Q1 2023 Warner Music Group Corp Earnings Call
Yes.
Welcome to Warner Music group's first quarter earnings call for the period ended December 31st 2022.
At the request of Warner Music Group today's call is being recorded for replay purposes, and if you object you may disconnect at any time.
Now I would like to turn today's call over to your host Mr. Kareem Chin head of Investor Relations you may begin.
Good morning, everyone welcome to Warner Music group's fiscal first quarter earnings Conference call. Please note that our earnings press release earnings snapshot in the Form 10-Q, we filed this morning will be available on our web site.
On today's call, we have our CEO , Robert Kintzel, and our CFO , Eric <unk>, who will take you through our results and then we will answer your questions.
Before our prepared remarks I'd like to refer you to the second slide of the earnings snapshot to remind you that this communication.
Forward looking statements that reflect the current views of Warner music group about future events and financial performance.
We plan to present certain non-GAAP results. During this conference call and in our earnings snapshot slides and have provided schedules reconciling these results to our GAAP results in our earnings press release.
All of these materials are posted on our website.
Also please note that all revenue figures and comparisons discussed today will be presented in constant currency unless otherwise noted.
All forward looking statements are made as of today and we disclaim any duty to update such statements or expectations beliefs and projections are expressed in good faith and.
And we believe there is a reasonable basis for them. However.
However, there can be no assurance that management's expectations beliefs, and projections will result or be achieved.
Investors should not rely on forward looking statements because they are subject to a variety of risks uncertainties and other factors that can cause actual results that differ materially from our expectations.
Information concerning factors that could cause actual results to differ materially from those in the forward looking statements is contained in our filings with the SEC and with that I'll turn it over to Robert.
Thank you Carrie and good morning, everyone.
I'm pleased to be here speaking with all of you for my first earnings call at Warner Music Group.
I've been on the job for five weeks and I am grateful to our board of directors and our employees artists and songwriters for giving me such a warm welcome.
I would especially like to thank my predecessor, Steve Cooper.
Everything he has done to position the company for long term success.
And for all his insights as I have been getting up to speed.
Thanks also to you our valued shareholders and everyone who follows the company for your continued support.
So let's get into Q1 results.
I am committed to maintaining straightforward and consistent communication with the investor community.
So in that spirit I want to immediately unclearly acknowledge that this was a tough quarter.
Most companies.
<unk> has been dealing with macroeconomic headwinds and the impact of currency exchange rates.
It is important to note that last years Q1 included an extra week of reporting.
As a result, this quarter's comparisons need to be adjusted to provide an accurate picture and I will be discussing our results in that context.
Eric who will give you more detail, but here are the headlines.
Total revenue in Q1 grew 2% and adjusted OIBDA increased 13% with 210 basis points of margin improvement.
Recorded music revenue was flat as the strength of our global performance was offset by a softer quarter in the U S.
We had a tough comparison with the prior year quarter, which included releases from some of our superstar artists.
We're expecting a stronger release schedule in the back half of the fiscal year, which will feature new music from Sharon Cardi B David Maura.
Amora NPV rexam.
Music publishing had another strong quarter with revenue growth of 14%.
Our operating cash flow growth was healthy despite some of our revenue lines coming under pressure.
Further underscores our disciplined fiscal management as we navigate this challenging business environment.
I'd like to spend some time on this call proactively addressing two questions that I've often been asked specifically why I chose to go into the music business.
<unk> joined the Warner Music group up to 12 years at Youtube and seven years at Netflix.
Youtube drugs at the intersection of creators and technology, which means that I have many options to choose from and planning My next chapter.
I chose music.
First and foremost because everyone loves music, including it's embraced by 100% of global population.
In an increasingly digital world music makes people feel.
It brings them Joy hope and comfort.
And then increasingly divided world.
As it brings people together.
That engagement is very powerful and valuable and we expect the evolution of monetization models to reflect that.
On top of that music global appeal is matched by its ubiquity.
Industry has achieved something rare.
It's built mutually beneficial long term partnerships with many of the worlds biggest companies.
Amazon Apple Google meta.
Hi, Fi and concern among them.
As successful as music has become there is still meaningful upside ahead for three reasons.
One <unk>.
As technology opens up emerging economies, the industry's addressable market will continue to expand even further.
Two <unk>.
Innovation is constantly creating new use cases for music, giving us the opportunity to diversify our revenue sources.
