Universal Music Group N.V. (UMG) Earnings Call Transcript & Summary

Good evening, and welcome to Universal Music Group's Second Quarter and First Half Earnings Call for the period ended June 30, 2026. My name is Gavin and I'll be your conference operator today. Your speakers for today's call will be Sir Lucian Grainge, Chairman and CEO of Universal Music Group; and Matt Ellis, Chief Financial Officer. They will be joined during Q&A by Michael Nash, Chief Digital Officer; and Boyd Muir, Chief Operating Officer. [Operator Instructions] As a reminder, this call is being recorded. Please also let me remind you that management's commentary and responses to questions on today's call may include forward-looking statements, which by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may vary in a material way. For a discussion of some of the factors that could cause actual results to differ from expected results, please see the Risk Factors section of UMG's 2025 annual report which is available on the Investor Relations page of UMG's website at universalmusic.com. Management's commentary will also refer to non-IFRS measures on today's call. Reconciliations are available in the interim financial review and unaudited condensed consolidated interim financial statements for the 6-month period ended June 30, 2026, on the Investor Relations page of UMG's website. Thank you, Sir Lucian, you may begin your conference.

Thank you, and thank you all for joining us today to discuss our second quarter performance. For the quarter, UMG in its entirety, grew total revenue by 13%, of which was 6% excluding downtown. Our adjusted EBITDA in its entirety grew by 1.5% to EUR 674 million. For the half year, adjusted EPS grew 4%. We recently completed our first EUR 500 million buyback program and declared an interim dividend of EUR 432 million. Matt will take you through the numbers in greater detail later. This quarter, there were areas where we performed well and areas where I expect us to improve. While I'm pleased with our strategic progress. and aspects of our financial performance, we know where we can accelerate our growth and operate more efficiently. Our confidence starts with the fact that music is the world's most enduring and accessible form of entertainment and every way that innovation has expanded its reach as well as its appeal. And this one will, too. But what gives me the greatest confidence is the broad strength of UMG. No other company brings together the three things I'm about to describe. Together, they create a competitive advantage that positions us to lead the next phase of growth. I'm very confident in what we're doing and where we're going. First is the strength of our core business. UMG developed elevates and sustains more of the world's most successful artists and songwriters than anyone else. Second is our leadership in shaping a more valuable ecosystem through initiatives such as Streaming 2.0. Third, our significant opportunities still ahead of us from our system label services and high-growth markets to super fans and of course, AI. So let me start with how we continue to strengthen our core business. Our chart performance is undeniable and has regained momentum after a larger release schedule earlier in the year. We expect that momentum to continue into the second half with new releases from Ariana Grande, Katseye, Sam Smith, Mrs. GREEN APPLE, and some other very exciting things yet to be announced. Over the past 10 years, on the IFPI's annual list of the world's best-selling artists, UMG has averaged just under 14 of the top 20. Put a different way, UMG artists have accounted for nearly 70% of the world's most successful stars for the last decade. And if you look across our roster over the past 3 months, you'll see the range of our results. There are a few results of those and examples. Sam Fender earned his first #1 single in the U.K., which is a Duet with Olivia Dean, which went on to tie the record for the U.K.'s longest running #1 ever. Olivia Rodrigo, Noah Kahan and Gracie Abrams all celebrated #1 albums in the U.S. with career best first week sales globally. And our success spans every stage of an artist's career, including legends such as Paul McCarney, whose latest album was his 22nd top 10 album in the U.S. and -- the Rolling Stones, who hit #1 in 11 countries with the 25th studio album. Every new release by a successful artist lifts their entire body of work. It also expands opportunities to build lifelong fans across merchandise, touring, brand partnerships, film, television and so on. At the same time, each successful release by an exciting newly signed artist is building the value of tomorrow's catalog. And I know our artist roster acts as a magnet for the next generation of talent we see that all of the time. This virtuous cycle is where we invest for decades, not just quarters. Next, our leadership is shaping a more valuable music ecosystem. Subscription revenue grew 16.6% and or 6.7% excluding downtown. A key component of our Streaming 2.0 strategy is to continue accelerating customer acquisition, whilst driving conversion of free tiers to paid and then adoption of new super premium tiers. Let me remind you, we anticipated the rise of AI slop and we anticipated the potential for fraud. So our 2.0 agreements have built in protections against royalty dilution. This is important work as it will be ongoing. We now have Streaming 2.0 agreements with almost all of our major streaming partners, including subscription services, Spotify, YouTube, Amazon and Deezer. This quarter, we announced a new strengthened deal with TikTok. And today, I'm happy to share we've completed our agreement with Pandora, a top 10 partner. I'm pleased that all these partners share our commitment to protecting human artistry. Music platforms should reward creativity and guard against the legally trained AI models. Pumping AI slope or fraud designed to divert royalties from artists, songwriters, labels and music publishers. Fans don't want AI slop. And there's no justifiable reason that this content should be algorithmically served to audiences on streaming platforms or siphoning money from human artists. Leading the industry in growing the value of music requires bold decisions, especially in local markets, Streaming 2.0 provides a repeatable framework for doing exactly that. I'll come back to this in a second. Leadership isn't just about strategy. It's about disciplined execution, including our capital allocation. As promised last quarter, we'll take you through our investment returns across ANR advances, catalog and M&A. Our track record from EMI in 2012 and frankly, for many years before that, to downtown this year and many more demonstrates our ability to create significant upside, whether we're investing in artists and songwriters, catalogs, emerging markets or the independent services sector, we deploy capital under rigorous financial framework. As a result, since our public listing, we have exceeded