Something strange is happening at Warner Music Group…

You’ll probably see a few headlines this morning about streaming income overtaking download revenue at Warner Music Group in its fiscal Q2 – the three months to end of March.

That’s completely fair enough: WMG’s recorded music income from streaming jumped by US $25m in the quarter, offsetting digital download declines of $22m.

But overall, digital recorded music income at Warner was pretty much flat year-on-year: up 0.7% to $274m from $273m in Q2 2014.

Warner primarily blamed this lack of growth on currency fluctuations – particularly the strength of the Dollar against the Euro and other key currencies.

Which makes its other big achievement all the more remarkable: income from physical sales was up by $12m year-on-year in Q2, or 8% – jumping from $145m to $157m.

According to MBW estimates, at constant currency, that actually represents a 17% increase.

Indeed, with digital income flat, physical was almost fully responsible for dragging up Warner’s overall recorded music income by 5% in Q2.

This flies in the face of industry trends: over the course of last year, physical sales by value fell by 8.1% across the global music business.

A quirky one-off? Nope.

There appears to be a positive pattern for physical sales happening at Warner this year, and jolly unexpected it is too.


Cast your mind back: In February, MBW noticed that in Warner’s prior quarter, the three months to December 30 last year, its physical music sales had risen $20 million year-on-year – up 7% in real terms to US $293m.

(This income number is significantly higher because it covers the Christmas period.)

All of which means that in the first half of Warner’s fiscal year, in the six months to end of March 2015, its physical music sales grew by $32m, or 8%, to $450m.

They’ve done so at a time when sales growth has been significantly hampered by currency exchange rates.

At constant currency, these six-month physical sales have therefore grown by an even more impressive amount – around 16.5%, according to MBW’s estimates.

In its latest SEC filing, Warner notes that the physical revenue increase in Q2 was driven by “physically-centric releases such as the releases from Kid Rock and Led Zeppelin” – which included a remaster of the band’s classic Physical Graffiti album -as well as “local releases in physically-centric territories such as France”.

Physical sales made up 36.4% of WMG’s total recorded music income in Q2 2015, with digital sales/streaming claiming 63.6%.

In the same period of 2014, physical sales claimed 34.7%, with digital sales/streaming on 65.3%.

Across the first six months of Warner’s fiscal year, physical income amounted to 45% of total recorded music sales, which stood at just under a billion Dollars ($996m).Music Business Worldwide

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