By Rob Curran

Warner Music Group's fiscal first-quarter earnings rose on lower expenses, but revenue fell and the record company struck a brace of deals in an effort to better capture profits from growing music consumption in the digital world.

The record label posted earnings of $236 million, or 45 cents a share, for the first quarter ended in December 31, up from $159 million, or 30 cents a share, a year earlier. On average, Wall Street analysts forecast earnings of 33 cents a share, as per FactSet. The year-earlier quarter included a one-off expense of $50 million.

Revenue fell 4.7% to $1.67 billion, edging ahead of the average Wall Street target of $1.66 billion, according to FactSet. Recorded music revenue fell 7% to $1.35 billion, distorted somewhat by a licensing deal extension the prior year that resulted in $75 million of one-off revenue. The discontinuation of a distribution deal with longtime partner BMG also weighed. Music-publishing revenue rose 6% to $323 million.

The company also cited temporary macroeconomic conditions for some of its struggles.

Separately, Warner Music said it struck a deal with Spotify on recorded music and music publishing, as the record label seeks to capitalize on the leading music streaming service's extensive reach. Terms of the deal weren't disclosed.

The deal will include a direct-licensing arrangement with Warner Chappell Music in several additional countries including the U.S., expanding use of a model seen as fairer to songwriters.

Warner Music also acquired a controlling stake in Tempo Music Investments, a vehicle for holding the music rights of artists such as Bruno Mars and Adele from investment firm Providence Equity Partners. Providence will remain a minority investor in Tempo and continue to work with WMG in an advisory capacity.

Wall Street firms have snapped up rights to artists' catalogs in recent years as digital-use royalty payments are viewed as potential sources of long-term investment income.

"In our ongoing effort to both grow the pie and grow our share of the pie, we are increasing our A&R [talent scouting] spend, acquiring valuable catalogs, and striking important agreements with streaming services," said Chief Executive Robert Kyncl, in a statement.

The company reaffirmed its 2025 targets for subscription streaming revenue and operating cash-flow conversion.

Write to Rob Curran at rob.curran@dowjones.com

(END) Dow Jones Newswires

February 06, 2025 08:11 ET (13:11 GMT)

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