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Earnings: Warner Music Group Q2 Digital Revs Rise 39 Percent; Net Loss Reduced
Considering the wider decline of the traditional music industry, Warner Music Group (NYSE: WMG) had a pretty good quarter, as the company's Q2 net loss narrowed to $9 million from $17 million and revenues gained 5 percent to $848 million from $804 million. But the high point was digital revenue, which was up 39 percent to $166 million year-over-year for WMG, which houses such record labels as Asylum, Atlantic, Bad Boy, Elektra, Nonesuch, Reprise, Rhino and others. Sequentially, digital revenues grew a slight 1 percent from Q1's $164 million. The digital segment now makes up roughly 20 percent of WMG's total revenues. Other highlights from WMG's Q2 included:
-- Op income from continuing operations grew 10.9 percent to $51 million from $46 million in the prior-year quarter and operating margin from continuing operations increased 0.3 percentage points to 6 percent.
-- U.S. revenue fell 6.5 percent. International revs were up 17.2 percent, and grew 3.6 percent on a constant-currency basis. On a constant-currency basis, revenue increased in Europe and Canada.
-- Recorded Music revenue increased 5.1 percent from the prior-year quarter to $686 million, and was down 1.0 percent on a constant-currency basis, again reflecting the declines in U.S. sales. Domestic Recorded Music digital revenue amounted to $101 million or 31.7 percent of total U.S. Recorded Music revenue. Digital sales strength came mostly from global online downloads, and to a lesser extent growth in international mobile.
Release | Webcast (8:30 AM EDT)
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WMG Call: Bronfman: We're Not Doing As Bad As The Rest Of The Music Industry
Edgar Bronfman, Jr., Warner Music Group's Chairman and CEO, began the call offering a set stats designed to show how the company is outpacing the rest of the music industry—or at least doing less worse. However, major successes came from albums by Frank Sinatra and Madonna, not exactly rising young artists. On the digital front, ringtone revenue remains small and was flat in Q2, especially in Europe and the U.S., but Bronfman has expectations that mobile revenue growth will grow soon as western consumers have been gradually adopting the portable music listening and purchasing habits that are entrenched in Japan.
In terms of other experiments designed to grow digital, Bronfman pointed to Jason Mraz's album We Sing. We Dance. We Steal Things. The album release was preceded by sales of bundled tracks over three months. Ultimately, WMG was able to offer two versions of Mraz' album on iTunes, with the premium release eventually outselling the basic one on Apple's (NSDQ: AAPL) download store. WMG is also working with Nokia (NYSE: NOK) on its "Comes With Music" feature, which is slated to launch later this year and Bronfman is hopeful about the benefits. He also emphasized short-term business deals for digital to maintain flexibility and see what works and what doesn't.
-- Not playing games: Bronfman calls current video game licensing fees on a per song basis "paltry for video games, such as Guitar Hero. But the actual royalty derived from the use or download of individual songs remains far below their true value. Unless there is a real partnership among game marketers and artists and labels, WMG will be hesitant about going further to license its music for video games.
-- All digital cost structure: Nokia's plans to include music on handsets before their sold has huge potential, Bronfman said. "But we'll have to wait at least a year to see what the results are." Asked about when WMG will have an "all digital cost structure," Bronfman said that the company is closing in on the day when digital is 50 percent of the balance sheet.
-- Amazon (NSDQ: AMZN) and iTunes: Bronfman said that Amazon's sales are largely additive to iTunes. Interestingly, Amazon seems to sell more full albums, whereas iTunes is more about singles.
Pic Courtesy: Spcoon
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Earnings: Sony's Games Unit In Profits; SonyBMG Sales Decline 6 Percent
Sony (NYSE: SNE) reported its Q208 earnings this morning, and the picture isn't that pretty: it posted a 39 percent fall in quarterly operating profits, hit by losses in its Sony Ericsson (NSDQ: ERIC) JV. Its profits fell to $327 million (34.98 billion yen)—about half of last year. However, among the bright lights: profits in its Playstation division, unlike last year's losses...it had operating profits of $51 million for the games division. Sales increased 16.8 percent year-on-year primarily as a result of an increase in sales of PS3 and PSP. In the Sony Pictures segment, there was a 31.0 percent decrease in sales year-on-year primarily because no film performed as strongly as last year's Spider-Man 3, meaning it didn't have a blockbuster to bank on.
SonyBMG, which Sony is trying to buy back the 50 percent share it doesn't own, according to reports, recorded equity in net loss of $24 million, reflecting the impact of the continued decline of the worldwide physical music market, higher restructuring costs and the non-recurrence of a prior year gain.
The full results are in the PDF file here.
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Earnings: Vivendi's H1 Revs up; Universal Music's Digital Revs Up 33 Percent
Vivendi (EPA: VIV), the France-based media giant and parent of Universal Music Group, has reported its first half 2008 and Q208 earnings, and its revenues totaled €11.2 billion ($17.7 billion), compared to €10.2 billion ($16 billion) for the first half 2007. For Q2, Vivendi's revenues totaled €5.98 billion ($9.35 billion) compared to €5.2 billion ($8.15 billion) a year earlier. Out of the units: Universal Music Group saw a 2.4 percent decline in revenues, while Vivendi Games saw the largest revenue drop, at 11.2 percent.
