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Music Services May Have Less Churn Than Video Streamers, Warner Music CEO Says - Hollywood Reporter

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The music major reported higher fiscal second-quarter revenue, including digital revenue.
By Georg Szalai
International Business Editor
Warner Music Group, home to the likes of Cardi B, Ed Sheeran and Bruno Mars, reported higher fiscal second-quarter revenue on Tuesday, driven by digital growth.
Earnings for the latest period fell to $92 million from $117 million in the year-ago period, “primarily due to aggregate realized and unrealized losses on the mark-to-market of certain investments.”

Quarterly operating income rose though to $166 million from $151 million in the prior-year period, and operating income before depreciation and amortization (OIBDA) climbed to $255 million from $228 million, “primarily due to increased revenue.”

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During an earnings conference call, Warner Music CEO Steve Cooper touted music subscription services as “sticky,” arguing that this was different from video streamers whose subscribers constantly search for the latest desirable content. “As the world grapples with war, inflation and other macro-economic concerns, one thing is certain: music’s ubiquity and value have already proven to be resilient through any kind of disruption,” he said. “Unlike the video streaming market, which churns as subscribers constantly search for new and different exclusive content, the music streaming market is sticky.”

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He argued that users not only have “access to all the music they could ever want on a single platform,” but also become particularly “attached to the collections and playlists they have curated over time.” Concluded Cooper: “While films and TV series may come and go, devotion to one’s favorite music and artist is more deep-seated and longer-lasting.”
Before the market open, the music major posted a 10.1 percent jump, or 12.1 percent when assuming constant currencies, in revenue for the latest quarter, which ended on March 31, to $1.38 billion, amid digital growth in both recorded music and music publishing operations.
Total streaming revenue increased 9.0 percent, or 11.6 percent on a constant currency basis, driven by growth “across recorded music and music publishing, including revenue from emerging streaming platforms.”
In recorded music, major sellers in the fiscal second quarter included Ed Sheeran, Michael Bublé, Dua Lipa and Red Hot Chili Peppers. Recorded music revenue was up 8.3 percent, or 11.4 percent in constant currency, in the latest quarter. The company cited “growth across all revenue lines, including increases in digital revenue which reflect the continued growth in streaming, the company’s largest source of revenue.” Digital revenue grew 6.3 percent, or 8.8 percent in constant currency, licensing revenue jumped 19.4 percent, or 23.1 percent in constant currency, driven by higher synchronization activity, and physical revenue rose 3.4 percent, or 8.0 percent in constant currency.

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Music publishing revenue increased 19.8 percent, or 23.0 percent on a constant currency basis. The gain was driven by growth “across all revenue lines,” the firm said. Digital revenue jumped 22.1 percent, or 25.7 percent, “reflecting the continued growth in streaming, including emerging streaming platforms, and timing of new digital deals.” Synchronization revenue increased due to higher commercial licensing activity, while performance revenue rose “as bars, restaurants, concerts and live events continued to recover from COVID disruption,” the company said.
“Warner Music Group’s unique combination of scale and agility gives us, our artists, and our songwriters an edge in music’s ever-expanding universe of opportunity,” said CEO Cooper. “We continue to build our unparalleled artist development expertise, our differentiated approach to global expansion, and our ground-breaking commitment to innovation at the intersection of music, gaming, social and fitness.”
Added CFO Eric Levin: “The underlying health and resilience of our business is reflected in the diversified revenue growth that we delivered in the second quarter. While our core business continues to flourish, new growth vectors are constantly emerging.”
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