Ed Sheeran, Dua Lipa Drive Warner Music Revenue Growth – The Hollywood Reporter

Warner Music Group, home to the likes of Ed Sheeran, Cardi B and Bruno Mars, reported higher fiscal fourth-quarter revenue and net income Tuesday, with its music publishing unit growing revenue 23.9 percent.

The music major said that top sellers in its recorded music unit in the latest period included Sheeran, Jack Harlow, Dua Lipa and Lizzo.

Fiscal fourth-quarter revenue rose 8.8 percent, or 16.0 percent in constant currency terms, to $1.50 billion, driven by the music publishing gain and digital revenue growth of 6.8 percent, or 12.3 percent in constant currency, across recorded music and music publishing.

Net income for the latest quarter ending in September amounted to $150 million, compared with $30 million recorded in the year-ago period, the company said before the stock market opened. Adjusted net income rose from $69 million to $170 million. Quarterly operating income jumped 63 percent from $100 million to $163 million.

Warner Music Group CEO Stephen Cooper, during a morning analyst call, welcomed music subscription services, led by Apple Music and Deezer, raising their monthly subscription rates, despite recessionary pressures in the wider economy.

“Making these announcements in the current economic environment shows that music subscription services offer amazing value to consumers,” Cooper said. He added other music subscription services were also likely to raise their own monthly subscription rates. Spotify is expected to follow Apple Music and increase its own prices in 2023.

Warner Music artists share in the royalties when their music is played on Apple Music, Spotify and other music streaming sites. CFO Eric Levin told analysts consumers will continue to embrace music service subscription services globally. “We think there’s a lot of runway to look forward to,” he added, as developed markets will see continuing growth, and emerging markets will grow even faster, albeit with lower revenue-per-subscriber rates.

At the same time, Levin pointed to ad-supported streaming services like YouTube Music being held back by recessionary pressures, and that growth in that sector would return when the wider economy improved.

CEO Cooper also addressed speculation the streaming music market share of music label giants, including Sony and Universal Music Group, was falling as a host of far smaller music creators increasingly get their product launched online.

“While distribution has been democratized, talent never will be. Genuine talent is rare and difficult to find and discovery is just the beginning. True long term success requires significant resources, including financial investment, global infrastructure, creative expertise and the skills to navigate the changing tech landscape,” Cooper told analysts.

He added big name talent is more likely to remain with major labels to build their careers over the long term. “Over and over again, artists and songwriters not only stay, but grow their relationships with us in this fiercely competitive market,” Cooper insisted.

During the latest financial quarter, operating income before depreciation and amortization (OIBDA), another profitability metric, jumped 37 percent from $179 million to $245 million percent, while adjusted OIBDA rose 22 percent to $265 million, the company said.

Music publishing unit revenue for the latest quarter increased 32.3 percent when assuming constant currencies. “The revenue increase was driven by growth in digital and performance revenue,” Warner Music said. Digital revenue jumped 32.5 percent, or 39.5 percent in constant currency. Music publishing operating income of $36 million compared with $28 million in the prior-year quarter.

Recorded music revenue in the quarter climbed 6.1 percent, or 13.1 percent in constant currency, “due to artist services and expanded-rights revenue growth of 21.4 percent, or 33.3 percent in constant currency, reflecting an increase in merchandising and concert promotion revenue.” Digital revenue grew 2.9 percent, or 8.1 percent in constant currency. Recorded music operating income hit $165 million, up from $129 million in the prior-year quarter.

“Our strong fourth-quarter and full-year results were driven by our talented artists, songwriters and teams, across a wide range of genres, geographies and generations,” outgoing Warner Music Group CEO Stephen Cooper said. “Against the backdrop of a challenging macro environment, we once again proved music’s resilience, with new commercial opportunities emerging all the time. We’re very well positioned for long-term creative success, and continued top and bottom-line growth. We’re excited to have Robert Kyncl joining next year as WMG’s new CEO, as we enter the next dynamic phase of our evolution.”

Kyncl, who will succeed Cooper on Jan. 1, knows Warner Music well, having spent years as the chief business officer of YouTube, one of the label’s biggest partners.

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