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Warner revenues down, but Edgar still upbeat
By CMU Editorial | Published on Wednesday 9 February 2011
A quick summary of the latest set of financials from Warner Music – “down, down, down”. A quick summary of top man Edgar Bronfman Jr’s investor call – “smile guys, there’s some light ahead”.
Yes, Warner Music’s revenues in the last quarter of 2010 were down 14% year on year, with operating income also down 19.6% and net loss up from $16 million to $18 million. CD income continued to slide, obviously, though more interestingly – and worryingly, possibly – digital revenues, although up year on year, were down on the previous quarter. Publishing income was also down 14.9%. Aren’t digital and publishing meant to be the saving grace for major music companies? Oh shit.
But no, there’s light ahead remember.
In his investor call Bronfman said that while digital had slipped in the last quarter, the digital market still had a lot of growth potential, particularly in the streaming service domain. This is interesting because Bronfman has previous expressed concern about Spotify’s business model, albeit mainly the ad-funded free element. The Warner chief wouldn’t comment on how close his firm was to licensing Spotify in the US, but said such services would become “ever more meaningful” in the major’s financials moving forward.
Talking of future potential, probably most interesting of all the things Bronfman said was his claim that about 55% of Warner’s active artist deals now cover more areas that just sound recordings, up from about 0% five years ago. We knew Warner had been quietly moving into so called 360 degree deal territory for a while now – more by negotiating interesting deals and partnerships with new talent rather than the Universal method of buying up key players in management, branding, live and TV – but this comment suggests such an approach is more extensively applied than we possibly realised.
Bronfman admitted that such deals are yet to deliver big revenues to Warner, but said that as they come of age in the coming years they – as much as new digital revenues – could help the major finally stop revenue slides and enable a new era of expansion.
Although I don’t know the specifics of all of those 360 degree deals, Bronfman is probably right to be mildly optimistic about what they may deliver long term, though the best quote to come out of the investor call was a negative one, so I’m going to go with that instead.
According to Billboard, Deutsche Bank’s Doug Mitchelson observed: “It seems like this industry has always been two to three years away from returning to growth, and it seems like it’s been that way for four or five years”.
As previously reported, Warner has consultants from Goldman Sachs in the building reviewing the company’s options, which might include buying a chunk of EMI, selling off a chunk of the current Warner empire, or looking for a buyer for the whole of the Warner Music Group. With Warner, EMI and HMV all facing possible acquisitions and split ups, is anyone up for constructing the Warner Chappell Parlophone Virgin MAMA Music Group, or WarChapParGinMa as I’m thinking we might call it?
