Warner Music Group shed $17 million – or 11 cents per share – during the fourth quarter, a sharp reversal from year-ago gains. But Wall Street was expecting something worse – closer to 14 cents according to Thomson Reuters – and shares moved upward in Tuesday trading. At the bell, WMG finished at $5.02, a 4.8 percent gain over the previous close.
After the earnings call Tuesday morning, a deeper numbers dive is revealing a few positive wrinkles. International recording sales gained 2.5 percent on constant currencies to $498 million, a nice counterweight to a 9.5 percent drop in US-based recording revenues (to $285 million). Additionally, Atlantic Records finished as the top-ranked label in the US, according to WMG chief Edgar Bronfman, Jr.
The digital component has positive elements, though the broader picture is subject to debate. Digital sales – at $185 million – now account for 20 percent of broader revenues, though year-over-year gains are slowing. Specifically, Warner pointed to a 5 percent gain (at constant currencies) compared to the previous quarter in 2009. But sales were flat when compared to the third quarter, reaffirming theories that a digital plateau has arrived. On top of that, digital percentages are gaining against a sinking top-line revenue level, instead of boosting the broader total.
Meanwhile, diversification remains a serious challenge. Warner is clearly suffering from the rapid erosion in CD sales, though other revenue sources are not ramping fast enough. On a revenue total of $918 million, itself rather steady from last year, recordings account for $783 million. Suddenly, the more stable publishing component – a mere 14.3 percent at $141 million – seems less important, and even publishing is facing its own downward demons.
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Tags: Atlantic Records, Compact Disc, Edgar Bronfman, Music, Revenue, Thomson Reuters, Wall Street, Warner Music Group
