Warner Music Group’s Recent Announcements
This morning, Warner Music Group made a series of significant announcements (February 6).
Initially, it was confirmed that Warner had acquired a control share in Tempo Music Investments, also known as Tempo Music, which MBW first reported on last month.
The second major announcement from Warner was a new Perennial License Agreement with Spotify, with sources confirming the conflicting Spot Spot Payment structure “Association” in the USA.
Following these highlights, Warner released its financial results for Q4 (Fiscal Q1), reporting company-wide earnings of 1.67 billion US dollars (including recorded music, music publishing, and other activities) alongside a 6.6% increase in streaming subscription revenue.
WMG General Director Robert Kinkl also confirmed today on the company’s call that Warner has struck a new deal with Amazon Music.
In response to a question about the Spotify Warner transaction, without diving into specific details of the agreement, Kinkl explained: “We are focused on a tripartite strategy which includes: one increasing our market share overall. For instance, Atlantic saw significant growth last quarter.
Two expanding the overall market through our DSP agreements. And finally, efficiency aiming at increasing the overall size of the market.”
He added: “I am very pleased with our progress and this deal. This has to be done in collaboration with our distribution partners. As we’ve stated before, it’s never straightforward. There’s always a transitional period.
“This is one of those matters where we need to pivot throughout the industry. But I am thrilled to report that we now have two major deals in place with Amazon and Spotify.
“There’s more work to do with others, and all of this is about moving forward, but this is a truly significant step in the right direction.”
Key Highlights from the Earnings Call
Here are four more notable points from the call…
The acquisition of Tempo Music is an “excellent example” of the M&A strategy in action for the company.
Warner Music Group announced today that it acquired a controlling interest in Tempo Music, which, as mentioned this morning, is the largest acquisition under Robert Kinkl since he became CEO in 2023.
The deal reportedly values Tempo at over 450 million dollars.
The previous owner of Tempo, Providence Equity Partners, retains a minority stake in the company under this transaction.
Kinkl confirmed in the income call that WMG has “the opportunity to acquire the remainder by the end of 2027.”
“As we become more effective, we create a virtuous cycle that will increase reinvestment, which drives accelerated growth.”
Robert Kinkl
Commenting on the acquisition, Kinkl stated: “Tempo will provide us with an evergreen catalog featuring premium rights to songs recorded by artists such as Bruno Mars, Twenty One Pilots, Adele, Wiz Khalifa, Florida Georgia Line, and Lukas Graham.”
He added: “Apart from the high quality of these rights, the robust margins and cash flow generation create an attractive financial profile that aligns with our key investment criteria.
“We have an existing administration agreement with Tempo, and these investments will become more pronounced as transactions with other publishers evolve, and we expand our direct control over the catalog.”
Kinkl also informed analysts that “the acquisition of Tempo Music by WMG is a prime example of our mergers and acquisitions strategy in action.”
Kinkl concluded: “As we continue to become more effective, we generate a virtuous cycle that enhances reinvestment and propels growth.”
Strengthening the Music Ecosystem
During his initial comments, Kinkl highlighted Warner’s strategy and positioning in the market.
He stated, “Warner Music Group is an integral part of a flourishing ecosystem,” emphasizing “the stability, nurturing environment, and durability of its music that makes it such a unique and valuable sector.”
He elaborated that the company’s performance in this quarter, which can be seen in our coverage here, “shows the impact of temporary macro trends, both in our industry and in the global economy.”
Kinkl: “As these influences stabilize over time, I want to concentrate my comments on our strategy and clarify why we are so optimistic about the future.
“Our goals are definitive,” Kinkl stated:
- “Increase our market share, thereby enhancing the market’s value;
- “Expand the industry by increasing music’s value;
- “Enhance efficiency to provide larger cash flows for reinvestment and shareholder profitability.”
Highlighting the first goal, Kinkl remarked, “You often hear me say that we’re becoming the premier home for talent at every career stage—from emerging groups to established superstars.
