leadership position. Its unique diversified model has evolved to include
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music subscription, digital music sales and social entertainment - e.g. online karaoke
and live streaming. Looking ahead, we expect new business initiatives such as TMELive
(live concert), Kuwo Changting (long-form audio), QQ Music live streaming and upgraded
Tencent Musician Program to contribute incremental revenue, partly offsetting the
decline in social entertainment revenue sub-licensing fees revenue. In the music
streaming subscription segment alone, we expect TME’s share of global paid music
subscribers to increase more than any other player, to 19% by 2030 from 15% in 2021,
becoming the second-largest player in the market.

We remain Sell-rated due to 1) User engagement share loss to SFV. China music
aggregate timespent (including QQ Music, Kugou Music, Kuwo Music, WeSing,
NetEase Cloud Music and Himalaya FM) witnessed continuously shrinking time spent
share, to 1.7% in 1Q22 from 2.2% a year ago; 2) Regulatory and macro headwinds
pressure revenue growth of non-subscription business, including advertisement and live
streaming. Advertisement accounts for 50% of non-subscription revenue, which

f2f7b3e207d345db88c12137042c6c26
remains under pressure from the lingering impact of regulation on the open-screen ad
format and scaled back ad budgeting amid weak macro. On Live streaming, we expect
2022E to continue to be a transitional year for TME’s social entertainment business,
with revenue from legacy operation including Kugo Live and Kuwo Live likely declining
yoy due to weakened macro economy, competition, and regulation.

Our 12-month price target of US$5.0 is based on 12x average 2023E P/E. Key risks
include: (i) a more benign regulatory environment, (ii) higher-than-expected content
pricing by label companies, (iii) Higher-than-expected revenue sharing to broadcasters,
(iv) being able to sustain its dominant market position and increase user engagement,
amid ongoing intense competition and ever-changing tastes of its vast user base, and (v)
a stronger-than-expected execution in LFA and ads strategies.

Live Nation Entertainment (covered by Stephen Laszcyk, Buy; last close $93.9)
We believe that as the world’s largest live event promoter, Live Nation is well-positioned
to benefit from a strong recovery in concert activity following the COVID-19 pandemic
(in 2022), and from strong secular supply and demand tailwinds (over the long-term)
including the globalization of music and the experiential economy. We see ample

13 June 2022 54
 Goldman Sachs Music in the Air

opportunity for Live Nation to gain market share (in both promotions and ticketing)
through organic expansion and M&A. The company has seen strong leading indicators
for 2022 (e.g. ticket sales & pricing, sponsorship pipeline, etc.) which suggests that
demand trends are tracking in-line with the expectations underwritten in our
above-consensus outlook for revenue, AOI and FCF in 2022+. Further, we believe that
Live Nation (and the live music industry broadly) is better positioned today (than what it
was heading into 2008) heading into a potential recession given i) greater artist supply of
touring, ii) enhanced market based ticket pricing, and iii) better segmentation of VIP and
onsite fan offerings.

We have a Buy rating. Our 12-month price target of $130 and is based on a weighted
average of three valuation methodologies: 33% on 20.0x 2023E EV/Adjusted EBITDA,
33% on 30.0x 2023E P/FCF, and 33% DCF using a 7.9% WACC and a 4.0% TGR. Key
risks include: (i) health and economic risks associated with an increase in COVID-19
infections rates, (ii) a weaker economic and consumer spending backdrop, (iii) change in
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consumer preferences and the adoption of virtual concerts, (iv) increased competition
for talent from promoters, and (v) higher interest rates.

Sonos (covered by Rod Hall, Neutral; last close $21.6)

We believe the faster shift to music streaming is a long-term positive for Sonos speaker
sales. In particular, we note Sonos’ software expertise in seamlessly integrating multiple
voice assistants as well as streaming services is a key advantage. The company saw no
deterioration in demand in Q1 but did note that the supply situation got incrementally
worse from China lockdowns. Sonos expects to remain supply constrained on products
such as the AMP for the rest of the year. We also believe that consumer demand signals
have weakened since the company reported and believe this could drive increased
discounting and lower levels of demand from Summer 2022 onward.

We are Neutral-rated and our 12-month price target of $24 is based on 8x Q5-Q8

f2f7b3e207d345db88c12137042c6c26
EV/EBITDA. Upside risks include: (i) sustained customer demand, (ii) increased pace of
new product lines, and (iii) M&A. Downside risks include: (i) inflationary pressure on
margins, (ii) higher competition, and (iii) operational/execution issues.

