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With Stocks In Flux, Why Analysts Think the Music Business Can Weather a Possible Recession

As stocks founder and analysts warn of a possible recession, the music business could face another storm — and come through better than it did in 2008.

The last time the stock market crashed, in 2008, CD sales had cratered, summer tours were canceled and one of the major record labels faced serious business problems. Now, as the recent stock market decline hints at the possibility of a recession, analysts say the music business may be healthy enough to withstand it better than other sectors.

“The economics of the music industry have stabilized,” says Tim Jorstad, business manager for Journey and The Doobie Brothers and chairman of AltaPacific Bank. “And even in a recession, people spend their money going to movies and concerts.”

Unlike in 2008, when record companies had yet to transition from 99 cent download sales to streaming, and top concert-ticket prices had ballooned over 760 percent from 1998, pricing fans out, the music business is reasonably stable. Streaming is growing worldwide, labels are lean, and dominant promoter Live Nation’s share price has jumped from about $2.50 to $50 during the past decade. Analysts say market conditions are unlikely to dissuade Vivendi from its plan to sell half of its Universal Music Group, the world’s biggest record label; while a new Deutsche Bank report predicts the costs of signing artists will soar, it still values UMG at $33 billion, up from its earlier valuation of $22 billion.   

   

Although the market has recovered a bit since Christmas, stocks lost $84 billion during the final six weeks of 2018, and Apple’s first earnings warning since 2002 hinted at a possible downturn for big tech companies. So far, the music company most affected by the market turmoil is Spotify, which went public in April 2018 at a stock price of $165 but dropped below $110 as recently

Article source: https://www.billboard.com/articles/business/8493001/stock-market-music-business-recession-analysts

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