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Warner Music Group beat analysts’ revenue expectations today, posting quarterly revenues of $1.63 billion for its fiscal Q4 (calendar Q3).
But it was the company’s subscription streaming results that delivered a dose of optimism for any observers doubtful about the growth trajectory of streaming revenues at major music companies in 2024.
As we reported this morning, WMG revealed today (November 21) that for the fourth straight quarter, in the three months to the end of September, it saw double-digit YoY recorded subscription streaming growth on a normalized basis.
The company’s subscription streaming revenues grew 10.6% YoY on a normalized constant currency basis to $645 million in calendar Q3 (WMG’s fiscal Q4).
Speaking on the company’s earnings call today, WMG CEO Robert Kyncl was bullish about subscription music streaming’s future.
He noted that “with both subscriber growth and opportunities for wholesale price increases, the formula for streaming growth is strong,” adding that “there is plenty of room for acceleration.”
Added Kyncl: “With penetration in mature markets expected to increase from approximately 35% today to nearly 50% by 2030 and emerging markets going from single to low double-digits over the same timeframe, music subscriber growth should remain healthy for years to come.
“For reference, in the US, cable TV penetration is a little over 50% and SVOD penetration is approaching 50%, highlighting that even in a mature market, music penetration is very low and has plenty of runway ahead.”
Bryan Castellani, WMG’s CFO, also glanced forward to yet more growth in WMG’s future… pointing his finger at said growth happening for many years to come.
Said Castellani: “Looking ahead, our strong Q4 momentum in 2024 is carrying into 2025. Subscription streaming continues to see healthy underlying trends and we expect [normalized] high-single-digit growth for fiscal ‘25 and on a multi-year basis.”
Elsewhere on the call, Kyncl explained in his opening remarks that Warner Music Group has “reimagined” its organization this year, “based on the principle that simplicity and focus drive higher intensity and impact”.
He added: “We’ve done a lot of important work, which has set us up for success today…and will help us grow more profitably in the future.”
Those efforts, said Kyncl, have included strengthening the company’s presence in the US, the world’s largest recorded music market and “shift[ing] to a simpler and flatter organizational structure… to create faster and more direct channels for local talent to reach the global stage”.
“We’ve done a lot of important work, which has set us up for success today.”
Robert Kyncl
Kyncl added: “We’ve reorganized key business lines such as Catalog and Distribution in order to deliver greater global reach.
“We’ve continued to find ways to strengthen the coordination across our record music and music publishing divisions and we’ve fixed a lot of our foundational infrastructure issues that will now enable our technology team to be more offensively focused.”
Kyncl also explained that Warner Music Group’s “focus on efficiency” this year has “freed up capital,” to enable WMG “to increase [its] investments in growth opportunities”.
Added Kyncl: “As we previously promised, we’ve increased our A&R investment by approximately 11% in fiscal 2024 as we continue to sign new artists and songwriters and acquire IP and catalogs, all while driving our digital transformation.”
As part of its investment strategy, Kyncl explained that WMG will “consider bolt-on acquisitions that accelerate our progress while meeting our return thresholds”.
In addition to these investment opportunities, Kyncl revealed that WMG’s Board has authorized a share repurchase program of up to $100 million.
“The program demonstrates our confidence in the value of our company and our optimism for the path ahead,” said Kyncl.
Here are three more things we learned on Warner’s earnings call today…
1. Elliot Grainge‘s appointment as Atlantic Music Group CEO was ‘a seamlessly executed handover’
Early in his opening remarks, Robert Kyncl addressed Atlantic Music Group’s recent leadership shakeup, which saw 10K Projects founder Elliot Grainge elevated to the CEO role on October 1. Grainge’s 10K Projects was acquired by WMG in September last year.
“While this kind of transition is never easy, this was a seamlessly executed handover,” said Kyncl of the transfer of power to Grainge. AMG was formerly led by Chairman Julie Greenwald, who left her leadership role at the company at the end of September, and is staying on to consult through January 2025.
According to Kyncl, the revamped AMG leadership team “has delivered first-class results for priority projects, while bringing in fresh ideas, onboarding dynamic executives, and attracting exciting new artists.”
He added: “Elliot and his team have an impressive ability to discover extraordinary talent across multiple genres, and find fresh ways to help both established and emerging artists stand out from the crowd.”
Kyncl also praised Atlantic Music Group’s “digitally native approach,” which he elaborated on during the Q&A section of the call. He was responding to a question from Benjamin Swinburne at Morgan Stanley about what’s “working so well” at 10K Projects that’s “applicable to the larger business of Atlantic.”
“When you think about the music industry today, there are obviously lots of different independent music companies, many of whom claim to do many things really well. I would say you have to take everything with a grain of salt,” said Kyncl.
“But one of those [labels] that did [well] was 10K. I know that’s a fact from the numbers they had prior [to joining WMG] and the numbers they have delivered in the first year under the WMG umbrella. [10K has achieved] phenomenal growth, both on top line and bottom line.”
