The latest round-up of earnings re-caps:
Here is the lone example of an annual earnings report. In August, EMI’s private equity owner, Maltby Capital (which was set up by Terra Firma), released an annual report that offered two important numbers. First, EMI’s net loss for the year ended March 31 was £512 million ($800 million). A big loss, yes, but an improvement over the previous year’s loss of £1.56 billion ($2.3 billion). Second, revenue improved about 5% to £1.65 billion ($2.5 billion). EMI has shown operational improvements and is enjoying a string of strong releases. Even so, accounting losses are large and the report warns that EMI is likely to need additional equity injections in the coming year. One thing to watch this year is the possible impact on EMI’s debt load from Terra Firma’s lawsuit against Citigroup. Since that earnings report was released, EMI has made some bold organizational and structural changes. So, some of the people and processes that have helped its turnaround are no longer in place.
Warner Music Group
A sluggish release schedule added to the general malaise in the market for the period ended June 30. In its fiscal third quarter, Warner Music Group reported a 15% drop in revenues to $652 million. Operating loss was $1 million, an improvement from $25 million the year before. Net loss was $55 million, its worse in six quarters and second-lowest in the last five years. Digital revenue grew a mere 2% year-over-year to $179 million and was down 10% from the previous quarter. Recorded music revenues were down 17.9%. Music publishing revenue dropped 6.1% year-over-year.
Universal Music Group
UMG’s revenue was $1.01 billion in the second quarter, up nearly 3% over the second quarter of 2009. But that followed a weak first quarter, and UMG’s revenue in the last 12 months were down nearly 8% versus the prior 12-month period. For the first half of 2010, UMG had a U.S. track equivalent album market share of 30.3%, up one tenth of a percentage point from 2009 and two and a half points better than second-place Sony.
Sony Music Group
In the quarter ended June 30, Sony Music’s sales increased 1.3% to $1.24 billion. Best-selling titles during the period included AC/DC’s soundtrack to “Iron Man 2,” music from the television show “Glee,” Usher’s Raymond vs. Raymond and Christina Aguilera’s Bionic. For the first half of 2010, Sony had a U.S. track equivalent album market share of 27.8%, a tenth of a percentage point down from 2009.
The company’s second quarter earnings revenue was $1.27 billion, down 9.7% from last year (when compared to combined revenue of Live Nation and Ticketmaster, which did not merge until the first quarter of 2010). The quarterly results were in line with guidance the company issued at its July 15 investor presentation. On that day Live Nation warned of lower ticket sales, especially for concerts, for the first half of the year. The second half of 2010 could be weak, but 2011 is expected to be better.
It seems the World Cup is about as bad for entertainment sales as digital piracy. For the 19-week period ending September 4, HMV’s sales in the U.K. and Ireland were down 14% and comp store sales were down 15%. HMV experienced a similar sales slump in the summer of 2006 as same store sales were down 17%. However, the company ended the fiscal year up nearly 4%.
In the U.S., the trials of HMV are worth watching for a number of reasons. First, the U.S. lacks chains like HMV after Virgin and Tower went out of business. Second, physical sales are stronger in the U.K. than in the U.S. and HMV is a part of that (although it’s probably more a symptom than a cause of the relative stability in brick-and-mortar retail). But if HMV falters, that would signal a change in the health of the U.K. retail market will falter as well. Luckily for HMV, the next world cup is four year away. Lastly, HMV is pursuing a hybrid strategy for engaging music consumers by moving into live events (through its acquisition of Mama Group). Live events are the beneficiary of a shift in power in the music industry. It’s only natural that existing companies would want to move into live events. The HMV Live division, which includes music venues, experienced a comp sales increase of 8% during the period.
Trans World’s decline continued in the second quarter. Total sales were down 18% to $136 million and its net loss was just under $16 million. A big reason for the losses was the company’s shrinking footprint. Ten stores were closed during the quarter. The company ended the period with 534 stores, down from 697 stores a year earlier. Comp store sales were down just 2% while comp store music sales were down 3%. Music accounted for 38% of sales, the same percentage as last year.
The latest round-up of earnings re-caps: