‘Turbocharged’ streaming revenues now double download at Warner

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Warner Music Group’s streaming revenues stood at almost twice those from downloads in the past quarter.

In the three months to end of June (Warner’s Q3), WMG-wide revenues grew 14.2% year-on-year (or 15.0% at constant currency) to $811m.

As previously reported, this was the biggest Q3 in Warner’s five-year history under ownership of Len Blavatnik’s Access Industries.

The hike was largely thanks to a 45% year-on-year increase in recorded streaming revenues, as well as an increase in physical sales.


WMG’s total recorded music revenues grew 14.9% (15.4% at constant currency) in the quarter to $680m, with digital recorded music revenues growing 19% to $348m.

MBW estimates that around $230m of this figure came from streaming, with download accounting for around $120m.

That means Warner generated over $2.5m a day from streaming in the period, and close to $20m a week.

Including publishing, WMG’s total Q3 digital revenues grew 21.3% (22.5% at constant-currency) year-on-year, up to $381m.

Official WarnerQ3

Within this digital growth, streaming asserted its dominance to a surprising degree over iTunes.

Warner CEO Steve Cooper told investors today (August 4):

“We can report that our Recorded Music streaming revenue grew more than 45% over the prior-year quarter.

“Streaming revenue for the quarter was about double the size of download revenue, and was meaningfully larger than physical revenue.”

Stephen Cooper

“Streaming revenue for the quarter was about double the size of download revenue, and was meaningfully larger than physical revenue.”

Steve Cooper, Warner

However, Cooper stopped short of giving an exact streaming income figure for the quarter.

He added: “We continue to look for ways to turbocharge streaming growth,” citing Warner’s acquisition of playlisting specialist X5 Music Group in June.

“At the same time, we’re exploring new business models, beyond traditional streaming services,” said Cooper.

“This is because we aren’t satisfied with simply growing existing revenue streams; we want to create additional opportunities that anticipate new types of fan engagement.”

Examples, he said, include Warner’s industry-first licensing deal with fast-growing karaoke app Musical.ly.


Len Blavatnik

Cooper compared the make-up of WMG’s business to its state when Access Industries (and Blavatnik – pictured) bought the company five years ago this month.

“In 2011, physical formats were our largest source of recorded music revenue, and those formats were declining steadily,” said Cooper.

“In stark contrast, over the last five years, given our early embrace of streaming, it has grown from an insignificant portion of digital sales to our largest single source of revenue for the second quarter running.”

Increases in recorded music digital revenue, physical revenue and artist services were dragged down slightly by declines in licensing revenue – which WMG primarily pinned on exchange rates.

Recorded Music operating income was $64 million up from $43 million in the prior-year quarter, while operating margin was up 2.1% to 9.4% versus 7.3% in the prior-year quarter.


Cooper also proudly told investors that, since Access’s buyout in 2011, Warner’s recorded music revenues had grown at a CAGR of 5%.

CAGR (compound annual growth rate) represents the mean annual growth rate of an investment over a period of time.

“[Between] 2011 and 2015, the recorded music industry stayed relatively flat… an indication we have been outpacing the business.”

Steve Cooper, Warner

“For calendar year 2011 through 2015, the recorded music industry stayed relatively flat at a CAGR of 0.1% – a very positive indication that we have been outpacing the industry,” said Cooper.

He added that Warner’s OIBDA (operating income before depreciation and amortization) – the major’s chosen measure of operating profitability – was up at a CAGR of 9% in the five years.


Coldplay

Major sellers for Warner in the quarter included Renaud, Twenty One Pilots (pictured, main), Red Hot Chili Peppers and Coldplay (pictured inset).

WMG said that sales from catalogue artists were also strong.

“In the first half of calendar 2016, we gained almost 3 points in US market share for physical and digital albums, more than any other major,”  added Cooper.

“Other countries show a similar story including the UK, where we’ve moved up to the No. 2 spot in artist album share, and Germany, where our year-to-date album market share is at an all-time high.”

He added: “Our third-quarter results were strong across the globe, in both established and emerging markets, but we saw especially bright spots in emerging territories such as Russia and Latin America, where our operators grew revenue by 40% and over 25%.”


JonPlatt

Music Publishing revenue at Warner/Chappell – run by CEO & Chairman Jon Platt (pictured) – rose 8.9% (10.7% at constant currency).

Growth in digital revenue, performance revenue and synchronization revenue at WC was partially offset by a decline in mechanical revenue.

Music Publishing operating income was $6 million compared with $3 million in the prior-year quarter and operating margin rose 2.1% to 4.5%.


WMG’s overall operating income was $45 million compared to $23 million in the prior-year quarter, while OIBDA increased 20.0% to $120 million from $100 million in the prior-year quarter.

The major’s OIBDA margin rose 0.7% to 14.8% from 14.1% in the prior-year quarter.

Warner said these increases were the result of revenue growth, as well as a $9 million gain on assets – which MBW understands included the sale of the Radiohead catalogue to Beggars Group.

Net loss narrowed to $7 million, compared to net loss of $43 million in the prior-year quarter.

As of June 30, 2016, Warner Music Group reported a cash balance of $345 million, total debt of $2.908 billion and net debt (total long-term debt, including the current portion, minus cash) of $2.563 billion.Music Business Worldwide

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