Warner Music Group posts solid Q3 growth thanks to Ed Sheeran, digital

Ed Sheeran’s return to the spotlight with ‘Divide’ was a particularly bright point for Warner Music Group, which reports its eighth consecutive quarter of year-on-year growth and gains in recorded music across all major regions.

Sheeran was singled out, along with Bruno Mars, Gorillaz, Clean Bandit and TWICE, as the music major registered total revenue growth of 13.1% to US$770 million for its fiscal third quarter, or a rise of 15.5% in constant currency against the corresponding period last year.

Also during the period, digital revenue rose 30.2% (or 33% in constant currency) and digital now represents the biggest piece of the pie, accounting for more than 54% of total revenue, against 47% in same quarter in 2016. It’s the second consecutive quarter where digital revenue exceeded 50% of the company’s total revenue (digital generated 53.2% of Q2 revenues).

Not surprisingly, WMG’s CEO Steve Cooper was upbeat on the latest results. “Our momentum continues with our eighth consecutive quarter of revenue growth – the last seven of which were up double digits,” he said in a corporate statement.  “Our artists and songwriters are creating great music and our team is outperforming in a growing industry.”

“I’m proud of our team for delivering such strong results, particularly against difficult comparisons in the prior-year quarter,” added Eric Levin, Warner Music Group’s Executive Vice President and CFO.  A confident Levin says he expects 2017 will be “another strong year.”

Pouring over the numbers, recorded music operating income was US$77 million, up 20% from US$64 million, thanks to growth in digital, licensing and artist services and expanded rights revenue (with a special shout-out to merchandising and ticketing sales), though the increase was partially offset by the ongoing decline in sales from physical soundcarriers.

Also, revenue from Warner/Chappell Music Publishing reports its best Q3 since 2009 on 11.9% year-on-year growth to US$150 million, with digital accounting for US$50 million, up 47%.

WMG did not, however, give an update on its ongoing licensing negotiations with Spotify, though during a conference call execs confirmed “positive” talks were continuing with streaming services.

Net income came in at US$143 million, against a loss of US$7 million in the same period last time, and operating income before depreciation and amortization (OIBDA) was down 4.2% to US$115 million from US$120 million last time. Net income for Q2 2017 came in at US$20 million, while OIBDA was US$141 million.

This article originally appeared on The Industry Observer, which is now part of The Music Network.