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Warner Music Group Sees Earnings Growth, Spurred by Continued Digital Gains

Warner Music Group showed improvements across the board in its fiscal year ended September 30. Helped by growing royalties from streaming services, total revenue increased 6.2 percent at constant…

Warner Music Group showed improvements across the board in its fiscal year ended September 30. Helped by growing royalties from streaming services, total revenue increased 6.2 percent at constant currency to $2.97 billion.

Warner reached another milestone as annual recorded music streaming revenue exceeded download revenue. Streaming grew 34 percent in the fiscal year and a staggering 47 percent in the fourth quarter. Previously, digital had exceeded download revenue in the company’s fiscal second quarter. “Streaming continues on a trajectory to become our largest revenue source,” CEO Stephen Cooper said during Thursday morning’s earnings call. He later added that the decline in download revenue in the fiscal fourth quarter was below 10 percent and “significantly” below 10 percent at constant currency.


Digital revenue rose 10 percent at constant currency, or 19.8 percent as reported, to $1.24 billion in the fiscal year. At $1.15 billion, digital accounted for 48.5 percent of the label’s $2.5 billion of recorded music revenue. In the United States, digital accounted for 58.8 percent of recorded music revenue.

“As the first music major to report streaming revenue exceeding download revenue, we’ve continued to lead the digital transformation, helping us to achieve four consecutive years of revenue growth in our combined recorded music digital and physical business,” said CEO Stephen Cooper in a statement.

The fourth quarter and fiscal year numbers exclude any effect of the launch of Apple music, of which “early signs are encouraging.” Apple Music launched on June 30 and had a free, three-month trial period. Free trials started on the launch date would have turned into paid subscriptions the same day as the close of Warner’s fiscal year. Apple announced in October the service had 6.5 million global subscribers. It has not updated that figure since.

Constant currency removes the impact of large currency fluctuations that can give an inaccurate portrayal of financial performance in other markets. Measurements in constant currency compare successive financial periods as if current exchange rates existed in the prior period.  Removing these changes in foreign exchange rates, revenue declined 2.0 percent.

In the recorded music division, fiscal year revenue was $2.5 billion. Total digital and physical revenue edged upward to $1.9 billion. Physical revenue was basically flat at $767 million. Artist services and expanded rights, otherwise known as 360 deals,

At Warner/Chappell Music, digital accounted for 20.5 percent of the publishing division’s revenue of $482 million, an improvement from 18.8 percent a year earlier. Performance royalties, the largest component of publishing revenue, was flat at $184 million. Improvements in synchronization revenue made up for a small decline in mechanical revenue.

Cooper briefly addressed Warner/Chappell’s loss in the lawsuit about the composition “Happy Birthday To You,” which will soon fall into the public domain. Terms of the settlement, announced Monday, have not been released, but CFO Eric Levin said “the settlement is not material to our results.”

Operating earnings before depreciation and amortization grew to $436 million at constant currency from $340 million in the previous year. The fiscal year’s net loss improved to $88 million at constant currency from $303 million.

“We stayed focused on cost and cash management throughout the year and saw significant improvement in key financial metrics,” Levin said.

This story was updated with information from the company’s earnings call.