MySpace Music confirms Holt as President

It’s official. After months in the making, MySpace Music finally has a formal head of operations. As had been widely expected, the top job goes to Courtney Holt who will take over on January 5.

“Courtney understands how to successfully blend technology with music and the resulting new business opportunities born from such a combination,” said Chris DeWolfe, CEO and Co-Founder of MySpace. “Courtney’s unique vision and willingness to innovate makes him an incredible addition to our executive team–we’re thrilled to have him on board.” 

Previous posts of Holt included the MTV Networks Music and Logo Group and Interscope Geffen A&M/Universal Music. 

Maybe he will be able (allowed?) to reveal more details on the success of MySpace Music which launched in September with much fanfare but recently failed to give updates on the performance of the service. 

Need to know more about Courtney Holt? Check out his profile and listen to his current faves.

HMV to pass tax savings on to consumers

What to do when customer demand is waning? You lower the prices. In an ideal world, that is. The UK government did indeed show some bold faith in market powers when it deciced to lower the national sales tax for a 13-month period, starting December 1st. The Value Added Tax (VAT) will be temporarily cut from 17.5 to 15 percent in an attempt to stimulate consumer spending. 

Retailers in the UK are free to decide whether they are going to use the VAT suspension to boost their margins or if they want to pass the tax savings on to their customers. Entertainment retail chain HMV has chosen to do the latter and reduce prices. Instead of £11.99 a regular CD at HMV will cost only £11.74 for the time being. The labeling of the products will remain the same, however, HMV said.

“Although we are passing on the VAT reduction at the point of sale, the re-stickering of our entire stock would represent an enormous undertaking for our sales staff at this very busy time of year, so the prices shown on our product packaging will for the time being remain unchanged.”

Atlantic Records says it has reached the digital tipping point

When Warner Music today reported Q4 and FY results the one detail many news outlets were focusing on was digital sales. $639 million revenue with everything not related to selling shiny discs isn’t bad. It represents 18.3 percent of total group revenue at WMG. More precisely, $599 million digital sales in the recorded music division is the equivalent of 20.7 percent of all recorded music revenue at Warner Music. 

What WMG didn’t release in its report card was the fact that Atlantic Records, Warner’s East Coast recorded music arm, has now reached what they call a milestone in the business: According to information slipped to the International Herald Tribune/New York Times, Atlantic claims “more than half of its music sales in the United States are now from digital products, like downloads on iTunes and ring tones for cellphones.” And let’s not forget subscriptions, Sirius XM, MySpace Music, YouTube, etc. 

Atlantic and WMG didn’t support this with more detailed figures, though. Looking at their annual report of today, domestic digital revenue in the recorded music division reached $388 million, or 28.1 percent of sales in fiscal FY. For Q4 the digital sales figure is $99 million, or a 27.2 percent share of the domestic recorded music pie. 

This begs the question: How can Atlantic be digital beyond 50 percent? Even if Warner’s New York office had significantly outperformed Warner Bros. Records (the West Coast business in L.A.) digitally, it still wouldn’t be able to come up with such a revenue split. 

But Craig Kallman, Chairman & CEO at Atlantic, stands by his claim: “We’re like a college basketball team on an 18-2 run.” Well, I guess that explains it …

Or maybe this does:
“I think we’ve figured it out,” said Julie Greenwald, the president of Atlantic Records. “It used to be that you could connect five dots and sell a million records. Now there are 20 dots you can connect to sell a million records.”

I still have my doubts. WMG/Atlantic will have to prove their point by releasing more details.

iLike like imeem? Sale chatter …

I didn’t post anything on the recent rumors that imeem has put itself up for sale, because in today’s credit market it seemed to be kind of a long shot. That was about a month ago. Now news is surfacing that iLike, another well-known player in the online social music streaming business, is looking for buyers or investors. 

The often well-informed Peter Kafka at MediaMemo has the story. Who could be helping founder Ali Partovi and his partners/investors? Your best bet is probably Ticketmaster which already owns about a quarter of the start-up. Other options: Facebook which is basically the number one distribution platform for iLike and RealNetworks’ Rhapsody which has been collaborating with iLike.

Warner Music surprises with Q4 earnings, FY results bleak

Warner Music Group reported Q4 and full-year (ended September 30) results today. Details can be found in the regulatory filings here.
Upon a first look: Even though it’s a mixed bag, FY revenue actually went up slightly, but net loss is ballooning. Q4, however, saw revenues that weren’t hit as bad as some might have thought, while net profit grew 20 percent. Also, it looks like international business is keeping WMG out of more serious financial trouble. 