“Our recent successes showcase how we perform at all levels of this spectrum, including new artists like Benson Boone, who had the biggest song globally last year with Beautiful Things, and Teddy Swims, with the leading song in the U.S. titled Lose Control.
“It’s the stability, nurturing environment, and resilience of music that make it a one-of-a-kind and valuable sector.”
Kinkl continued: “In addition to pursuing organic growth behind A&R investments, we are actively taking other steps this quarter as part of our ongoing efforts to enhance our market share.”
These efforts, he noted, included “Partnerships with local players such as Skillbox in India; acquisition of valuable catalogs like Cloud 9 in Benelux; and leadership changes, including appointing a new CEO (Takeshi Okada) in Japan.”
Kinkl stressed: “All this hard work aims to grow our share of the global market.
“We are already seeing early positive indications as Atlantic, one of our flagship labels, increased its market share by half a percent in the U.S. last quarter, according to Luminate.”
Powerful Combinations in Music Services
In outlining the second goal of “growing the overall market by enhancing music’s value,” Kinkl explained how the company collaborates with its expanding partner network to grow the pie.
He remarked: “Innovative collaborations have always been integral to our DNA. We proactively work with our partners to continually develop and engage more customers in the music ecosystem.
“Whether launching new formats, expanding features, adding new tiers, or experimenting with business models, our collective goal is to ensure further market growth.
“As this progresses, our objective is to elevate the music’s value alongside increased revenue.”
“Our objective is to elevate the music’s value as the revenue increases.”
He further noted that “despite ongoing industry progress,” recent WMG agreements, “including the recent update regarding Spotify, represent a positive momentum.”
The official press release announcing the Spotify WMG agreement today verified that the deal would “deliver a newfansdeeper music and video experience, further paidsubscriptiontiers, and differentiated content bundles.”
The release adds: “The agreement is based on the existing alignment of the companies around a ‘focus on artist’ model, which rewards and protects the artists’ power to attract and engage audiences.”
“We look forward to the opportunity to elevate the music’s value as we stimulate growth through further innovations with Spotify,” Kinkl noted.
“This represents our increasingly powerful combination of recorded music and music publishing, making our repertoire essential for any service.”
Kinkl also noted that in 2024, “Artists and Songwriters,” WMG contributed to nine of the top 10 or more than half of the Billboard Hot 100 charts.
“Our music has fueled the mass subscriber growth over the last 16 years and will continue to do so,” Kinkl concluded.
Focus and Efficiency in Music Business
The transition to the third goal outlined by Kinkl during the call focused on efficiency. The WMG CEO expressed his “mantra,” stating:
“Focus and simplicity bring greater intensity and influence.”
Kinkl added: “Thanks to organizational changes and investments in technology, we continue to enhance our efficiency and effectiveness.
“Simultaneously, we have divested from some underperforming ventures to allocate resources to our most impactful activities, strengthening our core value propositions for artists and songwriters.”
“We have seen genuine progress on these fronts and are delivering on our previously announced restructuring programs.”
“This has enabled us to increase our investment in A&R to double digits last year and this year.”
Some of these organizational changes took place in February last year, when WMG announced a reduction in its workforce by approximately 10%, with most layoffs occurring within WMG’s “owned and operated” media properties, such as news and entertainment websites Uproxx and HipHopDX, as well as the now social media publisher Nim.
Kinkl previously affirmed that WMG would “exit these ‘owned and operated’ media platforms.” (UPROXX, HIPHOPDX, and other media assets were later sold to UPROXX founder and CEO Jarrette Mayer in April of the previous year).
In February of last year, Kinkl stated that the majority of the savings from these reductions would be reinvested in “providing more funds for music.”
Addressing the company’s earnings today, Kinkl confirmed: “As previously mentioned, our objective was to reinvest most of these savings into strategically crucial initiatives that advance our business.”
“This has allowed us to increase our A&R investments to double digits last year and this year.”
