Thanks to Streaming, WMG Posts $4 Billion in Revenue for 2018

Streaming music revenue continues to increase Warner Music Group’s bottom line.

Warner Music Group (WMG) has published its results for the fiscal fourth quarter and full year ended September 30th, 2018.

For the first time in its fifteen-year history, the major label’s revenue has exceeded $4 billion.  In addition, WMG has ended the quarter and year with over $500 million in cash, despite significant spending in A&R, marketing, M&A, and dividends.

Eric Levin, the label’s Executive Vice President and CFO, called the figure “evidence of the underlying strength of our business.”

For the fourth quarter of 2018, revenue grew 13.3%, or 14.8% in constant currency.

Revenue grew in all regions.  A decline in recorded music physical revenue partially offset growth in recorded music digital, licensing and artist services, and expanded-rights revenue.  But the label experienced growth in music publishing digital, performance, synchronization, and mechanical revenues.

Digital revenue grew 24.1%, or 23.1% in constant currency.  This figure represented 57.3% of WMG’s total revenue, up 3.9% over the same period last year.

Operating income grew to $16 million, up from $1 million in operating loss over last year.  OIBDA grew 20% to $72 million, up from $60 million over the same period last year.  OIBDA margin increased 0.4% to 6.9%.

WMG still posted a net loss of $13 million, down significantly over $38 million in the same period last year.

Adjusted net income reached $10 million, up from a net loss of $39 million in the prior-year quarter.

For the full year ended September 30th, 2019, total revenue increased 12%, or 9.2% in constant currency.

Domestic revenue rose 10.5%, and international revenue rose 12.7%, or 7.8% in constant currency.  Revenue grew in all regions.  Digital revenue grew 20.4%, or 18.5% in constant currency, led primarily by streaming.  This figure represented 56.2% of WMG’s total full-year revenue, compared to 52.3% last year.

Operating income fell $217 million to $222 million last year.  Operating margin also fell 6.2%.  Adjusted operating income rose 0.7% to 7.3% from 6.6% last year.  OIBDA totaled $478 million, up 1.1% from $473 million last year.  OIBDA margin dipped 1.3% to 11.9% from 13.2%.

Net income totaled $312 million, up from $149 million last year.  Adjusted net income totaled $388 million, up from $162 million last year.  This number reflects higher other income related to the net gain on the sale of Spotify shares, among other factors.

Net debt reached $2.31 billion, up from $2.16 billion last year.  WMG attributed this rise to “a difference in year-end cash balances.”

Recorded music revenue jumped 12.5%, or 13.9%, in the fourth quarter of 2018.

Recorded music operating income grew to $31 million, up 121.4% from $14 million in the same period last year.  OIBDA increased 20.4% to $65 million from $54 million in the prior-year quarter.  OIBDA margin increased 0.5% to 7.5%, driven primarily by revenue growth and lower variable compensation expense offset by higher A&R expense.  Adjusted OIBDA totaled $84 million, up from $50 million year-over-year.

Recorded music revenue rose 11.3%, or 8.5% in constant currency, for the full fiscal year ended September 30th, 2018.

Recorded music digital revenue grew 19.3%, or 17.3% in constant currency.  This figure represented 60.1% of WMG’s total recorded music revenue, up from 56% last year.  Domestic recorded music digital revenue reached $1.04 billion, or 71% of total domestic recorded music revenue, up from 67.2% last year.

Major sellers included Ed Sheeran, The Greatest Showman Soundtrack, Cardi B, Bruno Mars, and Dua Lipa.

Recorded music operating income reached $307 million, up from $283 million last year.  Operating margin fell 0.3% to 9.1%.  Recorded music OIBDA increased 6.4% to $480 million.  OIBDA margin declined 0.6% to 14.3%.  Recorded music adjusted OIBDA rose 18.6% to $543 million.  Recorded music adjusted OIBDA margin increased 1% to 16.2% due to revenue growth and revenue mix.

For the fourth quarter of 2018, music publishing revenue rose 15.7%, or 18% in constant currency.

WMG attributed the increase to growth in all segments, including the ongoing shift to streaming in digital, timing of distributions in performance, higher licensing revenue in synchronization, and the timing of mechanical distributions.

Music publishing operating income totaled $39 million, up from $36 million over the same period last year.  Operating margin decreased 1.5% to 22% due to revenue mix and higher A&R costs.  Music publishing OIBDA increased by $3 million, or 5.5% to $5.8 million.  In addition, music publishing OIBDA margin declined 3.1% to 32.8% from 35.9%.

Music publishing revenue rose 14.2%, or 11.8% in constant currency, with growth in all segments for the full year ended September 30th, 2018.

Music publishing digital revenue rose 26.7%, or 25.4% in constant currency, reflecting the ongoing shift to streaming.  This figure represented 36.3% of total music publishing revenue, up from 32.7% last year.

Music publishing operating income reached $84 million, up 3.7% from $81 million last year.  Operating margin fell 12.9%, down 1.3% from 14.2% last year due to revenue mix and higher A&R costs.

Music publishing OIBDA rose 4.6% to $159 million.  Music publishing OIBDA margin decreased 2.3% to 24.3%.

You can view the full results here.