“Elliot and his team have an impressive ability to discover extraordinary talent across multiple genres, and find fresh ways to help both established and emerging artists stand out from the crowd.”
He added: “The skill set that they bring, and not just Elliott, also his team, is being very digitally native. Today, a vast majority of our revenue is coming through streaming. Promotion mostly happens online. You must be digitally native if you want to succeed today, and in the future, in the music industry. And that is important to the DNA of the company, and they have brought that.”
Recent Atlantic Music Group successes highlighted by Kyncl include APT, the collaboration between Korean superstar Rosé and Bruno Mars
“Bruno Mars is the biggest artist in the world,” Kyncl noted. “He has the largest reach – with over 130 million monthly listeners on Spotify.”
Other recent Atlantic successes highlighted by Kyncl included Coldplay’s recent US No.1 album, and the “impactful remix” of the Brat album from Charli XCX, who has been nominated for seven Grammy awards, including Album of the Year and Record of the Year.
He also pointed to the “next generation of talent” at AMG, including Artemas whose hit, I Like The Way You Kiss Me reached 1 billion streams, as well as Forrest Frank and Jordan Adetunji who recently received their first Grammy nominations.
2. Atlantic and Warner Records are “important twin engines for growth” at Warner Music Group.
In addition to highlighting Atlantic’s successes this year, Kyncl zoomed in on the company’s other flagship US label group, Warner Records, led by Aaron Bay-Schuck and Tom Corson in Los Angeles.
According to Kyncl, the two label groups, AMG and Warner Records, are “important twin engines for growth” within the global Warner organization.
“At Warner Records, the team’s commitment to artist development is driving hits and training superstars,” Kyncl told analysts on the call today.
“Under the leadership of Aaron Bay-Schuck and Tom Corson, the label’s market share hit a new peak this year, reaching the No.3 position in the U.S. for current releases,” Kyncl added.
“I cannot stress enough how exhilarating it is to watch the creative success that both Warner Records and Atlantic are having.”
Some of the breakout Warner Records stars highlighted by Kyncl include Teddy Swims (pictured), Benson Boone, Zach Bryan and NLE Choppa.
As acknowledged by Kyncl on the call, Teddy Swims’ US No.1 single, Lose Control, has spent 44 weeks in the Top 10 of the Billboard Hot 100, while Swims and Benson Boone are both nominated for Best New Artist at the upcoming Grammys.
NLE Choppa, meanwhile crossed the 9 billion career stream mark this year, according to Kyncl, “at the ripe old age of 22”.
Kyncl also highlighted that Warner Records “has been integral to the successful resurgence of icons” like Green Day, Cher and Linkin Park.
“I cannot stress enough how exhilarating it is to watch the creative success that both Warner Records and Atlantic are having,” he said.
3. “India will become an increasingly influential global force in the music business.”
Warner Music Group has been making serious M&A moves in India over the past couple of years, and Kyncl told analysts today that the company believes in the territory’s “huge global potential.”
Some of those investments include a recent minority stake in ticketing platform SkillBox, and a strategic investment in JetSynthesys’ Global Music Junction in April. WMG also acquired India-based artist management and live events company E-Positive in October 2023, and bought a majority stake in digital media and music company Divo in February last year.
Since officially launching Warner Music India in March 2020, the company has also struck distribution deals with Bollywood specialist Tips Music and Punjabi music company Sky Digital India.
“With a population of 1.4 billion, India is more like a continent than a country,” said Kyncl on the call. He added: “It has the fifth largest GDP, but is still only the 14th largest music market in the world.”
That gap, argued Kyncl, will continue to close in the coming years, and “as it does, India will become an increasingly influential global force in the music business”.
Kyncl added in his opening remarks: “The country has already seen a significant increase in paid subscribers, which have increased by almost 40% since last year, but [the total number of subs is] still at less than 2% penetration” [of the total population].
He provided more insight into that 2% stat later on the call, noting that the total number of subscribers in India today is “about 15 million” but pointed out that “there’s a lot of room to grow” when you consider there are “more than 100 million households” subscribing to TV services in India.
Elsewhere on the call, Kyncl revealed that Warner has seen “impressive revenue growth [of] over 100% in fiscal 2024” in India. He added: “Most importantly, everything we’re doing means we’re well positioned to keep taking market share, as India continues its explosive growth.”
Evidence of the explosive growth arrived via stats published by Luminate in January, which showed that the market saw the biggest YoY increase in total annual on-demand music streams of any nation last year.
As MBW reported in Jan, if annual streaming volume growth in the US slows in 2024, as many expect it will – but India manages to sustain its 2023 YoY streaming growth margin this year – India could become the world’s largest music streaming territory by volume in 2024.
Kyncl noted that WMG is “helping Indian stars like Diljit Dosanjh [pictured, inset] and King reach new audiences while building loyal Indian fan bases for global talent such as Coldplay and Dua Lipa, who were both touring there in the coming months”.Music Business Worldwide