UMG Posts Strong Q3; Grainge Touts Downtown Integration, AI Safeguards

Sir Lucian Grainge

Universal Music Group saw subscription revenue growth accelerate and underlying profitability improve in the third quarter as its headline revenue growth continued to benefit from the integration of Downtown Music.

Revenue for the three months ended Sept. 30 reached €3.39b, up 11.7% year over year in constant currency. Excluding Downtown, revenue grew 5.3%—a step back from the 6.4% growth recorded in Q2—but subscription momentum improved.

Recorded music subscription revenue rose 19.2% in constant currency, or 9.5% excluding Downtown, benefiting from wholesale price increases and continued subscriber growth. That compares with 16.6% growth in Q2, or 6.7% excluding Downtown. Ad-supported streaming revenue increased 4.7% excluding Downtown, while physical revenue jumped 17.4%, with gains in North America, Japan and Europe and in both frontline and catalog.

“At our Capital Markets Day in 2024, we projected that global paid music subscriptions would hit 1b by the end of 2028,” said Chairman and CEO Sir Lucian Grainge. “We are on track to exceed that target. Industry forecasts now point to 1.5b paid subscribers by 2035. Growth will come from both more subscribers and more value per subscriber.”

UMG’s adjusted EBITDA rose 9% in constant currency, including Downtown, and 7% excluding the acquisition. The latter marks a notable improvement from Q2, when adjusted EBITDA excluding Downtown was essentially flat. Adjusted EBITDA margin excluding Downtown expanded 0.4 percentage points to 22.4%, following a 1.3-point decline in Q2.

Merchandising and “other” revenue dropped 4.6% due to lower touring income, compared to a prior-year quarter that included a greater number of high-profile tours. The number was partially offset by growth in D2C revenue from the company’s ship-to-home program for select tour merch.

Top UMG sellers in Q3 included Olivia Rodrigo, Stray Kids, Ariana Grande, The Beatles and Mrs. Green Apple.

Regarding AI-generated music, Grainge said that while ‘the volume is growing faster than the safeguards… we have made real progress.’

“Our results show the enduring value of backing extraordinary artists, bold ideas and the teams and technology that help bring their work to the world,” said Grainge. “The industry is healthy and growing, and we will keep evolving from a position of strength. We are investing in human artistry, improving the economics of streaming and expanding what’s possible for artists and fans.”

On a conference call with journalists, UMG execs referred to the Downtown acquisition multiple times as “the most important” the company has made since purchasing EMI in 2012.

“Our strategic intention with the acquisition, as well as our Virgin strategy, is to partner with real people, real artists and real entrepreneurs at every stage of their career,” Grainge said. “We really like what we see. It’s a great opportunity to add to a business that has propelled us to the #2 position quickly in this fast-growing artist services sector.”

The proliferation of AI-generated music was also a major talking point, with Grainge quoting numbers that show a nine-fold increase in those tracks entering the marketplace since early 2025.

“The volume is growing faster than the safeguards,” Grainge noted. “We have made real progress. We introduced first-of-their-kind anti-dilution protections in our platform agreements. We are helping establish AI-labeling and chart standards for licensed, human-led recordings. We helped launch the Streaming Integrity Initiative and have taken legal action against bad actors while supporting legislation that protects artists and their livelihoods. Many of our DSP partners are also taking meaningful steps, and we welcome that progress. But the scale of the problem is still outpacing the guardrails.”