Warner Q4 Earnings Conference Call — Mobile Up, Agreements With Motorola And MobiTV

The conference call for Warner Music fourth quarter earnings focused a lot on mobile and online music — probably because it’s the growth area. In the introductory speech CEO Edgar Bronfman spoke about the deal with Motorola, “our Motorola alliance is representative of the next phase in our mobile strategy as we focus on collaborating with manufacturers to complement and further enhance our carrier distribution footprint by creating the first-rate music experiences on the handset to improved music-driven user interfaces”: He also spoke about the deal with MobiTV, “this agreement is another opportunity for Warner to transform our huge repository of video content from a secondary marketing expense into a primary profit center to an advertising and pay-for-play revenue model”.
CFO Michael D. Fleisher gave some financial figures. For the fourth quarter Warner had a net income of $18 million on revenue of $928 million…which is an 11 percent decline on revenue year-on-year, put down to a light release schedule. Digital revenue for Q4 was $100 million, a 45 percent increase year-on-year but a 4 percent decrease sequentially. This fall was also put down to a light release schedule, with Bronfman saying that the digital revenues were now a significant enough part of overall revenue to be affected by the general sales cycle. Of the digital revenue, 65 percent is from the US. Around half of the digital revenue is from mobile and half is from online…”While today, online is still larger than mobile in the U.S. and the reverse is true internationally, we see this distinction continuing to blur as the mobile contribution becomes more prominent in the U.S.,” said Fleisher. “We continue to believe that we are still in the very early stages of a digital music revolution that will flourish as 3G penetration rises, product innovation flows, and broadband expands globally.”
In question time Bronfman said that pricing on mobile platforms has remained relatively flat, and added that the margins on a product unit in the digital world are less important because the costs are fixed. “So we are obviously focused on maintaining margins but we are also focused on finding consumer propositions that will drive dramatic uptake and significant volume.”
He also said that the iPhone will drive uptake of mobile music, if not by itself then by encouraging other handset manufacturers to improve their products, and therefore 2007-2008 should be a good year for mobile music. He did have a go at Steve Job’s “abandon DRM” proposal (see PaidContent), and Staci also posted more general figures at PaidContent.
Related stories:
Warner Music Launches Mobile Music Portal on NTT DoCoMo’s 3G Network
Warner Plans To Expand Rhino Globally
Sony BMG, Warner Invest In China-Melodeo JV Focused On Mobile Downloads

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