Warner Music Group’s Quarterly Profits Up 14% on Streaming Growth

Warner Music Group reported on Wednesday strong streaming revenue growth and keeping a lid on its costs helped offset declines in merchandise and physical music sales in the company’s third fiscal quarter.

Quarterly net profit rose nearly 14% to $141 million from $124 million in the third quarter last year. Overall revenue fell by 1% to $1.554 billion from $1.564 billion in the year ago quarter due to the roll off of BMG’s distribution deal and a difficult comparison to the year-ago quarter, which included a $7 million benefit from the Copyright Royalty Board in Phonorecords III.

The company’s digital revenue and streaming revenue were up 4.7% and 5.5% respectively, as subscription revenue grew 7%. Recorded Music streaming revenue increased 5.0%, and music publishing streaming revenue increased 7.9%.

“Our strong subscription streaming growth in [the third quarter] was driven by the performance of our music and healthy industry trends,” Warner Music Group chief executive Robert Kyncl said in a statement. “We’re nurturing the next generation of artists and songwriters, creating fresh impact for our iconic catalog, and working with our partners to increase the value of music. Our commitment to long-term artist development, combined with a flatter structure in recorded music, will enable us to super-serve talent and set WMG up for sustained future growth.”

WMG’s operating income jumped 10% to $207 million in the quarter from $189 million in the third quarter last year. Adjusted operating income before depreciation and amortization (OIBDA), which measures profitability over a specific period of time, rose 6% to $316 million from $297 million in the prior-year quarter.

Revenue from WMG’s recorded music division fell by 2% to $1.251 billion from $1.282 in the year-ago quarter. This was due in part to the exiting of BMG as a client, which resulted in $26 million less revenue, and a “renewal with one of the Company’s digital partners” which created an additional $3 million drage on recorded music streaming revenue, the company said.

BMG began winding down its distribution agreement with WMG’s ADA last September to move control of its 80 billion-stream digital business in-house.

Physical revenue fell by 4.8% because of release timing and a tough year-ago comparison, the company said. Artist services and expanded-rights revenue fell by 27.1% mainly due to lower merchandising revenue.

Revenue from WMG’s music publishing division rose by 8% to $305 million from $283 million in the year-ago quarter.

Topline Results:

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Written by Mr. Nimbus