Warner Music streaming revenues surge above $500m in last quarter, but publishing slides 4.5%

Warner Music Group‘s recorded music revenues rose by $111m year-on-year in calendar Q2 (its fiscal Q3) to $913m – up by 13.8% or 16.9% in constant currency.

To put that into perspective: rival Sony Music’s label revenue was up by 11.5% in the same period at constant currency, while Universal’s equivalent figure was also up 16.9%.

Warner’s recorded music sales in calendar Q2 (the three months to end of June) included a $59m increase related to the acquisition of merch company EMP, in addition to a $7m increase due to a switch to ASC 606 accounting. These one-off gains were partially offset by a $21m decrease related to concert promotion divestitures.

Within WMG’s recorded music figures, streaming generated $540m, up by $92m (+20.5%) on the equivalent figure from the prior year quarter.

That $540m made up 59% of WMG’s recorded music revenues ($913m) in the quarter.

Physical recorded music revenues dropped by 27% YoY to $95m in the three months.

Warner’s major sellers in the quarter included Ed Sheeran (pictured), A Boogie Wit da Hoodie, The Yellow Monkey, Nipsey Hussle and Cardi B.

Recorded Music operating income was $85m, up 26.9% from $67m in the prior-year quarter, and operating margin was up 0.9% to 9.3% versus 8.4% in the prior-year quarter. OIBDA increased 13.9% to $131m from $115m in the prior-year quarter and OIBDA margin was constant at 14.3%.

There was less rosy news for Warner Music Group when it came to its publishing company, Warner Chappell Music.

WCM’s sales declined by $12m year-on-year, or 7.5% (4.5% at constant currency), in calendar Q2.

The publisher’s revenue declined year-on-year in both performance and mechanical royalties. Warner said this was “driven by lower market share and loss of administration rights in certain catalogs”.

Performance royalties were particularly hit, sinking 29.4% year-on-year (-$15m) to $36m.

Warner noted that the adoption of ASC 606 had an $8m negative impact on WCM in the quarter, which still didn’t account for the further slide of $4m.

(Update: It’s worth noting that, if both constant currency and the ASC 606 adjustment are taken into account, WCM’s quarterly publishing revenues rose slightly in calendar Q2 – up by 1% YoY.)

On the upside, WCM’s revenue grew in digital due to what Warner called “the ongoing shift to streaming and in synchronization due to higher activity”.

WCM’s quarterly operating income was $18m compared with $5m in the prior-year quarter. Operating margin improved to 12.2% from 3.1%.

The publishing company’s quarterly OIBDA increased by $12m to $36m and OIBDA margin increased by 9.4% to 24.5% from 15.1%, due largely to a $12 million benefit from the adoption of ASC 606.

Overall, quarterly revenues at Warner Music Group (including both recorded music and publishing) grew 10.4% YoY (or 13.4% in constant currency) – up to $1.06bn.

This revenue growth included a net 4% benefit from M&A, primarily related to the acquisition of EMP.

Company-wide operating income was $58m compared to $28m in the prior-year quarter. OIBDA was $124m, up 25.3% from $99m in the prior-year quarter and OIBDA margin increased 1.4% to 11.7% from 10.3% in the prior-year quarter.

OIBDA included $18 million from the adoption of ASC 606.

“Our third-quarter results are proof of our continued momentum,” said Steve Cooper, Warner Music Group’s CEO. “To say that streaming is responsible for the recovery of our business is an oversimplification. Without the talent and creativity of our artists and songwriters, and all of the investment and expertise that we put behind them, there would be no growth.”

“We had strong growth in revenue, OIBDA and cash flow,” added Eric Levin, Warner Music Group’s Executive Vice President and CFO. “We expect fiscal 2019 to be another great year.”Music Business Worldwide

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