Three music is still undervalued, especially when compared to other forms of entertainment like video.
I'd like to expand a bit on that last point.
Since 2011, the subscription price with Netflix established service has roughly doubled.
Data shows that almost 80% of U S households, subscribe to at least three of streaming video services.
It means that the average household spending more than four times per month on a combination of digital video services that isn't even a comprehensive offering.
In contrast, the price of a music subscription has stayed the same since streaming was introduced over a decade ago.
Most consumers subscribe to a single service that carries virtually all the music ever released.
Against this backdrop it is encouraging that we're seeing first steps in the right direction by Apple and.
And Amazon.
The other question I, often get asked is why WMC.
First and foremost, it's the artists and songwriters and powerful catalog, but are the lifeblood of this company and it's such a pleasure.
To bring this creative work defense around the world.
The new generations of stars like litho to Alibaba and I am not gomorrah.
Global Superstars, such as at Sharon from Nomura, Coldplay and Neil Young.
So long that it isn't composers like Lin Manuel Miranda Gamble, and Huff and John Williams, and legends, such as John Coltrane led Zeppelin, Arista Franklin and prints.
Second it's the people at W. Mg.
This company has a consistent decades long history of finding and developing unique voices that change culture globally.
And then increasingly complex cluttered world that originality is an essential ingredient of our success.
Third is about size.
WMC is big enough to drive meaningful change in the industry.
But small enough to have plenty of room for growth.
That's just one example, the company has been decades thoughtful approach to global expansion.
<unk> has made a bold time moves that leapfrog the competition and dynamic fast growing markets, such as China and the middle East.
This approach has also delivered a record breaking global first with artists like Anita from Brazil, Although loan dropped from Argentina, King from India, and CK from Nigeria.
I wanted to briefly address what we're doing to architect the next phase of growth.
I am only five weeks in but I've been very intentional about how we've gone about this.
We made two significant appointments.
Which tells you something about our priorities going forward.
<unk> my former colleague do too as our new EVP of strategy and operations.
Which is a new role at WMC.
They will be critical to facilitating our strategic vision and ensuring its operational execution.
I also hired a real burden as our president of technology.
Carrier includes 16 years at Google, where he was.
<unk> launched and let some of the company's most successful products, including Youtube creator tools memberships and content Heidi.
He will drive the development of the systems infrastructure and products needed to support our growth.
As I said I'm committed to clear and straightforward communication on our progress.
I also want you to know I'm, a big believer that actions speak louder than words, and I'm laser focused on execution.
Right now I'm working with leaders across the company to develop our plans for the future.
Already exploring some exciting ideas and initiatives.
And we will provide you with updates as soon as appropriate.
That said <unk>.
Many of the fundamentals will remain the same.
Foundations of this company are very strong and the music industry is rich with opportunities. We will continue to invest in new artists and songwriters our catalog and our global expansion.
At the same time, we plan to thoughtfully reallocate some resources to accelerate how we use technology and data to empower artists and songwriters as well as drive greater efficiency in our business.
As subscription revenue continues to grow.
What it recovers and we explore the possibilities of new technologies and business models, it's essential we structure, our deals smartly and strategically.
I am approaching this next phase of growth with a unique benefit of having been on both sides of the table.
I am proud that over the last five years that Youtube, we developed a very collaborative mutually beneficial relationship with the music industry after years of Rocky brands.
I plan on bringing the same approach to WMC and the industry. So that our interests are aligned with our partners and that our artists and songwriters gain maximum participation and monetization.
Now I'll pass it over to Eric who will take you through our results and then we'll answer your questions.
Thank you Robert and good morning, everyone as.
As Robert mentioned, our year over year comparisons should take into account the impact of the extra week in fiscal Q1 2022.
Adjusting for the extra week, we delivered growth across key metrics, including revenue adjusted OIBDA and adjusted OIBDA margin.
Additionally, we saw strong operating cash flow growth.
Strong cash conversion as a percentage of adjusted OIBDA, Despite a challenging macro environment.
Total revenue declined two 7%, but increased 2% when adjusted for the impact of the extra week.
Adjusted OIBDA was flat and increased 12, 8% when adjusted for the extra week adjusted OIBDA margin was 22, 5% compared to 21, 9% in the prior year quarter.
Adjusting for the extra week margin increased 210 basis points.
These increases were primarily due to disciplined operating performance and the impact of currency exchange rates.