our target hurdle rates. We're also sharpening our focus on the highest return investments and improving efficiency across the entire company. The bottom line is that we're determined to translate the strength of our business into stronger earnings per share and stronger free cash flow. That brings us to an update on the 4 areas where we see significant opportunities to widen our advantage. First, artists and label services, serving the independent immunity is central to our strategy. We've been building these capabilities for more than a decade. Just as we do with artists and songwriters, we've invested patiently developing the business for long-term success. In 2013, we relaunched Caroline, the independent services business of EMI. In 2019, we acquired the remaining 50% of Ingrooves. In 2022, we bought the two together under the newly launched Virgin Music Group with new leadership. This year, with our acquisition of Downtown, Virgin offers a best-in-class suite of services spanning high-touch support to self-service solutions. With the deal approved and the combined leadership team in place, our focus has been fully on execution. And therefore, I'm proud to say that we're now the second largest operator in this far growing space, and we're seeing extremely encouraging momentum. Downtown's contribution to our revenue this quarter is just the beginning and we expect it to create increasing strategic and financial value with opportunities for greater efficiencies moving forward. Next, high potential markets. While other companies have been pulling back from new frontiers, we've continued investing in the countries, genres and artists that will produce the next generation of global stars. Last quarter, I talked about Indonesia. Today, I want to focus on how we're building healthy music markets in the world's two most popular countries, China and India. Both have extraordinarily creative talent, vast smartphone adoption and all the ingredients for long-term growth. Over the past 5 years, we've transformed our business in China through a multi-label strategy. In 2023, we decided we needed to refresh and strengthen our local management, and we brought in Tim Xu to lead our Greater China region. And just this past quarter, we signed one of China's biggest stars, Jason Zhang and acquired Carrier Creative, home of the Legendary Group Little Tigers and one of Mandopop's most important catalogs. These investments have strengthened our ability to discover and develop Chinese artists while connecting them to audiences around the world through UMG's global network. At the same time, we help build a more valuable music ecosystem. In 2019, we worked with major Chinese DSPs to put domestic and international music behind the paywall. In post collaboration with our partners, we carefully escalated the staging of this initiative over time until we significantly transform the market. Any skeptics predicted it would have a negative impact and that we shouldn't do it and that it would affect music consumption and the market development, exactly the opposite happened. By 2025, China had overtaken Germany to become the world's fourth largest recorded music market. Driven by premium subscriptions and new superfan experiences, revenue grew more than 20% year-over-year, making China the world's fastest-growing major music market and the second largest digital market after the U.S. Now we're applying the lessons we've learned in China to India. Tailored to the diverse and dynamic Indian market, we've also built a multi-label system to cater to the many different genres and [ dialXs ]. We've also expanded our capabilities through strategic investments and acquisitions across artist management, live entertainment, film and television and regional repertoire, so important there. Now we're taking the next step. Pleased to announce today that beginning at the end of August, UMG's new releases from major domestic and international office will be launched exclusively to paid streaming subscribers for their first 72 hours on both global and regional streaming services. After that, they will become available on our ad-supported services to. Fans will still have access to the music they love and artists will see the benefit of improved compensation. China has shown what's possible when healthy music ecosystems take hold. We want India to follow a similar path and believe many other high markets -- potential markets will do too. As I've said before, superfans represents one of the greatest opportunities to help partners build longer, more valuable careers. Today's biggest fans want more than just the music. They want community, physical products and deeper relationships with the artists they love. As a result, we're helping grow an entirely new category of super fan experiences. Our direct-to-consumer channels represent up to 50% of first physical sales for this quarter's biggest releases. That's one reason we've been reorganizing our merchandise operations, creating an improved platform to serve artists and better capture this growing opportunity. And beyond music itself, we're creating new ways for fans to experience artists and their stories. Sinatra the Musical recently opened in London's West End, while UMG Productions accounted for 3 of the top 4 most watched music documentaries in the midyear rankings. These are films about Noah Kahan, Red Hot Chili Peppers and Paul Mccartney on platforms such as Netflix and Amazon. And we have several other projects, which I'm equally excited about to come further down the pipe. And now, of course, AI. Licensed innovation is replacing unlicensed exploitation. That is our North Star. Our responsible AI strategy is being brought to life through partnerships with start-ups such as Audio and Clay, creative platforms like Splice and Stability and tech giants like NVIDIA. This quarter's Spotify UMG announced an industry-first framework that will enable fans to use generative AI within Spotify's self-contained environment to create covers and remixes of songs from those artists who've opted in. Industry standards are improving, too. With a new industry labeling initiative distinguishing between AI-generated and AI-assisted tracks as well as chart eligibility principles requiring AI-assisted recordings to be properly authorized, substantially human-made and free from fraud concerns. I've been doing this a long time. Every generation invest new instruments. Great artists showed what's possible with them. AI is a new instrument and not the next artist. I'll conclude with this. Music has never been more global. Artists have never had more ways to reach fans and fans have never had more possibilities to engage with the artists they love. Those trends are creating extraordinary opportunities. But as I said at the beginning, what gives me the greatest confidence is UMG itself. And on that note, I'd like now to hand over to Matt, who's going to run through in more detail the numbers for you. Thank you.

