WMG 4Q Loss Grows
Healthy gains in the U.S. market for music didn’t prevent Warner Music Group Corp. from posting an overall revenue decline for the quarter through September.
The world’s third-largest recording company, taken private by billionaire Len Blavatnik’s Access Industries in July, also saw its net loss more than double to $103 million from $46 million a year ago.
Revenue fell 6 percent to $707 million from a year ago, despite year-to-date unit sales in the U.S. being up 4 percent, the company said.
Adjusted operating income before depreciation and amortization grew 19 percent to $101 million as the company continues to cut costs.
Severance charges fell to $10 million on the quarter, down from $34 million a year ago.
Stephen Cooper, a restructuring expert who became CEO in August, said on his first conference call with bond analysts that Warner’s market share slipped slightly in its fiscal 2011 year through September because of a light release schedule and underperformance by some key albums.
Nielsen SoundScan has said that Warner’s share of the U.S. music market was 18.6 percent at the end of October, down from 20 percent at the end of 2010.
Digital music revenue grew 7 percent to $210 million and now makes up 34 percent of recorded music revenue, up from 30 percent in the same quarter a year earlier. CD sales continue to fall.
The company said so-called “360 revenue,” which is made up of revenue the company makes from participating in an artist’s touring, merchandise and other sales, came to 17 percent of recorded music revenue, or $94 million, up from 12 percent a year ago.
Cooper said 70 percent of Warner Music’s active artists are signed to “360” deals.
Blavatnik’s Access Industries won a bidding war earlier this year and purchased Warner Music for $1.3 billion, while assuming about $2 billion in debt and $320 million in cash.
Blavatnik is betting the music industry can turn itself around after a decade of declining CD sales. New digital businesses including monthly all-you-can-listen subscription plans offered by companies such as Spotify are helping create new revenue streams.
Edgar Bronfman Jr., who was CEO of Warner Music and had been an investor in a group that bought it from Time Warner Inc. in 2004, became chairman in August, switching roles with Cooper. Bronfman told the company recently that he will also quit as chairman at the end of January, while remaining on the board.