On UMG side, for H108, it had revenues of €2 billion ($3.12 billion), which is 2.4 percent decline in actual currency compared to the same period last year. It had a 33 percent increase in digital sales at constant currency. For Q208, UMG had revenues of €1.01 billion ($1.58 billion), which is a 5.3 percent decline in actual currency compared to the same period last year. More details in release here.
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Earnings: Vivendi Q1 Profits Fall 5.6 Percent; Universal Music Digital Up 33 Percent
Entertainment and telecom conglomerate Vivendi (EPA: VIV) said its Q1 EBITA dropped 5.6 percent to $1.86 billion (€1.203 billion) from $1.91 billion last year. Although not exactly an indication of what Vivendi called a "very good quarter" in its earnings statement, it was still enough to beat analysts' aggregated forecast of $1.7 billion, according to Reuters. Adjusted net income was $1.07 billion, a fall of 9.6 percent from Q107's $1.1 billion. Revenues in Q1 were on the positive side, coming in at $8.2 billion, rising 5.2 percent over the year before. Highlights from the owner of Universal Music Group, Vivendi Games, Maroc Telecom and other media properties included:
-- UMG: The music label's EBITA was $171 million, a rise of 94.7 percent year-over-year. The company cited digital sales growth of 33 percent and the inclusion of BMG Music Publishing. However, revenues were essentially flat at $1,598 million—0.6 percent above Q107.
-- Vivendi Games: Vivendi Games, which includes Blizzard Entertainment, the producer of World of Warcraft, saw Q1 revenue fall 24.1 percent at $341 million. Blizzard Entertainment's revenues were $297 million.
-- Maroc: The telecom unit's revenues grew 11.6 percent to $950 million during the quarter, as revenues were up 15.5 percent to $688 million. Earnings release (PDF)
Updated: Earnings: RNWK Q1 Rev Up 14 Percent; Earnings Beat Estimate: Music Up 12 Percent,
RealNetworks (NSDQ: RNWK) is playing two this afternoon—announcing Q1 earnings and the spinoff of its casual games business. Revenue rose 14 percent to $147.6 million, compared with $129.5 million in the same quarter last year. Earnings dropped to $2.4 million, or $0.2 per share, down considerably from Q107's $40 million, or $0.22 per share—but, as I was just reminded, beat the consensus by five cents. Q107 was the last quarter of Microsoft's (NSDQ: MSFT) direct contribution to Real's bottom line through its antitrust settlement. (It's also a vivid reminder of the law of large gains—next year's comps can be painful.) Some revenue details:
-- Gaming, which is being spun off, rose 33 percent, to $31.8 million
-- Music was up 12 percent, to $38.1 million
-- Technology Products and Solutions, up 15 percent to $51.3 million (in part from 2007 acquisitions SonyNetServices and Exomi)
-- Media Software and Services took a hit, down 2 percent to $26.4 million
Earnings release | Webcast (5 p.m. ET)
Earnings call: A lot of attention on the proposed gaming spin as analysts try to wrap around the idea. Glaser explained that this is a unique case since the casual games business was set up and operated autonomously from the beginning. "Overall, we feel very comfortable with this decision" and that it "was deliberated over pretty carefully." He also reminded them that 80 percent of the company's business is unchanged.
Music: Speaking of the unchanged part, the gaming talk didn't drown out questions about Real's music business. Glaser listed three initiatives that are moving slower than planned, in part, because they turned out to be even more interrelated than originally planned. The three: streaming free music on the web, DRM-free sales, and the Verizon (NYSE: VZ) deal to deliver mobile music for Rhapsody America.
Update: Meanwhile, Burst.com announced the settlement of its patent dispute with Real: "RealNetworks agreed to pay Burst a one-time payment of $533,500 cash, in exchange for a license to a subset of the Burst patents. The nonexclusive license doesn't include pass-through rights.
Earnings: WMG Revs Up 2 Percent; Loss Deepens; Digital Up 47.6 Percent; Dividend Cancelled
Another challenging quarter for Warner Music Group (NYSE: WMG), which has suspended its dividend in the name of "financial flexibility." The label announced quarterly revenue of $800 million, up 2 percent from $784 million a year ago, though on a constant currency basis, it would have declined. Losses grew to $34 million ($.23 per share) from $27 million ($.19 per share) on higher costs. Analysts had been looking for a loss of $.12 per share, though revenue surpassed estimates.
Some bright spots: The music business declined by just .6 percent from the prior year. Sure it was helped by currency and strength outside of the US, but it isn't completely falling off a cliff. And digital revenue was up 47.6 percent to $155 million, representing 23.8 percent of total music revs. What's more, digital growth accelerated from last quarter, when it was up just 41 percent. Music publishing also continues to hold up, growing 8.4 percent to $155 million. More from the conference call after the jump…
Release | Webcast (8:30 AM ET)
-- Conference call: While touting its sales on iTunes, as well as its deal with social net Imeem, Edgar Bronfman, chairman and CEO, reserved greater praise for Amazon's (NSDQ: AMZN) MP3 sales, and the development of MySpace Music. Citing the breadth of the offerings on both, Bronfman argued that Amazon provides strong opportunities for the sale of full album package. At the same time, executives tried to make the case that its deal with Amazon has not harmed its sales on iTunes.