Thank you. As Lucian has outlined, we're confident that our strategic plan will drive healthy top and bottom line growth over a multiyear horizon. That said, there are aspects of our quarterly results that we're pleased with and other areas that we're not satisfied with and already at work to improve. For the second quarter, total revenue grew 13.3% year-over-year to EUR 3.3 billion. In Recorded Music, Downtown physical sales, Streaming 2.0 pricing, audiovisual and live and related all contributed to new growth. Downtown contributed EUR 202 million to total revenue. Excluding Downtown, total revenue grew 6.4%. Recorded revenue grew a solid 8.7%. Music Publishing grew 2.7% and merchandising declined 10.7%. Q2 adjusted EBITDA grew 1.5% to EUR 674 million, with EUR 10 million from Downtown. Excluding Downtown, adjusted EBITDA was flat year-over-year and would have grown 2.2%, if not for the settlement with an Internet service provider we disclosed in Q2 last year. Excluding Downtown, adjusted EBITDA margin declined by 1.3 percentage points to 21.5% because of revenue and repertoire mix in recorded music, the settlement I just mentioned, which have last year's margins by 30 basis points and a loss in merchandising, which I will cover in more detail later. In addition, we had an increase in corporate overhead that included higher professional and legal fees. While we remain on schedule with our EUR 250 million cost savings program, some of the cost savings in the first half of this year were reinvested into areas of growing importance to our business, such as AI, for example. For the half year, total revenue grew 10.8% or 5.7%, excluding Downtown, while adjusted EBITDA grew 2.7% or 1.6%, excluding Downtown. Operating profit declined 0.8%, excluding Downtown, with EBITDA growth and lower restructuring charges more than offset by an increase in depreciation and amortization and higher integration and business transformation costs. The higher amortization is software-related or the higher depreciation is related to real estate projects. Adjusted net profit grew 3.9% and adjusted diluted EPS grew by 4.3% to EUR 0.47 a share. The decline in operating profit combined with higher interest expense was more than offset by an increase in income from equity affiliates. The higher interest expense is largely the result of higher net debt due to the closing of the Downtown acquisition and the implementation of our share buyback program, partially offset by the sale of a portion of our Spotify shares. We bought back EUR 485 million of shares as part of our first EUR 500 million buyback program, which was completed during July. And EUR 250 million from our second EUR 500 million authorization to participate in the shares sold by [ Persing ] Square in June. While the share buybacks will ultimately be primarily funded by the sale of a portion of our Spotify shares that share sale is still in process. During the first half, we sold just under 1/3 of our planned 50% stake sale for gross proceeds of EUR 403 million. Now let me turn to the second quarter results from each segment. For the quarter, recorded music revenue grew 16.2% and adjusted EBITDA grew 2.8%. Downtown added EUR 162 million of revenue and EUR 7 million of EBITDA in the quarter. Excluding the contribution from Downtown, recorded music revenue grew 8.7% and adjusted EBITDA grew 1.6%, with adjusted EBITDA margin down 1.8 percentage points to 24.9%. EBITDA margin was affected by both revenue and repertoire mix, but also by the inclusion last year of the high-margin settlement I mentioned. This was booked in other digital revenue and accounted for EUR 31 million of revenue and EUR 15 million of EBITDA. The margin effect from revenue mix was due to outsized growth in lower-margin audio visual and life and related income as well as strong physical revenue growth, while the repertoire mix pressure was driven by healthy growth in Virgin music. Looking further at Recorded Music revenue, subscription revenue grew 16.6% or 6.7% excluding the EUR 116 million contribution from Downtown. This underlying growth relates 3.5 percentage points of pricing benefits from Streaming 2.0 agreements partially offset by 1.5 percentage points of headwind from market share. It's worth noting that we recorded improved market share as the quarter progressed and ended the period with good momentum, thanks to strong releases from our artists. In addition, the year-over-year growth reflects the normal variability of each quarter where items such as minimum guarantees, accruals, audits and catch-up payments can impact year-over-year comparisons. This quarter, these types of movements created a 1 percentage point headwind to growth. The remainder of the differential compared to first quarter growth was a result of the typical fluctuations in subscriber growth related to timing of promotions and price increases. We do not see any meaningful changes in industry trend lines and industry subscriber growth remains healthy. In physical, revenue grew 16% in the quarter with a minimal contribution from Downtown as strength in the U.S. and Europe, there by Olivia Rodrigo and Noah Kahan was only partially offset by a decline in Japan, which benefited from significant local releases last year. These strong results support our conviction on the growing