Recorded music revenue declined five 6%, but was roughly flat when adjusting for the impact of the extra week.
Streaming revenue decreased by two 6% after.
After adjusting for the extra week streaming revenue grew by 5% as subscription streaming revenue grew by high single digits and was partially offset by AD supported revenue declining in the mid teens.
Physical revenue declined 27% adjusting for the extra week physical declined 22%.
Our streaming and physical results reflect a lighter release schedule, we had this quarter compared with the prior year period, which included releases from Ed Sheeran and coal play.
Artist services and expanded rights revenue decreased by 4% due to macro economic pressures affecting our E&P business and lower advertising revenue.
Licensing increased 17% due to an increase in broadcast fees synchronization and other third party licensing.
Recorded music adjusted OIBDA decreased by 6% with margin of 24, 1%, which was roughly flat compared to the prior year quarter.
Excluding the impact of the extra week adjusted OIBDA grew 7%.
The margin improvement was approximately 150 basis points.
This was driven by disciplined operating performance and the favorable impact of currency exchange rates.
Music publishing continues to deliver strong results posting 14% growth driven by strength across digital performance and mechanical.
Digital revenue grew 16%, reflecting growth in streaming which increased 17% driven by continued growth in streaming services and timing of new digital deals.
Performance revenue increased by 29% due to continued growth from bars restaurants concerts and live events.
<unk> revenue increased by 17% due to growth in France, and sync revenue decreased by 5% due to lower commercial licensing activity in the U S and the timing of legal settlements.
Music publishing adjusted OIBDA increased 36% to $72 million.
With margin, increasing 460 basis points, driven by strong operating performance and the favorable impact of currency exchange rates.
Q1, capex decreased to $21 million as compared to $34 million in the prior year quarter, mainly due to lower facilities investments, we anticipate some acceleration in the coming quarters, driven by infrastructure facilities and financial transformation.
Yes.
Our financial transformation program remains on track to meaningfully rollout in fiscal 2024 and expand globally in the following years.
The program is expected to deliver annualized run rate savings of $35 million to $40 million once fully implemented.
Operating and free cash flow growth and conversion were robust in Q1.
Operating cash flow increased 62% to $209 million from $129 million in the prior year quarter free.
Free cash flow increased 98% to 188 million from $95 million in the prior year quarter.
Operating cash flow conversion was 62% in Q1, the strong performance was driven by the timing of working capital items.
Working capital will fluctuate from quarter to quarter, our goal remains to deliver a conversion rate of 50% to 60% over a multiyear period.
As of December 31, we had a cash balance of $720 million total debt of $3 9 billion and net debt of $3 2 billion. Our weighted average cost of debt is three 7% and our nearest maturity date is in 2028.
As we look ahead to the rest of the year. Our goal is to release amazing new music from our talented roster of artists and songwriters.
While some of the macro and release schedule driven pressures. We saw in Q1 will impact Q2, our slate in the back half of fiscal 2023 is strong.
Featuring releases from some of our biggest stars as well as our next generation of talent from across the globe.
There is no question that our industry is feeling the impacts of the macroeconomic environment.
From currency fluctuations and a dislocated market to the short term choppiness inherent in our business. There are a number of variables that can obscure our underlying health.
However, our resilience through challenging times has been proven and we remain confident in our future growth.
Against that backdrop, we are resolved to capitalize on the powerful tailwind that will drive our company forward.
Thank you to everyone for joining us today.
We'll now open the call for questions.
Thank you.
A reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
So withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
And our first question will come from Benjamin Black from Deutsche Bank. Your line is open.
Good morning, and thanks for taking my question Robert I know you.
It's only been in the seat for about a month now, but can you touch on where you potentially see opportunity for improvement within the organization.
Where do you see potential for faster growth.
Thank you.
Yes.
Yes.
Thank you for the question Benjamin.
So yes, as you said yourself have been on the job for five weeks.
And have been digging in.
Very quickly strategy at this point is in development as I mentioned.
Do you know.
I do have the benefit of understanding the industry from both sides, but to be honest I am still calibrating the site.
Due to my short tenure on this one.
So I'd like to have a little bit more time on that.
And in order to be thoughtful but.
Here's what I know, which is well very thoughtfully relocate resources to accelerate our technology investments and.
To empower not only artists and songwriters, but also to drive efficiencies in the company.
