Warner Music Stock Regains Ground Following Post-Earnings Slip

Warner Music Group stock (NASDAQ: WMG) is rebounding after experiencing a nearly 10% post-earnings dip. Will new streaming-monetization moves enable shares to continue climbing into the new year?

While we don't have an immediate answer to that question, we aren't without relevant insights. Similarly, we don't lack information about why Warner Music stock slipped yesterday; revenue climbed modestlyearnings missed estimates, and quarterly net income plummeted 69% YoY to $48 million.

At the points' intersection, a number of investors in their earnings-call questions emphasized not WMG's core quarterly and fiscal-year financials, but the company's streaming-growth runway heading into 2025. That's also a major focus at Universal Music and elsewhere, and digital accounted for roughly two-thirds of WMG's Q3 recorded revenue.

This same fraction happens to be the approximate percentage of total global recorded revenue attributable to the major labels, Evercore's Kutgun Maral noted in the opening question on Warner Music's Q3 2024 call.

Summing up the analyst's comments, the market is decidedly bullish on streaming platforms and live players – Spotify (NYSE: SPOT) and Live Nation (NYSE: LYV) chief among them. As music is, after all, essential to on-demand services and concerts, how can Warner Music, Universal Music, and Sony Music benefit from a bigger slice of the pie and the same investor optimism?

From there, Kyncl broke down two types of changes that he believes can drive bolstered subscription-revenue growth (with Wall Street enthusiasm presumably following). First, as we touched on yesterday, the exec directly mentioned dialing back streaming services' family tiers.

The move, likely being discussed at the other majors as well, will be worth looking for in 2025. Stated bluntly, recorded subscription revenue growth is slowing in today's largest music market – both per WMG figures and the RIAA's bigger-picture data – and seeking greater contributions from multi-package offerings makes sense on several levels.

Enter long-discussed superfan initiatives – Warner Music Group is working on a superfan app of its own, release date unknown at present – ​​and adjacent “Deluxe” plans designed with diehard listeners in mind. (Often conflated, the two areas are, in fact, distinct; K-pop fanatics might be interested in artist- or genre-specific offerings, whereas audiophiles may flock to Deluxe plans simply for higher-fidelity audio.)

These and other “innovations,” potentially including showing ads on certain releases, could be in the cards moving forward, per Kyncl.

Meanwhile, higher-ups are banking on long-term subscriber (and revenue) growth in emerging music sectors – especially India.

Although difficult to monetize as things stand, the latter nation is attracting considerable industry investments (including from WMG) and “will become an increasingly influential global force in the music business,” per Kyncl. The exec indicated as well that India's paid-streaming base had grown 40% on the year.

Lastly, in terms of Warner Music's monetization objectives, Kyncl further noted an ongoing embrace of wholesale pricing (see our initial coverage for the relevant quotes). Plus, the former YouTube and Netflix higher-up has “two to three new revenue streams sketched out,” albeit with nothing to publicly reveal for the time being.