Warner Music Group (WMG) achieved a small year-over-year (YoY) revenue improvement in its second quarter with Robert Kyncl at the helm, as modest growth on the publishing side managed to offset another decline in recorded income.
The Big Three record label posted its Q1 2023 financials (covering the second quarter of the company’s 2023 fiscal year) this morning. According to the analysis, Warner Music Group generated nearly $1.40 billion during this year’s initial three months, up approximately two percent from the same period in 2022 but down from around $1.49 billion in Q4.
Behind the newer of the totals, WMG pointed to $1.14 billion in income from recorded music (down slightly YoY and about $100 million quarterly) as well as $257 million from publishing (up 12 percent YoY and $7 million quarterly). In explaining the dips, execs cited a comparatively barren Q1 release schedule and emphasized the figures’ relative growth in constant currency.
“I promised I would be direct with you,” WMG CEO Robert Kyncl said during his company’s earnings call, “so I’ll simply say that while our results in music publishing were best in class, we underperformed in recorded music. There’s plenty of room for improvement, and we’re addressing both company-specific and industry-wide issues.”
In keeping with a small YoY boost in overall digital revenue for Q1 2023 (and a two percent dip during the six months ending on March 31st), recorded music’s own digital income fell to $796 million (down $8 million YoY) on the quarter, the breakdown shows.
Rounding out the recorded side, WMG identified $118 million from physical sales like vinyl and CDs (down $4 million YoY and $15 million QoQ), $131 million from artist services (down 7.09 percent YoY and $75 million quarterly), and $98 million from licensing (up 22.5 percent YoY and essentially flat quarterly).
Additionally, recorded music operating income fell 20 percent YoY to $151 million and OIBDA declined by 19 percent YoY to $203 million, per the resource. Bearing in mind the figures, Kyncl expressed support for streaming price increases and signaled that Warner Music, like Universal Music Group, is working with platforms to develop “different streaming models.”
“Recent price increases have been successful and are a move in the right direction,” said the former YouTube chief business officer, “but they should be just the first step. Those subscription services which have raised prices have done the fiscally prudent thing for themselves, their shareholders, and the creative community. There is no sign that they’re seeing elevated churn.
“At the same time, WMG has started to experiment with different streaming models. I cannot name all these services, as the deal terms are confidential. But this is just the beginning, and we will continue to collaborate with our partners on new paradigms,” continued Kyncl, who anticipates that his company will starting next fiscal year save close to $50 million annually (and $20 million this FY) from the layoffs it announced in March.
Transitioning to Warner Chappell’s operations, publishing revenue is said to have climbed 12 percent YoY to $257 million on the quarter, as mentioned, as WMG disclosed double-digit YoY hikes in performance (an even 25 percent), digital (almost 15 percent), operating income (a 37 percent improvement to $52 million), and OIBDA (a 23 percent jump to $75 million).
Elsewhere in WMG’s Q1 2023 earnings report and call, Kyncl struck a mostly optimistic tone when discussing the far-reaching effects of artificial intelligence (“with the proper expertise, it will be a powerful tool for the music industry”). The 53-year-old also underscored the perceived significance of the “unprecedented” proprietary technology that WMG is now developing.
“The music part of [the] company is embracing it [in-house technology] in the most welcoming sense,” relayed Kyncl. “Because everyone sees what a force multiplier this can be on all of our activities that we do, developing artists and marketing artists and songwriters. It’s an exciting journey to be part of. And I can’t underscore enough how unprecedented this is. But obviously, we will have to prove it through our products that we shape and our delivery.”
At the time of this writing, Warner Music stock (NASDAQ: WMG), a substantial portion of which belongs to Vanguard, was down about 11 percent from Monday’s close at $25.32 per share.