Warner Music Group Releases Second Quarter Fiscal Numbers

Warner Music Group released its earning report for the end of the second quarter and while total revenue was down compared to the same quarter last year, streaming and digital revenues were up.

“We had a tough comparison with an especially strong Q2 in 2019, so I’m pleased that we’ve matched our excellent performance in the prior-year quarter, due in large part to an 11% increase in Recorded Music streaming revenue and a 17% increase in Music Publishing digital revenue. That’s a tremendous achievement, especially coming on the heels of Q1, when we achieved the highest quarterly revenue in our sixteen-year history as a standalone company,” said Steve Cooper, Warner Music Group’s CEO. “In these unprecedented times, we’re determined to protect the livelihoods of our artists, our songwriters and our people. We’re confident that our distinctive combination of creative innovation and financial discipline will help us weather this storm and emerge stronger, better and more agile than ever.”

Points from the report included:

• Digital revenue grew 5.7% (or 7.4% in constant currency)
• Total revenue was down 1.7% compared to the prior year-quarter (or flat in constant currency)
• Net loss was $74 million versus net income of $67 million in the prior-year quarter
• OIBDA was $12 million versus $191 million in the prior-year quarter

Growth in Recorded Music digital revenue and Music Publishing digital, synchronization and mechanical revenue was more than offset by a decline in Recorded Music physical and artist services and expanded-rights revenue and in Music Publishing performance revenue.  Recorded Music licensing revenue was flat.  The revenue decline was primarily due to a lighter release schedule, some COVID-related business disruption and foreign exchange rates in the current quarter and one-time impact of a digital streaming license in the prior-year quarter.  Digital revenue grew 5.7% (or 7.4% in constant currency), and represented 65.3% of total revenue, compared to 60.6% in the prior-year quarter.

The company showed an operating loss at $49 million compared to operating income of $122 million in the prior-year quarter. Operating income before depreciation and amortization (OIBDA) was $12 million, down 93.7% from $191 million in the prior-year quarter and OIBDA margin decreased 16.4 percentage points to 1.1% from 17.5% in the prior-year quarter.  The decrease in operating income, OIBDA and OIBDA margin was primarily the result of higher variable compensation expense of $164 million related to the Company’s long-term incentive plan, as well as the margin impact of COVID-related business disruption and one-time non-cash charges of $13 million, partially offset by revenue mix.  Adjusted OIBDA decreased 78.4% to $43 million and Adjusted OIBDA margin decreased 14.3 percentage points to 4.0% from 18.3% due to higher variable compensation expense and the margin impact of COVID-related business disruption, partially offset by revenue mix.

Recorded Music revenue was down 2.8% (or 1.5% in constant currency).  The revenue decline was primarily due to a lighter release schedule, some COVID-related business disruption and foreign exchange rates in the current quarter and the one-time impact of a digital streaming license in the prior-year quarter.  Growth in digital revenue was more than offset by declines in physical and artist services and expanded-rights revenue.  Licensing revenue was flat.  Digital revenue growth reflects the continuing shift to streaming and was impacted by a one-time digital streaming license in the prior year-quarter.  The decline in artist services and expanded-rights revenue was due to the timing of tour schedules compared to the prior-year quarter, tour postponements and lower merchandise revenue resulting from COVID.  The decline in physical revenue reflects industry trends and a lighter release schedule as well as lower physical sales due to the impact of COVID.