Shares in Warner Music Group rose 6% after the third-largest music company said on Wednesday that higher streaming revenue and lower costs offset a decline in merchandise and physical music sales in the fiscal third quarter.
Quarterly net income rose nearly 14% to $141 million from $124 million in the third quarter last year. Total revenue fell 1% to $1.554 billion from $1.564 billion in the prior quarter, due to the termination of the BMG distribution deal and a difficult comparison to the prior quarter, which included a $7 million Copyright Royalty Board benefit to Phonorecords III.
The company's digital and streaming revenue rose 4.7% and 5.5% respectively, as subscription revenue rose 7%. Recorded music streaming revenue increased 5.0%, and music publishing streaming revenue increased 7.9%.
“Our strong subscription flow growth in [the third quarter] driven by the performance of our music and healthy industry trends,” said the Warner Music Group CEO Robert Kyncl he said in a statement. “We're nurturing the next generation of artists and songwriters, creating new resonance in 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 allow us to serve talent and set WMG up for continued future growth.”
WMG's operating income rose 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 year-ago quarter.
Revenue from WMG's recorded music division fell 2 percent to $1.251 billion from $1.282 in the prior quarter. This was due in part to the departure of BMG as a customer, which resulted in $26 million less revenue, and a “renewal with one of the Company's digital partners” that generated an additional $3 million in recorded music streaming revenue, the company said .
BMG began winding down its distribution deal with WMG's ADA last September to transfer control of its in-house 80 billion-stream digital business.
Physical revenue fell 4.8 percent due to launch timing and a difficult year-ago comparison, the company said. Artist services and extended rights revenue decreased 27.1% primarily due to lower merchandising revenue.
Revenue from WMG's music publishing division rose 8% to $305 million from $283 million in the prior quarter.
Topline results:
- Total revenue 1% to $1.554 billion in the third fiscal quarter of 2024 from $1.564 billion in the same period last year.
- Net income rose 14% to $141 million from $124 million in the third quarter of 2023.
- Recorded music revenue fell 2% to $1.251 billion from $1.282 billion in the third quarter of 2023.
- Music publishing revenue rose 8% to $305 million from $283 million in the third quarter of 2023.
