For the quarter, the company posted $155 million in operating income before interest, taxes, depreciation and amortization, or OIBDA, which was down slightly from the prior quarter’s $157 million in OIBDA. It blames that dip on higher compensation, legal costs, increased investment in A&R, and costs related to its office consolidation in Los Angeles. Adjusted OIBDA, however, rose 4.3 percent to $168 million, versus $161 million the year prior. Operating income was down 4 percent to $90 million, from the year-prior's $94 million.
"2018 is off to a great start," said Steve Cooper, WMG's CEO. "For three years running, we have grown revenue by double digits in the first quarter, a great testament to the sustainability of our success. Streaming is driving the industry and we continue to outperform thanks to fantastic new music and the strength of our worldwide operating team."
The company said recorded music revenue grew in all regions during the quarter, with top sellers including Ed Sheeran, Bruno Mars, Dua Lipa, Lil Uzi Vert and Liam Gallagher. Moreover, Cooper noted during the analyst conference call that Atlantic Records had a great showing at the Grammy awards with Mars winning all seven categories for which he was nominated and Sheeran taking home two Grammys, while Kraftwork, Mastodon and Portugal. The Man all picked up awards as well.
Recorded music operating income was $129 million, up from $123 million, while adjusted OIBDA was $183 million, up from $168 million in the prior-year quarter.
Looking closer at revenue within the recorded music segment, digital rose 20 percent to $481 million, up from $402 a year earlier. Within that, streaming accounted for $404 million, up from $311 million, and downloads $77 million, down from $91 million. That jump within digital offset a slight decline in physical sales for the period, with $223 million, versus $227 million in the corresponding year-earlier period. Elsewhere, artist services and expanded rights was up to $105 million from 90 million, while licensing and other revenues grew to $95 million from $78 million.
As a percentage of revenue, that breaks out to streaming 44.7 percent, downloads 8.5 percent, physical 24.7 percent, artist service and expanded rights 11.6 percent and licensing and other 10.5 percent. In the prior year those percentages were 39 percent streaming, 11.4 percent downloads, 28.5 percent physical, 11.3 percent artist service and 9.8 percent other.
Meanwhile, music publishing revenue rose 15.3 percent to $143 million, up from $124 million. More than a third of that was digital revenue, which rose 23 percent to $53 million during the quarter, compared to $43 million in the prior-year quarter. According to the company, revenue grew in all segments within publishing -- digital, performance, synchronization and mechanical. On that revenue, the company produced $17 million in OIBDA, up slightly from $16 million the prior year, and its operating losses totaled $1 million compared to $2 million in the prior-year quarter.
Looking at total revenue geographically, the U.S. generated $433 million, while international accounted for $614 million minus the $2 million in intersegment revenues.
In a conference call with analysts, Cooper pointed out that the Warner Music Group will continue to benefit by the expansion of digital music services around the globe. He noted that Amazon Prime Music is now available in over 30 countries while Deezer has a presence in 1875 markets.
Cooper said that expanding WMG’s global presence is a priority, pointing out that the company enjoyed 43 oercent growth in Japan, 28 percent in Latin America, 21 percent in China and 15 percent in the U.K. He also pointed out that the company had just launched a Mid-East operation which will have headquarters in Beirut.
After the quarter closed, the company paid a $125 million dividend to shareholders, thus reducing its $776 million in cash to about $651 million, which was further reduced by paying annual bonuses to employees. When asked during the conference call if the company will use cash to pay down debt, which still stands at $2.818 billion, which is up from the $2.2 billion Access Industries initially borrowed to pay for the WMG acquisition, Levin answered the company’s priorities for cash are: No. 3 to pay cash dividends; No. 2, to continue to optimize the company’s capital structure; and No. 1 to "re-invest in the business first because we see a terrific growing market."