This story was written by David Kaplan.
While Warner Music Group (NYSE: WMG) certainly has been trying to make headway as music listening becomes more digital, it couldn’t fight the wider economy and the downward spiral of physical record sales. The company’s loss widened to $37 million ($0.25 per share) from $9 million ($0.06 cents per share) as revenue slid 9.3 percent to $769 million from $848 million. An analysts poll taken by Factset (via Marketwatch) called for a loss of only $0.15 per share.
Still, the company is growing its digital revenues, even if it’s not enough to balance out the losses. Digital revenue was $175 million, a 5 percent gain over last year and a slight 1 percent increase over Q109. Digital now represents 23 percent of WMG’s total revenue, signaling the online sales might be growing, but mostly, that physical sales are declining, as the recorded music segment’s revenue dropped 8.3 percent to $629 million.
|2Q 2009||2Q 2008||Analysts Estimates For 2009|
Some highlights from WMG’s report:
—Recorded Music digital revenue was $163 million, a 4.5 percent gain year-over-year.
—In the U.S., digital recorded music revenue amounted to $105 million, or 37 percent of total domestic Recorded Music, versus a 31.7 percent share in Q208. Year-over-year digital revenue growth was driven by increased global online downloads.
—Music publishing, as opposed to record sales, is still considered a good business to be in for the major labels in general. And digital revenue from publishing grew 60 percent to $16 million. However, the total publishing segment was down, as revenue fell 12.5 percent to $147 million.
—Tiered pricing on iTunes: about time: During the call, Chairman and CEO Edgar Bronfman said that celebrated Apples April introduction of variable pricing for single track downloads on iTunes. Bronfman: “Its early days, but the variable pricing strategy is beginning to show a net positive impact on our top line digital revenue results. More importantly, this model gives us the flexibility to offer consumers more choice and provides us an opportunity to differentiate our offering.”
—Ringtones: Ringtone sales have been falling, as MocoNews’ Tricia Duryee reported earlier, and WMG was a victim as well. The slackening demand for ringtones was partially responsible for lower international sales, especially in Japan.
—Mobile hopes: As a result of the softess in ringtone revs, WMG’s U.S. mobile unit sales slipped 7 percent. Bronfman said that, over time, the company expects new sources of mobile revenue to come from over-the-air downloads, subscription services and access models, which he hopes will compensate for the shift away from ringtones. As for the progress on those different revenue streams, Bronfman told analysts: “We are monitoring the progress of recently launched services that are based on access models which bundle the purchase of a mobile device with access to music, such as Nokias Comes with Music and Vodafone (NYSE: VOD) Spains new mobile access plan.”
By David Kaplan