opportunity to monetize music culture and found them through vinyl and other collectibles, which remains a key component of our super band strategy. Turning to Music Publishing. Revenue grew 0.8% in the quarter or 2.7% excluding EUR 40 million from Downtown. Healthy live performance revenue growth was partially offset by a decline in sync revenue which was largely related to the timing of deals. Digital revenue growth reflected strength in subscription partially offset by softer ad supported streaming similar to the trends in recorded music. Excluding the EUR 3 million contributed by Downtown, adjusted EBITDA grew 1.6% and margin was down 20 basis points to 22.6% largely due to higher legal fees. Much of the slowdown in Music Publishing growth for the past 3 quarters stems from anniversarying new deals, which we talked about last year or the timing of various industry payouts in addition to the secular slowdown in radio and linear TV performance revenues. And within Music Publishing Digital revenue, ad-supported streaming faces the same pressures we are seeing in the reported music business. As a result, we expect Music Publishing to be a mid-single-digit growth business rather than high single digit for the immediate future. Moving to Merchandising and other, which is not impacted by the Downtown acquisition. For the quarter, revenue was down 11% due to declines in touring, merch and direct-to-consumer sales, both of which were largely related to the timing of artist, touring and album release cycles. Adjusted EBITDA fell EUR 6 million year-on-year to a loss of EUR 5 million due to a timing-related increase in A&R costs. We are making some structural changes to our merchandising operations, which we believe will produce improved performance over time, and we expect 2027 to show improvement over 2026. Turning now to cash flow. For fiscal year 2026 in response to shareholder feedback, we've revised our free cash flow definition to better represent the cash that's available for strategic investments and capital return. Our new definition is before our discretionary strategic investments in catalog and M&A, which better aligns with how we view the business and will give investors a clear review of the cash available to fund our long-term growth. A fact sheet with our historical results in this new presentation can be found on our IR website. As you know, our 2023 to '28 guidance framework includes an adjusted EBITDA conversion market. With this new definition, our conversion range remains 60% to 70%, but will now be the conversion from free cash flow rather than our prior free cash flow before investment metric. You'll notice that these numbers are very similar. After the definition change, our first half '25 free cash flow increased from an outflow of EUR 179 million under the prior definition to an inflow of EUR 163 million under the new definition. In the first half of 2026, net cash provided by operating activities before income tax amounted to EUR 408 million compared to EUR 488 million in the first half of 2025. This included net royalty advance payments of EUR 292 million, down from EUR 377 million in the first half of last year due to the timing of deals and a higher recruitment. The decline in net cash provided by operating activities is largely the result of unfavorable working capital movement with a higher share of sales from our distribution business and payment of certain live event costs accrued last year. CapEx rose to EUR 44 million and EUR 23 million in the prior year. This was mainly due to the real estate projects we discussed on our 2025 year-end earnings call, and we expect the spend to pick up in the second half of the year. Free cash flow amounted to EUR 24 million compared to EUR 163 million in the first half of last year. This decline was primarily the result of the working capital movement. As usual, we expect free cash flow in the second half of the year to be stronger than this half. As Lucian mentioned in his remarks, I'd like to provide our shareholders more color on the performance of our investment framework in recent years. It's worth distinguishing between the two types of capital work in our business because they sit on different sites of our new free cash flow definition. First is the recurring investment required to operate and organically grow the business. Principally the advantage we make to artists, songwriters and partners, which are recouped as royalties are at. We view these advances as working capital. Short-term investments that drive revenue and scale the growth of our business. And second, the investments, our free cash flow enables us to make under our capital allocation framework across catalog acquisitions, core M&A and other M&A investments and also to return cash to shareholders. Of this discretionary and opportunistic investment from 2022 to 2025, approximately 60% went to catalog, 20% to core M&A and 20% other M&A while we returned EUR 3.6 billion to shareholders in the full dividend. And additionally, in 2026, we have authorized EUR 1 billion in share buybacks to enhance our investor return profile. We apply a disciplined risk-adjusted returns-based framework to both the advances and the discretionary investments we make with each project assessed against its appropriate hurdle rate and time