Is the Music Industry Dying? Despite Layoffs, Spotify Leads Music Stocks to New Highs

Amid a wave of layoffs and restructuring in the music industry, some have been quick to declare the industry's decline. However, recent market movements tell a different story. Shares of Spotify, the Swedish music streaming giant, surged 8.0% to reach $365.00 this week, leading all music stocks as the Billboard Global Music Index (BGMI) hit a record high of 1,873.87.

Spotify’s Meteoric Rise

Spotify’s impressive performance was fueled by a bullish report from Pivotal Research Group, which raised its price target from $460 to $510 and reiterated its “buy” rating. This optimistic outlook pushed Spotify’s stock to an intraday high of $368.29 on Thursday, marking its highest point since February 2021. The surge in Spotify's share price helped propel the BGMI, a 20-company index tracking global music stocks, to a 4.1% gain for the week. Despite skepticism surrounding the music industry, the BGMI has climbed 7.4% over the last two weeks and is now up 22.2% year-to-date, outpacing the Nasdaq and S&P 500, both up 19.6%.

Music Industry Layoffs and Restructuring

While Spotify celebrates its stock gains, other parts of the music industry are grappling with layoffs and restructuring. Warner Music Group (WMG) saw its shares rise 4.9% to $30.44, despite announcing layoffs of about 150 employees as part of a restructuring plan that began earlier this year. The company also secured a $1.3 billion term loan to refinance its existing debt, signaling a move to stabilize its financial position amidst industry turbulence.

Live Nation also posted gains, with shares climbing 4.9% to $103.65. The concert promoter received a boost from the Portland, Oregon city council’s decision to approve the development of a new 3,500-capacity music venue operated by the company. The expansion of live music venues indicates that, while some parts of the music business are downsizing, others are gearing up for growth.

Mixed Performance Across the Industry

Other live entertainment companies like MSG Entertainment and CTS Eventim also saw modest gains this week, with MSG rising 4.6% and CTS Eventim improving by 1.2%. However, not all music stocks fared well. Sphere Entertainment Co. dropped 2.7% to $41.09, and Universal Music Group fell 3.6% following its Capital Markets Day, where analysts expressed mixed feelings about the company’s future growth targets.

K-pop companies have been among the hardest hit, continuing their downward trend. HYBE, JYP Entertainment, YG Entertainment, and SM Entertainment all posted modest declines this week, with an average year-to-date loss of 40.4%. Despite the global popularity of K-pop, the financial performance of these companies has yet to rebound.

Is the Music Industry Really Dying?

Despite the layoffs and restructuring efforts, the music industry’s financial metrics show resilience, particularly in the streaming and live entertainment sectors. While traditional business models may be shifting, the industry's adaptability is evident in the gains seen by market leaders like Spotify and Live Nation.

The music business is undergoing significant transformation, but it is far from dying. As the industry adjusts to new economic realities, those companies that can adapt and innovate are likely to emerge stronger. With streaming giants like Spotify reaching new heights and live entertainment making a comeback, the music industry’s future may be challenging, but it is anything but over.

As the debate over the music industry’s health continues, one thing is clear: adaptation and resilience will be the keys to thriving in this evolving landscape.