Warner Music’s profit falls 74% amid soft sales
Warner Music Group Corp., home to recording artists such as Red Hot Chili Peppers, James Blunt and Daniel Powter, said Thursday that its fiscal first-quarter profit fell 74% because of fewer album releases and soft domestic and European sales. Its shares fell nearly 6%.
The New York-based recording company said net income for the period that ended Dec. 31 declined to $18 million, or 12 cents a share, from $69 million, or 46 cents, a year earlier. Revenue fell 11% to $928 million.
Analysts polled by Thomson Financial expected earnings of 24 cents a share on revenue of $944.8 million.
Warner Music shares fell $1.24, or 5.8%, to $20.27.
“This was a difficult quarter, in some part because the industry still faces the challenging environment, but almost entirely due to the comparisons to our very strong first quarter last year,” said Edgar Bronfman Jr., Warner Music Group’s chairman and chief executive.
Digital revenue of $100 million grew 45% from $69 million in the year-earlier quarter.
Digital revenue was 11% of total revenue and 17% of total domestic recorded music revenue, the company said.
Revenue for the company’s recorded music business fell 13% to $800 million on softer domestic and European sales. The company said Asia Pacific sales were helped by strength in Japanese local repertoire.
Among the major sellers during the quarter were releases by Josh Groban, My Chemical Romance and Eric Clapton.
Bronfman noted that Warner gained market share during the quarter. The company increased its total U.S. album share in 2006, compared with the same period in 2005, he said.
Bronfman briefly addressed an essay by Apple Inc. CEO Steve Jobs this week in which Jobs called on record labels to drop their requirement that online music be sold with digital rights management technology designed to limit unauthorized copying.
“We advocate the continued use of DRM,” Bronfman said, adding that music deserves the same anti-piracy protections as software, TV broadcasts, video games and other forms of intellectual property. “We will not abandon DRM nor services that are successfully implementing DRM for both content and consumers.”