Yes.
So that is that is something that I can tell you now.
And I think my actions speak louder than words.
It made two appointments in that direction in the first months with the hiring of payment Oreo.
And I think my goal is to accomplish.
All of that with continued focus on financial discipline and cost and cost containment.
Okay.
And just a follow up if I may.
That mean that youre, saying potentially cut costs, we're beating company starts impacting the music industry more broadly.
From Spotify for example songs any view on cost containment and more specific and if so which areas would you be cutting some.
So so.
One.
The company has actually.
And then much more measured in its head count growth for instance over the last few years than others in the industry, who are now undergoing.
Significant.
Wales.
Two.
You all are aware that our cost transformation initiatives already underway.
For the last two to three years before any of these microeconomic.
Issues emerged so.
So theres been a lot of momentum around this that is probably putting us in a slightly different position than others.
But again I'd like to reiterate that I'll be focusing on driving.
And Ah reallocating resources, our internal resources in order to.
To invest in technology and drive.
Not only more tools for each monetization for our creators, but also greater efficiencies for us.
Okay. Thank you.
Thank you.
Our next question comes from Bastian <unk> from Jpmorgan. Your line is open.
Hi, Thank you.
Robert I, just wanted to what Robert one for Eric.
Robert are you concerned about the de leasing of music from AI generated content.
Given your unique perspective, given some of your prior roles and median.
To hear your thoughts.
Eric you touched on the margin expansion was.
And just by our strong operating results.
Well ahead of expectations wanted to see if maybe you can provide us.
Little bit of detail there, maybe unpack some of the underlying underlying drivers within each segment that drove the.
Robust margin expansion. Thank you.
Thank you Sebastian.
So one I would like to say that AI is probably one of the most transformative things that humanity.
<unk>.
It has so many different applications.
So because of that yes, some paying very close attention to it and we across the company are.
Two.
There are many different ways to sort for the music industry as well as for other industries, who own copyrighted material.
And it really falls into four buckets, one which is the use of existing copyrights to train generate of AI.
The second one is sampling existing copyrights as the basis for new and remixed AI content generated content.
The use of AI to help and support creativity, So an assisted way to do that and then.
Most importantly.
Find ways to protect the craft of artists and songwriters from being dilutive to replace by generating AI generated content, which is what you mentioned.
But it's not just that question. It's all of these together that we as an industry and I don't mean, just the music industry, but overall sort of copyright owners.
I need to work together with.
With the AI platforms.
And I want to make sure that everybody understands it.
You don't have to be forward looking in order to address this which of course, we are but.
So look into today's world would can benefit our our our position in the future.
There's a lot of AI generated content and what I mean by that is tracking of content identifying and tracking of content.
On consumption platforms that can appropriately.
Identify copyright.
You know right Kathryn holders.
Underpinning all of this.
And <unk>.
Different platforms have different capabilities in this regard obviously Youtube is most advanced with content.
Something that <unk> has overseen.
But.
There are others, who lack in this department and need to work on that because.
In the future this would be a serious deficiency. So you can you can you will see us focusing on this quite a lot.
Eric Thanks.
So <unk> so margin expansion. So obviously this quarter.
When you look at adjusted for the extra week 210 basis points increase in margin is subs.
Substantive.
And we're proud of that we focus on disciplined management discipline cost oversight and management.
We can look at this quarter and see for example, Warner Chappell had a 36% quite a bit of increase.
Predict pretty extraordinary kind of growth from that line of business.
Are not targeting.
200 basis points of increase on a consistent basis, we are targeting margin expansion.
Generally on an annual basis, not every year will be exactly the same but half a point to one percentage point increase in margin is about what we.
Look towards again not every year is the same. So this is an exceptional quarter from margin enhancement, but margin enhancement as part of our strategy for sure.
Thank you for question.
Sure.
Yeah.
Thank you.
Our next question will come from Benjamin Swinburne from Morgan Stanley . Your line is open.
Good morning, Robert Nice meeting over the phone.
And welcome I wanted to ask you a bit more about your comments around music being undervalued obviously that's.
Been a long going debate in the industry between the labels and distributors and given your your seat on the other side of the negotiating table I'd love to hear your thoughts on how do you effect that change in the industry from the CEO position at Warner Music Group obviously.
You don't get to dictate per say the pricing is the DSP and sort of what you can extract some players like kick talked but what do you think you can do given your experience at Youtube to accelerate.
