Shares in Warner Group Music have dropped as much as 11 per cent to their lowest point in 18 months on Thursday after the company revealed disappointing fourth-quarter results as streaming growth stalled.
It reported net income of $48 million (A$73.74 million) in the three months ended September 30, down 69 per cent from a year earlier.
Revenue at the record label whose artists include Ed Sheeran, Dua Lipa and David Guetta, rose 2.8 per cent to $1.63 billion (A$2.5 billion).
Recorded music streaming revenue increased 2.1 per cent in the quarter, far lower than the 9.6 per cent growth in the same period a year earlier.
Warner Music and Universal Music Group have both been hit with weak streaming performance.
In July, Universal Music streaming revenue dropped 3.9 per cent to EUR343 million (A$569.25 million). UMG’s second-quarter subscription revenue growth slowed to 6.9 per cent from 12.5 per cent in the first quarter. It attributed that to a slowdown in subscriber growth at some platforms and as Meta stopped licensing premium music videos for Facebook. Apple and Amazon also aren’t signing up many new customers.
Warner Music added that the end of its music distribution deal with BMG would impact its financial results next year. In September, BMG ended a nearly 8-year-long deal with Warner when it said that it would handle its digital distribution in-house.
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,” said Bryan Castellani, chief financial officer of Warner Music Group, on a call with analysts, reported Bloomberg.
“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 (A$24.58 million), he said.
Recorded music revenue was up 3.6 per cent to $1.34 billion (A$2.06 billion), in the fourth quarter. That figure was $25 million (A$38.39 million) less revenue compared to a year earlier due to the end of the distribution agreement with BMG.
In September, as part of its restructuring plans, Warner said that trim its workforce by about 750 employees, which represents around 13 per cent of its total headcount.
