Profits plunge 74% to $18 million
Warner Music Group posted dire numbers Thursday as profit plunged 74% to $18 million last quarter on fewer releases and soft CD sales.
Revenue fell 11% to $928 million.
WMG shares took a beating, closing down 5.76% at $20.27.
CEO Edgar Bronfman Jr. said the number was skewed by tough comparisons — three of WMG’s top five sellers last year, including albums by Madonna and Blunt, had peak sales in the year-earlier quarter. Company said its 2007 results will be weighted to the back end of the year.
“This was a difficult quarter, in some part because the industry still faces a challenging environment, but almost entirely due to the comparisons to our very strong first quarter last year,” Bronfman said during a conference call.
He also noted that Warner gained market share during the quarter.
Digital revenue rose 45% year on year to $100 million. But it slipped 4% from the previous three months — or WMG’s fiscal fourth quarter.
WMG’s fiscal year ends Sept. 30.
Digital revenue made up 11% of total revenue. It included 17% of sales from domestic recorded music, which saw revenue fall 13% to $800 million on weaker domestic and European sales.
Asia Pacific sales were helped by strength in local Japanese acts.
Major sellers for the quarter included releases by Josh Groban, My Chemical Romance and Eric Clapton.
Bronfman — referring to a mini-maelstrom in the music biz sparked earlier this week by Steve Jobs — said WMG won’t abandon antipiracy software. In an open letter, the Apple chief had called for the music labels to do just that.
Jobs argues that digital rights management, DRM, prevents interoperability among various online musicstores and devices. He also claims it’s largely irrelevant since consumers can and do download most of their music outside of any DRM.
Music companies insist DRM itself is not the problem — instead it’s the fact that there are different versions of DRM in use by Apple and its rivals.
“We advocate the continued use of DRM,” Bronfman said. “The issue is obscured by asserting the DRM and interoperability is the same thing. They are not. To suggest that they cannot co-exist is simply incorrect.”