QUOTE AND NEWS
Forbes  Aug 11  Comment 
When someone in a movie sings “Happy Birthday to You,” or a group of waiters offers an a capella version at the next table, the Warner Music Group collects the fees. The company’s subsidiary, Warner/Chappell Music, claims to hold the...
The Hindu Business Line  Aug 9  Comment 
IIT-Kharagpur will establish a centre of manufacturing in collaboration with UK’s Warwick Manufacturing Group (WMG), on the lines of ‘Make in India’ programme.IIT-Kharagpur director Partha...
New York Times  Aug 4  Comment 
A ruling is near in a lawsuit that claims the copyright on the much-sung song is not valid. That would be an unhappy day for Warner Music Group, which could lose millions in licensing fees.
TechCrunch  Jul 7  Comment 
 For every musician who’s ever wanted their SoundCloud track to sound like it was produced by Timbaland, LANDR, a startup applying big data analytics to music mastering, has raised $6.2 million to build just the tool. Warner Music Group led...
Forbes  Jun 16  Comment 
Warner Music Group is the latest entertainment-related company that has settled with former interns in regards to pay owed. The firm has agreed to pay out $4.2 million, which is set to be shared between all those that sued the company, as well as...
Yahoo  Jun 10  Comment 
Warner Music Group Corp has agreed to pay hundreds of former interns more than $4.2 million to resolve a class-action lawsuit accusing the company of underpaying them. The settlement, disclosed in papers filed in Manhattan federal court on...
guardian.co.uk  May 12  Comment 
WMG chief Stephen Cooper warns rivals against ditching freemium streaming in favour of subscription services as part of war against piracy The boss of major label Warner Music Group has warned rivals to “think very carefully” before...
Forbes  May 1  Comment 
After a drawn out, back-and-forth legal battle, streaming music service Grooveshark has finally given in and settled with the three largest record labels in the world, Universal Music Group, Sony Music Entertainment, and Warner Music Group.
Forbes  Apr 30  Comment 
Like Viacom, ICM, and Warner Music Group, Universal Music Group must now address the complaints of their unpaid working contingent: a band of unpaid interns has filed a class action lawsuit against the Los Angeles based company, seeking claims...




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Warner Music Group (NYSE:WMG) is the world's third largest recorded music and music publishing company.[1] Its major domestic record labels include Warner Bros. Records and The Atlantic Records Group.[2] WMG's extensive recorded music catalog includes 28 of the top 100 U.S. best-selling albums of all time, (more than any other recorded music company), including the number one best-selling U.S. album of all time, The Eagles: Their Greatest Hits 1971-1975.[1] Signed artists range from Madonna to the Red Hot Chili Peppers, Josh Groban to Missy Elliott, and R.E.M. to the Trans-Siberian Orchestra.[2] The company earned $3.5 billion in revenue and $169 million in net income in 2009.[3]

Despite these strengths, WMG's revenues have been flat over the past few years due to declining CD sales and illegal music downloading, two factors which have offset gains from increased digital sales. The company's future success will depend on how successfully it adapts to the "digitalization" of the music industry. In addition to selling audio and video content through iTunes and other online media distribution centers, WMG has signed deals with sites like YouTube to receive advertising revenue from its posted video content. The company has also expanded its relationship with cell phone providers in an effort to get its digital content to more wireless subscribers.

Company Overview

Business Segments[2]

  • Recorded Music (82% of net sales) - The recorded music division oversees the sale, and licensing of music in a number of physical (CDs, DVDs) and digital (downloads, ringtones) formats. Major music companies like WMG have built up substantial recorded music catalogs that they can exploit for years after they stop releasing an artist's new albums, whether through compilations, box sets, special package releases, etc. In a given year, these catalog albums usually comprise around 40% of WMG's recorded music sales.
  • Music Publishing (18% of net sales) - WMG's music publishing segment owns and acquires the rights to musical compositions, which they then market to others who pay a royalty for their use. Warner holds over a million copyrights from more than 65,000 composers and songwriters.

Business Growth

FY 2009 (ended September 30, 2009)[3]

  • Net revenues remained flat at $3.5 billion. A 16% decline from physical products was offset by a 10% increase in digital products.
  • The company incurred a net loss of $169 million, down from the net gain of $60 million earned in the previous year

Trends and Forces

  • Maturation of the CD market leads to declining physical sales for music industry: From 1990 to 1999, the U.S. recorded music industry grew at a compound annual growth rate of 7.6%, a trend that was fueled in part by the replacement of vinyl records and cassettes with CDs. Since then, it's estimated that yearly sales of physical music product in the U.S. have declined at a compound annual growth rate of 6%. The recorded music industry as a whole has also seen negative growth since 1999, largely because of digital piracy, but also partly because of declining CD sales. WMG has not managed to escape this trend, as evidenced from the graph above showing a steady decline in revenue from physical sales over the past few years.[4]
  • WMG exploits growth of new formats for recorded music distribution: As the CD market has waned, the market for MP3 players like the ipod and digital music formats has exploded. Although we are still in the early stages of the music industry's digital revolution, Warner has already begun exploiting new avenues of media distribution. It has deals with online stores like iTunes to sell single tracks, albums, and video content. In addition, Warner was one of the first major music companies to enter into agreements to distribute its music video library on video sharing sites like YouTube in return for a chunk of the advertising revenue generated from those videos. The company has also expanded into the cell phone market with ringtones, track downloads, and music video downloads, a strategy it hopes will provide a hedge against the more insecure online market where piracy abounds. Digital sales comprise 25% of the company's net sales.[5]
  • WMG and competitors try to contain digital piracy: Illegal music downloading remains the music industry's biggest threat. The International Federation of the Phonographic Industry (IFPI) approximates that almost 20 billion songs were illegally downloaded in 2006.[6] WMG was originally a firm supporter of digital rights management technology (DRM), which prevents consumers from sharing their iTunes songs with friends. However, because of strong consumer dislike for DRM that had a greater negative impact on sales than it did a positive impact on piracy, Warner has begun to distribute its catalog DRM-free. Nonetheless, the future growth of the company and those like it will depend on their ability to find an accepted way to combat digital piracy. In addition to digital piracy, major record labels also face industrial piracy, which involves the mass production of illegal CDs in factories, mostly in developing countries. These CDs are sold at significantly lower prices than their legal counterparts.[7]

Competition

WMG's closest competitors are its rivals in the "Big Four" consortium: Sony BMG, EMI Group, and Universal Music Group. All four operate in recorded music and music publishing.

The "Big Four" account for 74% of all retail music sales globally.[8]

Notes

  1. 1.0 1.1 WMG 2009 10-K "Our Company" pg. 1
  2. 2.0 2.1 2.2 WMG 2009 10-K pg. 6-11
  3. 3.0 3.1 WMG 2009 10-K "Selected Financial Data" pg. 41
  4. WMG 2009 10-K "Industry Overview" pg. 17-19
  5. WMG 2009 10-K "Revenues" pg. 50
  6. WMG 2007 10K, Item 1, pg.16
  7. WMG 2009 10-K "Capitalize on Digital Distribution" pg. 4-5
  8. WMG 2009 10-K "Competition" pg. 15
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