Some key group FY details first: 

• Total group revenue grew 3.2 percent to $3.491 billion (down 2.2 percent on a constant-currency basis)
• 46 percent of group revenue was domestic, 54 percent was international
• Domestic revenue declined 3.9 percent, while international revenue was up 10.3 percent (down 0.5 percent on constant currency)
• Group digital revenue increased 38.6 percent to $639 million (domestic vs international = 65:35) and represents 18.3 percent of total revenue (year ago: 13.6 percent of total)
• Group operating income was down 9.2 percent to $207 million
• Loss from continuing operations was up by 338 percent to $35 million
• Net loss increased by 167 percent to $56 million

 FY Recorded Music: 

• Revenue grew 2.1 percent to $2.895 billion (down 2.8 percent on constant currency)
• 48 percent of recorded music sales were domestic, 52 percent were international
• Domestic RM revenue decreased by 5.4 percent to $1.380 billion, while international RM sales went up 10.1 percent to $1.515 billion (flat on constant currency)
• Digital RM revenue grew 38 percent to $599 million (domestic: $388m = 28.1 percent rev. share/ international: $211m = 13.9 percent rev. share) and represents 20.7 percent of total RM revenue
• RM operating income from continuing operations fell 6.4 percent to $233 million

 FY Music Publishing: 

• Revenue at Warner/Chappell grew 9.3 percent to $623 million (up 1.3 percent on constant currency)
• 36 percent of W/C revenue was domestic, 64 percent international 
• Domestic W/C sales were up 6.1 percent to $225 million, while international W/C revenues increaed 11.2 percent to $398 million (down 1.2 percent on constant currency)
• Digital W/C revenue was up 48.1 percent to $40 million and represents 6.4 percent of total W/C revenue (year ago: 4.7 percent)
• Mechanical royalty revenues were down 8.7 percent, synchronization royalties were up 10.9 percent, performance royalties grew 4.5 percent, and digital royalties increased 48.1 percent (all on constant currency)
• W/C operating income declined 7.1 percent to $91 million

And these are the group highlights for Q4: 

• Total group revenue declined 1.5 percent to $854 million (down 5.2 percent on a constant-currency basis)
• Domestic revenue declined 5.4 percent, while international revenue was up 3.7 percent (down 4.1 percent on constant currency), due to strong results in Japan, Italy and France
• Group digital revenue increased 27.5 percent to $167 million, representing 19.6 percent of group total revenue in Q4
• Group operating income from continued operations was down 20.5 percent to $66 million
• Income from continuing operations was down 64.7 percent to $6 million
• Net income increased by 20 percent to $6 million

Q4 Recorded Music: 

• Revenue declined 3.7 percent to $707 million (down 6.9 percent on constant currency)
• Domestic RM sales were down 7.6 percent to $364 million, while international RM revenue was up 0.9 percent to $343 million (down 6.0 percent on constant currency)
• RM digital revenue grew 25.8 percent to $156 million (domestic: $99m = 27.2 percent rev. share/ international: $57m = 16.6 percent rev. share) and represents 22.1 percent of RM sales in Q4
• RM operating income from continuing operations fell 22.2 percent to $56 million

Q4 Music Publishing

• Revenue at Warner/Chappell grew 13.9 percent to $156 million (up 6.1 percent on constant currency)
• Domestic W/C sales were up 12 percent to $56 million, while international W/C revenues increaed 14.9 percent to $100 million (up 3.3 percent on constant currency)
• Digital W/C revenue was up 57.1 percent to $11 million and represents 7.1 percent of total W/C revenue
• Mechanical royalty revenues were down 5.6 percent, synchronization royalties were up 31 percent, performance royalties grew 6.1 percent, and digital royalties increased 57.1 percent (all on constant currency)
• W/C operating income declined 7.7 percent to $36 million 

So, what does all this mean? Warner Music ended their fiscal year in a rather solid manner. And current market trading in the first hours after the release of the FY report suggests that Wall Street is honoring that. But given the increasing decline of domestic sales levels during WMG’s fiscal Q1 (calender Q4) it will be interesting to see how management can further control costs in coming quarters. CEO Edgar Bronfman jr. and his team have downsized operations so much, I wonder were they want to cut next. I suppose, we’ll see much different bottom lines in fiscal 2009.