Reporting fairly on Warner Music Group‘s fiscal results has been rendered something of a challenge of late by the unusual strength of the US Dollar.
WMG’s CEO Steve Cooper says his business had an “excellent year” in the 12 months to September 30, 2015, and in one regard you can see where he’s coming from.
Warner evaluates its business performance in constant currency terms – a like-for-like metric in which fluctuations in exchange rates year-on-year are artificially discounted.
On that basis, total revenue across the group, which runs both Warner’s recorded music division and publisher Warner/Chappell, increased 6%, or $173m in FY 2015 to $2.966bn.
However, in actual terms – thanks to cash earned abroad being savaged by rates when converted into US dollars – WMG’s total revenues fell 2% in the 12 months.
Net losses for the year hit $88m, a 71% reduction on WMG’s $308 net loss in FY 2014.
The biggest news to come out of Warner’s latest 12 month results, however, was this: 2015 was the first full year in which streaming revenues have out-performed download income. And Warner’s the first major to report such a breakthrough.
Steve Cooper told investors today (December 10) that streaming beat download earnings at WMG by a “significant amount” in the 12 months.
He added: “For fiscal 2015, our streaming revenue grew 34%, with fourth quarter up an impressive 47% – the highest growth rate of any quarter this year. Streaming continues on a trajectory to become our largest revenue source.
“Recent industry data underscores this point. In June, Spotify announced it had 20 million paying subscribers, roughly double where it was in the prior year. In September, RIAA announced that, during the first half of calendar 2015, industry streaming revenue in the U.S. had grown 23%, to $1.03 billion, accounting for a third of U.S. revenue. I should note that those last two stats cover the period before the launch of the Apple Music subscription service.
“While the long-term impact of this launch is still unclear, early signs are encouraging. With services such as Spotify and Deezer joined by the services of giants such as Apple, Google and Amazon, we now have meaningful competition in the subscription streaming business. This is especially positive when you remember that the download space has been dominated by Apple for over a decade.”
WMG’s recorded music revenue increased by $168m, or 7%, to $2.501bn in FY 2015 at constant currency – but was down 1% in actual terms.
Excluding the unfavorable impact of foreign currency exchange rates, Warner’s recorded music operation saw increases in physical revenue of $15 million, digital revenue of $107 million, licensing revenue of $40 million and artist services and expanded-rights revenue of $6 million.
In actual terms, physical revenue decreased by $55 million.
Even accommodating the unfavourable exchange rates, digital revenue increased by $42 million.
Revenue from streaming services grew by $121 million and was partially offset by digital download declines of $64 million.
Licensing (sync) revenue increased by $19 million, or $40 million excluding the unfavorable impact of foreign currency exchange rates, as a result of increased synchronization activity in the year as well as the inclusion of Parlophone Label Group repertoire in broadcast fee income for the first time since the completion of the PLG Acquisition in certain territories.
Artist services and expanded-rights revenue – that’s ‘360’ and label services revenues – decreased by $31 million, or increased by $6 million excluding the unfavorable impact of foreign currency exchange rates, due to the timing of tours from artists such as Ed Sheeran, Bruno Mars and Skrillex.
Over at Warner/Chappell Music Publishing revenues decreased by $35 million, or 7%, to $482 million for the fiscal year ended September 30, 2015 from $517 million for the fiscal year ended September 30, 2014.
Excluding the unfavorable impact of foreign currency exchange rates, Warner/Chappell’s revenue increased by $6 million, or 1%.
Excluding the unfavorable impact of foreign currency exchange rates, Music Publishing revenue increased due to increases in digital revenue of $7 million and synchronization revenue of $6 million, partially offset by decreases in performance revenue of $1 million and mechanical revenue of $6 million.
The increase in digital revenue was primarily due to an increase in streaming services revenue of $12 million partially offset by a decrease in download revenue of $3 million, excluding the unfavorable impact of foreign currency exchange rates.
Synchronization revenue increased primarily due to increased activity and timing of society distributions. The offsetting decrease in performance revenue and mechanical revenue is attributable to an ongoing shift towards digital products in the industry.Music Business Worldwide
