Warner Music Group ( WMG ) reported strong quarterly profit growth on Wednesday (August 7) thanks to lower costs and solid streaming and digital revenue gains — which helped offset physical revenue declines due to release time and a difficult year before comparison, according to the company. All of that led to a boost in the company's stock, which was up nearly 2% by the end of trading on Wednesday (though some of those gains were pared on Thursday).
“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. He added, “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.”
Here's what else you need to know about the third largest music company's latest quarterly earnings call.
A positive note for the company's strategic reorganization
Kyncl began the call by thanking the outgoing leaders Max Lusanda and Julie Greenwald and welcoming the incoming CEO of Atlantic Music Group Eliot Grange while providing more details on how WMG's recently announced global structure will work.
“We're making changes from a position of strength, and I'm happy to say we're firing on all cylinders in new releases, catalog, distribution and publishing,” said Kyncl. Read more about his comments here.
Strong growth in streamer subscriptions
Total streaming revenue was up 5% for WMG this quarter, with recorded music streaming revenue up 8.7% — reflecting a 7% increase in subscription revenue. That was welcome news for investors: Warner stock jumped about 6% earlier in Wednesday's session, before settling for gains of nearly 2%.
On the call, Kyncl was asked about the sources of WMG's streaming subscription revenue, after other music companies reported less growth in that metric this quarter. That included Universal Music Group (UMG), which saw its share price drop 24% after it reported total streaming revenue fell 4.2%, UMG's top digital strategist Boyd Muir to suggest that streamers like Apple Music and Amazon Music are struggling to add new subscribers.
Kyncl said WMG's revenue mix has remained largely the same and warned the financial community to resist viewing Spotify as a proxy for the music industry. “It's much more diverse [than Spotify]Kyncl said.
WMG's subscription streaming revenue is forecast to grow in the fourth quarter, with that growth remaining “consistent across a handful of our top DSPs, certainly driven by subscriber growth and … price,” said the CFO Brian Castellani.
In a nod to the music industry's handling of Spotify's bundling practice, Kyncl said in opening remarks that labels and DSPs are not “adversaries playing a zero-sum game.”
“That's just not the case,” Kyncl said. “We are actively engaging with our partners on ways to promote growth for all of us. Streaming dynamics remain healthy, with plenty of scope for subscriber growth in both established and emerging markets across multiple partners. Also, pricing optimization and improvements to royalty models will provide continued opportunities for additional growth.”
Celebrating Brat summer and the Benson blessing
From the 'pop sensation of summer' — Kyncl's description of Charli XCX's album Brat — to Benson Boone, whom Kyncl called the “star of the year,” the former YouTube executive seemed pleased with Warner's recent and upcoming music releases.
“So far in 2024, WMG has more new artists debuting in the Spotify Global Top 10 than any other music label,” Kyncl said, highlighting “homegrown hits” such as Benson Boone, Teddy Swims and Artemas, the Anglo-Cypriot singer and songwriter. in 10K projects.
Directory of Streaming 'halo effect“
When Twenty One Pilots released their last album, Clancythe band's entire body of work benefited, with streams more than doubling in the first week after the album's release. That's “the beauty of streaming,” Kyncl said on the call. “Recently released hits have a halo effect on the rest of the artists' catalog.”
While loyal fans can increase streams of an artist's catalog after the release of a new hit, Kyncl added that WMG can amplify and expand that halo effect, turning hits into an “evergreen, deep catalog.”