horizon. Let me first walk you through the framework, and then I will discuss our actual returns in these areas since our public listing. I'll start with advances. We underwrite advances at a project level with risk-adjusted IRR hurdle rates based on artist stature, deal structure and terms. We target overall portfolio pretax returns of at least 15% with project-level hurdle rates range from 10% to 20% based on risk. For example, we use the lower end of those hurdle rates for proven superstars and higher hurdle rates of developing artists. The second area of our framework relates to catalog acquisitions. These are investments in recording and music publishing rights with predictable long-term cash flows. Our catalog deals target pretax IRR hurdle rates of at least 10%, improving as we further monetize the assets. Our industry-leading global reach across marketing, sync, audio visual branding content enables us to amplify the rights we acquire and to grow their income. Our partnership with Chord further expands our capacity to invest in this area. Chord is designed to attract long-term institutional capital by combining UMG's operational expertise with an asset class that offers investors stable long-duration cash flows enabling the vehicle to continuously grow to acquisition capacity. Chord target mid-teens returns and has invested over EUR 2.6 billion in catalog acquisitions that are then managed and cultivated by UMG. Third, our core M&A acquisitions are focused on scaling attractive businesses, expanding into new geographies and adding strategic capabilities. These investments include purchase of consolidated companies, equity affiliates or financial assets. We deployed about EUR 530 million in this core M&A category from 2022 to '25. For example, in Maven and PS, our target IRR hurdle rates are at least 10% to 20% for these investments, depending on factors such as geography, revenue concentration, business maturity and integration risk. And finally, other M&A represents venture-like investments in innovative adjacent businesses as well as other less typical investments that are complementary to our core business. Our evaluations of these opportunities reflect broader benefits to UMG alongside near-term financial return. Hurdle rates on these investments have a broad range of 10 to 25-plus percent depending on risk. Now let me turn to the actual performance of our investments since our listing. The results reinforce our conviction in our approach and our capabilities of our team to successfully invest and generate attractive returns. Our investments in recorded music and publishing advances have generated blending -- blended IRRs in the high teens, which is above our 15% portfolio target. On catalog acquisitions, we are acquiring assets at an average entry multiple of 16.6x EBITDA with run rate EBITDA multiples improving to approximately 13x, reflecting our expertise on underwriting and the additional value we capture through active management. And touching on Chord since our initial investment in early 2024, we have invested a total of EUR 342 million booked in investments in equity affiliates. This includes our upfront payment of EUR 238 million to buy into the pre-existing fund, as well as an additional EUR 104 million we invested in 2025 to fund incremental catalog purchases and maintain our share. Chord's portfolio has delivered mid-teen returns in line with their targets while generating additional returns to UMG as manager of those rights. Turning to core M&A. Our investments in this category have generated blended IRRs in the mid- to high teens, in line with our objectives. The category we call other M&A primarily relates to two investments, our stake in the entity that acquired the Capital Records Tower in L.A. and a minority investment in Complex Network. The Capital Tower is an iconic cultural landmark with strategic value to UMG. This transaction is captured in investments because of its deal structure, but should be viewed more as CapEx for a long-lived real estate asset that supports our operations. And our stake in complex network is a growth equity investment tied to the opportunity we see in the superfan ecosystem. These two transactions were unique. And going forward, our investments in other M&A are expected to moderate. Since the listing, the vast majority of our growth has been organic between 2021 and 2025, we have grown EBITDA at a 12% CAGR, including organic EBITDA growing at 11% and acquisitions contributing 1 percentage point of growth. And the acquisition benefit to our revenue growth CAGR is less than 1%. Most of the inorganic contribution has come from catalog acquisitions. We expect our M&A investments to contribute over time. Additionally, a significant portion of our investments are not consolidated and the impact is below EBITDA with Chord being the largest example. In summary, we are fortunate to have an abundance of attractive investment opportunities, and we take a financially disciplined and highly selective approach consistent with our capital allocation framework. We will continue to invest in areas where we see our greatest comparative advantages and attractive rates of return. With that, Sir Lucian, Boyd Muir and Michael Nash and I will now take your questions. Operator, please open the line for Q&A.

