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 Group’s earnings call on Tuesday (Nov. 22) ended on an upbeat note — and it’s easy to see why.

WMG posted revenue $1.5 billion for three months till the end of September (above 16% YoY at constant currency), even with adjusted EBITDA 16, Year after year,

As a result, the share price of WMG skyrocketed. 15% Yesterday, as Bank of America upgraded the firm’s stock.

Fittingly, this dazzling quarterly earnings announcement was the last of Steve Cooper’s 11-year tenure as chief executive officer of WMG; Cooper will succeed Robert Kinsill, YouTube’s chief business officer, in the new year.

Cooper heaped praise on Kyncl on WMG’s earnings call on Tuesday, calling it a “pioneer of the creator economy whose grasp of technology will enable us to unlock new opportunities for our company, our artists and our songwriters”.

Added Cooper of his 11-year tenure as Warner’s CEO: “It’s honestly been fun, incredibly interesting and one of the greatest experiences of my working life.

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

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

Steve Cooper, WMG

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

Naturally, there were raw numbers to chew on: WMG’s recorded music revenue was up 13.1% YoY In quarter continuous pose with recorded music streaming revenue up 4.7% YoY, music publishing revenues were up 32.3% YoY.

Yet perhaps the most illuminating news to come out of Warner’s calendar Q3 earnings came from Cooper himself — and WMG CFO Eric Levine — when he was put on the spot by analysts.

MBW delve deeper into one particularly important data point discussed by Cooper on the call through here,

But other things also came to light…

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1. ‘Emerging Platforms’ Now Generating Nearly $92 Million in Revenue Per Quarter for WMG

Warner Music Group ranks revenue between social, gaming and video streaming platforms – Facebook/Instagram, TikTok, Snapchat and Roblox – classified as “alternative” or “emerging” platforms.

You may recall that in September 2021, Steve Cooper indicated that Warner Music Group was generating around $273 million Recorded music and music publications from these platforms combined annually (on a run-rate basis).

A year later, this figure has grown significantly – with an increase of approximately +$100 million One year since then.

“From our annual revenue, including our recent deal with Meta [’emerging platforms’] reached $370 million in the quarter.”

Steve Cooper, WMG

Cooper confirmed on Tuesday: “Including our recent deal with Meta, our annual revenue [’emerging platforms’] reached $370 million this quarter.”

It’s “annualized” because Cooper is extrapolating over 12 months ahead. that extrapolation suggests that Warner originated around $92.5 million From emerging platforms in the quarter to the end of September this year.

Cooper told analysts on Tuesday that “the revenue growth curve is emerging [platforms] continues to leave behind more established formats”.

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

(Also worth noting: On Warner’s last quarterly earnings call in August (covering calendar Q2/fiscal Q3), WMG CFO Eric Levine Told that “companywide streaming revenue from emerging platforms was … $345 million on an annual basis “. this figure climbed around so $25 million in calendar Q3.)

2. Warner’s streaming revenue in calendar Q3 gets a boost from Meta

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

The deal, along with an unnamed digital partner, essentially saw Warner agree to a less favorable rate than those paid by said platforms.

Because of this, there’s a year-over-year drag-back in Warner’s recorded music streaming numbers in the four quarters through the end of September 2022.

Example: In calendar Q3, WMG is posted $774 million in recorded music streaming revenue, up 4.5% YoY on a fixed currency.

Yet if you leave out the effects of one of this “new deal [our] “digital partner” – as Warner calls it – company says its recorded music streaming revenue will climb 10.5% YoY In calendar Q3 2022.

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

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

Steve Cooper, WMG

regardless, here’s something we Doing Know for sure: Warner’s $774 million Huge monetary boost from recorded music streaming revenue in three months to September metaFacebook’s parent company.

The huge increase is likely in the form of an upfront payment from Meta in conjunction with Warner’s new licensing deal with the firm, which will see advertising revenue on Facebook shared with WMG. (Universal Music Group announced a similar deal with Meta last quarter.)

Eric Levine confirmed on Tuesday that WMG’s quarterly streaming figures in calendar Q3 were boosted by “benefits from emerging streaming platform deal renewals”.

Who were those renovations with? Steve Cooper dropped the big name.

,[WMG’s recorded music] Streaming revenue grew 5% [in calendar Q3]Cooper added, “Subscriptions reflect continued growth in streaming and a recent deal with Meta [which] partially offset by a market-related slowdown in advertising-supported revenue”.

credit: QuiteSimplyStock / shutterstock

3. WMG’s ad-supported streaming revenue declined between 5% and 10% YoY in calendar Q3

It was one of the few negative points in WMG’s quarterly earnings — and it’s one for the wider music business to sit up and take note of.

We’ve known for some time that ad-supported streaming revenue growth at large music companies was likely to be lower in the second half of 2022, due to the macroeconomic impact of the recession on general B2C digital ad spending.

But in calendar Q3 at Warner Music Group, that slump turned bearish.

CFO Eric Levine revealed Tuesday that the quarter saw “increasing pressure and high single-digit declines” in WMG’s ad-supported streaming revenue (i.e. between 5% and 10% YoY,

“When the macro environment gets tough, the first thing we’ve seen consistently negatively impact is ad-supported. We saw it in 2020 when COVID hit and we are seeing it now.

Eric Levine, WMG

Levine clarified that WMG “did not include revenue from emerging streaming platforms” in this calculation. In other words, we’re talking ad-supported revenue from the likes of Spotify and YouTube’s ‘free’ tiers… but No Tiktok and Meta.

(This may explain why Universal Music Group was able to post One 5.2% YoY Growth in non-subscription streaming revenue in calendar Q3.)

Some context: This single-digit drop in Warner’s ad-supported streaming revenue in the quarter came in the same three months that YouTube saw its ad revenue slip 1.9% YoY To $7.07 billion,

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

He said: “Even though the consumption of products [has gone] up, monetization [via ads] has gone down in the short term. When the macro environment gets tough, one of the first things we’ve seen consistently negatively impact is ad-supported. We saw it in 2020 when COVID hit and we are seeing it now.

He urged analysts to remember, however, that “before the macro environment was so challenging, the ad-supported [revenues] With subscriptions continuing to grow in the double digits”.

Added Levin: “When the macro environment starts to improve and the economy starts to recover, we would expect … Ad-supported [streaming revenues] To rebound strongly and go back to growth.worldwide music business

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