Digital revenues climb, cloud distribution in future

Warner Music Group CEO Edgar Bronfman Jr. on Wednesday dodged questions about whether his company would pursue a merger with rival EMI following recent reports that Warner was preparing a bid. “It makes no sense to speculate on what happens next,” Bronfman told analysts during an earnings conference call. “There has already been plenty of speculation in the press…When we have something to announce, if we have something to announce, you will be the first to know.”

Speculation of an EMI-Warner merger has been nearly a constant in the music biz for years, but a recent ruling by a court against EMI has fueled this latest round of rumors. Earlier this month, EMI’s owner, private equity firm Terra Firm operated by Guy Hands, lost a lawsuit it brought against Citigroup, accusing the bank of misleading it during the auction sale of EMI in 2007.

In reporting its fiscal fourth quarter results, Warner said revenues declined by 13% to $752 million, and that its net loss widened to $46 million vs. $18 million in the year-ago period. “We continue to face significant challenges,” said Bronfman. “But fiscal 2010 was a year of strong progress.” The highlight: nearly 40% of U.S. revenues now come from digital, he said, vs. zero when Bronfman and his backers first purchased Warner in 2004. He added that the goal is to continue to diversify Warner’s revenue mix, from mobile to artist services. Bronfman said he expected that digital revenues would continue to grow, despite a slowdown in downloads in the U.S.. Bronfman cited a new deal struck in Europe with the streaming service Spotify, and that cloud computing going forward offered significant opportunities for “consumers and for Warner.”

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