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Warner Music Group Shows Robust Third Quarter Earnings: Revenue, Digital Up

Warner Music Group showed solid growth for the third quarter (ending June 30), according to its earnings report issued Tuesday, with total revenue growing $13.1% to $917 million, thanks to digital revenue of $496 million, a gain of 30.2% over the same period in 2016. Digital revenue once more accounted for more than half the total revenue, at 54%, up from 53.2% last quarter, which marked the first time it represented more than half of the total.

The company’s net income for the quarter climbed to $143 million from a loss of $7 million a year before, thanks to a one-time tax benefit. Operating Income Before Depreciation and Amortization (OIBDA) was $115 million versus $120 million in Q3 2016. Net income for Q2 2017 was $20 million, while OIBDA was $141 million.

Not surprisingly, Warner Music Group CEO Steve Cooper was upbeat about the latest results. “Our momentum continues with our eighth consecutive quarter of revenue growth – the last seven of which were up double digits,” he said in a statement. “Our artists and songwriters are creating great music and our team is outperforming in a growing industry.”

Added WMG EVP/CFO Eric Levin, “I’m proud of our team for delivering such strong results, particularly against difficult comparisons in the prior-year quarter. I’m confident that 2017 will be another strong year.”

Those sentiments were reiterated during the earnings call on Tuesday morning. “The music industry is on track for its third year of growth,” Cooper said. “I often get asked whether these trends can continue. It is our belief that they can.”

For the Recorded Music Division, revenue for the quarter was $770 million, up 13% from the year before, while digital revenue climbed to $445 million, a rise of 30% over 2016, thanks to best-sellers from Ed Sheeran, Bruno Mars, Gorillaz, Clean Bandit and TWICE. Operating income was $77 million, up from $64 million, a 20% increase, thanks to growth in digital, licensing and artist services and expanded rights revenue (including merchandising and ticketing), though the increase was partially offset by the continuing decline in physical revenue.

Warner/Chappell Music Publishing saw 12% growth year-to-year in Q3 revenue to $150 million, with digital revenue growing 47% to $50 million, though Operating Income ($6 million) and OIBDA ($23 million) stayed static from Q3 2016. For the second quarter in a row, digital revenue represented over 50% of the total, this time topping 58%.

Asked by a reporter about the company’s relations with streaming services — Cooper had sent an unusually irritated-sounding memo to the Warner staff after the company updated its recorded-music and publishing deals with YouTube in May “following months of tough negotiations” that was obtained by Variety — the CEO was optimistic but vague. “We’re having very productive discussions with all of our partners whose deals have [or soon will] expire, and we expect to come to a meeting of the minds in the relatively near-term horizon,” he said. “We’ll end up with very balanced, well thought-out commercial relationships as we move forward.”

 

 

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