-- Michael Fleisher, CFO/EVP ticked off a series of stats to show the growth and importance of digital to WMG's bottom line, such as noting that 65 percent of digital sales are in the U.S., 35 percent international; also online makes up 70 percent of U.S. digital revs, with mobile providing 30 percent. Mobile remains soft as ringtone sales fell. Still, ringtones and ringback sales remain too small to impact the business.
-- During the Q&A, analyst asked about the company's decision to cut its dividend. Bronfman said suspending the dividend was one of the best levers available as executives attempt to steer WMG through dismal economic waters.
-- Bronfman identified four income streams from digital: purchases, ad-supported streaming, subscription and access. The purchase bucket is going to be the largest, though subscription is gaining tractions. overtime, as we expand partnerships with artists, ticketing and merchandise will offer additional buckets.
-- Jessica Reif Cohen asked what benefits WMG expects to receive from MySpace Music. The service is set to launch around September, so Bronfman said he expects some impact in Q4, with the hope for results to build quickly in 2009.
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Earnings: Napster Slims Losses In Q4; Revs Gain 15 Percent; DRM-Free Downloads By June
Napster (NSDQ: NAPS) narrowed its net loss to $2.8 million ($0.06/share) in Q4, compared to a net loss of $9.5 million ($0.22 /share) last year. Revenues continued to grow, reaching $32.8 million, up 15 percent from Q406's $28.4 million. The company may also be starting to arrest subscriber losses, which were down less than 1 percent compared to Q307. The online music service also offered a look at its with cash holdings on a consecutive basis: by the end of the quarter, Napster had $69.3 million in "cash, cash equivalents and short-term investments," an increase of $900,000 from the prior quarter.
Earlier this week, Napster bumped up subscription prices from $9.95 per month to $12.95 monthly - a 30 percent hike. Aside from that, Napster has also been focusing on building up its mobile services outside the U.S., particularly in Japan and Latin America. For the full year, the company's revenues were up about 18 percent to $96.6 million from $89.1 million. However, total cost of revenues were also up, rising from $57.4 million to $68.4 million, a 19.2 percent increase.
Earning release | Webcast (5:00 PM ET)
-- Conference call: Chairman and CEO Chris Gorog began by saying he believes that the shift to the MP3 format will make things less complicated for consumers and for Napster, as the company prepares to offer DRM-free downloads at its download store within the first six months of this year. He twice boasted that Napster reduced its ad spend in Q4, yet still managed to generate more subscription trials, which he presented as proof that the company's subscription is working. He believes the introduction of MP3 sales will attract more users to its subscription service.
-- Mobile moves: Early traction in mobile has gotten off to a slower start than Gorog and company had hoped because the number of Napster over-the-air compatible devices that hit the U.S. was lower than promised; delays in carrier launches also hindered sales. Napster's expectations for new devices coming to market are not diminished, however. Gorog says the company believes "millions" of handsets will soon be Napster-accessible.
Earnings: Napster Slims Losses In Q4; Revs Gain 15 Percent
Napster (NSDQ: NAPS) narrowed its net loss to $2.8 million ($0.06/share) in Q4, compared to a net loss of $9.5 million ($0.22 /share) last year. Revenues continued to grow, reaching $32.8 million, up 15 percent from Q406's $28.4 million. The company may also be starting to arrest subscriber losses, which were down less than 1 percent compared to Q307. The online music service also offered a look at its with cash holdings on a consecutive basis: by the end of the quarter, Napster had $69.3 million in "cash, cash equivalents and short-term investments," an increase of $900,000 from the prior quarter.
Earlier last month, Napster bumped up subscription prices from $9.95 per month to $12.95 - a 30 percent hike. Aside from that, Napster has also been focusing on building up its mobile services outside the U.S., particularly in Japan and Latin America. For the full year, the company's revenues were up about 18 percent to $96.6 million from $89.1 million. However, total cost of revenues were also up, rising from $57.4 million to $68.4 million, a 19.2 percent increase.
Earning release | Webcast (5:00 PM ET)
Earnings: WMG Execs: 'Smaller Scale' M&A; Imeem Investment; DRM-Free MP3s
"Growth, particularly mobile, remained on a slower trajectory," Warner Music Group (NYSE: WMG) CEO Edgar Bronfman, Jr. warned analysts and investors during the earnings call for the quarter ending Dec. 31, 2007. But he also used his prepared remarks to talk big: "We continue to explore new business models that will accelerate digital growth. We are expanding our rights ... with new artists." On Dec. 10, WMG artists held top slot on all four iTunes Store categories, he bragged. As for that Bulldog acquisition and subsequent disposal, Bronfman said not all acquisitions work out and, where they don't, "we move on".
