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Warner, profits turn to losses, but everyone still upbeat
By CMU Editorial | Published on Wednesday 10 February 2010
Within the UK record business, I suspect Warner Music is performing better than most, certainly the music major’s London office has been making some interesting developments in the so called ‘360 degree’ domain. Not so much by expensively launching or buying live, management, merchandising, digital or brand partnership ventures, but by quietly working with artist managers to negotiate the sort of career-wide business partnerships with new bands that are probably the future of the music industry, and the way music companies will increasingly work with the artists in which they invest.
In America, however, there are more critics of the Warner music company, possibly because, with it directly trading on the New York stock exchange, there is more scrutiny of its finances there. Plus, efforts to do the 360 degree thing at Warner US have generally involved setting up new divisions outside recordings and music publishing, and buying into digital start-ups, none of which has gone especially well, resulting in millions being written off. That said, despite Warner yesterday announcing it made a $17 million loss in the first quarter of its current financial year, compared to a $23 million profit the previous year, Wall Street types seemed quite upbeat about the company, having expected a bleaker financial report for the quarter up to 31 Dec 2009.
And it should be noted that despite the losses, revenues were up across the board, with digital sales continuing to grow and now accounting for 20% of Warner’s overall revenues. Warner themselves noted that their UK division was doing especially well, and that actually it was the major’s US operations that had let the side down a little.
It’s also worth noting that the $23 million profit a year earlier was in no small part helped by a final payment stemming from Warner’s sale of its stake in artist management company Frontline to Ticketmaster (what is soon to become the new artist management division of Live Nation Entertainment, of course). That particular effort by Warner to diversify its interests in other strands of the music industry was short lived but delivered a good return on investment.
Despite the overall loss, comments by Standard & Poor analyst Tuna N Amboi (who possibly sounds more like he should be signed to the record company, than providing insightful analysis of its finances) were typical of the thoughts of most US investment types, when he said: “These numbers are encouraging relative to the industry-wide numbers. There’s no getting away from the challenging environment for CD sales”.
