Third quarter results weren’t as bad as expected for Warner
Music Group, as European earnings made up for the U.S., Asia-Pacific and Latin
America losses, as the music industry is going through some changes. Madonna,
Disturbed, Plies, Luis Miguel and Frank Sinatra have contributed to a 5.1%
increase in revenue on a constant-currency basis.
The losses from continuous operations totaled $9 million, or
$0.06 per diluted share, which is a big step forward if we look at the $16
million loss, or $0.11 per diluted share, in the same period last year.
Increased sales in the U.K., France and Germany were responsible
for a constant-currency growth in International Recorded Music. Local, as well
as international releases, together with international touring and management business,
have contributed to the gains in international revenue.
International Recorded Music went up 19.2% compared to the
same quarter last year, reaching $367 million, while domestic Recorded Music
revenue fell 7.5% from the same period a year before to $319 million.
Overall, Warner Music’s revenue grew 5.5% to $848 million
from $804 million in the same quarter last year, and fell 1.1% on a
constant-currency basis, as a result of the transition the music industry is
going through right now, as it passes from physical products to digital music.
Canada and Europe had the greatest contributions to these figures.
“This quarter, we continued to outperform our competitors,
even in the midst of a challenging recorded music environment,” said Edgar
Bronfman Jr., Warner Music Group Chairman and CEO. “As we transform the
business to position it for the future growth in an evolving industry, we
remain focused on driving profitability and cash flow, while prudently managing
capital and costs.”
The company explained the year-over-year revenue differences through the timing of release and declines in the physical business, as the digital
music industry begins to take over. Furthermore, domestic retailers have
reportedly continued to actively manage their inventory levels as a response to
tougher economy and credit market, as well as the changing in demand for the
physical recorded music products.
Warner Music Publishing reported the Music Publishing
operating income of $15 million, going down 16.7% from the $18 million last
year, which led to an operating margin of 8.9%.
Quarterly Recorded Music operated income stayed at a flat
$66 million, which led to an operating margin from continuing operations of
9.6% compared to 10.1% the year before. Recorded Music digital revenue, which
accounted for 22.7% of the Recorded Music revenue, grew 39.3% compared to last
year, to $156 million.
Digital sales were primarily driven by growth in global
online downloads, as well as to a lesser extent growth in international mobile.
Michael Fleisher, Warner Music Group’s Executive Vice
President and CFO said that the benefits from the steps they’ve taken this year
to increase their financial flexibility were evidenced by their building cash
balance and riding quarterly year-over-year Free Cash Flow.