Warner Music Group generated $92 million from ’emerging platforms’ in calendar third quarter – and other takeaways from Steve Cooper’s latest earnings call with WMG

Warner Music GroupTuesday’s (November 22) earnings call ended on a bullish note – and it’s easy to see why.

WMG posted revenue of $1.5 billion for the three months until the end of September (until 16% year over year at constant exchange rates), with adjusted EBITDA also up by 16% Annual.

As a result, WMG’s share price soared 15% yesterday as Bank Of America upgraded the company’s shares.

Fittingly, this glowing quarterly earnings announcement was the latest in Steve Cooperhis 11-year tenure as chief executive of WMG; Cooper will be replaced in the role in the New Year by Youtubecommercial director of , Robert Kyncyl.

Cooper praised Kyncl during WMG’s earnings call on Tuesday, calling it “a trailblazer in the creator economy, whose mastery of technology will allow us to unlock new opportunities for our business, our artists and our songwriters”.

Cooper added of his 11 years as CEO of Warner: “Honestly, it has been an enormous amount of fun, incredibly interesting and one of the greatest experiences of my professional life.

“I am truly honored to have been part of Warner Music Group’s incredible journey.”

“I am truly honored to have been part of Warner Music Group’s incredible journey.”

Steve Cooper, WMG

Cooper’s parting remarks weren’t the only interesting revelations from Warner’s Q3 (fiscal Q4) calendar earnings call.

There were, of course, the raw numbers to digest: WMG’s recorded music revenue was up 13.1% year over year at constant exchange rates for the quarter, with recorded music diffusion rising income 4.7% over one year; music publishing revenue increased 32.3% over one year.

Yet perhaps the most enlightening news about Warner’s third-quarter results came from Cooper himself — and WMG’s chief financial officer, Eric Levin — when they were put in the hot seat by analysts.

MBW digs deeper into a particularly important data point Cooper discussed on the call this way.

But a handful of other things also stood out…


1. “Emerging platforms” now generates around $92 million in revenue per quarter for WMG

Warner Music Group categorizes revenue from a bundle of social, gaming and video streaming platforms – Facebook/instagramTikTok, Snapchat and Roblox among them – as “alternative” or “emerging” platforms.

You may recall that in September 2021, Steve Cooper noted that Warner Music Group generated around $273 million annually from these platforms (on a regular basis) for recorded music and music publishing combined.

A year later, this figure has rebounded considerably – with an increase of approximately +$100 million a year from now.

“Including our recent deal with Meta, our annualized revenue from [’emerging platforms’] hit $370 million this quarter.

Steve Cooper, WMG

Cooper confirmed on Tuesday: “Including our recent agreement with Metaour annualized revenue of [’emerging platforms’] achieved $370 million this trimester.”

It’s “annualized” because Cooper extrapolates over the next 12 months. This extrapolation suggests that Warner generated approximately $92.5 million emerging platforms in the quarter to the end of September this year.

Cooper told analysts on Tuesday that “the emerging market income growth curve [platforms] continues to outpace more established formats.”

“These new platforms are all heavily reliant on music,” he added. “And as engagement continues to grow, we expect monetization to follow.”

(Also note: On Warner’s previous quarterly earnings conference call in August (covering the Q2/Q3 fiscal calendar), WMG Chief Financial Officer Eric Levin said that “enterprise-wide streaming revenue from emerging platforms was… $345 million on an annualized basis. This figure has therefore increased by approximately $25 million in the Q3 calendar.)

2. Warner’s third calendar quarter streaming revenue was boosted by Meta

Warner Music Group’s recorded music streaming revenue has been a tough thing to report lately, all because of a deal the company struck with a certain licensing partner in the summer of 2021.

This deal, with an anonymous digital partner, essentially saw Warner agree to a less favorable rate than it was used to being paid by said platform.

For this reason, Warner’s recorded music streaming numbers in the four quarters to the end of September 2022 are down year-over-year.

Example: In the Q3 calendar, WMG published $774 million Recorded music streaming revenue up 4.5% per year at constant currency.

Yet, if you omit the impact of this “new agreement with one of the [our] digital partners” – as Warner puts it – the company says its recorded music streaming revenue would have soared 10.5% year over year in the Q3 2022 calendar.

Warner has not confirmed who this streaming partner is, but sources tell MBW that he is not Spotify.

“WMG’s quarterly streaming revenue increased 5% [in calendar Q3]reflecting the continued growth of subscription streaming and a recent deal with Meta… partially offset by the market-related slowdown in ad-supported revenue.

Steve Cooper, WMG

Regardless, here’s something we do know for sure: Warner’s $774 million in recorded music streaming revenue in the three months to September received a large monetary boost of Metaparent company of Facebook.

This large increase probably took the form of an advance payment from Meta in collaboration with Warner’s new license agreement with the company, which will see ad revenue on Facebook shared with WMG. (Universal Music Group announced a similar deal with Meta last quarter.)

Eric Levin confirmed on Tuesday that WMG’s quarterly streaming numbers in the third calendar quarter were boosted by “the benefit of emerging streaming platform deal renewals.”

Who were these renewals with? Steve Cooper dropped the big name.

“[WMG’s recorded music] streaming revenue increased by 5% [in calendar Q3]”said Cooper,” reflecting the continued growth of subscription streaming and a recent deal with Meta [which] partially offset by the market-related slowdown in advertising-supported revenue.

Credit: QuiteSimplyStock/Shutterstock

3. WMG ad-supported streaming revenue was down 5%-10% year-over-year in the third calendar quarter

It was one of the few negatives in WMG’s quarterly results – and it’s something the wider music industry needs to sit up and pay attention to.

We’ve known for some time that ad-supported streaming revenue growth would likely slow across major music companies in the second half of 2022, due to the macroeconomic impact of a recession on general B2C digital ad spend.

But in Warner Music Group’s third calendar quarter, that deceleration turned into a downturn.

Chief Financial Officer Eric Levin revealed on Tuesday that WMG’s ad-supported streaming revenue in the quarter came under “increasing pressure and declined by a high number” (i.e. between 5% and 10% year over year).

“When macro environments get tough, one of the first things we’ve seen consistently negatively impacted is the advertising medium. We saw it when COVID hit in 2020, and we’re seeing it now.

Eric Levin, WMG

Levin clarified that WMG did not “include revenues from emerging streaming platforms” in this calculation. In other words, we’re talking ad-supported revenue, like Spotify and YouTube’s “free” tiers…but not TikTok and Meta.

(This might explain why Universal Music Group was able to post a 5.2% per year increase in non-subscription streaming revenue in the third calendar quarter.)

A bit of background: This single-digit decline in Warner’s ad-supported streaming revenue in the quarter happened in the same three months that YouTube saw ad revenue plummet. 1.9% per year at $7.07 billion.

Levin noted that “the publicity medium has been more difficult [than subscription] in the short term” and acknowledged that “the ad-supported market is in decline”.

He added: “Even if the consumption of products [has gone] up, monetization [via ads] decreased in the short term. When macro environments get tough, one of the first things we’ve seen consistently negatively affected is the ad medium. We saw it when COVID hit in 2020, and we’re seeing it now.

He urged analysts to remember, however, that “before the macroeconomic environment was so challenging, ad-supported [revenues] would grow by double digits fairly consistently with subscriptions.”

Levin added, “As the macroeconomic environment starts to improve and economies start to improve, we would expect… [streaming revenues] bounce back strongly and return to growth.The music industry around the world

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