Warner Music Group enjoyed its best-ever quarter in calendar Q4, with recorded music streaming revenues up 14% YoY

Warner Music Group has published its financial results for the final three months of calendar 2023.

According to the company’s fiscal Q1 (calendar Q4) results for the three months ending December 31, 2023, WMG saw its quarterly global revenues reach USD $1.748 billion.

A bit of housekeeping before we dig into the numbers: WMG noted that the quarter included $68 million from a licensing agreement extension (‘Licensing Extension) for an artist’s catalog in Recorded Music licensing revenue, plus the impact of the termination of the distribution agreement with BMG in Recorded Music digital revenue (‘The BMG Termination’), which resulted in $13 million less revenue compared to the prior-year quarter.

Additionally, according to WMG, the quarter included $27 million of incremental revenue from a renewal with one of the company’s digital partners (‘The Digital License Renewal’) that resulted in upfront revenue recognition in the quarter in Recorded Music streaming revenue.

Excluding the Licensing Extension, the BMG Termination and the Digital License Renewal, total revenue across the company increased by 10.6% YoY on a normalized, constant currency basis.

(Including the Licensing Extension, the BMG Termination and the Digital License Renewal, total revenue was up 15.9% YoY at constant currency).

Commenting on the company’s latest set of results, Robert Kyncl, CEO, Warner Music Group, said: “These results reflect the impact of our chart-topping artists, hit-making songwriters, iconic catalog, and laser focus on execution by all our teams.”

“These results reflect the impact of our chart-topping artists, hit-making songwriters, iconic catalog, and laser focus on execution by all our teams.”

Robert Kyncl, Warner Music Group

He added: “As we deliver our plan to accelerate our growth, we are becoming more efficient, increasing operating leverage, and freeing up more funds to invest in music and tech, which in turn will drive further sustainable growth.”

Recorded Music

WMG generated recorded Music revenues of $1.445 billion in calendar Q4, up 8.7% YoY on a normalized, constant currency basis (excluding the Licensing Extension, the BMG Termination and the Digital License Renewal detailed above).

Warner’s recorded music streaming revenue (including ad-supported and subscription) was up 11.4% YoY on a normalized, constant currency basis (adjusted for the BMG Termination and the Digital License Renewal) to $887 million (see below).

WMG breaks that streaming figure down in its balance sheet to highlight the performance of its subscription streaming and ad-supported streaming revenues, respectively.

Adjusted for the Digital License Renewal and the BMG Termination, revenues from recorded music subscription streaming grew 12% YoY on a normalized, constant currency basis to $644 million (see below).

WMG generated $243 million in ad-supported recorded music streaming revenues in calendar Q4, which was up 10% YoY at constant currency.

Meanwhile, WMG’s recorded music business generated $154 million from physical revenues in calendar Q4, up 13.2% YoY at constant currency. WMG said this performance was “primarily due to strong releases in the US, Japan and the UK”.

Artist services and expanded-rights revenue decreased 3.8% YOY at constant currency to $204 million primarily due “to lower merchandising revenue, partially offset by higher concert promotion revenue in France and Japan” according to WMG.

Elsewhere at the company’s recorded music business, licensing revenues increased 80.8% YOY to $179 million “primarily due to $68 million from the Licensing Extension and the timing of new licensing deals primarily in the US”.

WMG’s top recorded music sellers included Zach Bryan, Ed Sheeran, Bruno Mars, and the Barbie soundtrack album.

Music Publishing

Warner’s global music publishing division – Warner Chappell Music – saw its quarterly revenues increase by 19.7% YoY at constant currency to $304 million (see below).

WMG reported that the increase was driven by growth in digital and performance revenue.

The company’s music publishing streaming revenue increased 30.4% YoY at constant currency to $193 million.

WARNER’S CALENDAR Q4 2023 IN SUMMARY (% IN CONSTANT CURRENCY):

• Warner Music Group’s overall revenues were up 15.9% YoY at constant currency to $1.748 billion in calendar Q4;
• Excluding a Licensing Extension, BMG Termination and the Digital License Renewal detailed in WMG’s earnings release, total revenue was up 10.6% YoY on a normalized, constant currency basis.
• Recorded music revenues were up 8.7% YoY on a normalized, constant currency basis to $1.445 billion;
• Within that figure, recorded music streaming revenues were up 11.4% YoY at constant currency to $887 million;
• Recorded music subscription streaming revenues were up 12% YoY on a normalized, constant currency basis to $644 million.
• Music publishing revenues – at Warner Chappell Music – were up 19.7% YoY at constant currency to $304 million.

WMG: PROFITABILITY IN CALENDAR Q4 2023

• WMG’s net income stood at $193 million versus $124 million in the prior-year quarter.
• Operating income stood at $354 million versus $265 million in the prior-year quarter.
• The firm’s quarterly adjusted OIBDA was $451 million versus $335 million in the prior-year quarter, which was up 33% at constant currency.

“The strength and resilience of our business was highlighted by an acceleration in Recorded Music streaming growth and continued momentum in Music Publishing, which saw its fifth consecutive quarter of increasing revenue growth.”

Bryan Castellani, Warner Music Group

“Our strong Q1 results reflect double-digit revenue and Adjusted OIBDA growth, as well as robust operating cash flow conversion,” said Bryan Castellani, CFO, Warner Music Group.

“The strength and resilience of our business was highlighted by an acceleration in Recorded Music streaming growth and continued momentum in Music Publishing, which saw its fifth consecutive quarter of increasing revenue growth.

“With a healthy and growing music ecosystem as our backdrop, we’re intensifying our focus on the highest-return opportunities while creating efficiencies across our business.”

In a memo sent to staff on Wednesday (February 7), WMG’s CEO, Robert Kyncl, confirmed that his company will be reducing its headcount by approximately 10%, resulting in layoffs for around 600 employees.Music Business Worldwide