Warner Music Group has published its latest quarterly financial results, for its fiscal third quarter (calendar Q2). They reveal the impact that the Covid-19 pandemic continues to have on its business.
WMG generated revenues of $1.01bn last quarter, down by 4.5% year-on-year. However, its digital revenues grew by 11% to $720m as part of that, accounting for 71.3% of the company’s total revenues.
WMG recorded a whopping operating loss of $433m, although that was due to ‘a higher non-cash stock-based compensation expense of $426 million related to the Company’s long-term incentive plan’ as well as $86m of costs associated with its IPO in early June.
Breaking those revenues down, WMG’s recorded music revenues fell by 5.7% year-on-year to $861m, although its digital revenues grew by 7.9% to $630m – just over 73% of the total.
That’s up from 63.9% a year ago, although bear in mind that physical revenues have been hit by Covid-19 – they were down by 46.3% to just $51m last quarter – as well as artist services and expanded rights (down by 21.5% to $124m) and licensing (down by 26.3% to $56m).
(One point that jumps out of WMG’s SEC filing for the financials: its US recorded music business was hit harder by Covid-19 than its international recorded music business: revenues were down by 9.4% and 2.9% respectively.)
For the global total, within the ‘digital’ segment WMG’s streaming recorded music revenues grew by 9.1% year-on-year to $589m, while downloads and other digital income fell by 6.8% to $41m.
Within digital, WMG’s streaming recorded music revenues grew by 9.1% year-on-year to $589m, while downloads and other digital income fell by 6.8% to $41m.
The company’s publishing division actually grew its revenues year on year: they were up by 1.4% to $149m, with $90m of that coming from digital sources – 60.4%.
Those digital publishing revenues were up by 38.5% year-on-year, which made up for falls in performance royalties (down 25% to $27m), mechanical royalties (down 38.5% to $8m) and synchronisation revenues (down 24.1% to $22m).
“We’re very pleased with our performance this quarter, especially in light of the global pandemic. Our results highlight the underlying strength and resilience of our business. Streaming revenue grew double digits and our digital transformation continues,” said CEO Steve Cooper in a statement.
“These results are slightly better than our expectations, given the sustained effect that COVID has had on certain aspects of our business,” added EVP and chief financial officer Eric Levin.
“We have a robust cash position and all the music and resources needed to come out the other side of this with our long-term prospects as strong as ever.”
Later in the afternoon, Cooper and Levin held an earnings call with analysts. We’ve written up some of the key talking points from the Q&A, including Cooper’s views on Spotify’s podcasts expansion; the opportunities for WMG in livestreaming; the “somewhere between crazy and really, really crazy” mergers and acquisitions market; and TikTok.