[Operator Instructions] And the first question comes from the line of Stephen Laszczyk from Goldman Sachs.

Matt, I was curious if you could -- maybe talk a little bit more about the components of your streaming revenue growth. Appreciate the context you provided in the second quarter. I would just be curious if you could speak a little bit more to how you would expect volume pricing and market share factors to progress here over the next couple of quarters? And then to maybe a second on the exclusive windowing in some select markets, I would just be curious to learn more about how some of those conversations came together with your DSD partners and how you expect that to translate ultimately into improved monetization in these markets in the coming quarters?

Well, I'll answer your second question first. The -- I've not been happy with some of the monetization as I called out earlier, in India, for example. And these are discussions that we've had with several of the major partners and they're very sequential. So I'm excited about these developments, and we've got a lot of experience in driving extra revenue and profit and benefit to the artists over a period of time with these platforms. And that's -- it's something that we did in China, where we booked an amount of product around the payable -- and I said when the first conversations came in, I said, well, let's do it. Let's book 5x the amount of product around the label and have a real go we did. And the tests were extremely successful, and we've ended up with a much more healthy robust ecosystem. As I said earlier, we're doing exactly the same mining in India, and this is core part of our strategy with 2.0, fraud, AI slot, dilution, real artists, real talent, how we get the talent to actually integrate with the platforms and phasing is critically important in this process. It's across all the various geographies. Obviously, as I said, different platforms, different products, genres. And the benefits aren't just always limited to price. So I hope that gives you some sense. I mean, Michael, you should probably handle some of the details on the first question as well.

