Warner Music Group delivered a number of big announcements in quick succession this morning (February 6).
First came the confirmation that Warner has acquired a controlling stake in Tempo Music Investments aka Tempo Music, which MBW first told you about last month.
Warner’s second big announcement was a new multi-year licensing deal with Spotify, which sources have confirmed overrides SPOT’s controversial ‘bundling’ payment structure in the US.
After those two news alerts, Warner published its calendar Q4 (fiscal Q1) financial results, posting company-wide revenues of USD $1.67 billion (across recorded music, music publishing, and other activities) and subscription streaming revenue growth of 6.6% YoY.
WMG CEO Robert Kyncl also confirmed on the company’s earnings call today that Warner has a new deal with Amazon Music.
Responding to a question about Warner’s Spotify deal, without going into specific details about the agreement, Kyncl explained: “We’re focusing on a three-pronged strategy, which is, one, increasing share of the pie (market share) – which is our work day to day. To give you an example, Atlantic has seen a lot of progress in the last quarter.
“Two, to increase the pie itself which is where our deals with the DSPs go. And then three, efficiency. So [focusing] on increasing the size of the pie.”
He added: “I’m very happy with our progress and with this deal. It’s obviously important that we are doing this in conjunction with our distribution partners. As we said, it’s never easy. There’s always transition time to it.
“It’s one of those things that we need to still roll out through the entire industry. But I’m happy to say that we now have two deals, which are headed in this direction, which are Amazon and Spotify.
“There’s more work to do with others and for all of this to cycle through, but this is a really great step in the right direction.”
Here are four other things that stood out during the call…
1. Warner’s Tempo acquisition is “a great example” of the company’s “M&A strategy in action”.
Warner Music Group announced the acquisition of a controlling interest in Tempo Music today, which as we noted this morning, is the largest company acquisition under Robert Kyncl, since he became WMG CEO in 2023.
The final deal is understood to have valued Tempo at north of $450 million.
Tempo’s previous owner, Providence Equity Partners, retained a minority stake in the company as part of the deal.
Kyncl confirmed on the earnings call today, however, that WMG has “an option to acquire the remainder by the end of 2027”.
“As we become more efficient, we’re creating a virtuous cycle that will enable greater reinvestment that delivers accelerated growth.”
Robert Kyncl
Commenting on the deal, Kyncl said: “Tempo will provide us with an evergreen catalog, which includes premium music rights to songs recorded by artists such as Bruno Mars, 21 Pilots, Adele, Wiz Khalifa, Florida Georgia Line and Lukas Graham.”
He added: “In addition to the high quality of these rights, Tempo’s robust margins and cash flow generation make for an attractive financial profile that meets our key investment criteria.
“We have a preexisting administration agreement with Tempo, and this investment will become even more accretive as deals with other publishers roll off and we expand the scope of our direct control over the catalog.”
Kyncl also told analysts that WMG’s “Tempo acquisition is a great example of our M&A strategy in action”.
Added Kyncl: “As we become more efficient, we’re creating a virtuous cycle that will enable greater reinvestment that delivers accelerated growth.”
2. Robert Kyncl says that “Warner Music Group’s engine is strong” and that the company is “a crucial part of a thriving ecosystem”.
During his opening remarks, Kyncl outlined Warner’s strategy and positioning in the market.
He argued that “Warner Music Group is a crucial part of a thriving ecosystem” and that “it’s music’s resilience, sharability, and durability that makes it such a unique and valuable sector”.
He explained that the company’s results this quarter, which you can see in our coverage here, “reflect the impact of temporary macro trends, both in our industry and in the global economy”.
Added Kyncl: “As all of these impacts will stabilize over time, I’d like to focus my remarks on our strategy, and explain why we’re so confident about the future.
“Our goals are clear,” said Kyncl:
- “Increase our share of the pie, meaning market share;
- “Grow the pie itself by increasing the value of music, and;
- “Become more efficient, providing greater cash flow, both for re-investment and for shareholder return.”
Highlighting the first goal, of growing the company’s share of the market, Kyncl said: “You’ve often heard me talk about us becoming the best home for talent at every stage of their careers, from baby bands to veteran superstars.
