Warner Music loss narrows, but shares fall

Warner Music Group Corp today posted a narrower loss in its first quarterly report as a publicly traded company, helped by growth in online music sales, but its shares fell nearly 3 per cent on overall weakness in the music industry.

Year-to-date music industry sales are down 7 per cent from a year earlier, according to tracking firm Nielsen Soundscan. But Warner executives were quick to note that the company's sales fell only 3 per cent in that period, outperforming the industry.

"From a management perspective, that outperformance is good news," said Soleil/Media Metrics analyst Laura Martin.

"From an investor standpoint, it's bad news, because they're essentially telling investors they're operating in a declining business and that they should be investing elsewhere."

Warner chief executive Edgar Bronfman Jr said, "With a more robust release schedule, we expect to be gaining market share beyond the small market share gains we have achieved year-to-date."

But the company, home to such artists as Green Day and Madonna, declined to provide details on its release schedule or its future financial targets. "That was disappointing," Martin said.

"This is a hit-driven business. The analyst community doesn't have information to help determine (sales expectations)."

Warner said its loss narrowed to US$35 million ($50.15 million), or 28 cents a share, in the fiscal second quarter ended March 31, from US$48 million a year earlier. It did not provide a year-earlier per-share loss.

Revenue rose 4.4 per cent to US$767 million. The company posted US$31 million in sales of digital music, much of which was offset by declines in CD sales. Warner's distributor of independent labels showed an improvement for the quarter.

Revenue at the company's recorded music unit rose 5 per cent, and its operating income before depreciation and amortisation, a measure of cash flow preferred by media companies, more than tripled to US$72 million.

Music publishing revenue rose 3.4 per cent and its operating income before depreciation and amortisation rose 4.4 per cent to US$47 million.

The weaker dollar helped the company's revenue year-over-year. The dollar hit nine-month highs on Monday relative to the euro.

Warner Music said it would take a third-quarter charge of US$73 million for the termination of a management agreement with its private equity investors, which include Thomas Lee Partners, Bain Capital and Providence Equity. It also plans to take a US$33 million charge in the third quarter for one-time bonuses to employees and other issues.

The charges were disclosed previously, but the timing was not.

Warner Music shares were down 48 cents at US$16.47 in afternoon trade on the New York Stock Exchange trade.

The company raised US$554.2 million in its initial public offering on May 10, roughly a year after Bronfman and a group of private equity partners acquired Warner Music for US$2.6 billion from Time Warner Inc.

- REUTERS