The world's third largest music company, Warner Music Group Corp. (NYSE: WMG), reported this morning a wider second quarter loss and suspended a quarterly dividend to strengthen its balance sheet. Warner Music posted a quarterly loss of $37 million, dragged down by higher costs and lower compact disc sales. Analysts had expected a loss of 12 cents per share, and were disappointed to see the company report a loss of 25 cents per share.
Warner's quarterly revenue rose only 2% to $800 million compared with $784 million a year ago. The company attributed the revenue decline to its recorded-music segment whose sales climbed only 0.6% due to consumers' preferences for digital music. However, the drop in revenue could have been even worse if the recording company hadn't benefited from the weak dollar, Warner stated. Analysts expected revenue of $780 million, according to Thomson Reuters.
The company had a pretty difficult past year, as it faced continued worries over a possible recession. The credit crises which brought a slowdown in consumer spending whose effects were reflected in the company's weak earnings. Thus, with a last attempt to beat the economy woes, the music company suspend its dividend in order to conserve cash.
Looking ahead, it looks like there are some hopes about a nice recovery.The company's Chairman and Chief Executive Edgar Bronfman Jr. expressed his enthusiasm "about the long-term prospects for our business" even if "an uncertain economic backdrop and evolving recorded music industry make a conservative approach to our balance sheet a prudent strategy."
Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.
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