Warner Music Group published its latest financial results yesterday, for the third quarter of 2018 – which is the company’s fiscal Q4, thus meaning it also put out numbers for its last financial year. In keeping with the other trends of 2018, the numbers were very good.
WMG’s annual revenues grew by 12% (or 9.2% at constant currency) to just over $4bn – the first time it’s hit this figure in 15 years as a standalone company, according to boss Steve Cooper. WMG’s digital revenues grew by 20% (or 18.5%) to $2.25bn as part of this, thus accounting for 56.2% of the total.
The net profit for the financial year came in at $312m compared to $149m the year before, although ‘adjusted net income was $388m “reflecting higher other income related to the net gain on the Spotify share sale” among other factors.
WMG highlighted streaming as the key to all this growth. Billboard notes that within the company’s recorded-music division, digital generated $2.02bn, physical sales $630m, artist services and expanded rights $389m and licensing $322m.
“As recently as three years ago, streaming represented less than 25% of our recorded music revenue. It’s remarkable that for fiscal 18, streaming generated over half of our revenue, and is now nearly three times physical. Although from a smaller base, streaming is on a similar trajectory in publishing,” said Cooper on WMG’s earnings call.
He was asked by one analyst about the future trajectory of streaming growth. In terms of subscribers and monthly active users: “I think that that will continue to grow in a very robust way. Frankly if I could predict that more precisely, I would be not sitting here, I’d be sitting in front of my other crystal ball, just watching the money come out of the ATM!”
He noted that in the developed, western markets “streaming subscription has a very nice foothold, and we continue to believe there is growth there, but I believe because of the adoption, just mathematically… slow down over time. And over the next 5-10 years we see something akin to saturation. In the emerging markets, they’re just now being tapped, and I would expect to see very strong subscriber and/or monthly active user growth.”
“As we move to those markets, the emerging markets, we would expect to see reduced economics just because of the economic status of those countries, and the ability of their population to pay. So while we would expect a continued strong trajectory for the metrics around subscription and monthly active users, I think we can expect over time a more-modest trajectory by way of revenue growth, and by way of what we refer to as ARPU.”
He also talked about upcoming licensing renegotiations with streaming services, and possible pressure on margins. “Every time we enter into a renegotiation, it’s an opportunity to create better, stronger partnerships on both sides of the coin, with the understanding that we feel very strongly that music is valuable, and that it’s always in the best interests of our artists and songwriters to negotiate deals that recognise that value. At the same time, we know that we have to support in a thoughtful, well-balanced way, the growth of our streaming partners…”
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