If you’re in the music business, Taylor Swift is not the problem, everyone agrees. And yet Universal Music Group somehow still can’t make it work. 

The giant record label with mega-stars including Swift and Lady Gaga reported its second-quarter financials late on Wednesday. The result? A giant sad trombone noise. Subscription revenue grew much slower than predicted, sending UMG’s shares on a dramatic 24% decrescendo.

The Day the Music Died

UMG’s financials showed that its subscription revenue grew at a rate of 6.9% year-on-year for the second quarter, well below analysts’ predictions of 11%, while its streaming revenue fell 4%. UMG blamed that fall on a “deceleration in growth at key advertising-based platform partners as well as shortfalls on certain platforms related to the timing of deal renewals.” It was coy on which exact deal renewals, but in January it got into a public spat with TikTok about the terms of licensing its artists’ music to the social media platform. 

TikTok and UMG managed to squash their beef in May, but it looks like UMG’s problems go beyond just one social media platform: 

• Chief Financial Officer Boyd Muir said Thursday that Spotify and YouTube and others had driven strong subscriber growth, but not every platform had performed so well. Spotify reported better-than-expected user growth in its own financials.
• “It has been evident for years now that subscription streaming is reaching an inevitable saturation point in mature markets like the US,” Tatiana Cirisano, senior music industry analyst at MIDiA, told The Daily Upside.

“Although there is still much growth to be had globally, that growth is offset by lower average revenue per user (ARPU),” Cirisano added. She said that the music industry has seen that saturation point coming for a while, so there’s an increased emphasis on monetizing “fandom.” Cirisano pointed to the fact that while UMG’s streaming revenues were lackluster, its revenue from merchandise was up 45%.

Spot the Difference: Spotify’s continued growth while UMG stagnates may be explained by Spotify finding success in the Global South, Cirisano said, where UMG artists are less dominant. “If this is the case, UMG would be getting a double discount, so to speak, because not only is the revenue Spotify collects from these regions smaller due to weaker ARPU, but UMG is getting a smaller share of that pie than they would in Western markets,” she added.

The 2024 Paris Olympic Games kick off today with an elaborate opening ceremony that will see 8,000 athletes ferried by boat along the iconic River Seine and reportedly feature a duet by Lady Gaga and Céline Dion, the latter making a triumphant comeback performance after being diagnosed with a rare autoimmune and neurological disease in 2022.

What this grand opening spectacle won’t include is a nerdy breakdown of the Games’ economic impact. That’s what morning newsletters are for.

Tourist Trap

Earlier this month, France’s National Institute of Statistics said the Paris Olympic Games could contribute a one-time bump of 0.3% to the national GDP in the third quarter, helping push overall growth up to 0.5% from 0.3% in Q2. In May, economists at the University of Limoges estimated the Games could net between €6.7 and €11.1 billion ($7.3 to $12 billion) in economic benefits for the Île-de-France region that includes Paris.

To meet those targets, the Games will need to pull in robust tourism and sell lots of tickets. Early metrics, however, have proven far from golden. Paris je t’aime, the city’s tourism board, downgraded its estimate of tourists during the Games by four million to 11 million, something that’s already been felt on the ground:

• Pascal Mousset, president of the Groupement des Hôtelleries et Restaurations pour Paris et l’Ile-de-France, told Les Echos that this month restaurants in the Olympic security zone have reported a 70% to 80% drop in turnover, while in other parts of the city turnover is down 30%. Airlines including Air France-KLM and Delta have said they expect to miss out on hundreds of millions in business as crowd-averse tourists avoid booking flights to the city, the fifth most visited in the world last year according to Euromonitor.
• Tickets to the games themselves, meanwhile, are struggling to sell out; 8.8 million tickets had been sold as of Thursday, an Olympics record, but more than a million were still available and a Financial Times analysis earlier this week found over 250,000 unwanted tickets stuck on the secondary market with little demand.

Liberté, égalité, frugalité: Thanks to Paris’ existing high-quality infrastructure, costs have remained relatively low. The Paris Games’ price tag is expected to be around €8.9 billion ($9.6 billion), or 25% more than initial projections, according to S&P Global Ratings. The ratings agency noted that Rio de Janeiro’s 2016 Games and Tokyo’s 2020 Games went 350% and 280% over budget, respectively. Whatever the inflated final cost, Céline’s soprano is worth every penny.

So much for first-mover advantage. 

On Thursday, pioneering online education company 2U filed for Chapter 11 bankruptcy. It’s not exactly a surprise: The firm hasn’t posted an annual profit since going public a decade ago, even as the public writ large gradually embraced online learning.

Remote Learning

Call it a failure to meet the moment. For years, online program managers (OPMs) succeeded by helping universities design, attract students for, launch and operate online-only courses and degree programs — often in a revenue-sharing model that created a somewhat thorny entanglement between non-profit schools and for-profit companies. 2U, arguably the most prominent practitioners of the trade, first took off after inking deals with elite colleges like Georgetown, the University of North Carolina at Chapel Hill, and the University of Southern California. By 2018, the firm had a market cap of over $5 billion.

But then came covid, a time when OPMs should’ve theoretically taken off. Instead, the industry has come out of the other side “on life support,” market analyst and ed-tech consultant Phill Hill told trade publication Inside Higher Ed last year, after largely failing the pandemic practicum:

• On the one hand, schools were forced to adapt to the times and grew far more comfortable developing online programs entirely in-house, or leaning on OPMs that offered à la carte assistance rather than full-service operations, like 2U.
• Meanwhile, amid congressional probes and backlash from consumer protection groups, last year the Department of Education greatly increased its oversight of OPMs. One Wall Street Journal analysis of government data found that 2U’s social work master’s program offered through USC had one of the worst debt-to-earnings ratios of any masters program offered by an elite school in the US.

Flunked Out: Amid the fallout, schools like USC, Baylor, and UNC began unwinding their partnerships with 2U. Enrollment plummeted, revenue flagged, and last month 2U had to execute a 1-for-30 reverse stock split to avoid being delisted from the Nasdaq; at market close on Wednesday, 2U’s market cap sat at just $11.5 million. As part of the Chapter 11 filing, 2U has entered into agreement with its lenders to cut its $945 million of debt by roughly half. We’re sure that somewhere out there, a very smart business school professor can design an entire bankruptcy lesson plan on 2U’s demise.