Warner Loses Over $100 Million In Market Capitalization
-- Shares of Warner Music Group fell 9.79% to $5.62 on Tuesday, knocking off $94.5 million of the company's market capitalization. Shares fell another 1.4% to $5.54 on Wednesday, reducing the market capitalization another $9.5 million for a total of $104 million.
In other words, over $100 million of shareholder value was just wiped out. (Market capitalization equals the number of shares outstanding times the share price. It is the market's opinion on the value of a company.) Now, a 10% drop in share price doesn't necessarily mean any big events are coming at Warner. In general, however, a lower share price makes it less expensive for shareholders to increase their ownership percentage and increase their voting rights. And a lower market capitalization makes a company less expensive to acquire (although a company's debt also comes into play).
On Tuesday morning the company reported disappointing earnings for the quarter ended December 31, 2010. Losses amounted to $18 million, or 12 cents per share, on revenue of $789 million. Analysts polled by Thomson Reuters forecast a loss of 19 cents per share on revenue of $798 million.
With All of WMG's Publishing Acquisitions, Where's the Revenue Growth?
-- Read a Digital Music News post on Warner's publishing revenue over the last six years and you might get the impression publishing revenue has been fairly steady - especially relative to recorded music revenue. And as the post shows, revenue has indeed been quite steady. But there's an asterisk to consider when tracking publishing revenue: acquisitions.
Warner/Chappell, Warner's music publishing division, has acquired numerous companies and catalogs in recent years. Here are a few, with the companies/catalogs and the date of announcement: Southside Independent Music Publishing in January 2010, 615 Music in December 2010, Sammy Hagar's catalog in November 2010, Groove Addicts Production Music and Carline Recorded Music Library in March 2010, Muse's catalog in August 2009, Ranka in January 2008 and Non-Stop Music in April 2007, to name a few.
With so many acquisitions - in addition to the frequent co-publishing and administration deals - a publishing company is going to grow - or at least stay in place.
To be clear, the music publishing world is not without its challenges. Revenues are far more predictable than those of recorded music -- thus publishing's attractiveness to investors such as pension funds -- but revenues are still closely tied to the fate of recorded music. And that means a lot of revenue growth tends to be the result of deal-making, not organic growth due to improved structural or market conditions.
Blame Canada: CAA Partners With S.L. Feldman
-- Creative Artists Agency (CAA) and S.L. Feldman & Associates (SLFA), Canada's leading full-service talent agency, have announced a partnership that provides CAA's music department with enhanced booking capabilities within the Canadian marketplace. In addition, SLFA will get access to a broader array of talent for select concert and private event bookings. SLFA will act as a portal for CAA's clients with local venues and promoters, offering additional local market expertise support. CAA will represent a limited number of SLFA music clients in the U.S. and overseas.
The Hurt Locker: Motion Picture Association Sues Hotfile
-- The Motion Picture Association of America (MPAA) has sued Hotfile, a Florida-based cyberlocker service, for copyright infringement violations. "Hotfile facilitates the theft of copyrighted motion picture and television properties on a staggering scale and profits handsomely from encouraging and providing the means for massive copyright infringement," the MPAA said in statement. The trade group claims Hotfile actually discourages users from uploading personal content by offering incentives for them to upload popular content. "Hotfile profits richly while paying nothing to the studios for their stolen content," claims the MPAA.
Hotfile received 2.1 million visitors on Tuesday and has averaged 1.83 million visitors in the last three months, according to Alexa Cyberlockers, which provide cloud-based storage and sharing of files, have become a priority target for content owners around the world. One way of attacking those sites is to strangle off the flow of money. In December 2010, a report claimed the MasterCard was in proactive talks with the RIAA and others in the entertainment community about a partnership that could impact payment processing for cyberlockers and other sites that engage in piracy.