Warner Music Reports Mixed Quarterly Financials

4:39 AM PST 08/09/2012 by Georg Szalai
Rick Maiman/Bloomberg/Getty Images

UPDATED: The music major, owned by Len Blavatnik, posted lower revenue, but its loss narrowed, and digital revenue in the recorded music unit offset physical declines.

Len Blavatnik-owned Warner Music Group on Thursday reported mixed quarterly financials.

The music giant posted a loss of $32 million for its fiscal third quarter, compared with a loss of $46 million in the year-ago period.

But revenue declined 5 percent to $654 million amid unfavorable foreign currency impacts. Assuming constant currencies, revenue was down only 1.2 percent.

Recorded music revenue dropped 5 percent as music publishing declined 4 percent. Major recorded music sellers included Linkin Park, Jason Mraz and Germany’s Die Toten Hosen.

WMG said its digital revenue rose 13 percent, or 16 percent assuming constant currencies, to $230 million. It said digital amounted to 41.5 percent of total recorded music revenue in the quarter.

"There were several bright spots in our results for the quarter,” said WMG CEO Stephen Cooper. "In our recorded music business, strong growth in digital revenue more than offset the decline in physical revenue on a constant-currency basis, showing the promise of the industry’s transformation."

On the company's earnings conference call, Cooper referenced the example of Sweden as "one of the most progressive markets in digital music" as an interesting case study. 

"Sweden’s music sales are up 30 percent year-to-date driven by subscription revenue, which is up nearly 80 percent over the comparable prior-year period," he told analysts. "The strong showing by subscription services actually coincided with a stabilization in the physical business. CD sales were down just 1 percent after declining 54 percent in 2011." 

Cooper concluded that this could be a case study for a changing music sector. "This success can be attributed to a combination of high-quality legitimate digital services, as Sweden is Spotify’s home market, and strong copyright enforcement," he said. "While we’re not suggesting that every market will follow this trend, it does demonstrate how the combination of attractive, legal consumer offerings and strong intellectual property enforcement can produce promising results."
 
Among examples for countries improving anti-piracy rules this year, he mentioned Japan, which introduced a bill that calls for jail time and significant fines, and New Zealand. 

In terms of Warner music that has received much TV exposure, Cooper mentioned Eurovision Song Contest winner "Euphoria" from Loreen and English rock band Muse's "Survival," which has been played during Olympics coverage across the globe.

Muse, signed to Warner for both recorded music and music publishing, was selected to write and perform the official song of the London 2012 Olympic Games. “Survival” is "being used internationally by broadcasters covering the games as athletes enter the Olympic Stadium and in the lead-up to medal ceremonies," Cooper said. "This provides a unique opportunity and a global platform for Muse, and “Survival” will be included on their upcoming album, “The 2nd Law"."


Email: Georg.Szalai@thr.com
Twitter: @georgszalai

 

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