Music Business Worldwide: Tim Ingham, August 8, 2017
Warner Posts Biggest Revenues in Over 14 Years as Q3 Streaming Cash Jumps 59%
If you want to know how well streaming is treating the big players of the recorded music business, just ask Len Blavatnik.
Warner Music Group has just posted $917m in revenues for the three months ending June 30.
That represented the company’s biggest fiscal Q3 since before WMG was acquired by a group of investors led by Edgar Bronfman Jr for $2.6bn in late 2003.
Not only that: it was a whopping 41% up on the equivalent quarter in 2012 – Warner’s first full Q3 after Blavatnik’s Access Industries bought the firm for $3.3bn in 2011.
What’s more, this performance was actually slightly dragged down by currency rates: WMG revenues grew 13.1% year-on-year, or 15.5% at constant currency.
Total digital revenues were up 30% to $496m – claiming 54.1% of overall sales.
“Our momentum continues with our eighth consecutive quarter of revenue growth – the last seven of which were up double digits,” said Steve Cooper, Warner Music Group’s CEO.
“Our artists and songwriters are creating great music and our team is outperforming in a growing industry.”
The above figures contain both Warner’s recorded music and music publishing divisions.
The former – money generated solely by Warner’s record labels and artists – posted $770m in the three months to end of June this year.
That was also a historic 14-year best, up 15.6% year-on-year in constant currency (13.2% in real terms).
It represented an increase of no less than 49% on the $517m reported in fiscal Q3 of Len Blavatnik’s first year as owner (2012).
For comparison’s sake, Sony Music’s performance in the same quarter – as reported last week – stood at $899m, up 8.3% at US$ constant currency.
The reason for Warner’s growth in its Q3 was, predictably enough, streaming.
The likes of Spotify generated $360m in quarterly recorded music revenues, up 58.6% year-on-year.
Quarterly digital download revenues fell 27% to $88m.
At $448m (+28% YoY), digital revenues made up 58% of all WMG’s recorded music revenues in the quarter.
Artist-wise, the company’s biggest sellers in the three months included Ed Sheeran, Bruno Mars, Gorillaz (pictured), Clean Bandit and TWICE.
As for publishing, Warner/Chappell posted its best fiscal Q3 since 2009, with $150m in revenues.
That was up 11.9% year-on-year (or 14.5% in constant currency).
Warner Music Group’s overall operating income increased to $51 million, compared to $45 million in the prior-year quarter, as a result of its higher revenue.
“I’m proud of our team for delivering such strong results, particularly against difficult comparisons in the prior-year quarter,” added Eric Levin, Warner Music Group’s Executive Vice President and CFO.
“I’m confident that 2017 will be another strong year.”
Net income was $143 million, compared to a $7 million loss in the prior-year quarter, and Adjusted net income was $149 million, compared to a $16 million loss in the prior-year quarter.
OIBDA (Operating Income Before Depreciation and Amortization) declined 4.2% to $115 million from $120 million in the prior-year quarter and OIBDA margin declined 2.3% to 12.5% from 14.8% in the prior-year quarter.
The decline in OIBDA and OIBDA margin was primarily due to a one-time gain on PLG-related asset sales in the prior-year quarter and a one-time loss on PLG-related asset sales, higher variable compensation expense and higher A&R investment in the current quarter.
As of June 30, 2017, Warner reported a cash balance of $567 million, total debt of $2.797 billion and net debt (total long-term debt, which is net of deferred financing costs of $31 million, minus cash) of $2.230 billion.