-- Mobile/MP3: Addition of DRM-free MP3s to Amazon's (NSDQ: AMZN) store "underscores our commitment to enhance the competitiveness of the digital marketplace." PlayNow, the Sony (NYSE: SNE) Ericsson (NSDQ: ERIC) service to which WMG added tunes in January, "has greatly improved its user interface ... and functionality from its previous incarnation, addressing key gating factors. We are pleased to see Sony Ericsson and other handset manufacturers beginning to recognize the importance of music content and ... make it seamlessly available on their devices. ... You're going to see an increase in music-capable devices."
-- Plans: This year's strategy is "playing a key role in industry initiatives, platform development and standard setting such as our recent pan-European digital licensing effort." Speaking on the Warner/Chappell publishing arm: "Diminishing CD sales will cause mechanical revenue (i.e. royalties) to decline over time." CFO Michael Fleischer: "Today's recorded music business is challenged and it may take some time before it returns to growth." WMG is trying to expand to get a greater slice of touring, fan club and ticket operations as well as more 360 deals, which it wants for most of its new artists.
-- M&A: Fleischer: "Deals this fiscal year should be on a smaller scale than those we concluded in 2007". WMG will "only add smaller businesses. ...It's more about building on the skills required to build our opportunities. I don't see that there are large opportunities this year." Bronman said the only targets would be: "Small companies that do things that we don't do that allow us to improve our offering to artists and connect with their fans."
-- imeem: What was last year referred to as a revenue-share "partnership" - struck after WMG dropped a lawsuit against the social network in July - Bronfman today called an "investment": "We think this investment also will be both extremely useful and helpful for the music industry generally as well as being significant value to our shareholders over time."
-- Piracy: Said Bronfman: "We are gratified to see the French government put together a groundbreaking agreement which takes a novel approach against internet piracy." (See our previous posts on how France's new policy will see ISPs monitor customers' traffic and ban illegal file-sharers.) "We see this as an important initiative in the war on internet piracy."
Other formats: Bronfman pledged support for Sony BMG's digital music card, which "could potentially be a very positive format, and expand the retail availability of music by taking that format in to non-traditional outlets." MVI discs, a DVD-Audio successor, account for 20 percent of some title sales.
Update SeekingAlpha.com has posted the transcript.
Earnings: WMG Ups Digital 41 Percent Annually; Records Loss In 'Challenging' Year
Warner Music Group (NYSE: WMG) digital revenue grew nine percent in the last three months of 2007 to $141 million. Digital now makes up 14 percent of total group revenue and is up 41 percent over the corresponding 2006 quarter.
Overall, revenue rose 6.6 percent to $989 million but WMG made a $16 million net operating loss, including an $18 million impairment from the purchase of concert promoter Bulldog last May. That's down from a net income of $18 million in the corresponding 2006 quarter. So CEO Edgar Bronfman Jr started the release predictably: "2007 was a challenging year for the recorded music industry ... We recognize that there remains much to be accomplished." It continued: "The shift in consumption patterns from physical sales to new forms of digital music continues."
In the recorded music division, income fell from $99 million the previous year to $71 million, though digital revenue grew 41.9 percent over the year to $132 million, "primarily driven by strength in global online downloads". In the music publishing division, digital revenue was $10 million, or 6.9 percent of the unit's total revenue.
Release | Webcast | Transcript (SeekingAlpha.com)
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Earnings: WMG Ups Digital 41 Percent For Quarter; Records Loss In 'Challenging' Year
Warner Music Group (NYSE: WMG) digital revenue grew nine percent in the last three months of 2007 to $141 million. Digital now makes up 14 percent of total group revenue and is up 41 percent over the corresponding 2006 quarter.
Overall, revenue rose 6.6 percent to $989 million but WMG made a $16 million net operating loss, including an $18 million impairment from the purchase of concert promoter Bulldog last May. That's down from a net income of $18 million in the corresponding 2006 quarter. So CEO Edgar Bronfman Jr started the release predictably: "2007 was a challenging year for the recorded music industry ... We recognize that there remains much to be accomplished." It continued: "The shift in consumption patterns from physical sales to new forms of digital music continues."
In the recorded music division, income fell from $99 million the previous year to $71 million, though digital revenue grew 41.9 percent over the year to $132 million, "primarily driven by strength in global online downloads". In the music publishing division, digital revenue was $10 million, or 6.9 percent of the unit's total revenue.
From the later earnings conference call???
- Bronfman Jr: "Growth, particularly mobile, remained on a slower trajectory." "We continue to explore new business models that will accelerate digital growth. We are expanding our rights ... with new artists." On December 10, WMG artists held top slot on all four iTunes Store categories, he bragged. On that Bulldog acquisition and subsequent disposal, Bronfman Jr said not all acquisitions work out and, where they don't, "we move on".
- Mobile/MP3: Addition of DRM-free MP3s to Amazon's (NSDQ: AMZN) store "underscores our commitment to enhance the competitiveness of the digital marketplace". PlayNow, the SonyEricsson (NSDQ: ERIC) service to which WMG added tunes in January, "has greatly improved its user interface ... and functionality from its previous incarnation, addressing key gating factors. We are pleased to see SonyEricsson and other handset manufacturers beginning to recognize the importance of music content and ... make it seamlessly available on their devices." "You're going to see an increase in music-capable devices."