Sirius XM (covered by Brett Feldman, Sell; last close $6.15)

We believe that the continued shift to music streaming is a long-term negative for Sirius
XM. In particular, we see risk that Sirius XM’s satellite subscription business will slow as
streaming services like Spotify and Apple Music become more popular and increasingly
offer a more robust array of content (e.g. music + talk + news + sports) that is more
comparable to Sirius XM’s premium offering. Indeed, we expect Sirius XM’s self-paid
subscriber growth to slow in the coming years as more people subscribe to streaming
services (instead of Sirius XM) and as these apps become more integrated within in-car
infotainment systems (eliminating one of Sirius XM’s most valuable competitive moats).
In addition, we continue to see declines in Pandora’s ad-supported listener hours as
on-demand streaming leaders out innovate the company and outspend it on acquiring
unique pieces of content.

We are Sell rated and our 12-month price target of $5.75 is based 50% on 2023E

13 June 2022 55
 Goldman Sachs Music in the Air

price/FCF at 12.0x, 25% on 2023E TEV/EBITDA at 11.0x, and 25% on a DCF using 8.2%
WACC and a 2.0% TGR. Key risks include (i) stronger-than-expected new car sales, (ii)
higher uptake in the used car segment, (iii) improvements in core fundamental drivers
such as churn or ARPU, (iv) increased share repurchases, strategic or accretive M&A in
the digital music or podcast space, and (v) increasing monetization of ad supported
radio.

NetEase (covered by Lincoln Kong, Buy, last close $103.8/HK$167.4)

We see NetEase as a beneficiary of the growth of music streaming, particularly in
China, and new monetisation opportunities through NetEase Cloud Music, a platform
where social meets streaming. The company has signed strategic partnerships with
Warner Chappell Music, Merlin and Believe over the past couple years on music
licensing, online karaoke and music IP development, in an effort to expand its music
content portfolio to tap into the evolving user content consumption needs. As of 1Q22,
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Cloud Music content library consists of more than 90mn music tracks, and a pool of
450,000 registered independent artists. We forecast music revenue growth of
+22%/+28% in 2Q22E/2022E and in the music streaming subscription segment alone,
we expect NetEase’s share of global paid music subscribers to increase to 9% by 2030
from 6% in 2021.

We are Buy-rated on NTES/9999.HK with 12-month SOTP-based target prices of

US$126/HK$197. Key risks include: i) Weaker performance of legacy games, ii)
slower-than-expected monetization ramp-up of new games, iii) more intensive
competition in games, ecommerce and other business areas, iv) rising content costs
associated with music.

Warner Music Group and Sony Group are Coverage Suspended.

Exhibit 108: Global music industry comps table

f2f7b3e207d345db88c12137042c6c26
GS Price Last 12 Month Up/(down) Mkt Cap EV (€mn) P/E EV/ EBITDA Revenue Growth EBITDA Growth
Company
Rating Ccy Price Target side €mn 2022E 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E
Music Labels
Believe Neutral EUR 9.3 14.8 60% 823 689 nm nm nm 22.8x 19.4x 15.7x 24% 28% 25% 30% 32% 37%
Universal Music Group Buy EUR 21.1 31.1 48% 38,195 39,781 26.0x 22.0x 19.1x 18.6x 15.7x 13.5x 16% 11% 10% 20% 18% 15%
Warner Music Group* USD 28.3 13,703 16,966 38.5x 29.3x 22.3x 16.8x 14.9x 13.0x 17% 12% 9% 26% 13% 15%
Sony* USD 12,130 107,288 113,213 16.2x 17.0x 15.9x 9.7x 9.1x 8.6x 11% 10% 7% 21% 7% 5%
Music Labels Average 54% 52,722 32.3x 25.7x 20.7x 19.4x 16.7x 14.0x 19% 17% 15% 25% 21% 22%

Streaming
Spotify Technology S.A. Neutral USD 111.9 133.0 19% 20,712 18,874 nm nm 68.7x nm nm 47.4x 18% 13% 11% nm nm nm
Tencent Music Entertainment Group Sell USD 4.45 5.0 12% 6,972 4,050 13.8x 13.2x 11.6x nm nm 4.3x -14% 3% 8% -16% 8% 16%
Streaming Average 16% 27,684 13.8x 13.2x 40.1x nm nm 25.9x 2% 8% 10% -16% 8% 16%

Live Music
Cts Eventim AG* USD 58.7 5,688 4,761 nm 46.5x 32.0x 44.8x 18.9x 14.1x 271% 25% 10% nm 137% 34%
Live Nation Entertainment Buy USD 93.9 130.0 38% 20,023 21,934 131.7x 62.5x 45.0x nm nm 13.2x 134% 11% 8% nm 26% 14%
Live Music Average 38% 25,712 131.7x 54.5x 38.5x 44.8x 18.9x 13.6x 202% 18% 9% nm 82% 24%

