Thursday, August 9, 2012

Warner Music Loss Down Thanks To Digital Sales

Warner Music Group logo image from Bobby Owsinski's Music 3.0 production blog
Warner Music Group's 3rd quarter report is out, and if you look at it closely, it really is a indicator to the trends of the music business today. Here's what we discovered:
  • Warner's loses were $32 million, which were down from $46 million last year at this time. This is considered a positive somehow, which is the crazy world of publicly traded companies for you. It always amazes me when a company gets hammered for having only a 14% increase rather than the predicted 15%, and this is much the same. WMG is still losing money, and even though it lost "only" $32 mil, that's not that great when you factor in that there was actually a $11 million tax benefit figured in.
  • Total revenue decreased about 5% to $654 million, and much of that they attribute to an unfavorable exchange rate. 
  • Recorded music sales slipped 8.4%, and publishing revue also slipped from from $97 to 84 million.
Now for the good news:
  • Digital music revenue climbed 13% to $230 million and represented about 35% of WMG's income.
  • 25% of the digital revenue came from streaming, which amounted to $54 million, or about 8% of total revenue.
  • Domestic revenue was up slightly to $282 million from $276, mostly on the basis of hit records by Jason Mraz, Lincoln Park and B.O.B.
If you want to see exactly how their revenues break down, Digital Music News did a nice graphics below.
Typical major label income split image from Bobby Owsinski's Music 3.0 blog

What does this tell us? Major record labels are sinking, but very slowly as they hold their own, at least for now. Digital music income may be rising, but it's not going to replace the sales of physical product, and streaming music makes the situation even worse, as that doesn't replace the income from digital downloads. Oh, and the most important piece of the puzzle - you still need hits to make money.

If you're from the musical old school, you're probably lamenting the fact that the business model is changing from the way it previously worked. If you're not tied to that paradigm, you're embracing the change, as a new business model will have to replace the old one at some point. None of us know what that that is at the moment, but we're all on the lookout for it. When you find it, let me know, please.
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