Warner Music Group posts smaller 2Q loss as cost cutting offsets revenue decline

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Warner Music Group posts smaller 2Q loss

NEW YORK — Cost-cutting efforts helped Warner Music Group Corp. narrow its fiscal second-quarter loss as the recording industry continues to struggle to make the transition to selling music over the Internet.

The company said Thursday that broader economic weakness is still weighing on consumers. Revenue from online sales rose, but not enough to offset the decline in compact disc sales.

Warner lost $25 million, or 17 cents per share, in the first three months of the year. That compares with a loss of $68 million, or 45 cents per share, a year ago.

Revenue slipped a little more than 1 percent to $662 million. The revenue Warner Music takes in from online music sales climbed 15 percent from the same quarter a year ago to $199 million.

Analysts surveyed by Thomson Reuters expected a bigger loss of 30 cents per share on revenue of $663 million.

Shares rose 30 cents, or 4.6 percent, to close at $6.90. Wedbush analyst Chris White maintained a “Neutral” rating on the shares but raised his price target to $7.50 from $6 reflecting better cost-cutting results.

“We are waiting for more evidence before becoming bullish,” he wrote in a note Thursday.

Warner Music CEO Edgar Bronfman Jr. said the results showed the company’s ability to generate stable results in the face of continued pressure on the music industry, even with a limited release schedule.

He also noted that online music revenue reached 47 percent of U.S. recorded music revenue, close to the tipping point that should help overall revenue rise consistently.

“We are approaching the digital divide,” Bronfman said on a conference call. “It is indicative of the great strides we’ve been making to create a more digital-centric business model.”

Overall, digital revenue accounted for 30 percent of total revenue.

Bronfman declined to speculate about how Apple Inc. might incorporate song-streaming technology from its recent acquisition of online music retailer Lala. Apple announced it would shut the service at the end of May, just months after it bought it, leading some to believe it would incorporate the technology into its iTunes music store.

Bronfman also declined to comment on a possible tie-up with EMI Group PLC. EMI parent Terra Firma Capital Partners is struggling to raise 120 million pounds ($178 million) by mid-June to meet its commitments on loans from Citigroup and has sought help from rival recording companies.