Warner Music Tumbles After Results Show Streaming Slows
(Bloomberg) — Warner Music Group Corp. stock dropped the most in 18 months after the company reported disappointing fourth-quarter results and said streaming growth stalled.
The record label reported net income of $48 million in the three months ended Sept. 30, down 69% from a year earlier. Revenue rose 2.8% to $1.63 billion, beating the $1.59 billion expected by analysts.
Recorded music streaming revenue increased 2.1% in the quarter, a significant slowdown from the 9.6% growth in the same period a year earlier and softer than some analysts expected.
The shares fell as much as 11% to $29.96 in New York after the results were released but recovered much of those losses later in the day. They were down 5.9% at 2:53 p.m.
Warner Music and its larger rival Universal Music Group NV have both been grappling with investors concerns over a slowdown in streaming growth.
UMG stock got walloped in July after second-quarter results showed a deceleration in subscription revenue, which it attributed to a slowdown in subscriber growth at some platforms and as Meta Platforms Inc. stopped licensing premium music videos for Facebook. Apple Inc. and Amazon.com Inc. also aren’t signing up a lot of new customers. Investors have known the streaming boom has been over for a while, but seeing the effects in the numbers has spooked Wall Street.
Warner Music also said the end of its music distribution deal with BMG would weigh on financial results next year. In September, BMG, a unit of Germany’s Bertelsmann, said it would handle its digital distribution in-house, ending its nearly 8-year deal with WMG.
In the first quarter, “streaming growth will be impacted by the BMG digital distribution roll-off, the digital license renewal in the prior year, and the lapping of Spotify price increases,” Bryan Castellani, chief financial officer of Warner Music Group, said on a call with analysts to discuss results. “Our digital distribution relationship with BMG that was planned to roll off by the end of fiscal ‘24 will now continue into fiscal ‘25.” That will affect revenue in the first quarter by about $16 million, he said.
Recorded Music revenue was up 3.6% to $1.34 billion, in the fourth quarter, however the end of the distribution agreement with BMG resulted in $25 million less revenue compared with a year earlier, the company said. A renewal with one of the company’s digital partners also resulted in a $4 million “unfavorable impact” on recorded music streaming revenue.
Music publishing revenue fell 1% to $295 million, missing analysts expectations of $313 million.
(Updates with streaming revenue in third paragraph.)
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