- Plans: This year's strategy is "playing a key role in industry initiatives, platform development and standard setting such as our recent pan-European digital licensing effort". Speaking on the Warner/Chappell publishing arm: "Diminishing CD sales will cause mechanical revenue (ie. royalties) to decline over time." CFO Michael Fleischer: "Today's recorded music business is challenged and it may take some time before it returns to growth." WMG is trying to expand to get a greater slice of touring, fan club and ticket operations as well as more 360 deals, which it wants for most of its new artists.
- M&A: Fleischer: "Deals this fiscal year should be on a smaller scale than those we concluded in 2007". WMG will "only add smaller businesses". "It's more about building on the skills required to build our opportunities. I don't see that there are large opportunities this year." Bronman Jr. said the only targets would be: "Small companies that do things that we don't do that allow us to improve our offering to artists and connect with their fans."
- imeem: What was last year referred to as a revenue-share "partnership" - struck after WMG dropped a lawsuit against the social network in July - Bronfman Jr. called an "investment": "We think this investment also will be both extremely useful and helpful for the music industry generally as well as being significant value to our shareholders over time."
- Piracy: Said Bronfman Jr: "We are gratified to see the French government put together a groundbreaking agreement which takes a novel approach against internet piracy." See our previous posts on how France's new policy will see ISPs monitor customers' traffic and ban illegal file-sharers. "We see this as an important initiative in the war on internet piracy."
- Other formats: Bronfman Jr. pledged support for Sony (NYSE: SNE) BMG's digital music card, which "could potentially be a very positive format, and expand the retail availability of music by taking that format in to non-traditional outlets". WMG has seen MVI discs (a DVD-Audio successor) account for 20 percent of some title sales.
Related
Earnings: WMG Ups Digital 41 Percent Annually, Records Loss In 'Challenging' Year
Warner Music Group (NYSE: WMG) digital revenue grew nine percent in the last three months of 2007 to $141 million. Digital now makes up 14 percent of total group revenue and is up 41 percent over the corresponding 2006 quarter.
Overall, revenue rose 6.6 percent to $989 million but WMG made a $16 million net operating loss, including an $18 million impairment from the purchase of concert promoter Bulldog last May. That's down from a net income of $18 million in the corresponding 2006 quarter. So CEO Edgar Bronfman Jr started the release predictably: "2007 was a challenging year for the recorded music industry ... We recognize that there remains much to be accomplished". It continued: "The shift in consumption patterns from physical sales to new forms of digital music continues".
In the recorded music division, income fell from $99 million the previous year to $71 million, though digital revenue grew 41.9 percent over the year to $132 million, "primarily driven by strength in global online downloads". In the music publishing division, digital revenue was $10 million, or 6.9 percent of the unit's total revenue.
Earnings call to come...
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SpiralFrog: Q3 Losses of $3.4 Million; Looking to Raise Up to $25 Million
Ad-supported music startup SpiralFrog isn't a public company, but it files financial data with the SEC per an agreement with investors. Its latest 10-QSB filing shows the company lost $3.4 million in Q3 on a revenue trickle of $20,400. The balance sheet reveals that the company has just $2.3 million in cash right now, and a total stockholder's deficit of $6.2 million. Among its liabilities are $10.8 million in senior notes and $2.4 million in accrued minimum royalty payments. Obviously the company is in need of more cash, and the filing does say it plans to raise up to $25 million at some point in the next 12 months.
As for how the company plans to get some momentum: "Execute marketing campaign in the United States aimed at 13-34 year olds, through one or more of the following approaches: hire gorilla (sic) marketing firms for unconventional promotions; consumer targeted press releases; advertising on some of the youth community sites; or hiring 'bloggers' to attract attention to us on the internet." You be the judge of this.
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Earnings: Vivendi Plans Entertainment Portal; Universal Slides Despite Digital Doubling
Vivendi (EPA: VIV) will this week test a "content and services platform" website that, whilst secretive, could be a direct-to-consumer online TV outlet. "Zaoza", "a major project", will be "a platform for a huge number of users", with "some element of social networking", "a wide range of entertainment products" and availability over mobile (via Telecommunications magazine). Thomson: "Observers have seen the project as an attempt by Vivendi to compete with the likes of Google's (NSDQ: GOOG) YouTube and News Corp's MySpace by drawing on content from Vivendi units such as pay-TV operator Canal Plus and mobile phone network SFR." More in extended entry???
Levy in September spoke out against rates employed by Apple's (NSDQ: AAPL) iTunes Store - which NBC Universal, (NYSE: GE) in which it has a 20 percent stake, was set to pull out of - and a recent restructure of NBC Universal International emphasised direct sell-through opportunities.
- Music: In earnings for the nine months to September 30, Universal Music Group (UMG) saw digital sales grow 47 percent on last year to 488 million euros and they now make up 15 percent of all the label's revenue (up from 11 percent). But overall UMG earnings before tax, interest and amortisation (EBITA) for Q3 was down 16.7 percent to 115 million euros (and down 26 percent to 335 million euros over the nine months)
- France: At Canal+, pay TV revenue is up 24 percent to 551 euros for the nine months thanks mainly to the recent acquisition of the TPS platform. In the telco SFR, mobile revenue crept up one percent to 6.54 billion euros and data revenues were up 3.9 percent on growth in MMS; music, TV and gaming content; and mobile internet services, all of which now comprise 13.2 percent of service revenue.
