-- Standard & Poor's downgraded Warner Music Group's stock to "negative" from "stable" last week. The ratings agency believes a lower rating is proper "until there is an indication that digital sales can resume at healthy growth rates and eventually offset physical CD sales declines." Warner had a light release schedule in its fiscal third quarter (second quarter of calendar year) and will see more releases in the next two quarters. But S&P's concerns go well beyond near-term releases.

A number of factors go into the valuation of a company, not only its revenue but the cash left over after expenses, taxes, capital expenditures and changes in working capital. Its level of risk plays a part, as does the rate at which its revenue will grow - or shrink - in the future.

S&P's lower outlook is notable because it reflects concern for the entire industry. The macro forces that affect Warner - the loss of physical sales, the transition to digital - affect everybody. The downgrade also signals of lack of confidence in Warner's business model. That in turn is a statement against the business models of Warner's peers. Non-traditional revenue is growing but doesn't yet account for much. Digital growth is meager. Everybody is taking a very similar approach to dealing with these disruptions. Companies are pushing hard to expand into promotion, licensing, merchandise and e-commerce. But there is still doubt about music companies' ability to make that transition. Analysts obviously want to see more from Warner and its peers before they have more faith in the new multi-rights music company model.

Shares of Warner were flat on Friday and were up slightly against in early Monday trading. Warner closed at $4.30 on Friday. Its 52-week low is $3.76 and its 52-week high is $8.02.
(AP)

-- Entertainment retailer Hastings reported a net loss of $100,000 on revenues of $98.6 million for the quarter ended July 31, 2010. Both figures were slightly better than the year ago period. For the six-month period ending July 31, revenue was up 2.2% to $207 million and net income was down 28% to $936,000.

Comp store sales rose 4.7% during the quarter - 5.3% for merchandise and 2.1% for rental. Comp store music sales declined "only 6.1% during the first six months of the year. That's a big improvement from the 15.4% drop in the first half of 2009. (Hastings reduced its CD footprint in 89 of its 148 stores.) Video games (up 24.4%), Hardback Café (up 12.9%) and movies (up 10.3%) were the categories with the largest year-over-year increases.
(Earnings Release)

-- MOG has launched MOG Music Network, an editorial hub with "best of" content from the blog network's 1,300 music blogs as well as in-house news and reviews. This new portal is separate from the MOG music streaming service. But the new site does provide marketing opportunities for the streaming service. Currently, there is an offer for a free music service trial at the bottom of the Mog Music Network page.
(Press Release)

-- Live Nation will present at the Bank of America Merrill Lynch Media, Communications & Entertainment Conference in Newport Beach on Sept. 16. A live audio webcast will be available.
(Press Release)

-- Epitonic.com, one of the web's earliest download portals, is being re-launched by its founders. No specific timeline has been given, but the founders have made their goal clear: "To get an exciting, modern, brand-new version of the site online by the end of year." The founders have created a Kickstarter campaign, with a goal of $4,650, to raise funds for the re-launch.

Epitonic.com was launched in 1999 as a place to get free and legal MP3s with editorial, information on new releases and album streams. It received funding from NBCi and CNET. The site was acquired in 2001 by Sputnik7, a music site co-owned by Palm Pictures founder Chris Blackwell.
(Press Release)

-- The RIAA chimes in on Google and Verizion's proposed Internet framework. "We appreciate that Google and Verizon, like the FCC and Congress, recognize that lawful and unlawful content should be treated differently. We look forward to seeing the specifics of the proposal once it is fleshed out, and to actively participating in the legislative and regulatory process to ensure that any ultimate solution permits and encourages ISPs to take measures to deter unlawful activity over their networks, whether copyright infringement, child pornography or other illegal conduct." (RIAA Music Notes blog)

The RIAA is referring to a section of the companies' joint statement that proposes the prohibition of discriminatory practices. "This means that for the first time," it states, "wireline broadband providers would not be able to discriminate against or prioritize lawful Internet content, applications or services in a way that causes harm to users or competition." The companies' inclusion of the word "lawful" is important to content owners because it implies networks should be able to discriminate against unlawful Internet content. It would be difficult to get an ISP to filter illegal file sharing traffic or take measures against suspected copyright infringers if its policies did not allow it to differentiate between illegal and legal content on its network.

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