Other
NetEase Inc. Buy USD 103.8 126.0 21% 64,803 52,128 22.2x 18.9x 17.1x 15.5x 12.5x 10.6x 10% 14% 11% 2% 25% 14%
Sirius XM Holdings Sell USD 6.15 5.75 -7% 26,851 31,485 19.4x 17.4x 15.3x 11.9x 11.0x 10.1x 5% 4% 4% 2% 6% 6%
Sonos Inc. Neutral USD 21.6 24.0 11% 2,884 2,031 12.2x 11.0x nm 7.0x 6.3x nm 13% 7% nm 9% 13% nm
Other Average 21% 64,803 17.9x 15.8x 16.2x 11.5x 9.9x 10.3x 9% 8% 8% 4% 15% 10%

* indicates Thomson Reuters consensus estimates, otherwise GSe

Source: Company data, Goldman Sachs Global Investment Research, Thomson Reuters

13 June 2022 56
 Goldman Sachs Music in the Air

Exhibit 109: Indexed share price performance of global music companies

450

400

350

300

250

200

150

100

50
For the exclusive use of [email protected]

Believe UMG WMG Spotify TME

CTS Eventim Live Nation NetEase Sirius Sonos

Source: Thomson Reuters

Exhibit 110: 12m forward P/E ratios of global music companies Exhibit 111: 12m forward EV/EBITDA of global music companies
80 60

70 50
60
40
50
30
40
20
30

20 10

10 0
Jun-19

Dec-19

Feb-20

Apr-20

Jun-20

Feb-21
Apr-21

Jun-21

Feb-22
Apr-22

Jun-22
Aug-19

Oct-19

Aug-20

Oct-20

Dec-20

Aug-21

Oct-21

Dec-21
0
Jun-20
Jun-19

Apr-20
Feb-20

Feb-21
Apr-21

Jun-21

Feb-22
Apr-22

Jun-22
Aug-19

Dec-19

Aug-20

Dec-20

Aug-21

Dec-21
Oct-19

Oct-20

Oct-21

f2f7b3e207d345db88c12137042c6c26
Believe UMG WMG Spotify
Believe UMG WMG TME TME CTS Eventim Live Nation NetEase
CTS Eventim NetEase Sirius Sonos Sirius Sonos

Source: Thomson Reuters Source: Thomson Reuters

Exhibit 112: 12m forward EV/Sales of global music companies

8
7
6
5
4
3
2
1
0
Apr-20
Jun-20

Apr-21
Jun-21

Apr-22
Jun-22
Jun-19

Feb-20
Dec-19

Aug-20

Dec-20
Feb-21

Aug-21

Dec-21
Feb-22
Aug-19

Oct-20

Oct-21
Oct-19

Believe UMG WMG Spotify

TME CTS Eventim Live Nation NetEase
Sirius Sonos

Source: Thomson Reuters

13 June 2022 57
 Goldman Sachs Music in the Air

Prices based on the market close as of June 9, 2022.

For the exclusive use of [email protected]

f2f7b3e207d345db88c12137042c6c26

13 June 2022 58
 Goldman Sachs Music in the Air

Disclosure Appendix
Reg AC
We, Lisa Yang, Eric Sheridan, Rod Hall, CFA, Stephen Laszczyk, Ronald Keung, CFA, Lincoln Kong, CFA, Brett Feldman, James Tate and Manish Adukia,
CFA, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its
or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.

GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
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percentile and (100% - Multiple percentile).

Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.

M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.

Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

Disclosures
Rating and pricing information
Believe (€9.3), Live Nation Entertainment Inc. ($93.9), NetEase Inc. (ADR) ($103.8), NetEase Inc. (H) (HK$167.4), Sirius XM Holdings ($6.15), Sonos Inc.
($21.6), Spotify Technology S.A. ($111.9), Tencent Music Entertainment Group ($4.45) and Universal Music Group (€21.1)

