The Warner Music Group attributed its fiscal second quarter decline in revenue to a light release schedule while blaming growth in red ink to an increase in product costs.

For the quarter ended March 31, 2014, the company lost $60 million on revenues of $653 million, versus a $2 million net loss on revenues of $675 million for the corresponding period in 2013.

While that represents a 3.3% decline in revenue, the company said its revenue decrease would have been a 13.9% drop, if it weren't for sales contributed by the Parlophone Label Group, which it acquired on July 1, 2013.

“We have begun to see the strength in our release schedule for the remainder of the fiscal year,” Warner Music Group CEO Stephen Cooper said in a statement.  “Through our A&R, marketing and promotional efforts, we continue to discover and develop new artists and further the careers of established artists.”

In its press release announcing the results, the company said so far this year its major sellers for the period included Bruno Mars, Jason Derulo, Macklemore & Ryan Lewis, Kylie Minogue and Passenger. In a conference call with Wall Street analysts, Cooper added that the company expected sales to improve with the recent releases of albums by Lily Allen, Christina Perri, Paolo Nutini, Dan + Shay and U.K. electronic group Clean, as well as upcoming releases by Coldplay, the Black Keys and Ed Sheeran. He also cited the company's deal with Prince, which will result in a re-release of Purple Rain to celebrate that album's 30th anniversary.

For the six month period ended March 31, WMG reported a $97 million net loss on revenues of $1.47 billion, versus a $78 million net loss on revenues of $1.44 billion. That means revenue increased 1.7% while its red ink grew by 24.3%.

Within that, WMG's recorded music operation produced $76 million in operating income on revenues of $1.23 billion, while its publishing operation, Warner/Chappell Music produced $39 million in operating income on revenues of $250 million.

Of its $1.47 billion in total revenue for the first six months, physical product sales contributed $418 million, digital contributed $529 million while licensing produced $133 million and artist services and expanded rights added another $146 million.

Meanwhile, its $250 million in publishing revenue was split among performance licensing, which produced $98 million; mechanical licensing, $49 million, synchronization, $53 million, digital $44 million and other $6 million. 

Overall, recorded music digital revenue grew 6%, to $529 million from $499 million, in the first half of the fiscal year. But, excluding PLG revenue, digital revenue declined 5.3%.

Nevertheless, during the conference call Cooper said that all indications point to streaming revenue growth continuing to outpace the decline of download sales.

The company also said revenue from streaming services increased by 51%, but the company didn't break out specifically how much revenue it had from that channel. Within the increase in revenue from subscription services, Cooper said that subscription revenue grew by 65%, while ad-supported streaming revenue grew by 13%.

"The data clearly indicate that streaming will be critical to our future," Cooper said. "Streaming is a complex category as it is comprised of a wide range of models including paid and ad-supported audio subscription services, internet and satellite radio services and ad-supported video services, many of which have yet to achieve scale."

He added that bundling deals, whereby a music subscription service is included in a cellular plan or device, are very important to achieving scale, and said the company was excited by a number of recent deals, including the Beats Music/AT&T U.S. partnership; Sprint's just announced alliance with Spotify in the U.S.; and Samsung's deal for its new Galaxy S5 smartphone, which gives six months of free access to Deezer's premium service in 15 countries.

So far in its reported fiscal year, WMG has produced $167 million in operating income before depreciation and amortization, which is down 27%  from the $228 million it produced in the first half of its fiscal 2013 year.

In announcing its results, the company pointed out that during April it had refinanced debt to produced $30 million in interest payment saving by issuing $935 million new notes that carry rates ranging from 5.625% to 6.75% and paid back $765 million in senior notes that paid 11.5% interest.

While the company's balance sheet lists long-term debt at $2.86 million, with the additional $170 million million in debt it took on, long-term debt is now slightly over $3 billion.

“We were very pleased to complete another successful refinancing last month, which will generate cash interest savings of approximately $30 million per year,” WMG executive VP and CFO Brian Roberts said in a statement. “We remain strongly committed to delivering solid free cash flow in the quarters to come.”

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