Warner Music Group‘s most recent couple of quarters have risked looking a little insubstantial: In the three months to end of March this year, for example, the firm’s recorded music streaming revenues were up by just 2.2% YoY.
That narrative changed today, with the announcement of WMG’s calendar Q2 (fiscal Q3) results, which brought the company’s performance back in line with a high-single-digit annual growth trajectory.
In the three months to end of June 2023, WMG’s overall revenues – encompassing recorded music, music publishing, and other income streams – were up by 9.9% YoY to USD $1.564 billion.
Recorded music revenues were up 8.6% YoY to $1.282 billion in the quarter. And, within that figure, those all-important recorded music streaming revenues were up 7.3% YoY to $822 million.
(All percentage figures used in this report represent constant currency.)
Warner said in an SEC filing today that “growth in [recorded music] streaming revenue increased due to a stronger release schedule and growth in ad-supported revenue recovered due to moderation in a market-related slowdown”.
WMG’s music publishing division – Warner Chappell Music – continued its recent strong run, with its calendar Q2 revenues up 16.0% YoY to $283 million.
Robert Kyncl, CEO, Warner Music Group, said: “Our [fiscal] Q3 results were driven by a wide diversity of music, and our strength came from many different territories, labels, and revenue lines. We succeeded with artists and songwriters across the spectrum of genres and generations, with both new releases and catalog projects.”
He added: “We expect our momentum to build, led by our extraordinary music and inventive campaigns, as well as improving macro and industry trends. We continue to invest in new creative talent, and evolve our expertise and resources, while collaborating with partners across the entertainment economy to drive long-term success.”
Eric Levin, CFO, Warner Music Group, said: “In the third quarter, we delivered solid growth across key metrics which give us increased confidence in our full-year margin and operating cash flow targets.
“The market’s adoption of subscription price increases, combined with the ongoing evolution of our key partnerships, gives us tremendous optimism for the future of streaming growth.”
WARNER MUSIC GROUP: OVERALL CALENDAR Q2 PERFORMANCE
WMG’s company-wide revenue (including both recorded music and publishing) was up 9.2% YoY (or 9.9% YoY in constant currency, as mentioned) in calendar Q2 2023.
Digital revenue increased 8.8% YoY (or 9.8% YoY in constant currency) and streaming revenue across recorded music plus music publishing increased 9.5% YoY (or 10.5% YoY in constant currency).
WMG’s operating income in calendar Q2 was $189 million, significantly up vs. the $146 million posted in the prior-year quarter.
Quarterly OIBDA (operating income before depreciation and amortization) was $275 million, compared to $233 million in the prior-year quarter, an increase of 18.0% YoY (or 20.1% YoY in constant currency).
Warner told investors today: “The increases in operating income, OIBDA and OIBDA margin were primarily due to strong operating performance, lower variable marketing spend, savings from the previously announced restructuring plan and the favorable impact of exchange rates, partially offset by revenue mix, incremental overhead in technology and the $10 million impact of the mark-to-market adjustment of an earn-out liability in the prior-year quarter related to an acquisition.”
WARNER MUSIC GROUP: CALENDAR Q2 RECORDED MUSIC PERFORMANCE
Warner’s recorded Music revenue was up 7.8% YoY in calendar Q2 (or 8.6% YoY in constant currency, as mentioned), with recorded music streaming revenue up 6.3% YoY (or 7.3% YoY in constant currency).
Warner noted that the quarter included “successful releases” from Ed Sheeran, Linkin Park and Melanie Martinez.
Recorded music licensing revenue increased 22.7% YoY (or 24.3% YoY in constant currency), with growth across synchronization, broadcast fees and other licensing.
Physical revenue was up 2.4% YoY (the same in constant currency) primarily due to stronger performance in the US.
‘Artist services and expanded-rights’ revenue – covering Warner’s activities in merch, live and other fields – increased 14.7% YoY (or 14.1% YoY in constant currency) primarily due to an increase in concert promotion and merchandising revenue.
WMG’s recorded music operating income in calendar Q2 was $207 million, up from $166 million in the prior-year quarter.
Recorded music OIBDA increased 16.5% YoY (or 18.1% YoY in constant currency) to $261 million from $224 million in the prior-year quarter.
WARNER MUSIC GROUP: CALENDAR Q2 MUSIC PUBLISHING PERFORMANCE
WMG’s music publishing revenue increased 15.5% YoY (or 16.0% YoY in constant currency, as mentioned). The increase was driven by growth in digital and mechanical revenue, said the company today.
Publishing’s digital revenue increased 26.4% YoY (or 27.3% YoY in constant currency) in the quarter, while publishing streaming revenue increased 27.1% YoY (or 28.1% YoY in constant currency).
Warner said that publishing’s streaming jump in the quarter reflected “the continued growth in streaming, the impact of digital deal renewals and a revenue true-up of $9 million, partially offset by a $10 million quarter-over-quarter decrease in the impact of the CRB Rate Benefit”.
Warner Chappell Music’s mechanical revenue increased driven by a higher share of physical sales and timing of distributions; synchronization revenue remained flat on an as-reported basis and in constant currency, primarily due to lower commercial licensing activity, offset by copyright infringement settlements; performance revenue decreased due to the timing of payments from collection societies.
Music Publishing operating income was $50 million in calendar Q2 2023, compared to $33 million in the prior-year quarter.
Music Publishing OIBDA increased 28.1% YoY (or 30.4% YoY in constant currency) to $73 million.
Warner said the increases in operating income and OIBDA were “primarily due to strong operating performance and the favorable impact of exchange rates, partially offset by revenue mix”.
As of June 30, 2023, Warner Music Group reported a cash balance of $600 million, total debt of $3.988 billion and net debt (defined as total debt, net of deferred financing costs, premiums and discounts, minus cash and equivalents) of $3.388 billion.Music Business Worldwide