Despite a flat EOFY, Warner Music celebrates year’s achievements

The impact of COVID was evident when Warner Music Group released both its results for the financial year as well as for the calendar Q3 (or fiscal Q4).

After a record achievement in 2019, its yearly revenue tally for this year was flat as major stars stayed away from recording studios, and film and TV productions remained slow to return to activate sync activity.

Total revenue decreased by 0.3% year-on-year (YoY) to US$4.463 billion, net loss was $470 million, after a profit of $258 million last year, and digital revenue – fuelled by streaming – was up 11.2%.

But the pandemic hit artist services, rights revenue, merch sales and performance revenue.

Recorded music revenue for 2020 was down 0.8% at $3.81 billion.

Physical sales dropped 22.4% to $434 million, also attributed to the light release schedule.

Recorded Music digital revenue grew 9.6% to $2.568 billion.

It now represents 67.4% of total recorded music revenue, up from 61.0% in 2019.

Top sellers were Dua Lipa, Tones And I, Saweetie, Lizzo, Charlie Puth, and Cardi B.

Music publishing revenue went up 2.2% YoY to $657 million. Sync revenue was flat.

Q4 was also a flat liner, just up 0.2% over the three months to $958 million – of which 66.7% ($693 million) was from streaming which grew 16.2% YoY.

Other divisions like licensing and physical, as expected, showed wear and tear.

A notable victim was Artist Services & Expanded Rights, which includes merchandising, touring, concert promotion, ticketing, sponsorship and fan clubs.

That took a tumble from $171 million in Q4 2019 to $98 million – virtually half a wipe-out.

Publishing revenues shrunk 2.3% YoY. But declines in performance, synchronization and mechanical revenue were offset by growth in digital revenue.

The net loss of $1 million in the quarter was in stark contrast with a profit of $91 million in Q4.

2020 POSITIVES

In an investors earnings call, CEO Steve Cooper (pictured, above) pointed out the positives.

“We’re proud of everything we’ve accomplished in the past year, despite the challenging conditions that the world has faced,” he said.

“We’re essentially flat against a record-breaking prior year and, during the quarter, we grew 11% on an as-reported basis, excluding the revenue streams most impacted by COVID.

“We’ve had huge successes from global megastars and local hitmakers, breakout sensations and long-time legends.

“Our streaming growth has stayed strong, and we’ve also seen an acceleration in a whole spectrum of emerging revenue streams such as social media, gaming, and in-home fitness.

“In this increasingly complex environment, where music is woven into every aspect of our lives, our creative expertise and global reach are more valuable than ever.”

Cooper noted how WMG set up operations in Vietnam, India and Turkey, while COVID also sped the company’s expansion of technology use across the business.

“COVID is reinforcing the importance of technology across every aspect of our business, from how we sign talent to how we market music and how we pay royalties,” Cooper said.

“It’s made us more agile and more efficient.”

Spotify’s recent moves to test higher subscription rates was something he expected other streaming services to follow.

“I don’t see any massive shift of subscribers from Spotify to other services. They have created their playlists, they have their routines on Spotify.

“And, as we said during the IPO, ultimately the value of the ears has to begin to catch up with the value of the eyeballs.

“I think this is a start. I’m very hopeful that it will be a successful start.

“And I believe this will give the other services the opportunity to follow.”

Cooper also excited by social media as increasing as a major revenue source, and how its reliance on user-generated content had seen the sales and cultural return of catalogue.

“With an expanding number of partnerships, including Facebook, TikTok and Snap among others, social media is already a meaningful nine-figure revenue stream, and is growing at a rate faster than subscription streaming.

“These platforms enable artists to engage with audiences through interactive immersive content that defies real-world limitations,” he said.