f2f7b3e207d345db88c12137042c6c26
The rating(s) for Believe and Universal Music Group is/are relative to the other companies in its/their coverage universe: Adevinta ASA,
Allegro.eu, Auto Trader Group, Auto1 Group, Believe, Cazoo Group, ITV Plc, InPost, Informa, JCDecaux, Learning Technologies Group,
MFE-MediaForEurope NV, Naspers Ltd., Pearson, ProSiebenSat.1, Prosus N.V, Publicis, RELX Plc, RTL Group, Rightmove Plc, Schibsted ASA, Scout24
AG, Stroeer SE & Co., Universal Music Group, Vivendi, WPP Plc, Wolters Kluwer
The rating(s) for Live Nation Entertainment Inc. and Sirius XM Holdings is/are relative to the other companies in its/their coverage universe:
AMC Networks Inc., AT&T Inc., Altice USA Inc., American Tower Corp., Charter Communications Inc., Cogent Communications Holdings, Comcast
Corp., Crown Castle International Corp., DISH Network Corp., Endeavor Group, Equinix Inc., Fox Corp., Frontier Communications Parent Inc., IHS
Holding, Liberty Formula One, Limelight Networks, Inc., Lions Gate Entertainment Corp., Live Nation Entertainment Inc., Lumen Technologies Inc.,
Paramount Global, SBA Communications Corp., Sirius XM Holdings, Starry, Switch Inc., T-Mobile US Inc., Uniti Group, Verizon Communications, Walt
Disney Co., Warner Bros Discovery Inc., iHeartMedia Inc.
The rating(s) for Tencent Music Entertainment Group is/are relative to the other companies in its/their coverage universe: ATRenew Inc.,
Alibaba Group (ADR), Alibaba Group (H), Dada Nexus Ltd., Full Truck Alliance Co., JD Logistics, JD.com Inc. (ADR), JD.com Inc. (H), Kerry Logistics
Network Ltd., Kingsoft Cloud, Meituan, Pinduoduo Inc., S.F. Holding, STO Express, Sinotrans Ltd. (A), Sinotrans Ltd. (H), Smart Share Global Ltd.,
Tencent Holdings, Tencent Music Entertainment Group, Tongcheng Travel Holdings, Trip.com Group (ADR), Trip.com Group (H), Vipshop Holdings, YTO
Express Group, Yunda Holding, ZTO Express (Cayman) Inc. (ADR), ZTO Express (Cayman) Inc. (H)
The rating(s) for NetEase Inc. (ADR) and NetEase Inc. (H) is/are relative to the other companies in its/their coverage universe: Baidu.com Inc.
(ADR), Baidu.com Inc. (H), Bilibili Inc. (ADR), Bilibili Inc. (H), NetEase Inc. (ADR), NetEase Inc. (H), Zhihu Inc., iQIYI Inc.
The rating(s) for Apple Inc. and Sonos Inc. is/are relative to the other companies in its/their coverage universe: ADTRAN Inc., Apple Inc., Arista
Networks Inc., Avaya Holdings, Cambium Networks Corp., Ciena Corp., Cisco Systems Inc., CommScope Holding, Corning Inc., Corsair Gaming Inc.,
Cricut Inc., Dell Technologies Inc., F5 Networks Inc., HP Inc., Hewlett Packard Enterprise Co., Infinera Corp., Juniper Networks Inc., Kornit Digital Ltd.,
Latch, Lumentum Holdings, Markforged, NetApp Inc., Nutanix Inc., Pure Storage Inc., Qualcomm Inc., SmartRent, Sonos Inc., Vivint Smart Home Inc.
The rating(s) for Spotify Technology S.A. is/are relative to the other companies in its/their coverage universe: ACV Auctions Inc., ANGI
Homeservices Inc., Activision Blizzard Inc., Airbnb Inc., Alphabet Inc., Amazon.com Inc., AppLovin Corp., Bird Global Inc., Booking Holdings Inc.,
Bumble Inc., Chewy Inc., Coursera Inc., DoorDash Inc., Duolingo Inc., Electronic Arts Inc., Expedia Group, Fiverr International Ltd., Frontdoor Inc.,
GoodRx Holdings Inc., IAC/InterActiveCorp, Lyft Inc., Match Group, Meta Platforms, Inc., Nerdy Inc., Netflix Inc., Nextdoor Holdings, Peloton Interactive
Inc., Pinterest Inc., Playtika, Poshmark Inc., Rent the Runway Inc., Roblox, Sciplay Corp., Snap Inc., Spotify Technology S.A., Take-Two Interactive
Software Inc., ThredUP Inc., Twitter Inc., Uber Technologies Inc., Ubisoft Entertainment SA, Upwork Inc., Vacasa Inc., Xometry Inc., ZipRecruiter Inc.,

13 June 2022 59
 Goldman Sachs Music in the Air

eBay Inc., ironSource Ltd.

Company-specific regulatory disclosures

Compendium report: please see disclosures at https://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this
compendium can be found in the latest relevant published research

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 50% 35% 15% 65% 57% 45%

As of April 1, 2022, Goldman Sachs Global Investment Research had investment ratings on 3,143 equity securities. Goldman Sachs assigns stocks as
Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage universe and related definitions’ below. The Investment
Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.

Price target and rating history chart(s)

Compendium report: please see disclosures at https://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this
compendium can be found in the latest relevant published research
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See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or
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 Goldman Sachs Music in the Air

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Buy (B), Neutral (N), Sell (S) Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or
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5G: From Lab to Cars: the road ESG Sector The Rise of Shale Scale to
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IMO 2020 Revolution Digital Health Investing Future of Work Drones Space

Factory of the eSports: From Wild EVs: Back to Venture Capital

Future West to Mainstream Music in the Air Reality Horizons ESG Womenomics

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China Future of New China, Old China’s Credit Made in
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