Warner Music Group generated $92m from ’emerging platforms’ in calendar Q3 – and other takeaways from Steve Cooper’s last earnings call with WMG

Warner Music CorporationTuesday’s earnings call (November 22) ended on an upbeat note – and it’s easy to see why.

WMG posted revenue of the 1.5 billion USD in the three months to the end of September (increase 16% annually in constant currency), with adjusted EBITDA also increasing 16% annual.

As a result, WMG stock price skyrocketed 15% yesterday, when Bank Of America upgraded the company’s stock.

Fittingly, this brilliant quarterly earnings announcement is the last in Steve Cooperhis 11-year tenure as CEO of WMG; Cooper will succeed in the role in New Year YouTubeSales Director of Robert Kyncyl.

Cooper praised Kyncl during WMG’s earnings call on Tuesday, calling him “a pioneer of the creative economy whose mastery of technology will allow us to unlock new opportunities for innovation.” new opportunities for our company, artists and musicians.”

Cooper added of 11 years running as Warner’s CEO: “Honestly, it’s been a tremendous amount of fun, it’s been incredibly fun, and it’s one of the best experiences of my life. My work.

“I’m truly honored to be a small part of Warner Music Group’s incredible journey.”

“I’m truly honored to be a small part of Warner Music Group’s incredible journey.”

Steve Cooper, WMG

Cooper’s valuable remarks aren’t the only interesting revelation from Warner’s scheduled Q3 (financial quarter) earnings call.

Of course, there are raw numbers to mull over: WMG’s recorded music sales have grown 13.1% annually with currency unchanged for the quarter, with recorded music streaming increase revenue 4.7% annually; music publishing revenue increased 32.3% annually.

However, perhaps the brightest news that has slipped out of Warner’s scheduled Q3 earnings report has come from Cooper himself – and WMG CFO Eric Levin – as they were targeted by analysts. .

MBW dug into a particularly important data point discussed by Cooper during the call come here.

But some other things stand out as well…

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1. ‘Emerging Platforms’ currently generating approximately $92 million in revenue per quarter for WMG

Warner Music Group categorizes revenue from a range of social, game and video streaming platforms – Facebook/InstagramTikTok, Snapchat and Roblox among them – are “alternative” or “emerging” platforms.

You may recall that in September 2021, Steve Cooper shown that Warner Music Group has created around 273 million USD annually from these platforms (on a run rate basis) on recorded music and published music mixes.

A year later, that number has increased dramatically – with an increase of about +100 million USD one year since then.

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

Steve Cooper, WMG

Cooper confirmed on Tuesday: “Including recent deal with MetaOur annual revenue from [’emerging platforms’] obtain $370 million this square.”

It’s “annual” because Cooper is extrapolating over the next 12 months. That extrapolation shows that Warner has created around 92.5 million USD from emerging platforms in the quarter to the end of September this year.

Cooper told analysts on Tuesday that “emerging economies’ revenue growth curve [platforms] continues to outgrow older formats.”

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

(Also worth noting: During Warner’s previous quarterly earnings call in August (including calendar Q2 / fiscal Q3)), WMG CFO Eric Levin speak that “company-wide streaming revenue from emerging platforms is… 345 million USD on an annual basis”. As a result, this number has increased to about 25 million USD in the third quarter of the calendar year.)

2. Warner’s streaming revenue in the third quarter of the calendar year increased strongly thanks to Meta

Warner Music Group’s recorded music streaming revenue has been hard to report lately, all due to an agreement the company reached with a certain licensing partner in the summer of 2021. .

That deal, with an unnamed digital partner, essentially saw Warner agree to a less favorable rate than it was once paid by the said platform.

As a result, Warner’s recorded music streaming numbers for the four quarters through September 2022 are down year-over-year.

Example: In the Q3 calendar, WMG posted 774 million USD in recorded music streaming revenue, up 4.5% annually in fixed currency.

However, if you ignore the impact of this “new agreement with one of the [our] digital partners” – as Warner said – the company says its recorded music streaming revenue will increase 10.5% annually in the third quarter of 2022 calendar year.

Warner hasn’t confirmed who this streaming partner is, but sources told MBW that Not Spotify.

“WMG quarterly streaming revenue up 5% [in calendar Q3]reflects continued growth in subscription streaming, and the recent agreement with Meta… partially offset a market-related decline in ad-supported revenue.”

Steve Cooper, WMG

Regardless, this is something we do know for sure: Warner’s 774 million USD in music streaming revenue recorded for the three months to September received a hefty sum from metaFacebook’s parent company.

That big boost can be in the form of an advance payment from Meta combined with Warner’s New License Agreement with the company, will see Facebook ad revenue shared with WMG. (Popular music group announced a similar deal with Meta last quarter.)

Eric Levin confirmed on Tuesday that WMG’s quarterly streaming figures for the calendar quarter were boosted by “benefit from the emerging streaming platform’s deal extension.”

Those extensions with whom? Steve Cooper dropped the big name.

“[WMG’s recorded music] streaming revenue up 5% [in calendar Q3],” says Cooper, “reflects continued growth in subscription streaming and a recent deal with Meta [which] partially offset by a market-related slowdown in ad-supported revenue.”

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3. WMG’s ad-supported streaming revenue fell 5% to 10% year-on-year in the third calendar quarter

This is one of the few negatives in WMG’s quarterly earnings – and it’s one that the broader music business has to pay attention to.

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

But in the calendar third quarter at Warner Music Group, that deceleration turned into a recession.

Chief Financial Officer Eric Levin revealed on Tuesday that WMG’s ad-supported streaming revenue for the quarter saw “increasing pressure and a drop in single-digit highs” (ie. Between 5% and 10% annually).

“When the macro environment gets tough, one of the first things that we see always being negatively impacted is ad support. We saw that when COVID hit in 2020 and we are seeing it now.”

Eric Levin, WMG

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

(This may explain why Universal Music Group can post one 5.2% annually increased unsubscribed streaming revenue in the calendar quarter.)

Some context: this single-digit drop in Warner’s ad-supported streaming revenue for the quarter comes in the same three months that YouTube saw its ad revenue drop 1.9% annually arrive 7.07 billion USD.

Levin notes that “ad support has gotten harder.” [than subscription] short term” and acknowledged that “the ad-supported market is on the decline”.

He added: “Although consuming products [has gone] up, make money [via ads] went down in the short term. When the macro environment gets tough, one of the first things that we see always being negatively impacted is ad support. We saw that when COVID hit in 2020 and we are seeing it now.”

However, he urges analysts to remember that “before the challenging macro environment, supported by advertising, [revenues] will grow at double-digit rates pretty consistent with subscriptions.”

Levin added: “As the macro environment begins to improve and economies begin to improve, we expect… to be supported by advertising. [streaming revenues] for a strong recovery and return to growth.”Global Music Business


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