<unk> value.
Sure at music and then I just wanted to ask.
Eric if I could a follow up you said high single digit subscription streaming revenue organically I believe.
Can that accelerate this year is that a new normal in your mind and Thats, obviously quite a bit lower than what we saw from Spotify. For example on an organic basis in premium revenue and I think the market's a bit concerned that the major labels, maybe losing share so I'd love to get your thoughts on that thank you both.
Thank you.
So.
One.
I made my comments.
I think everyone's been sort of stuck in the conversation sort of 101 relationship between them.
Content providers in the DSP.
I look at it more from a more macro level that the space is generally undervalued.
And if you look at all the other indicators how people pay for subscriptions and the price increases and various subscription not just kind of payment.
Has been much more significant than it has been.
<unk>.
And I think that is something that we have to all being very mindful of the.
I can't really get into the tactics of how we would achieve that but.
What I can tell you is that.
At Youtube.
The history of executing and delivering on our plans.
And that is precisely what I plan to bring here and we've done so.
At least in the last five to seven years and an extremely collaborative manner. So that is also something that I plan to bring here. So I know im not giving you much of the specifics other than.
The history of getting things done.
And have a history of being collaborative.
And.
I wanted to industrial to grow for everyone.
And I believe this is the right path.
Thank you.
Ben Good talking to you so.
So I would talk to our release schedule a little bit so as we said our.
Fiscal Q1 release schedule in the U S was a little bit of a softer schedule.
That could roll in and have some impact on Q2 as well this year, we have a second half.
Fiscal 'twenty, three or second half oriented release schedule or the strength of our release schedule tends to be more oriented this year towards the second half and we think that will have a positive impact on streaming if we just look back one quarter ago.
Our subscription.
Subscription streaming growth was.
In the teens in the low teens area. So release schedule does have a couple point impact.
So we do think this has a fair amount to do with re reschedule timing.
Thank you Bob.
Thanks Ben.
Thank you.
Our next question will come from Rich Greenfield from <unk> partners. Your line is open.
Hi, Thanks for taking the question.
Robert It's great to have you on these calls a month sort of your perspective on how important do you think music is.
Core product and then sort of a related question.
He says I remember, how the label, including Warner pushing very aggressively for you to launch a subscription product in addition to sort of the.
Marketing aspect of what you did for music I'm curious if you think the same thing in terms of the push for subscription product will happen with that.
Thank you Richard.
It's great to hear from you.
So.
Okay.
One.
Having lived through that.
We made the decision to launch subscription at Youtube.
Because we were looking at the industrial Holistically and we had a fast growing advertising business with free content to users while at the same time subscription was somewhat nascent for the industry.
And.
The industry really wanting us to invest into.
Converting that large user base into paying user base, obviously, you don't do it with.
All 2 billion users do it some fraction of it and to create great audience segmentation strategy.
And Thats exactly what we did so we decided that.
Music is important to us.
However.
And therefore, we should invest into it holistically and obviously that also followed a further expansion into shorts later on so.
<unk> has done an incredible job.
Delivering multiple formats.
Super short format, the charts Ewald and Premier music videos user uploaded content attracting Dr. Copyrighted tracked appropriately remunerated and subscription as well as life. So when you look at that.
Point of view of content owner and content provider, it's a phenomenal.
Partnership and phenomenal platform, that's exactly what we decided to do I think for picked out to go to the beginning of your question.
Well, let me also say we've looked at this question very closely and we decided that it was important to us and Thats why we did it.
<unk> needs to do that it's the right decision for them to evaluate.
And.
Yes.
You can see from Youtube execution with the rig.
<unk>.
The findings was for us, but I can speak to what.
We'll take talk obviously funds so to them, but alright.
Sorry, I'm, losing my voice.
But my answer is holistic relationship is what we're looking for.
Thank you.
Thank you.
Yes.
And our next question will come from Matthew Thornton from Shirley Securities. Your line is open.
Hey, good morning, Robert welcome aboard and Erika I hope you're well.
Maybe two if I could related first one Eric any update on emerging streaming and kind of how that trended in the quarter.
And then Relatedly when do you think as you think about fiscal 'twenty. Three is there any way to think about or handicap, whether we could get movements on the emerging streaming side I E. A new deal that would actually be the material to.
To kind of pushing that that business up higher.
