Warner Music Group Revenues Up 5% For Third Quarter
Digital Approaching Half Of U.S. Recorded Music Revenue
August 4, 2011 at 4:52 AM (PT)
WARNER MUSIC GROUP today (8/4) announced its third-quarter financial results for the period ended JUNE 30, 2011. WMG closed its sale to ACCESS INDUSTRIES, INC. on JULY 20th.
* Total revenue of $686 million grew 5% from the prior-year quarter and declined 1% on a constant-currency basis.
* Digital revenue was $203 million, or 30% of total revenue, up 13% from $179 million in the prior-year quarter, and up 9% on a constant-currency basis.
* Operating income was $10 million compared to an operating loss of $1 million in the prior-year quarter. Operating income included $10 million of severance charges ($3 million in Recorded Music, $2 million in Music Publishing and $5 million in Corporate) compared to $9 million of severance charges in the prior-year quarter ($7 million in Recorded Music and $2 million in Corporate) (the "Severance Charges"). Operating income in the quarter also included a $12 million benefit from a recorded music legal settlement with LIMEWIRE, as well as $5 million in expenses related to the sale to ACCESS INDUSTRIES.
* Operating income before depreciation and amortization (OIBDA) of $77 million was up 20% from the prior-year quarter. This quarter's OIBDA results reflect the impact of the LIMEWIRE Settlement, which was partially offset by the Transaction Expenses. OIBDA for the current- and prior-year quarters reflects the Severance Charges.
* Net loss was $0.30 per diluted share compared to a net loss of $0.37 per diluted share in the prior-year quarter. The Severance Charges had a $0.07 per diluted share impact in the quarter and a $0.06 per diluted share impact in the prior-year quarter. The LIMEWIRE Settlement had a positive $0.08 per diluted share impact in the quarter and the Transaction Expenses had a negative $0.03 per diluted share impact in the quarter.
"Our focus on disciplined A&R investments, revenue diversification and innovative digital strategies has helped us to grow our Recorded Music revenue and deliver healthy increases in three key segments of our Music Publishing revenue," said CEO EDGAR BRONFMAN, JR., Warner Music Group's CEO. "We are approaching the point where the majority of our U.S. Recorded Music business will be digital while continuing to transform our approach to artist signings with more than 60% of the artists on our active global recorded music roster being signed to deals with a comprehensive suite of expanded rights."
EVP/CFO STEVEN MACRI added, "An improved revenue profile, growth in digital and our artist development and cost-management efforts all contributed to enhanced OIBDA margins in the quarter and continue to position us well for the long term."
Revenue from the company's Recorded Music business increased 5.0% from the prior-year quarter to $545 million and declined 0.5% on a constant-currency basis, "which reflects the impact of foreign-currency exchange rates." Domestic Recorded Music revenue fell 8.1% from the prior-year quarter to $227 million, while international Recorded Music revenue grew 16.9%, or 5.6% on a constant-currency basis, to $318 million. "Revenue in the quarter reflected strength in FRANCE and JAPAN partially offset by declines in the U.S., U.K. and other parts of EUROPE."
Top sellers for the quarter included BRUNO MARS, SUPERFLY, WIZ KHALIFA, HUGH LAURIE and CEE LO GREEN. Recorded Music revenue in the quarter also reflects growth in the European concert promotion business, as compared with the prior-year quarter.
Recorded Music digital revenue of $191 million grew 13.0% over the prior-year quarter, or 8.5% on a constant-currency basis, and represented 35.0% of total Recorded Music revenue, compared with 32.6% in the prior-year quarter. Domestic Recorded Music digital revenue grew 6.9% to $108 million, or 47.6% of total domestic Recorded Music revenue, compared with 40.9% in the prior-year quarter. International Recorded Music digital revenue grew 22.1%, or 10.7% on a constant-currency basis, to $83 million, and represented 26.1% of total international Recorded Music revenue, compared with 25.0% in the prior-year quarter. Growth in digital revenue was driven by strength in global digital downloads and streaming.
Recorded Music operating income improved to $40 million from $21 million in the prior-year quarter, resulting in an operating margin of 7.3%, up 3.3 percentage points from 4.0% in the prior-year quarter. Recorded Music OIBDA increased 29.2% to $84 million for the quarter, from $65 million in the prior-year quarter, and Recorded Music OIBDA margin expanded 2.9 percentage points from the prior-year quarter to 15.4%. "The improvement in operating income and OIBDA reflects increased revenue, changes in our sales mix, proceeds from the LIMEWIRE Settlement and lower Recorded Music Severance Charges."