Warner Music Group reports quarterly recording and publishing revenue records

Warner Music Group ( WMG ) revenue hit a record $1.75 billion from October to December, the company said was announced Wednesday (February 7). This is up 17.5% from the year-ago quarter (up 15.9% at constant currency), as both the Recorded Music and Publishing divisions posted their best quarterly revenue ever.

With Spotify and other streaming services set to raise prices in 2023, WMG's digital revenue grew 16% and streaming revenue rose 16.6%. The company also posted gains in physical sales, licensing revenue and music publishing rights, although the company saw declines in recorded music artist services and expanded royalty revenue. Net income rose 55.6% to $193 million and operating income improved 33.6% to $354 million.

“These results reflect the impact of our top artists, hit-making songwriters, iconic catalog and laser focus on execution from all of our teams,” CEO Robert Kyncl he said in a statement. “As we execute our plan to accelerate our growth, we are becoming more efficient, increasing operating leverage and freeing up more capital to invest in music and technology, which in turn will lead to further sustainable growth.”

Moments after WMG released its quarterly results — an earnings call will take place on Thursday morning (Feb. 8) — news broke that the company will shed 10% of its staff, primarily through the sale of media companies such as Uproxx and HipHopDX. The company will also phase out its in-house ad sales operation and plans to spin off podcasting brand The Interval, as well as social media publisher IMGN. The reductions will free up $200 million in cost savings that can be reinvested elsewhere, Kyncl wrote in a staff memo obtained by Advertising sign.

Shares of WMG rose 6.4% to $36.19 in late afternoon trading following the release of earnings results and staff cuts.

Excluding three one-time items, WMG's revenue growth was 12.1% (10.6% in constant currency). A previously disclosed licensing agreement extension for an artist's catalog added $68 million in revenue, and a digital license agreement renewal added $27 million in the quarter. The termination of a distribution deal with BMG resulted in $13 million less revenue than the year-ago quarter.

Recorded music revenue improved 16.6% to $1.45 billion due to the success of Zach Bryan, Bruno Mars, Barbie soundtrack and Jack Harlow, whose track “Lovin on Me” first hit No. 1 on the Billboard Hot 100 singles chart in December and recently spent its fourth non-consecutive week at the top of the chart as of Feb. 3. The division's digital revenue grew 13.1%. to $908 million, while physical revenue increased 15.8% to $154 million. Licensing revenue rose 84.5% to $179 million.

Music publishing revenue increased 21.6% (19.7% constant currency) to $304 million thanks to a 32.2% improvement in streaming revenue and a 31.5% increase in digital revenue. Mechanical rights – which are tied to downloads and physical purchases – rose 7.1% to $15 million. Publishing sync revenue was flat at $39 million as lower commercial licensing activity in the United States was offset by the timing of certain legal settlements.

WMG's margins improved over almost the entire quarter. Company-wide, the company's operating margin increased 2.5 percentage points to 20.3% and adjusted operating income before depreciation and amortization (OIBDA) increased 3.3 percentage points to 25.8% (and was flat without BMG Termination, License Extension and Digital License Renewal ). Adjusted recorded music OIBDA margin increased 4.4 percentage points to 28.5% and operating margin improved 3.1 percentage points to 25.9%. Publishing operating margin increased 1.1 percentage points to 20.7%, while adjusted OIBDA margin decreased 0.5 percentage points to 28.3%, primarily due to the impact of foreign exchange rates.