Maybe just to go into some specifics with respect to India. Big picture, of course, key high-potential market, most populous country, fastest-growing major economy, Importantly, a burgeoning use demographic, over 40% of the population under 25. And of course, in India, music is deeply rooted into the culture of the nation. So we look at all these macros and we say India should certainly rank higher than the #15 global music market. It's one of the largest growth opportunities in the world, and we've got to accelerate market development. o why this focus in terms of the windowing of the content? India is one of the largest markets in the world for ad-funded streaming. This is a EUR 1 trillion streamed market in 2025. It has very, very low paid conversion rates. We're talking about industry estimates, 7% to 10% of the total individual streaming users are paid users. So we felt like it was very important under Lucian's leadership to work to organize an effort to facilitate market development. Again, on the specifics beginning in the last week in August, we're going to initiate the short 72-hour premium window for all of our top releases, both domestic and international. And during this first 72 hours of release, these tracks are only going to be available in premium tiers. That's across all platforms in India, the global DSPs as well as the domestic players. Lucian went into great detail about what we were able to accomplish in China, the lessons that we learned there. And I would just add this thought that with respect to examples in the India market of paywall and content, recently, the premium -- the Indian premium League, the Cricket League, all their matches were moved by GEO behind the paywall, and that was one of the major elements that drove GEO to obtain more than 200 million subscribers in that market. So that's a great example that points directionally to the opportunity to move premium content behind the paywall and work to engineer market development. On the first question in terms of the streaming growth, Matt, maybe over to you and you and I can tag team on that.

