Warner Music Revenue Up 6.3%, but COVID-19 Obliterating Concert Business
"Robust" digital revenue in the recorded music and music publishing segments drove Warner Music's fiscal Q1 revenue up 6.3% year on year to $1.3 billion. They were offset by COVID-19-related declines in physical recorded music, artist services, expanded-rights and performance revenue, the company reported.
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Streaming, the company’s largest and fastest-growing source of revenue, benefited from exchange rates, strong releases and direct-to-consumer merchandise revenue, offset by COVID-19-related business disruption and the continued decline in physical revenue due to the transition to streaming, it said. Digital revenue grew 17% in the quarter ended Dec. 31, for 62% of total revenue, up from 56%.
Warner is taking advantage of livestreaming to promote established and emerging artists via digital partners that are operating successfully during the pandemic, said CEO Steve Cooper on an investor call Monday. It continues to roll forward plans for live activities and promotional touring until live events return, he said.
Emerging talent relies on the opening of smaller venues, and while the company hopes that's going to happen sooner than later, scheduling has to be done carefully “so that our artists don't get lost in a traffic jam,” said Cooper. But people’s habits are changing, too, he said. The company is addressing those changes with livestreaming and establishing a position in the "interactive world's heat,” he said, citing Fortnite and Roblox. Cooper also sees discovery opportunities emerging from podcasts, where listeners who hear music they like on a Glee podcast, for example, would seek out the music on a streaming service. The company is seeking other ways to "capitalize" on opportunities during what has been "for the planet, broadly speaking, a horrendous situation,” he said.
On the outlook for subscription music streaming post-COVID-19, Chief Financial Officer Eric Levin said, “The environment is growing solidly now,” with opportunities to grow in developed and emerging markets. Developed markets are in “relatively early innings,” he said, with “ample room for subscriber growth.” Some platforms, such as Spotify, are experimenting with price increases, and Warner sees “a strong opportunity for that to gain traction.”
Cooper referred to “an enormous gap between the monetization of eyeballs and the monetization of ears.” He sees the gap narrowing with increasing adoption of premium features, such as Amazon Music HD and higher subscription prices. “Ultimately, we think that all of the services over time will increase prices,” and “we encourage them to do this,” he said. “When we think about the tens of millions of tracks that people get for a few dollars a month, our expectations every day grow that the services will begin to raise prices for functionality and features.”