With investors plowing billions of dollars into public music companies, Billboard will now track key stocks with its new Global Music Index, which premieres here and will initially be featured in the weekly newsletter The Ledger sent to Billboard Pro subscribers.
The Global Music Index provides a snapshot of the stock performance of 20 companies traded on exchanges in seven countries: the United States, the Netherlands, South Korea, the United Kingdom, Germany, France and China (Hong Kong). It is a market capitalization-weighted index that reflects the relative size of its constituent companies, each of whose market capitalization has been adjusted to remove long-term shareholders such as corporations, private equity firms, corporate executives and directors. What’s left is a more accurate representation of the shares being traded on the markets.
About two-thirds of the index’s value comes from companies listed in the United States, while 21% is derived from a single company listed in the Netherlands, Universal Music Group (UMG), the most valuable stock in the index. Two South Korean K-pop powerhouses, HYBE and SM Entertainment, account for close to 5% of the index’s value. A lone German company, concert promoter/ticketer CTS Eventim, commands 4.2%. Two music royalty funds listed on the London Stock Exchange, Hipgnosis Songs Fund and Round Hill Music Royalty Fund, total 2.8% of the index’s value. One company in Hong Kong, streaming service Cloud Music, is worth 0.7%. France’s two digital music stocks, Believe and Deezer, are worth a combined 0.4%.
Labels and publishers account for 44% of the index’s value; streaming, 24.1%; live music and ticketing, 22.5%; and satellite and radio broadcasting, a combined 9.4%.
The index’s value was 1,025.22 on Oct. 5 (considering the day’s closing stock prices and latest foreign exchange rates), up slightly from 1,000.00 on Sept. 23 but down 44.2% from 1,837.02 at the end of 2021. Most of the decline came in the second quarter when the value fell 27.3% from 1,553.18 to 1,128.98. To calculate the index values for the ends of the fourth, first and second quarters, Billboard replaced the stock prices of Anghami, an Abu Dhabi, United Arab Emirates-based streaming service, and Deezer with the special purpose acquisition companies they merged with, Vistas Media (on Feb. 3) and I2PO (on April 18), respectively.
The index’s falling value in 2022 reflects the challenging environment for stocks. Although most music companies have had record revenue or profits and global trends are favorable, persistent inflation and rising interest rates have battered stock prices and caused some investors to place a premium on profits rather than growth. For example, Spotify, one of the most valuable companies in the index, fell 60.9% from Dec. 31 to Oct. 5 as investors soured on streaming following a pandemic-related boom. At $91.40 per share, Spotify trades 74.9% below its all-time high of $364.59 set on Feb. 19, 2021.
Even concert promoters doing brisk post-pandemic business were affected. Despite a record-setting second quarter and signs pointing to strong demand for live music heading into 2023, shares of U.S. promoter and Ticketmaster-owner Live Nation have dropped 32.6% year to date, while shares of CTS Eventim are off 28.5%. The music concert might be recession-proof, but concert companies’ stocks aren’t immune from economic upheaval.
Some of this year’s decline in index value stems from foreign exchange differences. The Billboard Global Music Index converts the market capitalization of each company listed on a foreign exchange into U.S. dollars. Through Oct. 5, the euro lost 13.1% to the U.S. dollar, the pound sterling fell 16.3%, and the Korean won lost 16.1%. For companies traded in those countries, foreign exchange losses compound existing declines in share prices. The Hong Kong dollar declined only 0.7% against the U.S. dollar.
Recent stock market woes aside, the fact that an index with 20 music stocks is possible speaks to the health of the music market. The number of publicly traded companies has jumped sharply in recent years as streaming led the global music industry to rebound from a 15-year decline prompted by dwindling CD sales, the transition to digital platforms and peer-to-peer file-sharing software like Napster. Among the companies that have gone public since the beginning of 2020 are the first- and third-largest major-label groups, UMG and Warner Music Group; HYBE; Believe; independent music publisher/label Reservoir Media; Round Hill Music Royalty Fund, Anghami; Deezer; and Cloud Music.