- Games: World Of Warcraft continues to be a cash cow. Expansion packs released early in the year helped Vivendi Games Q3 EBITA up 70.8 percent to 41 million euros.
Overall, underlying Q3 group profit rose 2.7 percent to 1.335 billion euros.
Release | Financials | Slides
Earnings: Digital Music Group Grows Revs and Losses in Q2; Merger With Orchard Approved
Updated: The merger of Digital Music Group with indie music provider The Orchard has been approved by overwhelming ratio—99 percent—after a shareholders vote today, reports Bizjournals. Orchard CEO Greg Scholl will lead the combined company, which will be headquartered in New York City. The company's trading symbol on Nasdaq will also change from DMGI to ORCD. The combined business will all be conducted under the name "The Orchard."
Original post: Online music distributor Digital Music Group did Q3 revenue of $3.08 million, compared to $1.2 million last year, according to a 10-Q filed this morning. The company, which is in the process of merging with The Orchard, also saw its losses expand to $1.3 million from $848K, although this quarter includes $598K in merger-related costs. In the filing, the company indicated that a vote on the Orchard merger is taking place today (we'll update on the results) and that shareholders will be asked to approve a reverse stock split for NASDAQ listing purposes. Some highlights:
-- Total music downloads for the company hit 2.8 million in the quarter, up from last year's 1.36 million, as the company has expanded its catalog of available tracks.
-- Mobile distribution revenue was virtually flat at $444K, while subscription revenue grew to $499K from $107,000.
-- The company's newly launched video content service is still in market testing and did revenue of $25K. So far the company has delivered 5,000 episodes of video content to 17 online and mobile video retailers.
-- Apple's (NSDQ: AAPL) iTunes accounted for 59 percent of revenue, down from 78 percent last year.
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Earnings: Viacom Q3 Revenues Up 24 Percent; Net Income Up 80 Percent
A good performance from Viacom, with net income of $641.6 million in Q307, up 80 percent from $356.8 million. Revenues rose as well, up 24 percent to $3.27 billion, from $2.6 billion, aided by the performance of Transformers and Shrek The Third as well as stronger numbers from Media Networks.
-- Media Networks' revenue rose 9 percent, with adjusted operating income up 14 percent to $818 million, excluding one-time items like a $3 million charge for restructuring. Worldwide advertising revenues were up 7 percent, to $1.18 billion.
-- Filmed Entertainment revenue rose 57 percent, to $1.30 billion, from $829 million the previous year. It also showed operating income of $71.7 million compared with an operating loss last year of $7.8 million.
Earnings release | Webcast (8:30 a.m. eastern)
Earnings call: The call started with a lovefest between Chairman Sumner Redstone and CEO Phillipe Dauman, with Redstone talking about how smart he and the board were to bring in old friends Dauman and COO Tom Dooley and raving about their leadership, results, etc. If Sumner's happy, everybody's happy.
Digital: Dauman: "We are growing our audiences and doing a better job of monetizing… As we provide richer content, users are staying longer." They've added 185-p-lus new digital advertisers year to date. More to come.
Monetizing Flux: The translated short answer for an analyst who wants to know where the money is in Flux: increased traffic is good for advertising.
The Strike: The company says it's "well positioned" for a strike. In other words, it has stuff it's working on that doesn't require fresh material right away. As for things that will be affected, like the Daily Show, there will be reruns at first, and then they'll evaluate.
Earnings: Digital Music Group's Losses Increase; Revs Up
Digital Music Group (Nasdaq: DMGI), the online music distributor currently in the process of being merged with The Orchard, has reported its Q2 earnings, and its losses increased to $1.1 million, up from $0.6 million in the year-ago quarter. Revenues were $3.15 million, up from $0.84 million in Q206. This included costs related to the company's merger with The Orchard of $328K.
Some interesting stats from the distributor: Total paid downloads (with albums presented as single track equivalents) for Q2 were 4,092,000, up from Q206 figure of 3,343,300. The average monthly download rate for Q207 was 5.5 times, compared to download rates of 14.8, 9.5, 7.5 and 6.4 times for the Q1 to Q4 of 2006, respectively, and 6.9 times for Q107. Apple iTunes Store accounted for approximately 56 percent of the company's revenue for Q207 (down from 88 percent in Q206). Mobile revenues increased from 8 percent of its pro forma revenue in Q206 to 13 percent in Q207. Earnings release
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Earnings: WMG: Wider Loss; Digital Revenue Up 29 Percent—Now 15 Percent Of Revenue
The shift to digital continues to have an impact on the Warner Music Group (NYSE: WMG) bottom line, contributing negatively to lower sales in the spring quarter and positively to the company's growth. Revenues dipped 2 percent to $804 million from $822 million in the same period last year, with declines in physical sales only partly offset by growth in digital recorded music growth and music publishing. Domestic revenue dropped 1 percent while international was down 4 percent. The net loss was $17 million compared with $14 million in the same 2006 quarter, widening to $29 million if non-recurring items (realignment charges, Bertelsmann settlement, etc.) are excluded.