“Our recent successes have showcased how we’re firing on all cylinders across that entire continuum, including new [artists], such as Benson Boone, who had the biggest song in the world last year with Beautiful Things, and Teddy Swims who had the biggest song in the US with Lose Control.
“It’s music’s resilience, sharability, and durability that makes it such a unique and valuable sector.”
Kyncl continued: “In addition to growing [WMG’s] organic investment behind A&R, [WMG] continued to pull other levers in the quarter as part of our ongoing efforts to generate increased market share”.
Those efforts, noted Kyncl, included “partnering with local players, such as Skillbox in India; acquiring valuable catalogs, like Cloud 9 in Benelux; and making leadership changes, including appointing a new CEO [Takeshi Okada] in Japan.”
Added Kyncl: “All of this hard work is aimed at growing our global market share.
“We are already seeing early positive signs as Atlantic, one of our flagship labels, increased its market share by half a percentage point in the US over the prior-year quarter, according to Luminate data.”
3. WMG’s CEO says Warner’s “powerful combination of recorded music and music publishing rights” makes the company’s “repertoire essential for any service…”
Outlining the second goal mentioned above, “grow[ing] the pie itself by increasing the value of music”, Kyncl explained how the company is “aligned with [its] widening network of partners in growing the pie”.
He added: “Collaborative innovation has always been part of our DNA. We actively work with our partners to constantly evolve and to attract more customers in the music ecosystem.
“Whether it’s launching new formats, expanding features, adding new tiers, or experimenting with business models, our collective goal is to ensure the continued growth of the pie.
“As that is starting to happen, our goal is to ensure that the value of music increases as the revenue pie expands.”
“Our goal is to ensure that the value of music increases as the revenue pie expands.”
He also noted that, “while there is still progress to be made across the industry,” WMG’s recent deals, “including the renewal we just inked with Spotify, represent positive momentum”.
The official press release announcing WMG’s Spotify agreement today confirmed that the deal will “deliver new fan experiences, a deeper music and video catalog, further paid subscription tiers, and differentiated content bundles”.
The release added: “The agreement also builds on the companies’ existing alignment around ‘artist centric’ royalty models that reward and protect the power of artists to attract and engage audiences.”
“We look forward to seeing the value of music increase as we drive growth through further innovation together with Spotify,” continued Kyncl on the earnings call.
“It’s our increasingly powerful combination of recorded music and music publishing rights that make our repertoire essential for any service.”
Kyncl also noted that in 2024, WMG’s “artists and songwriters contributed to nine of Billboard‘s Top 10 and over half of the Billboard Hot 100″.
“Our music has fueled massive subscriber growth over the past 16 years and will continue to do so,” added Kyncl.
4. Robert Kyncl’s “mantra” is that “focus and simplicity bring great intensity and impact…”
Moving to the third goal outlined by Kyncl during the call, regarding “efficiency,” WMG’s CEO explained that his “mantra” is as follows:
“Focus and simplicity bring great intensity and impact”.
Added Kyncl: “Through a combination of organizational changes and investments into technology, we are continuing to make the company more effective and efficient.
“At the same time, we’ve exited some non-core businesses in order to allocate our resources to the most accretive activities, while doubling down on our central value proposition to artists and songwriters.”
“We’ve made real progress on these fronts and we are delivering on schedule through our previously announced restructuring programs.”
“This enabled us to increase our A&R investment by double-digits last year and this year.”
Some of those organizational changes arrived last February, when WMG announced a headcount reduction of approximately 10%, with the majority of those layoffs taking place within WMG’s ‘owned and operated’ media properties – such as news/entertainment websites Uproxx and HipHopDX, plus the now-shuttered social media publisher IMGN.
Kyncl confirmed at the time that Warner would be “exiting” those ‘owned and operated’ media platforms. (Uproxx, HipHopDX, and other media assets were subsequently sold to Uproxx Founder and CEO Jarret Myer in April last year).
Warner’s CEO said in February last year that the majority of the cost savings from the downsizing would be reinvested by “putting more money behind the music”.
Speaking on the company’s earnings call today, Kyncl confirmed: “As we told you, our goal was to reinvest the majority of those savings into strategically important initiatives that will propel our business forward.”
“This enabled us to increase our A&R investment by double-digits last year and this year.”
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