View Full Version : ITunes Posts Larger 3rd Quarter Loss


08-06-2010, 12:52 PM
Warner Music CEO Bronfman looks 'beyond iTunes' as it posts larger 3rd-quarter loss

Ryan Nakashima, The Associated Press
LOS ANGELES, Calif. - Digital download sales growth slowed further for Warner Music Group Corp. in its fiscal third quarter, prompting CEO Edgar Bronfman Jr. to say Thursday that the company was looking "beyond the iTunes model" to return to growth.

After the company reported a wider loss, Bronfman pointed to new "access models" based on monthly music subscription plans, and the entry of Google Inc. and others into the business to reverse a decade of declining CD sales.

"Digital growth ... has the opportunity to return to more robust growth rates as we see the introduction more broadly of access models and new business models beyond the iTunes model," Bronfman told analysts.

Revenue from digital sales of recorded music grew just 3.7 per cent to $169 million. That's a slower pace than the 4.5 per cent growth posted a year ago and 39 per cent growth two years earlier.

Sales of downloads from Apple Inc.'s iTunes store are slowing as the market matures, especially in the United States. Late adopters of new gadgets such as the iPod and iPhone generally consume less content than early buyers.

The third-quarter gains in digital music sales were limited to markets outside the United States. Domestically, digital music sales fell 3 per cent to $102 million. Digital music sales outside the U.S. grew 12 per cent thanks mainly to the later introduction of iTunes and a smaller base.

Bronfman said device manufacturers such as Apple and Sony Corp. are jockeying for position with Internet giants like Google and Microsoft Corp. for dominance in the arena for wireless content. He said he expected that competition to help Warner's business as companies vie to develop business plans that use music to attract customers.

"We think content, and music specifically, is a critical enabler to those companies," he said.

Sales of physical CDs and vinyl records declined 25 per cent to $350 million from $469 million, according to Warner's earnings release.

Online piracy and declining shelf space for CDs has hurt physical music sales industrywide. Warner also suffered from fewer big releases, as its top-seller, the soundtrack to the latest in the "Twilight" movie saga, compared poorly to prior-year releases such as Green Day's "21st Century Breakdown."

Warner's loss expanded in the three months to June 30 to $55 million, or 37 cents per share, from $37 million, or 25 cents per share, a year ago. Revenue dropped 16 per cent to $652 million from $773 million.

Excluding a one-time charge for severance payments of 6 cents per share, the adjusted loss of 31 cents per share was better than the loss of 37 cents per share expected by analysts polled by Thomson Reuters. Revenue was worse than expected though, as analysts were looking for a decline to $678 million.

Warner continued to cut costs amid the downturn and its cash position grew to $400 million from $383 million at the end of March. Wedbush analyst Chris White praised the company's balance sheet management in tough times, but kept his "Neutral" rating and $5 price target on the shares.

"Although pressure on the recorded music industry continues unabated, Warner Music has the balance sheet strength to be one of the last men standing," he wrote in a research note.

Shares fell a penny to $4.68 in afternoon trading Thursday.

08-06-2010, 01:25 PM
I am sure I can be considered biased. However, I suspect this wasn't unexpected. If I think back to Berry Gordy and his "record or sandwich" question, I guess the world is becoming a nation of over eaters!

For my own part, I don't feel the music has the same kid of excitement or freshness that it once had. When today's kids listen to music, it's been my experience that they prefer our kind of music which they can obtain free from one of the peer-to-peer networks. The new music doesn't seem to hold the same magic for them as it once did for us. I guess more importantly, it lacks the power to make consumers part with their cash.

Having a healthy Balance Sheet might help in the short term but long term, I wonder where this will all lead. I'm hoping it outlives me.

08-06-2010, 11:57 PM
There's a few factors here but the quality of the product certainly is one; there is no Elvis, the Beatles or Motown out there.

Pricing chased people away.

Free music drew people incredibly.

Music company bad attitude chased people away.

But in the end, I think the real problem is as the song once said: "I ain't gonna PAY for what I can git for free". That's the crux of it.

This article proves that even digital wont counter free!

08-07-2010, 12:11 AM
why the hell are these dumbshits surprised when an ENTERTAINMENT business is showing less sales in a crappy economy? It's not as if theyr'e selling FOOD, or some other item neccessary for life.

08-07-2010, 01:48 PM
Jobetrob, you may want to re read the article. It's Warner music that posted a loss during the third quarter, not itunes. Itunes sales growth slowed, but they didn't take a loss.

08-07-2010, 02:42 PM

You're gonna have to watch these youngsters. Smark21 has caught me out already this week!

Now it's your turn and I am smirking. LOL

08-08-2010, 01:27 AM
You know I read this...............and what got me screwed up was the headline...........these guys write them like Hip O sometimes does.............that headline reads: Bronfman looks beyond Itunes as IT posts Larger Third Quarter Loss; it IT is referring to Itunes and of course, it should have referred to Warners and I saw that in the article and ..........um, wasn't careful enough.

Now this Smark, or is it Smart.........he needs to be drafted by Hip O for editing and proofreading.

08-08-2010, 07:27 AM

One thing is for sure, these youngsters are gonna do a great job carrying on the legacy. At this rate, they will take over before I'm 60 and I can look forward to being officially retired and slung in the "Motowners Rest Home for the Aged". All I will need are free medical prescriptions and a bus pass for when the Velvelettes tour here.