Streaming pushes WMG to strongest growth in eight years

The streaming phenomenon has helped Warner Music Group’s strongest growth in eight years while posting a profit.

Total revenue for the third largest record company in the world grew by 9.4% and was up 13.1% in constant currency for the full year ending on September 30. It grew to US$3.2 billion (A$4.29 billion) for its full fiscal year, up from $2.96 billion.

Compared to an $88 million ($118.1 million) loss in 2015, Warner were able to make a profit of $30 million ($40.2 million).

Digital revenue rose by 21% to $1.5 billion ($2 billion) in the 12 months to September 30. During 2016, Warner Music was the first of the three majors to announce that streaming has become its largest revenue stream – surpassing physical sales and downloads.

"We’ve had another excellent year, in which we posted strong financial results and outperformed the industry," said its CEO, Steve Cooper.

He added: "This fiscal year marked our highest total revenue in eight years and our highest OIBDA in a decade. We’re creating great momentum by investing in a flow of fantastic new music, expanding our presence around the globe and embracing new business models early.

“Given our extraordinary roster of recording artists and songwriters and the strength of our operators around the world, we’re excited by the possibilities in 2017 and beyond.”

The bottom line was helped with huge sales from Ed Sheeran, Coldplay and Bruno Mars and a lucrative back catalogue that includes Prince and Fleetwood Mac.

The 2017 financial release has started strongly with releases from Green Day and Bruno Mars, with further releases coming from Michael Bublé, Clean Bandit, Robin Shulz, Dua Lipa and Charli XCX.

Cooper said that the $1 billion ($1.3 billion) spent on A&R in this fiscal year was paying off, with greater diversity and emergence of newer acts. There was less reliance on major acts: today the Top 10 sellers only account for 8% of revenue, while the number stood at 12% in 2013.

In a strong fourth quarter alone, revenue grew 3%, which was 12.1% above the year’s average, to $841 million ($1.1 billion). In this period, digital grew 12.1% (24.6% in constant currency) representing 48.8% of total revenue, compared to 44.4% in the previous quarter.

The recorded music operation posted $2.736 billion ($3.6 billion) in revenue, a 9% growth over the prior year’s total of $2.5 billion ($3.3 billion). Of this, digital, which includes streaming, accounted for $1.364 billion ($1.8 billion), nearly 50% of the total and a rise of 19%.

Physical was responsible for $726 million ($974.7 million) or 26.5%. Artist services and expanded rights made up $368 million ($520.9 million), or 13.5%. Licensing and other income streams accounted for $278 million ($373.2 million), or 10.2%.

Publishing revenue was up 8.7% to $524 million($703.5 million) from $482 million ($647.1 million). Digital income was 42.4% to $141 million ($189.3 million) from $99 million ($132.9 million). Performance revenue grew 4.8% to $193 million ($259.1 million), synchronization up 6.8% to $110 million ($147.6 million), other revenues steady at $10 million ($13.4 million) and mechanical fell 18.6% to $70 million ($93.8 million) from $86 million ($115.4 million).

Due to the Happy Birthday lawsuit where Warner paid $14 million ($18.7 million) and lost the song to public domain, OIBDA (operating income before interest, taxes, depreciation and amortisation) was down from $146 million ($196 million) to $138 million ($185.2 million).

With streaming now its largest source of income, Cooper said that Warner Music is “focused on finding ways to turbocharge mainstream adoption and improve monetisation.”

It’s generating more playlisting activity by bringing in skilled staffers and acquisitions as X5. It is offering consumers more choice by supporting tiered subscription offers from iHeartMusic, Pandora and Amazon.

Thirdly, “We are a very active part of the music community’s movement to close the value gap for user-uploaded services.”