Warner Music Group increased revenue 3.5% year-on-year to $918 million in the first quarter to Dec. 31, 2009 but recorded a net loss of $17 million.

The loss compared to a $23 million profit in the prior year quarter.

Although revenue was up 3.5% from $887 million a year earlier, it was down 2% on a constant currency basis.

Digital revenue was $184 million, representing 20% of total Warner Music Group revenue in Q1. This was stable compared to the previous quarter and up 7.6% from $171 million in the prior year quarter. The year-on-year increase for digital was up 4.5% on a constant currency basis, and it was up 4% on Q4 2009 on a constant currency basis.

Operating income grew 14.6% to $47 million compared to $41 million in the prior-year quarter. Operating income before depreciation and amortization (OIBDA) was up 4.7% to $112 million from $107 million.

In a statement, WMG said its "performance primarily reflected strong international results, while U.S. results were tempered by continued general economic pressures and the transition from physical sales to digital sales in the recorded music industry."

International revenue at WMG rose 12.1% (up 2.4% on a constant currency basis) while domestic revenue declined 8.8%. Revenue growth in the U.K., France and Italy was partially offset by weakness in the U.S., Japan and parts of Europe.

"We are pleased to have delivered stable revenue and OIBDA in our core recorded music and music publishing businesses despite ongoing recorded music industry pressures and macroeconomic headwinds," said Edgar Bronfman, Jr., WMG chairman and CEO, in a statement. "Our goals remain focused on delivering strong returns on A&R investments while we develop new business models, diversify our revenue mix and fortify our digital leadership position."

"As our stable margins show, we carefully manage our costs and regularly work to adjust our business in order to minimize the impact of a transitioning recorded music market," added Steven Macri, WMG's EVP and CFO. "Similar to last year, we expect our release schedule in fiscal year 2010 to be back-end weighted."

Revenue from recorded music increased 3.4% in Q1 from the prior-year quarter to $783 million, and fell 2.2% on a constant currency basis. International recorded music revenue climbed 12.7% from a year earlier to $498 million, up 2.5% on a constant-currency basis, while domestic recorded music revenue fell 9.5% from the prior-year quarter to $285 million.

The major said that both local and international artists fueled growth in international recorded music revenue. Major sellers in the quarter included albums from Michael Bublé, Enya and Muse.

Recorded music digital revenue of $172 million grew 10.3% over the prior-year quarter, up 7.5% on a constant-currency basis. Digital now represents 22% of total recorded music revenue, compared with 20.6% in the prior-year quarter.

Domestic recorded music digital revenue totaled $99 million, representing 34.7% of the total for domestic recorded music revenue. The domestic digital share was 31.4% a year earlier.

WMG's recorded music operating income grew 15.3% to $68 million, resulting in an operating margin of 8.7%, up from 7.8% in the prior-year quarter.

Music publishing revenue increased 4.4% from the prior-year quarter to $141 million, and was flat on a constant currency basis.

International music publishing revenue grew 9.2% to $95 million, up 2.2% on a constant currency basis, while domestic music publishing revenue fell 4.2% from the prior-year quarter to $46 million.

The first quarter results for 2008 included a gain of $36 million related to the sale of WMG's investment in Front Line Management for $123 million.

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