Warner Music Reports Mounting Losses

Wmg In a report to shareholders this morning, Warner Music Group revealed that in the quarter ending June 30th, 2009, total revenue decreased 9.3% and operating income from continuing operations declined 51%. Total losses from continuing operations swelled to $37 million from $9 in the prior year quarter.

WMG improved its financial position during the quarter with a $1.1 billion offering of secured notes which the company used to pay off previous loans. But the new new notes carry a hefty 9.5% interest rate and come due in just 7 years

This morning's SEC filing showed:

  • Total revenue of $769 million decreased 9.3 % from the prior year quarter.
  • Digital revenue was $175 million or 23% of total revenue in the quarter up just 1% from the second quarter and up 5%f rom $166 million in the prior year quarter.
  • Operating income from continuing operations declined 51% to $25 million compared to $51 million in the prior year quarter.

  • Operating income before depreciation and amortization (OIBDA) fell 22% to $90 million from $116 million in the prior year quarter.
  • Loss from continuing operations was $37 million or $.25 per diluted share compared to a loss from continuing operations of  $9 million or $.06 per diluted share in the prior year quarter.
  • Interest expense this quarter included $18 million or $.12 per diluted share of previously unamortized deferred financing fees related to the company's senior secured credit facility. These fees were written off in the current quarter when the company repaid the credit facility in full in connection with its senior secured bond offering.
Read the full filing here.

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  1. Unless record companies can figure out a new model, these reports will continue coming year after year. I have no sympathy for top-heavy corporations that make really bad decisions and continue to market product to a very small fraction of the population.
    In just about a week the 40th Anniversary of Woodstock will occur. I would guess the median age of people at that historic event was about 20. If you do the math those people are about 60 right now. It does not take a rocket scientist to figure out that demographic, the Baby Boomers created the empire the music industry once was. It doesn’t take a rocket scientest to figure out that people from that era LOVE music. Yet, the fact remains major record labels do not have a marketing plan for anyone older than about 25-35 years old.
    76-78 million people make up the Baby Boomer generation…the largest segment of the American population who genuinely appreciate cover art, liner notes and holding a physical product in their hands. They understand an entire album or CD is like a book. You can’t buy just one chapter and get the gist of what the author intended. There is an art to creating a full album of music.
    For those that insist they only like one or two songs on any given CD, this is what I was taught by one of the most renowned composers of the 20th century. Mason Williams who wrote Classical Gas said, “If you don’t like a song, listen to it until you can figure out why.” It’s very simple and important advice.
    Incidentally, Mason Williams composed the most- broadcast instrumental tune in history on Warner Bros.
    Janet Hansen

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