Digital accounted for $119 million—15 percent—of WMG's overall revenue. Digital revenue was up 29 percent over $92 million in the same quarter in 2006 and up 7 percent from the previous quarter. Total digital revenues, excluding eliminations, were comprised of U.S. revenues of $82 million, or 68 perecent of total digital revenues, and international revenues of $38 million, or 32 percent.
-- Recorded Music: A microcosm of the overall picture: revenue decreased 4 percent to $653 million while digital revenue rose 27 percent to $112 million and 17 percent of division revenue. Domestic digital revenue accounted for $77 million, 22 percent of total domestic recorded music revenue.
-- Music Publishing: Revenue was up 5 percent, to $157 million, with digital revenue contributing 5 percent or $8 million.
-- EMI: The EMI non-acquisition cost $8 million during the quarter.
Update: From the earnings call transcript (via SeekingAlpha): Chairman and CEO Edgar Bronfman Jr. said Terra Ferma's offer for EMI "created market expectations for a price from us that we could not justify." Instead, WMG will focus on its own transition from a traditional music company to a "music-based content company."
-- Bronfman highlighted deals with Imeem, LaLa and Russia JV Digital Access as examples of that transition.
-- Worldwide digital revenue is about 60 percent online and 40 percent mobile. Online is larger than mobile in the U.S. while the reverse holds internationally. CFO Michael Fleisher: "Logically, as the penetration of U.S. music-enabled handsets improves the mobile contribution to digital revenue should grow." Mobile was weak domestically because of the release schedule.
-- Asked about acquisitions, Bronfman gave the usual no comment on specifics but provided some perimeters: "We look at businesses in recorded music and we are increasingly looking at businesses throughout the music value chain, whether that's physical businesses, whether it is management businesses or potentially even digital distribution businesses."
Earnings: EMI Music Digital Income Up 26 Percent In Q2 But Overall Revenue Drops
Digital downloads increased for EMI Group (LON:EMI) in the second quarter, but that wasn't enough to stop an expected 5.1 percent fall in overall revenue. In the music division, digital income was up 26 percent and physical formats down 19.8 percent - overall, the unit was down 13.4 percent, reflecting the "tough market conditions experienced in the recorded music market".
That decline swallowed up what was an 11.9 percent rise in the publishing division, where digital revenue was up 13 percent and even physical formats rose 12 percent. EMI said early revenue indications are "encouraging" for its DRM-free range of high-quality downloads, introduced at iTunes Plus in May. No detailed financials as it is just a statutory UK quarterly update. Company shareholders last week finally accepted a £2.4 billion ($4.8 billion) private equity takeover offer from Terra Firma after Warner Music Group ruled itself out of the bidding. Release.
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Earnings: Napster's Losses Narrow; Subscribers Fall
Napster (Nasdaq: NAPS) reported its Q2 numbers, and it still keeps plugging away, with some surprises: its losses narrowed as it generated record revenues and managed to lower customer acquisition costs. It has losses of $4.2 million this quarter, after a loss of $9.8 million in the year-ago period. Revenues increased 15 percent to $32.3 million from $28.1 million in the year-ago quarter.
Napster said it has been scaling back marketing expenditures and, as a result, lowered its subscriber acquisition spending to an all-time low, reports AP. But Napster has about 770,000 subscribers. Excluding a seasonal decrease of 40,000 university subscribers, its paid subscriber base declined 2.5 percent during the quarter. The subscriber decline was partially offset by the addition of mobile service subscribers, the company said. More in release.
Earnings: ClearChannel's Net Income Up 19 Percent
Clear Channel (NYSE:CCU), the biggest radio network in U.S. and awaiting approval of its planned acquisition by two private-equity firms, has reported its Q2 earnings, and its revenues were up 5 percent for the quarter, to $1.8 billion. Its net income jumped 19 percent to $236 million, up from $197.5 million for the year-ago period. Radio business is flat with just 1 percent growth, but the company's outdoor advertising revenues jumped 12 percent.
Nothing on its digital revenues in the earnings release, and the company didn't hold an earnings call pending the acquisition.
Earnings: Vivendi's Q2 Sales Up; UMG Down; Digital Music Up 49 Percent
French media and telecom group Vivendi (Paris:VIV.PA) reported its Q207 numbers today, and its sales rose 7.4 percent. Revenues rose to $7.15 billion from $6.58 billion a year earlier, beating expectations.
Sales in the games unit rose 29 percent to $287.2 million after the January release the "World of Warcraft: The Burning Crusade" subscription game. At the end of June, Vivendi counted 9 million users and said preparations are under way for a release in China.
On the music side, the news wasn't so good: Sales at Universal Music Group, the world's largest label, dropping 0.8 percent to $1.47 billion as best-selling titles from Nelly Furtado and Amy Winehouse failed to offset the impact of a higher euro. Digital music revenues of $212 million increased 49 percent compared to last year at constant currency with both online and mobile sectors reporting significant growth.
