Warner Music Group head Robert Kyncl, whose company has reported modest calendar Q3 2024 revenue growth, speaking before the Senate Judiciary Subcommittee on Intellectual Property. Photo Credit: RIAA
Is Warner Music Group’s streaming growth actually “strong”? Execs still believe so, though the major has reported modest overall and streaming-specific revenue improvements for calendar Q3 2024.
Warner Music posted its fiscal fourth quarter financials (laid out in constant currency and covering July, August, and September 2024) this morning. Last time we checked in on the company’s performance, CEO Robert Kyncl over the summer touted WMG’s calendar Q2 showing and especially its “strong subscription streaming growth.”
The remarks and the framing were particularly noteworthy given the subscription-expansion woes of Universal Music Group, which suffered a material stock-price slip after reporting slowing paid-listening growth. Moreover, the focus promptly shifted to whether WMG was, in fact, managing to achieve solid streaming gains despite competitors’ positioning.
And while concrete takeaways depend on one’s definition of “strong,” WMG has identified a 0.2% YoY dip in across-the-board digital revenue for Q3 2024, when the overall streaming category turned in a 1% YoY uptick to $1.05 billion.
Behind that important sum, recorded subscription revenue is said to have jumped 5% YoY to $645 million in Q3, against a 5% YoY slip in the ad-supported category ($221 million). And on the publishing side, third-quarter streaming revenue declined 4% YoY to $182 million.
For reference, the overhauled Warner Music’s recorded subscription revenue for the 12 months ended September 30th grew 8% YoY to $2.54 billion, compared to 3% YoY growth for ad-supported to $901 million. Streaming publishing revenue, for its part, spiked 15% YoY in the fiscal year to $752 million.
(As emphasized by WMG in the earnings report, several of the growth percentages would be higher if not for the impact of, among other things, BMG’s ADA split. But logic suggests it’d be ill-advised to completely overlook the development, which is, after all, a loss of business.)
In other words, Warner Music’s Q3 2024 streaming growth was slower than that of the prior 12-month period. Notwithstanding the company’s bullish remarks (as well as those of UMG and more), it’ll be interesting to see whether the less-than-ideal trend reverses during the present quarter and the new year.
On this front, Kyncl during WMG’s earnings call emphasized paid streaming’s relatively low penetration in not only emerging music sectors, but established markets.
“[E]ven in a mature market, music penetration is very low, and there’s plenty of runway ahead,” Kyncl relayed of his company’s streaming strategy. “With both subscriber growth and opportunities for wholesale price increases, the formula for streaming growth is strong, and there’s plenty of room for acceleration.”
Kyncl, whose company is currently negotiating a fresh deal with Spotify, returned to the significant “wholesale” remark during the call’s Q&A component. “Wholesale prices generally go up, and that happens in all industries. It may not have been that way in music in the past, but it is how it works in 99% of industries. So we’re just trying to align with the way the world works.”
The exec also touched on plans to better capitalize on streaming moving forward, including much-discussed superfan initiatives (plus traditional price bumps) as well as the comparatively seldom-mentioned possibility of dialing back discounts and family plans.
Regarding other worthwhile disclosures, WMG’s Q3 2024 recorded physical sales, including vinyl and CDs, grew from $130 million in Q3 2023 to $134 million. And while U.S. recorded revenue increased 1% YoY during the fiscal year ($2.21 billion total), the category’s international counterpart hiked 9% YoY to $3.01 billion.
At the time of writing, WMG stock, now set to benefit from a $100 million buyback program, was down 9.24% on the day at $30.56 per share.