Warner Music Group earned $92 million from “emerging platforms” in Q3 and other revenue from Steve Cooper’s recent earnings call with WMG

Warner Music Group’s earnings call on Tuesday (November 22) ended on a positive note, and it’s easy to see why.

WMG announced its earnings 1.5 billion dollars for three months until the end of September (up 16% p.a in constant currency), adjusted EBITDA also increased 16% YY.

As a result, WMG’s share price rose 15% Yesterday, Bank Of America upgraded the firm’s stock.

Fittingly, this stellar quarterly earnings announcement was the latest in Steve Cooper’s 11-year tenure as WMG’s CEO; Cooper will be succeeded by Robert Kyncyl, YouTube’s Chief Business Officer, in the New Year.

Cooper spoke highly of Kyncl on WMG’s earnings call on Tuesday, calling it “a pioneer in the creative economy whose technology will allow us to open up new opportunities for our company, our artists and our songwriters.”

Regarding his 11 years as Warner’s CEO, Cooper added, “Honestly, it’s just been great fun, incredibly exciting and one of the greatest experiences of my working life.

“I am truly honored to be a small part of Warner Music Group’s incredible journey.”

“I am truly honored to be a small part of Warner Music Group’s incredible journey.”

Steve Cooper, WMG

Cooper’s valuable remarks weren’t the only interesting revelations from Warner’s calendar quarter 3 (fiscal Q4) earnings call.

Of course, there were raw numbers to chew on: WMG’s recorded music revenues were up 13.1% p.a in fixed currency per quarter, with recorded music flow income increases 4.7% p.a; music publishing revenues increased 32.3% p.a.

However, the most glaring news about Warner’s calendar Q3 earnings came from Cooper himself and Eric Levine, WMG’s CFO, when put on the spot by analysts.

MBW delved into one particularly important data point discussed by Cooper during the talk passes through here.

But a few other things stood out…

1. ‘Emerging platforms’ now generate nearly $92M per quarter for WMG

Warner Music Group classifies revenue from a number of social, gaming and video streaming platforms – Facebook/Instagram, TikTok, Snapchat and Roblox – as “alternative” or “emerging” platforms.

If you remember, in September 2021, Steve Cooper announced that Warner Music Group was formed around him. 273 million dollars combined recorded music and music publishing from these platforms each year (on a run rate basis).

A year later, this number has increased significantly – with an increase of around +100 million dollars a year from then to now.

“Our recent agreement with Meta, including our annual revenue [’emerging platforms’] This quarter reached 370 million dollars.

Steve Cooper, WMG

“Our annual revenue, including our last deal with Meta,” Cooper confirmed Tuesday [’emerging platforms’] reached 370 million dollars this quarter.”

It’s “annualized” because Cooper is extrapolating over the next 12 months. This extrapolation suggests that Warner was born around 92.5 million dollars From the emerging platforms in the quarter to the end of September this year.

“The revenue growth curve is evolving,” Cooper told analysts on Tuesday [platforms] continues to outperform more established formats”.

“All these new platforms are very dependent on music,” he said. “As engagement continues to grow, we expect monetization to follow suit.”

(Also worth noting: On Warner’s previous quarterly earnings call in August (covering calendar Q2 / fiscal Q3), WMG CFO Eric Levin said that “company-wide streaming revenue from emerging platforms … 345 million dollars on an annual basis”. That’s why this figure has been climbing around 25 million dollars in calendar 3.)

2. In Q3, Warner’s streaming revenue grew from Meta

Warner Music Group’s recorded music streaming revenue has been a tough thing to report lately due to a deal the company struck with a certain licensing partner in the summer of 2021.

That deal, with an unnamed digital partner, actually saw Warner agree to a less favorable rate than what the platform in question was used to getting paid for.

That’s why Warner’s music streaming numbers for the four quarters through the end of September 2022 are down year-over-year.

Example: WMG placed in Q3 774 million dollars in recorded music streaming revenues, increased 4.5% p.a in fixed currency.

Still, if you leave out this “new deal effect [our] “digital partners” — as Warner calls them — would have boosted its recorded music streaming revenues, the company says. 10.5% p.a In the third quarter of 2022.

Warner hasn’t confirmed who that streaming partner is, but sources tell MBW not Spotify.

“WMG’s quarterly streaming revenue increased 5% [in calendar Q3]reflecting continued growth in subscription traffic and the recent deal with Meta… partially offset by a market-related slowdown in ad-supported revenue.

Steve Cooper, WMG

Regardless, here’s something do make sure: Warner’s 774 million dollars In the three months to September, recorded music streaming revenue achieved a huge monetary increase MetaFacebook’s parent company.

That big increase was likely in the form of an upfront payment from Meta, along with Warner’s new licensing deal with the company, which will see Facebook advertising revenue shared with WMG. (Universal Music Group announced a similar deal with Meta last quarter.)

Eric Levin confirmed on Tuesday that WMG’s Q3 calendar quarter streaming numbers were boosted by “the benefit of evolving streaming platform deal renewals.”

Who were these updates with? Steve Cooper dropped the big name.

“[WMG’s recorded music] streaming revenue increased by 5% [in calendar Q3]”, Cooper said, “reflects continued growth in subscription traffic and the final contract with Meta [which] partially offset by a market-related slowdown in ad-supported revenue.”

Credit: QuiteSimplyStock/Shutterstock

3. WMG’s ad-supported streaming revenue fell between 5% and 10% year-over-year in Q3

It was one of the few negatives in WMG’s quarterly earnings – and one that the wider music business should sit up and take note of.

We’ve known for some time that ad-supported streaming revenue growth at major music companies will slow in the second half of 2022 due to the macroeconomic impact of the recession on overall B2C digital ad spending.

But at Warner Music Group, that slowdown turned into a setback in Q3.

CFO Eric Levin announced Tuesday that WMG’s ad-supported streaming revenue in the quarter “declined under increased pressure and high single digits” (ie 5% and 10% p.a).

“When macro environments get tough, one of the first things we see consistently being negatively impacted is ad support. We saw that when COVID hit in 2020, and we’re still seeing it now.”

Eric Levin, WMG

Levin clarified that WMG does not include “revenue from emerging streaming platforms” in this calculation. In other words, we’re talking about ad-supported revenue from the “free” tiers of Spotify and YouTube… but no TikTok and Meta.

(This explains why Universal Music Group a 5.2% p.a Growth in non-subscription streaming revenue in calendar Q3.)

Some context: this single-digit drop in Warner’s ad-supported streaming revenue in the quarter came in three months when YouTube saw its ad revenue decline. 1.9% p.a for $7.07 billion.

Levin noted that “advertising support has become more difficult [than subscription] in the short term” and admitted that “the ad-supported market is in decline”.

He added: “Although the consumption of products [has gone] up, make money [via ads] went down in a short time. When macro environments get tough, one of the first things we see consistently get negatively impacted is ad support. We saw it when COVID hit in 2020, and we’re still seeing it now.”

He urged analysts to remember that “the macro environment was so tough, before it was ad-supported [revenues] with subscriptions, it will grow in a double-digit line quite consistently.

Levin added: “As the macro environment starts to improve and economies start to improve, we would expect … advertising support [streaming revenues] to bounce back strongly and return to growth.Music business in the world