Shares in Warner Music Group rose about 3% on Wednesday (August 7) as investors gave an upbeat third-quarter earnings report that showed streaming revenue continued to grow for the third-largest music company.
In a call discussing the company's earnings, Warner Music Group (WMG) CEO. Robert Kyncl answered questions and shared his perspective on Spotify's bundle controversy. discussed what WMG is doing to get more mileage out of its catalog. and shared a broad update on the company's previously announced $200 million cost-savings/reinvestment plan — while staying mum on the latest executive shakeup that's been reverberating through the music industry since last week.
See below three important elements from the invitation.
Grouping is not inherently bad
Total streaming revenue rose 5% for Warner this quarter, with recorded music streaming revenue up 8.7% — reflecting a 7% increase in subscription revenue. While this was welcome news for investors, the issue of Spotify's controversial decision to bundle music and audiobooks — which allowed them to qualify for the lower mechanical royalty rate reserved for bundles under the Copyright Board's Phonorecords IV agreement (CRB) — not reported. But in his opening remarks and later during a Q&A session with analysts, Kyncl said the company derives its streaming profits from a variety of partners and appeared to limit discussion of the controversy that has erupted over his policy bundling.
“I know that investor attention has recently focused on the dynamic between labels and DSPs, with some speculating that we are rivals 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.”
Kyncl went on to note that bundling, which could lead to lower payouts to songwriters, has been used in other industries, such as television, to expand the market. “The job of wholesalers like music companies is to ensure that the sanctity of our prices is consistent with each other. You can expect us to follow that strategy,” Kyncl said. “As far as the CRB is concerned, I don't see it as something that will remain in the long term.”
Radio silence on executive restructuring
WMG executives did not immediately discuss the internal restructuring plans made public last week, which brought longtime Atlantic Records and Atlantic Music Group co-head chairman/CEO Julie Greenwald to announce his resignation on Tuesday (August 6). During his opening remarks, Kyncl highlighted the “commercially and creatively … successful” partnership between WMG and 10K Projects — whose CEO/founder Eliot Grange was tapped to succeed Greenwald — scoring Anglo-Cypriot singer-songwriter Artemas' single “I Like The Way You Kiss Me,” which reached No. 1 Advertising sign's Global Excl. American map in April.
However, Kyncl shared details of a restructuring plan it mentioned in WMG's latest earnings call, which included the sale of its entertainment sites Uproxx and HipHopDX — with an overall goal of increasing investment in music, technology and new skill sets and saving $200 million by the end of fiscal year 2025.
“The majority of the changes have already been implemented,” Kyncl said. “We are laying a strong foundation to accelerate our progress and deliver greater value over time. We made improvements to our royalty systems and tools used to identify unclaimed revenue, overhauled our global supply chain, unlocking our ability to scale third-party distribution activities, and transformed our proprietary tools that identify fan trends by creating new ways communication with super fans.”
Directory optimization is a top priority
One area where Kyncl is investing in technology is through a project it says aims to increase “catalog performance … across all our DSPs.”
Talking about recent spikes in streaming for artists in Warner's “deep” catalog – such as Joni Mitchell and Tracy Chapman – as well as the “shallow” catalog such as Ed Sheeran, Kyncl said that creating continued digital success stories for them actions are top priority.
“We have a project on this in our technology and business teams to move down the entire catalog and make sure it's properly optimized for streaming and on every major DSP,” he said on the call. “All of this reinforces the marketing campaigns against the catalog that we've done in the past and continue to do, and we're putting more and more focus on the front line in the catalog.”
