Believe Gives AI a Vote of Confidence as Company Revenues Climb 18%

With artificial intelligence creating widespread doubt and confusion throughout the music business, Believe gave the technological advancements a strong vote of confidence in the French music company’s midyear earnings report on Wednesday (Aug. 2).  

“We do think that generative AI, and what we’re seeing in the market, will empower every artist to make high quality music,” said CEO Denis Ladegaillerie. Believe sees AI having significant impacts in creativity. Ladegaillerie continued, “We think that for a large part of our business for our automated solutions [division], technology will rapidly be available to elevate the quality of the music, allowing younger artists, developing artists to compete faster in the mid-level market segments and towards the top with higher quality music and accelerate their learning curve to improve their craft.”

Ladegaillerie’s message was markedly different from that of major labels who tend to present AI as a cause for music content that floods digital platforms and steals value from more deserving — living and breathing — artists. Last week, Universal Music Group CEO Lucian Grainge drew a line between “real, actual human beings who have real, actual fans” and “those devoted to gaming the system, to committing fraud, to flooding the platform with content that music fans do not want.” 

While Grainge’s frequent comments about AI are underpinned by royalty concerns, Ladegaillerie’s comments on Wednesday also focused on how AI can help Believe perform its basic functions — marketing, promotion — more cost effectively. In the first half of the year, Believe further developed what it called “AI-enabled discovery solutions” and “explored” both partnerships with “several leading digital service providers” and “investments on core internal AI and generative AI use cases.” 

“We’ve been, for several years now, building machine learning models to be able to optimize the marketing and promotion of our artists of their tracks on various digital music services to help them expand market share and new services,” said Ladegaillerie.

AI may play a significant role in the company’s future, but in the first half of 2023, Believe’s financial performance was driven mainly by its growing roster of artists and labels, a strong showing in its home country of France and solid growth in the rest of Europe. Believe’s revenue in the first half of 2023 grew 17.9% to 415.4 million euros ($445 million at the average exchange rate in the period). 

Digital revenue grew 18% (20.5% at constant currency) but was hampered by moderate growth in ad-support streaming revenues and foreign exchange rates that turned unfavorable for the euro in the first quarter of 2023 “and even more” in the second quarter, the company stated. 

Revenue at Believe’s premium solutions division grew 17.9% to 388.5 million euros ($416 million). Revenue at the automated solutions division, which includes digital distributor TuneCore, rose 17.1% to 23 million euros ($25 million). 

In France, Believe had a 27% share of the country’s top albums — 40 of the top 149 titles — and four of the top 10 artists. In that market, the label AllPoints was the top hip-hop label and had 22 albums in the top 200. Ladegaillerie said the achievement “demonstrates the ability over time to build on a track record of success with a mix of breaking new artists as well as working with established artists where we have long-standing relationships.”

European revenues excluding France and Germany — Believe’s two largest markets — grew 23.9% to 121.9 million euros ($131 million). The company attributed the improvement to the acquisition of Sentric Music Group in the U.K., which added 7.5 million euros ($8 million) of revenue in the period, and “a strong growth trajectory” in South Europe and Eastern Europe. 

Believe singled out its 10-year anniversary of operating in Southeast Asia in fast-growing markets such as Indonesia, the Philippines, Thailand, Vietnam and Malaysia. Its Southeast Asian roster generated more than 634 billion of streams and views over the past 10 years. Believe expects the region’s paid streaming users will grow from 15 million today to 67 million in 2030. 

Looking ahead, Believe lowered its expectations for full-year organic growth to 14% from 18% and raised its target for adjusted earnings before interest, taxes, amortization and depreciation margin to 5.5% from 5%. 

Believe's earnings release was timed after the close of the market and did not impact its share price. Year-to-date, Believe's share price is up 5.6% and at Wednesday's closing price of 11.20 euros per share ($12) gives the company a market capitalization of roughly 1.1 billion euros ($1.2 billion).

Believe’s financial metrics: