A Christmas Day surge of music downloads on to new iPods helped Warner Music Group nearly double its first-quarter profits, the company said today.
The group, home to artists including The Darkness and James Blunt, said underlying profits for the three months to December 31 rose to $69 million, from $36 million during the same period a year earlier.
After concern about the effects of illegal downloading on the music industry, Warner’s positive results are likely to improve sentiment across the sector.
The improved profits, driven by high-margin digital tracks, came despite a slip in revenue to $1.04 billion, a figure below analyst expectations. The company said overall sales were hit by exchange-rate fluctuations and the disposal of its sheet music business in May.
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Digital sales rose to $69 million, up 30 per cent from the fourth quarter to record a near three-fold rise from a year earlier, boosted by iTunes, Apple’s online music store, and Napster.
Warner Music also benefited from the enduring popularity of Madonna, whose latest album, Confession on a Dance Floor, reached No 1 in Britain, America and Japan.
The company has moved to cut costs and invested in online opportunities following its flotation in New York in May. Distribution costs for music downloads are much lower than for traditional CDs, which have to be packaged and shipped to retailers.
Warner Music is also trying to embrace the digital market through the launch of an e-label, called Cordless, in which tracks are available for electronic download only.
“Our digital revenue was up dramatically year-on-year, especially after MP3 players went live on December 25,” Michael Fleischer, chief financial officer, told Reuters.
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The United States accounted for 70 per cent of digital music sales, which were split evenly between downloads and ringtones, he added.
Costs for the quarter fell 6 per cent from a year earlier to $900 million, the company said.
Revenue from Warner’s recorded music business fell 2 per cent to $920 million, and revenue from music publishing fell 15 per cent to $131 million.
It had earlier emerged that Paul-Rene Albertini had been replaced as the head of Warner Music Group’s international operations. The move was the biggest shake-up since the company’s flloat last summer. Mr Albertini will be replaced by Patrick Vien, head of NBC Universal’s global television networks division.
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Mr Bronfman said Mr Vien would bring “a deep understanding of the opportunities that new and emerging technologies present global content business”.
Warner Music was part of Time Warner until March 2004, when it was bought by private equity investors, led by Thomas H Lee, supported by Mr Bronfman, heir to the Seagram drink fortune.