Warner posts net profit in Q2 as streaming income overtakes download

Warner Music Group Corp has posted a $19m net profit for its second fiscal quarter, ending March 31 2015.

Overall revenue at the company – across Warner Music, Warner/Chappell and other business segments – grew 3.7% to $677m (or 12.8% in constant currency).

Perhaps the biggest story of the quarter was that streaming income overtook digital download income in recorded music.

Streaming grew by $25 million in the three months but was partially offset by digital download declines of $22 million.

Warner saw growth in all revenue streams of its Recorded Music business – including physical sales – with the exception of ‘Artist Services and Expanded-Rights’ revenue, which declined 11.3% (or was flat on a constant-currency basis).

With the exception of digital, all revenue streams at Warner/Chappell declined (though on a constant-currency basis performance and synchronization were up and mechanical was flat).

Warner said that “declines in download revenue are expected to be a continuing trend”.

WMG’s net income comes in contrast to a net loss of $59 million recorded in Q2 2014.

It said its profit was primarily due to higher revenue, lower operating expenses, currency-exchange gains on Warner’s Euro denominated debt and lower interest expense.

“We experienced significant revenue growth this quarter across key segments of our business – in particular Recorded Music, across the U.S. and international and across digital and physical – capping off a strong first half of our fiscal year” said Stephen Cooper, Warner Music Group’s CEO.

“Notably, in this quarter we saw continued growth in streaming revenue which surpassed download revenue for the first time in the history of our recorded music business.

“Our commitment to being at the forefront of industry change as well as our ongoing investment in artist development is the foundation of our continued success.”

“We are proud of our team’s ability to deliver a healthy financial performance,” added Eric Levin, Warner Music Group’s Executive Vice President and CFO.  “We will continue to find opportunities for growth while carefully watching our costs.”

Recorded music: Warner Music

WMG’s recorded Music revenue grew 5.4% to $564m (or 14.6% in constant currency), mainly driven by a stronger release schedule.

All revenue streams saw growth, other than Artist Services and Expanded-Rights revenue which declined 11.3% (or was flat on a constant-currency basis).

US expanded-rights revenue actually increased, but this was more than offset by a decrease in international artist services revenue due to the timing of European concert tours.

Recorded Music saw strength around the globe, with Japan the most significant exception.

US Recorded Music digital revenue was $144 million or 61.0% of total domestic Recorded Music revenue.

Major sellers included Ed Sheeran, Michael Bublé, Led Zeppelin and David Guetta.

Music Publishing: Warner/Chappell

Warner’s Music Publishing revenue declined 4.1% in Q2 to $117m (or rose 4.5% in constant currency).

Mechanical revenue declined 9.1% (or was flat on a constant-currency basis) – a fall blamed on the ongoing industry shift towards digital.

Digital revenue grew 4.3% (or was up 14.3% on a constant-currency basis) reflecting increases in streaming revenue.

Performance revenue declined 6.4% (or was up 2.3% on a constant-currency basis) and synchronization revenue was flat (or up 8% on a constant-currency basis).Music Business Worldwide

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