Earnings: WMG Execs: ‘Smaller Scale’ M&A; Imeem Investment; DRM-Free MP3s

“Growth, particularly mobile, remained on a slower trajectory,” Warner Music Group (NYSE: WMG) CEO Edgar Bronfman, Jr. warned analysts and investors during the earnings call for the quarter ending Dec. 31, 2007. But he also used his prepared remarks to talk big: “We continue to explore new business models that will accelerate digital growth. We are expanding our rights … with new artists.” On Dec. 10, WMG artists held top slot on all four iTunes Store categories, he bragged. As for that Bulldog acquisition and subsequent disposal, Bronfman said not all acquisitions work out and, where they don’t, “we move on”.

Mobile/MP3: Addition of DRM-free MP3s to Amazon’s (NSDQ: AMZN) store “underscores our commitment to enhance the competitiveness of the digital marketplace.” PlayNow, the Sony (NYSE: SNE) Ericsson (NSDQ: ERIC) service to which WMG added tunes in January, “has greatly improved its user interface … and functionality from its previous incarnation, addressing key gating factors. We are pleased to see Sony Ericsson and other handset manufacturers beginning to recognize the importance of music content and … make it seamlessly available on their devices. … You’re going to see an increase in music-capable devices.”

Plans: This year’s strategy is “playing a key role in industry initiatives, platform development and standard setting such as our recent pan-European digital licensing effort.” Speaking on the Warner/Chappell publishing arm: “Diminishing CD sales will cause mechanical revenue (i.e. royalties) to decline over time.” CFO Michael Fleischer: “Today’s recorded music business is challenged and it may take some time before it returns to growth.” WMG is trying to expand to get a greater slice of touring, fan club and ticket operations as well as more 360 deals, which it wants for most of its new artists.

M&A: Fleischer: “Deals this fiscal year should be on a smaller scale than those we concluded in 2007″. WMG will “only add smaller businesses. …It’s more about building on the skills required to build our opportunities. I don’t see that there are large opportunities this year.” Bronman said the only targets would be: “Small companies that do things that we don’t do that allow us to improve our offering to artists and connect with their fans.”

imeem: What was last year referred to as a revenue-share “partnership” – struck after WMG dropped a lawsuit against the social network in July – Bronfman today called an “investment”: “We think this investment also will be both extremely useful and helpful for the music industry generally as well as being significant value to our shareholders over time.”

Piracy: Said Bronfman: “We are gratified to see the French government put together a groundbreaking agreement which takes a novel approach against internet piracy.” (See our previous posts on how France’s new policy will see ISPs monitor customers’ traffic and ban illegal file-sharers.) “We see this as an important initiative in the war on internet piracy.”

Other formats: Bronfman pledged support for Sony BMG’s digital music card, which “could potentially be a very positive format, and expand the retail availability of music by taking that format in to non-traditional outlets.” MVI discs, a DVD-Audio successor, account for 20 percent of some title sales.

Update SeekingAlpha.com has posted the transcript.

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