“Turbo charged” streaming revenue shrinks Warner Music’s losses

Image: WMG artist Twenty One Pilots

“Turbo charged” revenue from streaming music has shrunk Warner Music Group (WMG)’s losses.

In the second quarter of 2015, losses were US$44 million. But in the quarter ending June 30 2016, losses were posted at just US$9 million. Revenue in this period was US$811 million, up 14%. Total debt was US$2.91 billion, while the company reported a cash balance of US$345 million.

WMG attributed the revenue boost to increases in digital and physical revenue, artist services and expanded rights. WMG CEO Stephen Cooper said that within five years, streaming has become “our largest single source of revenue for the second quarter running.”

The recorded music division accounted for 83% of total revenues at US$680 million. Digital grew 21.3% and made up 51.2% of revenue (or US$348 million).

Cooper revealed, “Recorded music streaming revenue grew more than 45% over the prior-year quarter. Streaming revenue for the quarter was about double the size of download revenue, and was meaningfully larger than physical revenue.”

He added: “We continue to look for ways to turbocharge streaming growth.”

Warner does not break down figures for streaming and downloads But Billboard estimated that US$230 million came from streaming, and downloads produced about US$115 million during the quarter.

Major sellers over the quarter included Renaud, Twenty One Pilots, Red Hot Chili Peppers and Coldplay.

Record label operations posted US$64 million in operating income before depreciation and amortisation, interest and taxes, up 48.8% year-on-year from US$43 million.

Cooper described it as the biggest quarter in the five years since Access Industries bought WMG – both in revenue and market share.

“Our results underscore this momentum, driven by exceptional music from our artists and songwriters, our expanded global reach and strong leadership from our team around the world,” he said. “With our recorded music streaming revenue now approaching double the size of our download revenue, and still growing fast, we are on course for another excellent year.”

Cooper added WMG is also “exploring new business models, beyond traditional streaming services. This is because we aren’t satisfied with simply growing existing revenue streams; we want to create additional opportunities that anticipate new types of fan engagement.”

Part of this strategy included experiments with video, licensing its music to the fast growing lip synch/ karaoke app Musical.ly, and finalising a deal with Vevo after seven years of refusing to allow its content on.

It also signed with effects company Digital Domain to create virtual and augmented reality concert packages for fans in Greater China.

Warner’s US market share for physical and digital has grown from 19.11% to 21.86%, which Cooper says is a rate that is “more than any other major.” In the UK it is second in artist album share, which is also at an all-time high in Germany.

Music publishing revenue grew nearly 9% to $134 million from US$123 million. Performance licensing remains its biggest money maker, of US$138 million, which made up 36.6% of publishing income. Digital was $94 million (24.9%); mechanical, US$56 million (14.9%); synchs, US$82 million (21.8%; and other, US$7 million (1.9%).

Outside the US, WMG recorded music generated US$1.21 billion and publishing US$213 million (after inter-segment business is eliminated).

“Our third-quarter results were strong across the globe, in both established and emerging markets, but we saw especially bright spots in emerging territories such as Russia and Latin America, where our operators grew revenue by 40%,” Cooper said.