More details in the PDF release here.
Earnings: As Revenue Falls, HMV Plans Social Net With DRM-Free Music Downloads
High street entertainment retailer HMV is to launch a "social network" including DRM-free music in a bid to halt falling revenue from physical sales. In results for the year ending April 28, pre-tax profits fell from £98.2 ($196) million to £48.1 ($96) million despite a 3.8 percent increase in sales. So HMV.co.uk will from September begin offering DRM-free MP3 downloads for sale, with material coming from EMI's DRM-free repertoire (previously iTunes Plus, PassAlong, 7Digital and VidZone) as well as from independent labels. Prices from £0.79 ($1.58).
The social network was referred to back in March. From today's statement: "Delivering film, music and games-related content to its online community, our new site will allow users to create home pages, meet like-minded people and access film previews, behind-the-scenes footage and music performances." HMV.co.uk already offers digital music downloads. Now it is aiming for 20 percent of UK sales to come from the site and for nine percent of Waterstone's sales to come from the books retailer's website by 2010. It expects digital music players and digital radios will account for 13 percent of store sales by 2010; coupled with a retail partnership with 3 UK, "these initiatives will further reduce our dependence on the declining physical music category". In books, HMV will move to stock more children's titles as these are "less prone to online purchasing".
Release | Financials
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Earnings: Napster Grows Q1 Net Loss As Revenues Rise
Napster (Nasdaq: NAPS) saw its Q1 net loss double to $8.5 million from its net loss of $4.4 million last year, while revenue was up 9 percent to $29.1 million from $26.8 million. Looking ahead, Chris Gorog, chairman and CEO, said he expects the company to benefit from deals with wireless carriers, such as its deals with Motorola and AT&T, as mobile phone music capabilities become more widely accepted. The subscription music service also alluded to partnership with Circuit City as a deal that should bear fruit shortly. Napster’s total worldwide paid subscriber base was 830,000, including university subscribers, Napster Mobile subscribers, Napster Japan subscribers and the AOL Music Now subscribers who transitioned in March 2007. The number of paid subscribers grew 47 percent from the third quarter of 2007 and 37 percent year over year. Earnings release | Webcast
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Earnings: Digital Music Group’s Q1 Losses Widen
Digital Music Group, the online music aggregator and distributor, has reported its Q1 numbers, and losses were up to $736K, compared to a net loss of $414K in the year-ago quarter. Revenues came in at $3.4 million compared to $720K in the year-ago quarter. Apple iTunes store accounted for about 70 percent of the company’s revenues for Q1. Lots of other data in the earnings release, which goes on to show how tough it is to make any decent revenues and margins in the digital music market.
Earnings: WMG Digital Revenues Rise, But Not Enough To Stem 2Q Net Loss
While digital revenues are growing at Warner Music Group (NYSE: WMG), the gains in that area were not enough to completely offset the FY07 2Q net loss of $27 million, or 19 cents a share, compared with a loss of $7 million, or 5 cents a share, a year earlier. Meanwhile, the quarter’s total revenue of $784 million decreased 2 percent from the prior-year quarter, or 5 percent on a constant-currency basis. A day after the company said it would layoff about 400 staffers as it shifts resources to digital efforts, WMG also said:
-- Digital revenue was up 23 percent to $111 million, or 14 percent of total revenue in the quarter.
-- Recorded music revenue in general fell 4 percent from the prior-year quarter to $648 million.
-- Recorded music digital revenue came in at $105 million, a gain of 22 percent compared to the prior-year quarter and represented 16 percent of total recorded music revenue. Domestic recorded music digital revenue was $77 million, or 22 percent of total domestic Recorded Music revenue.
-- Operating income for the quarter dropped to $19 million from $45 million in the prior-year quarter. Operating margin was down 3.2 percentage points to 2.4 percent. Earnings release | Webcast
Earnings: Creative Narrows Loss
Pointing to weaker than expected sales in Asia and the U.S. on Tuesday, Creative Technology (Nasdaq: CREAF), a maker of MP3 players, still managed to narrow its FY 3Q07 net loss to $23.6 million, with a loss per share of $0.28, compared to a net loss of $114.3 million with a loss per share of $1.38 for the same period last year. Revenues for the quarter came in at $183.8 million, versus revenues of $225.7 million in the prior year. The company also reported:
-- During the earnings onference call Craig McHugh, president of Creative Labs, said its personal digital entertainment unit, which includes its line of Zen MP3 players and web cameras, contributed 52 percent of total sales in the period. This compares to 68 percent of revenues that segment contributed last quarter and 60 percent of revenues from PDE in the same quarter of last year.
-- McHugh added the company is partnering with Wal-Mart’s download store. “If we look at the Wal-Mart online offering, I think it expands the capabilities that Creative has. They have a vast array of content partners. We are very excited about it short-term and what it could mean long-term… As you know, many people have credited iTunes as being a critical part of Apple’s strategy, but as we see now, key partners offering such great content, very good pricing and great services, as Wal-Mart and some of our other partners, I think it allows us to have a complete solution for our customers.” Earnings release (PDF) | Webcast | Transcript (SeekingAlpha.com)