Warner Music: We’re totally screwed

by Mathew on November 29, 2007 · 17 comments

I’m paraphrasing a little, but that seems to be the general thrust of Edgar Bronfman Jr.’s comments about the company’s latest financial results. In a nutshell, Warner — which Edgar Jr. maintains is not a record company at all, but a “music-based content company” — is selling less and less of its bread and butter (i.e., CDs), and not nearly enough new things to make up for the declining sales of old things.

According to a rundown of the news and the related conference call at PaidContent, Warner’s revenue was essentially flat, while earnings fell by almost 60 per cent to just $5-million — and that’s on total sales of almost $900-million, which works out to a profit margin of about .5 per cent. In other words, virtually non-existent. And the near future looks as though it’s likely to be as bad or worse.

Digital revenue climbed by 25 per cent, but at $130-million it is still only about 15 per cent of the company’s business, and that proportion is unchanged from the same quarter last year. Is it any wonder that Edgar Jr. seems to have finally gotten religion about the record industry’s futile war against new business models? It’s just too bad it happened four or five years later than it should have, and Warner is now sliding down the slope of a curve it could have been ahead of.

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