Warner Music’s Loss Narrows in Quarter

Warner Music Group Corp. said Monday that its fiscal second-quarter loss narrowed to $18 million from $45 million a year earlier thanks to increased digital revenue.

But the news failed to mollify investors, who continued hammering the stock less than a week after Warner’s initial public offering.

Warner’s stock fell 73 cents, or nearly 5%, to $15.23. Monday’s close means the stock is off more than 10% from the $17-a-share IPO price last week.

“The scars on this company are going to last a while,” said David Menlow of research firm IPO Financial Network. “The price has closed lower every day. I don’t know when the bloodletting stops.”

The drop came as Warner also reported an uptick in revenue, which rose 4.4% in the quarter ended March 31 to $767 million.

Digital distributions -- including sales of ring tones and digital downloads and subscriptions -- contributed $35 million in income. CD sales declined during the quarter, according to Warner’s filings.

Analysts said the digital sales were impressive.

“We project digital downloads and subscriptions will grow by over 500% in the next four years, so Warner is positioned to do well,” said David Card, an analyst at Jupiter Research who monitors Internet music. “But digital music won’t replace the CD business in the next 10 years.”

Major Warner albums in the last quarter included releases from Green Day, Michael Buble and Big & Rich.

Digital growth was a cornerstone of the strategy that Chief Executive Edgar Bronfman Jr. touted when Warner Music raised $554.2 million in last week’s initial public offering.

But investors have been wary of the company, noting that Bronfman and a group of private equity investors loaded $2 billion in debt on the music company’s balance sheet when they purchased it last year from Time Warner Inc. Interest expenses ballooned to $35 million during the second quarter from $9 million in the year-earlier period.

Overall, Warner decreased costs by more than $23 million, contributing to the company’s second-quarter operating income of $27 million. That contrasted with an operating loss of $21 million during the same period last year. Some of the savings in the most recent quarter came from the more than 1,000 jobs Bronfman cut when he reorganized the company.