Bronfman's music company cuts net loss
NEW YORK — Warner Music said Monday that cost cuts helped slash losses in the 10 months ended in September as revenue rose 2% to $2.5 billion.
The privately held music company led by Edgar Bronfman Jr. said net losses narrowed to $136 million for the period from $239 million the year earlier as Warner Music swung to a $7 million operating profit from a $197 million loss. Company reported a transitional 10 months, not 12, since it recently shifted its fiscal year end from Nov. 30 to Sept. 30.
Company, which has been restructuring since its separation from Time Warner earlier this year, forecasts cutting at least $250 million in recurring annual costs from the business by the end of 2005, with most of it already realized.
“Now that the lion’s share of the restructuring has been completed, we can turn our entire focus to building and developing the company’s roster of recording artists and songwriters,” Bronfman said in a statement.
Bronfman struck a deal last fall to buy Warner Music from Time Warner for $2.6 billion, backed by some of the nation’s largest investment firms, including Thomas H. Lee Partners, Bain Capital and Providence Equity Partners. When the transaction closed in March, Warner Music announced it was laying off about 20% of its workforce. Bronfman has merged labels and reshuffled the executive suite in an attempt to reinvigorate a business hard hit in recent years by piracy and a slump in global sales.
Bronfman said at a conference recently that he and his partners needed to address “too high a cost structure in the industry generally” and that the cuts they initiated would have been hard for Time Warner, or any other public company, to undertake. As the numbers improve, many on Wall Street see Warner Music launching an initial public offering next year.
Company said total revenue eased 3% after backing out favorable foreign exchange considerations.
The dollar is low against major currencies — particularly the euro — which can inflate foreign sales when they’re converted to dollars.
International revenue rose 6%. Adjusted for exchange rates, it fell 4%. U.S. revenue was “down slightly,” Warner said.
In recorded music, the bulk of Warner’s biz, revenue rose 1% to $2.06 billion but slipped 4% after exchange rate adjustments. Company attributed the dip mostly to the timing and number of new releases compared with a year earlier. International recorded music revenue rose 5% to $1.09 billion but fell an exchange-rate-adjusted 5%. Domestic revenue fell 3% to $977 million.
Top sellers in 2004 include Josh Groban, Green Day, Big & Rich, Twista, Jet and Michael Buble. That compares with releases by Linkin Park, Sean Paul, Madonna and Metallica the year before.
Worldwide publishing revenue rose 8% to $505 million. It was up a more modest 1% accounting for exchange rates. U.S. publishing revenue rose 4% to $218 million. International publishing rose 11% — but declined an exchange-rate-adjusted 1%.