And or continued price increase momentum this year that could be material to the subscription streaming side of the business any way to think about.
That impact or potential impact in 'twenty three would be would be very helpful. Thanks guys.
Sure.
Good to hear from you.
I appreciate the questions. This is Eric I will let me tackle these theyre more financially oriented so in this quarter.
<unk>.
There were no.
Significant renewals to note sequentially emerging streaming was roughly flat.
It's up about 20% 20, some odd percent year on year, so up substantially year on year, but generally we have 60 deals.
It moves up as we renewed deals with the current deal structures and quest.
Any movement on renewals to the second question so.
We don't specifically talk about individual deals and deal timing. What we have said is that we had a series of deals. We did in the 2021 timeframe and most of our deals in emerging streaming tend to be two to three years in length.
Meaning that within fiscal 'twenty three there certainly will be discussions about new deals when exactly those close in what form whether there.
To be fixed fee or a portion of them are variable as to be seen. So we will keep you guys apprised as deals are renewed and they impact the.
The category, but.
That is something where there will be discussions ongoing throughout the year with some of our partners.
On subscription price increases.
So there have been some meaningful players and partners that have <unk>.
<unk> price increases and increased prices already Apple Amazon These are.
We're pleased to see that.
Again, we don't talk about individual deals, but generally we say with our largest subscription partners our deals tend to be variable and those will have.
So, we'll obviously price increases will have a positive impact on growth so in future quarters, those will be rolling through the subscription revenue numbers in.
We expect that to be a positive to the subscription growth kind of story this year.
Thank you Matthew I appreciate it.
Sure.
Yes.
Thank you.
Our next question will come from Michael Morris from Guggenheim Partners. Your line is open.
Thank you good morning, guys I have two questions I think for Robert.
My first is your comments about technology and innovation and new use cases, and these appointments that you've made.
It seems that that element of the growth has largely been dependent on innovation from outside of the company.
And your participation there do you see areas to incrementally invest on the technology side and maybe bring any of those growth drivers in house I'd be curious what you think on that.
My second question is about streaming sure.
Spotify reported their annual results recently and indicated that the share of streams attributed to major labels head again declined by another couple of hundred basis points and I am curious how you view that information, whether you see that as sort of pervasive across your DSP partner relationships. What do you think it means and how.
Do you address that going forward. Thank you.
Sure. Thank you.
So so there is no question that technology will underpin everything we do.
Whether it's growth or whether it's efficiencies.
And it's important that we invest into it and that's what we're doing.
It's a little too early for me to describe exactly what we'll do in that regard, but I think it gives you the option investing into it gives you the optionality optionality to do that.
When when we have the investment capital.
And can deploy it against it.
<unk>.
I think the only <unk>.
Dilution question I think.
Something that <unk> been seeing all along it's obviously something that we keep an eye on.
I sort of consider as a fair game.
Our platforms for our content providers are uploading content, then we have to do a great job and having.
A robust catalog b.
More great artists that are gaining meaningful share and we'd have to do a great job at that so the onus is on us.
That's right Robert.
To tack onto that Michael.
We obviously Luis music that Anr and market ourselves, but we also have a significant business that is licensing and distributing in the music.
We are constantly expanding our business globally to additional territories, sometimes that involves acquiring.
Or licensing music or partnering with local independent players so.
The independent as well as the major part of the business are both part of the business, we participate and robustly and it's part of our strategy to make sure we're playing into the significant growth areas of the global music market.
Thanks, Thank you for that Eric if I could just follow up because I think that's an important point.
I don't know if you can help quantify or help us with that but.
Do you think then that that data is sort of from Spotify and I don't mean to just pick them, but.
That is an example is sort of underestimating your actual participation because of your share of the indie side as well.
Well.
So on a kind of respond to an individual platform because we literally have hundreds of digital platforms that were licensed to its a portfolio. Some of whom are global some of whom are local some of who are subscription some of whom are AD supported some are socially oriented.
It is our job to one the first thing is that the consumption of music across platforms globally digital digital consumption continues to grow.
That means that there's additional opportunities for us to license and monetize music. It's our job not just to look at one platform, but to look at different platforms and developed in different territories and develop a strategy to drive growth and it's our job to look at the different ways music has created and released in <unk>.
Thats the right strategy dissipate windows, so for us, it's kind of a multi layered multi tiered.
Strategy, and we believe that positions us well for continued strong growth.
