Warner’s Dog Was A Dud

The hits just keep on coming for Warner Music Group. The company recently posted its first quarter results and it looks as if one noteworthy acquisition of last year did indeed come to bite WMG in the end.

Warner Music paid $18 million, or 12 cents per share, for Bulldog Entertainment in May, despite the fact that the company’s pricey summer concert series in the Hamptons initially faced slow sales and the promoter was rumored to be papering the house with celebrities. WMG apparently muzzled the entertainment company last month.

"We were obviously disappointed with this acquisition," Warner CEO Edgar Bronfman said during an earnings call. "Realistically, not every transaction can succeed. … In the event they do not, we act decisively and move on."

WMG reported a net loss of $16 million, or 11 cents per share, for the quarter ending December 31st, compared with net income of $18 million, or 12 cents per share, during the same period last year.

Revenues rose to $989 million from $928 million the previous year, which topped Thomson Financial’s reported estimated income of 10 cents per share at about $949 million.

Warner executives said during the earnings call that sales on mobile ring tones have remained fairly flat and the demand for CDs has continued to decline.

The company reported $850 million in sales for recorded music, up from $800 million.

"2007 was a challenging year for the recorded music industry," Bronfman said. "We recognize that there remains much to be accomplished and are working towards translating these gains into enhanced value for shareholders."

According to the Motley Fool, WMG, minus the Bulldog loss, would have earned only a penny per share this quarter, compared to 12 cents in the same period the previous year.

"There’s nothing to like about this stock, and nothing that would justify the huge rally it has sustained so far this year. The company operates in two industries – recording and publishing – both of which are dying," the Fool wrote. "Thanks to their aggressive scare tactics, they have successfully alienated much of their potential customer base. All things considered, I just don’t see how this company can survive much longer."