Yes. Thanks for the question, Stephen. I think you mentioned three components of streaming volume pricing and market share. I'll make some general comments and if Michael wants to add anything. From an overall volume standpoint, we continue to see very strong industry subscriber growth on a global basis even as we see price increases be put in place from a retail standpoint, we see continued good subscriber growth. So we would expect that to continue here as we head into the second half of the year. From a pricing standpoint, obviously, in second quarter, we had the full benefit of the three major DSP agreements that we talked about a quarter ago. And obviously, a couple of updates to that will impact the second half of the year. As you heard Lucian mentioned in his remarks, we have an updated arrangement with Pandora. And then as you saw last week, Apple announced increases in their retail prices, which we'll see some benefit of in the third quarter and a more full quarter benefit as we get into the back end of the year. And then finally, on market share. And while that's certainly been a topic for us during the first part of the year, as I mentioned in my remarks, because of the stronger release schedule we saw in Q2, especially the back half of Q2, Lucian mentioned a number of the specific artists we come into third quarter with better market share momentum than we saw at the beginning of the second quarter. So those are some highlights across the three components you mentioned. Mike, I don't know if there's anything you want to add to anything.

You constantly hear me refer to long term. Well, there's also part of that is sequencing and phasing. It's not that long ago that many household name artists didn't support digital downloads. It didn't support the dissemination of the album bundle. Not so long ago that there were many, many household names didn't support streaming. So our work in creating different tiers in some of these newer markets is around the data that we have to allow the artists as well as ourselves and the platforms themselves to see in terms of consumer behavior. That's what creates artist followership and artists will follow the platforms and each other as well as us into this new world. It supports everything that we've been doing for 3 years now on antidilution. You've heard me talk repeatedly about 2.0. The anti-fraud and then that applies to platform integrity and the partnerships and the relationships that we've got with those platforms. This is the work goes on behind the scenes and takes time and takes trust. And then over this period of time, then the platforms themselves, let's say, in India and China, for example, start to see the economics for themselves. We've given the opportunity to develop their own markets and their own platforms with our product in partnership with them. And one other thing that I'd just like to add something that you said, Matt, with regard to market share, we've been around long enough to know that releases can be seasonal. When I started, everything came out in the last 6 weeks of the year because that was when Thanksgiving and Christmas was. Now we've got a 52-week of the year release cycle. And obviously, there are gifting cycles within that depending on which market you're talking about. So you're going to have seasonality, I suppose, in market share based on some of those releases. And we'll continue to see it, and it's just an inevitability of artistry and creation. And sometimes, sometimes artists there may be events, promotion events, timing events, which may slow down or extend when things come down the pipe. And that's just a constant part of what the business is.

I guess the only thing to add is that we don't see any meaningful changes in the industry trend lines with that variability that Lucian described as part of the context for looking at quarter-by-quarter numbers.

Your next question comes from the line of Will Packer from BNPP.

Obviously, AI worries have weighed on UMG and why they use it complex in the last 6 months. As a result, your new partnership with Spotify takes some particular importance as a potential catalyst for AI-based revenue growth. A couple of quick questions. Do you think the AI team needs to have top parties opt in for the product to succeed with consumers? And secondly, is it realistic to think that a substantial portion of your top artists will participate in the products at launch?

Will, thank you for your question. So with respect to this new AI tier that Spotify announced with us. We're obviously very excited about the development of the product. In terms of the success of this tier, obviously, it's going to be very important for us to work to get our artists to opt in to support the launch of this service. With respect to our engagement with the creative community, it's been going very well. Now keep in mind that we've had several deals that we previously announced in this AI product category. So we've been in conversations with thousands of our artists in their estates for a long time on this product model. We've already converted a significant percentage of those discussions into signed opt-in agreements, and we expect to be able to continue to make substantial progress. So we're building a portfolio of partnerships in this category. This new Spotify deal is obviously a very significant addition. And we believe that obviously, this product model is going to become increasingly attractive, and we expect to achieve a critical mass of artist support to help launch these services. So in terms of how you should think about this, yes, it's important for us to have significant artists. Yes, it's important for us to have a critical mass of artists that are involved. And it is our expectation that we're going to work towards that level of support from our artist roster and it builds on the conversations that have been ongoing for some period of time.

Your next question comes from the line of Doug Creutz from TD Cowen.

You mentioned elevated legal professional fees as impacting results in Q2. Are those going to remain elevated in the second half of the year? Or should they come back to more normal levels?