Tuesday, October 20, 2020

WMG set for $338m acquisitions (and possibly revenue decline) | Music Ally

It was a busy day for Warner Music Group yesterday, with several interrelated announcements. First, there was news of the company raising $250m of new funding through a ‘senior secured notes offering’ to be spend to “fund a portion of the aggregate cash consideration for certain acquisitions”.

Later that day, a US regulatory filing offered more information on those plans. “In early October we completed an acquisition for certain music assets, and we recently came to an agreement in principle regarding a second acquisition regarding certain other music and music-related assets… for aggregate cash consideration of approximately $338 million,” explained WMG, noting that it has set aside $90m of cash on top of the $250m offering to pay for the deals.

No, WMG isn’t saying what those acquisitions are until they’re completed. But the filing did offer other information: preliminary, unaudited estimates for WMG’s financial year, which ended on 30 September. They offer an important snapshot of the effect that the Covid-19 pandemic has had on the company.

WMG expects its overall revenues to be between $4.44bn and $4.49bn for that fiscal year, compared to $4.48bn for the year before – so possibly (but not certainly) a decline. WMG added that its recorded music revenues will definitely fall – from $3.84bn in its fiscal 2019 to $3.8bn-$3.83bn in 2020 – although its publishing revenues will rise – from $643m to $645m-$665m.

(We have a wide range of readers nowadays with varying experience of financial results. WMG’s fiscal year runs from October to September, so its ‘final quarter’ is actually Q3 as we’d think of it in calendar terms. So the industry’s traditional boom-time of Q4 is, for Warner Music, its fiscal first quarter. Significant here because WMG’s ‘2020’ financials include the non-Covid-impacted calendar Q4 from last year, rather than the Covid-affected calendar Q4 from this year.)

WMG also offered figures on streaming revenues for recorded music, which it expects to come in at around $2.39bn-$2.41bn for its fiscal 2020, up from $2.13bn in its fiscal 2019. That’s growth of between 11.6% and 12.2% for the year, down from 18.6% the year before. When WMG publishes its official financials for fiscal 2020, we may hear more about the extent to which this deceleration is Covid-fuelled, versus a natural slowdown in streaming-revenue growth for major labels.

Stuart Dredge

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