Thank you very much thanks.
Thanks, Michael I appreciate it.
Okay.
Thank you our next.
Question comes from excellent morale from RBC capital markets. Your line is open.
Good morning, and thanks for taking the question I wanted to follow up on the recording music subscription revenue discussion from earlier, just because it has been a major area of debate.
Eric I know you talked about the impact of the release slate and content cyclicality and how that can cause a couple of hundred basis points of volatility here and there but I.
Going to the deceleration from Q4 to Q1 was perhaps at the upper end of that maybe even greater.
Thinking through some benefits from the Apple music price increase so theres just this broader concern that there's something else going on beyond just market share shifts and so I wanted to confirm your views and maybe get a read on whether Q. The Q1 growth rate is high single digits, maybe inappropriate benchmark for Q2 ahead of stronger back half.
Reschedule thank you.
So thank you so I would say two things that affect streaming growth overall.
One of which is release slate and the second one is there was we did see an additional slowdown in AD supported streaming and we should spend a moment on that so given the kind of dislocations are challenges in the macro economy.
We are seeing AD supported streaming.
Continue to slow down and decelerate.
Actually decline versus prior year and the decline is getting more pronounced that we have not seen it.
At a floor or start to rebound. So we're still seeing continued worsening in the AD supported market on the subscription side.
We have looked at this and we did have a softer.
Largely U S based release schedule this quarter and we do think that is.
What is driving the slowdown in this quarter could roll into our fiscal Q2, but given our release schedule as second half oriented this year, we do feel good about our performance.
For leases and strength for the second half of the year.
Okay. Thanks, Eric.
Hugh.
Thank you.
And our last question will come from Stephen last check from Goldman Sachs. Your line is open.
Hey, great. Good morning, Thanks for taking the question maybe just a follow up on that last AD supported question, Eric could you remind us what portion of your total streaming revenues are driven by AD supported excluding the emerging deals and to what extent there might be any timing differences in those revenues versus what we see I don't know like a spotify or Youtube.
There shouldnt be a meaningful timing difference.
I think that so it is in the tens kind of Av streaming revenue call.
Low teens or maybe even.
A piano.
Kind of 12.
12, 13 kind of low teens kind of area.
And we've seen a deceleration there and there shouldn't really be a meaningful timing difference what others are seeing in the market.
Got it thanks for that and maybe just one on sync could you maybe talk a little bit more about the types of conversations you're team is having with your sync partners, maybe how much visibility they have into that piece of content creation or.
It's been this year and maybe how that's trending compared to what we what we've seen in years past. Thank you.
Well it is.
If what you're getting to Stephen is the slowdown in the AD markets affecting <unk>.
<unk> growth trends.
The answer is to a degree yes, we have seen that there are definitely an impact in the commercial slash advertising markets.
That growth has slowed in that category.
Though our sync teams are still seeing.
A lot of opportunities and potential for growth in film TV and other categories as well as global sync non U S based sync so.
Last year, we saw sync in both recorded and publishing growing in the.
Kind of 20% range year on year, those numbers were pretty extraordinary partly based on our new technologies, we've rolled out and enhancing our teams and our productivity in those markets, but we do see certainly in this quarter.
Softer market for sync.
We are managing that revenue line in both recorded in publishing for continued growth.
But it is more challenging market and our team certainly is targeting the areas that are more active.
Active and vital for critical thanks in the commercial AD market. This is one they are seeing a degree of softness.
Great. Thank you very much.
Thanks, Steven greatly appreciate it.
Thank you.
And I am showing no further questions from our phone lines I would now like to turn the conference back over to Robert <unk> for any closing remarks.
Alright.
Thank you everyone for.
Dialing in asking questions.
To be interested in our business.
I look forward to speaking with you frequently.
And as I get up to speed to obviously continue to share more and more information in our various straightforward.
Transparent matter.
You very much have a great day.
Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
The conference will begin shortly.
Lower Johan during Q&A, you can dial one one.
Yes.
Yeah.
No.
Got you.
One more question.
Good luck with that.
Thank you.
Yes.
Michelle.
Okay.
Okay.
Yes.
Steve.
Thank you.
Yes.
Please.
[music].
Peter.
Yes.
Thank you.
Thanks.
Okay.
Got it.
Thank you.
Okay.
Thank you.
Yes.
Good morning, Matt.
You may begin.
Is it.
Okay.