Warner Music Group‘s quarterly revenues grew 4.6% YoY to USD $1.399 billion in the opening three months of 2023 (calendar Q1) – the first quarter in which the company has been run by its new CEO, Robert Kyncl.
These numbers, announced by the company today (May 9) represent WMG’s company-wide operation, across recorded music, music publishing, and other activities.
In terms of recorded music alone, Warner saw a 2.2% YoY uptick in calendar Q1 (fiscal Q2) revenues to $1.143 billion. Within that figure, streaming recorded music revenues rose 2.2% YoY to $773 million.
Despite WMG posting sub-5% YoY growth – in the same quarter that Spotify posted a 13% YoY rise in revenues – Robert Kyncl said today (May 9) that Warner was “optimistic about the second half of the year”, due to factors including “a more robust schedule that includes the return of worldwide superstars and new artists breaking globally”.
Added Kyncl: “As the music ecosystem continues to morph, and the use cases multiply, it only increases conviction in our tech-enabled strategy.
“In a highly proactive, fiscally responsible way, we’re investing in the artists, songwriters, team, and technology that will deliver continued growth and long-term success.”
“As the music ecosystem continues to morph, and the use cases multiply, it only increases conviction in our tech-enabled strategy.”
Robert Kyncl, Warner Music Group
Said Eric Levin, CFO of WMG: “While macroeconomic, currency, and release slate headwinds continued to impact our revenue this quarter, our fiscal discipline enabled us to deliver solid Adjusted OIBDA growth and margin expansion.
“As we look to the future, we’ll combine A&R and marketing excellence with tech innovation to achieve greater efficiency, scale, and growth.”
The biggest bright spot for Warner Music Group in calendar Q1, in terms of YoY percentage growth, was its music publishing division – Warner Chappell Music – run by co-Chair and CEO, Guy Moot, alongside co-Chair and COO, Carianne Marshall.
The company’s music publishing revenue increased 14.7% YoY in the quarter to $257 million – a performance that Warner said was “driven by growth in digital, performance and mechanical revenue”.
Music publishing streaming revenue increased 18.3% YoY to $142m, which WMG said reflected “the continued growth in streaming and the impact of digital deal renewals”.
(All percentage figures cited above are at constant currency.)
Warner Music Group: Overall calendar Q1 performance
WMG’s company-wide revenue (including both recorded music and publishing) was up 1.7% YoY (or 4.6% YoY in constant currency, as mentioned) in calendar Q1.
Warner noted today that “revenue growth was unfavorably impacted by foreign currency exchange rates”.
Digital revenue increased 1.2% YoY (3.7% YoY in constant currency) and streaming revenue increased 1.9% YoY (4.5% YoY in constant currency) primarily driven by that growth in Warner Chappell’s streaming revenue of 16.4% YoY (18.3% YoY in constant currency).
Operating income in calendar Q1 was $124 million compared to $166 million in the prior-year quarter, while quarterly OIBDA (operating income before depreciation and amortization) was $207 million, compared to $255 million in the prior-year quarter, a decrease of 18.8% YoY (or 15.9% YoY in constant currency).
The decreases in operating income and OIBDA, said Warner, were “primarily due to $41 million in severance costs related to the restructuring plan announced in the quarter”. (Warner announced that it was laying off around 4% of its global workforce – approximately 270 people – in late March.)
Additional factors affecting the Q1 operating profit /OIBDA decrease included “non-cash stock-based compensation and other related expenses primarily related to the departure of our previous CEO”, said Warner, plus “other costs associated with the departure of our previous CEO and planned departure of our CFO”.
Warner Music Group: calendar Q1 recorded music performance
Warner’s recorded music revenue was down 0.3% YoY in calendar Q1 (or up 2.5% YoY in constant currency, as mentioned).
Streaming revenue was down 0.4% YoY (or up 2.2% YoY in constant currency).
This streaming revenue performance, said Warner, reflected “a lighter release schedule [than the prior year] and a market-related slowdown in ad-supported revenue”.
Recorded music licensing revenue increased 22.5% YoY (or 27.3% YoY in constant currency), including growth in brand income and a licensing settlement.
Physical recorded music revenue was down 3.3% YoY (or up 0.9% YoY in constant currency) primarily due to the unfavorable impact of exchange rates, which offset strong performance in the United States.
‘Artist services and expanded-rights’ revenue – covering Warner’s activities in merch, live and other fields – decreased 7.1% YoY (or 4.4% YoY in constant currency).
The company blamed this slip primarily on “lower merchandising and advertising revenue, partially offset by an increase in concert promotion revenue”.
Warner’s major recorded music sellers in the quarter included Michael Bublé, Ed Sheeran, Linkin Park, Zach Bryan and Dua Lipa.
WMG’s recorded music operating income in calendar Q1 was $151 million, down from $189 million in the prior-year quarter.
OIBDA decreased 18.8% YoY (or 15.8% YoY in constant currency). to $203 million from $250 million in the prior-year quarter.
Warner said its decrease in recorded music operating income and OIBDA were primarily due to costs related to its restructuring in Q1.
Warner Music Group: calendar Q1 music publishing performance
WMG’s music Publishing revenue increased 11.7% YoY (or 14.7% YoY in constant currency, as mentioned).
Digital revenue increased 15.0% YoY (or 17.7% YoY in constant currency) and streaming revenue increased 16.4% YoY (or 18.3% YoY in constant currency), reflecting, said Warner, “the continued growth in streaming and the impact of digital deal renewals”.
Performance revenue in music publishing increased due to the timing of payments from collection societies and continued recovery from COVID disruption.
Mechanical revenue increased driven by strong share of physical sales.
Synchronization revenue was lower on an as-reported basis and in constant currency, primarily due to lower commercial licensing activity in the United States, partially offset by copyright infringement settlements.
Music Publishing operating income in calendar Q1 was $52 million compared to $38 million in the prior-year quarter. Music Publishing OIBDA increased 23.0% YoY (the same in constant currency) to $75 million.
The increases in operating income and OIBDA in music publishing, said WMG, were “primarily due to strong operating performance”.
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