Warner Music Group has revealed the impact of Covid-19 on its revenues.
The major has reported its results for the fiscal third quarter, which covers the three months up to June 30, the period when the pandemic struck and WMG went public.
During the earnings call, CEO Steve Cooper hailed the recent WMG IPO as a “resounding success”.
Overall revenue was down 4.5% (3.1% at constant currency) at $1.010 billion (£778 million). Digital revenue including streaming was up 11.1% year-on-year (13.4% at constant currency) at $720m (£554.5m).
Operating loss was $433m (£333.4m) compared to operating income of $58m (£44.7m) in the prior-year quarter.
For recorded music, revenue was down 5.7% year-on-year (4.2% in constant currency) at $861m (£663m). The decline was down to Covid-19, including the impact on physical sales, tour merchandise and currency rates. Growth in digital revenue was more than offset by the declines in physical revenue, artist services and licensing revenue.
Physical sales were down 46% year-on-year for the quarter at $51m (£39.3m).
During the earnings call, Cooper said streaming consumption was largely unaffected by Covid-19.
“We’re also seeing competition in the streaming arena from newer entrants like Facebook and Snap,” he said.
“They serve a different purpose than a YouTube or Spotify, but they have discovered that music is relevant and important to virtually everybody on the planet.”
Cooper said he anticipates streaming growth continuing at “a very nice pace for the foreseeable future”. He said that WMG had no concerns about Spotify’s move into podcasts.
“Spotify’s basic foundation will always be music,” he added.
Cooper also spoke about what TikTok means to WMG.
“It is a source of discovery, both by way of new music and A&R,” he said. “From that perspective, it’s very important to us. Economically, it’s much more in the start-up category.”
Covid has hastened our move into the livestreaming world and the virtual concert world
Major sellers in the period included Dua Lipa, Roddy Ricch, Lil Uzi Vert, Tones And I and Ed Sheeran.
“Our strength in multiple genres has been a real strength during Covid,” said Cooper.
During the earnings call, Cooper spoke about plans to embrace livestreaming opportunities.
“It has hastened our move into the livestreaming world,” he said. “It has hastened our move into the virtual concert world. I would expect in the future that our activity in those areas is going to expand.”
Cooper said the “good news” during Covid was increased production of music from artists.
Recorded Music’s operating loss was $160m (£123.2m), down from operating income of $85m (£65.5m) in the prior-year quarter. OIBDA decreased to a loss of $119m (£91.6m) from income of $131m (£100.9m) in the prior-year.
Sony Music has today also reported results showing the impact of Covid-19 during the quarter.
“We’re very pleased with our performance this quarter, especially in light of the global pandemic,” said Cooper. “Our results highlight the underlying strength and resilience of our business. Streaming revenue grew double digits and our digital transformation continues.
“Our commitment to new artist development is illustrated by the fact that four out of our top five best-sellers this quarter were from artists releasing debut or sophomore albums. Our artists and songwriters continue to create music that moves the world including, in the US, the most-streamed song of 2020 [The Box by Roddy Ricch], as well as the No.1 and No. 2 biggest Pop songs during the first half of the calendar year.”
“These results are slightly better than our expectations, given the sustained effect that Covid has had on certain aspects of our business,” added Eric Levin, EVP and CFO, Warner Music Group. “That’s a testament to the incredible ability of our teams, our artists and our songwriters to pivot and adapt, and to keep the hits coming. We have a robust cash position and all the music and resources needed to come out the other side of this with our long-term prospects as strong as ever.”
Music publishing revenue at Warner Chappell grew 1.4% year-on-year (or 2.8% in constant currency) at $149m (£114.7m). Growth in digital revenue was partially offset by declines in performance, synchronisation and mechanical revenue.
The publisher’s decrease in performance revenue was primarily driven by Covid-related business disruption.
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