WMG Stock Falls
Warner Music Group shares hit new lows yesterday closing at $9.74. A year ago the stock traded at $27.
As the only publicly traded stand alone record label WMG is the most visible recipient of growing investor doubts about the recorded music industry. But despite public pronouncements to the contrary, the label group’s slow adoption of new revenue streams – WMG labels were left completely out of yesterday’s Amazon launch for example – is also causing concern.
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I would argue that Amazon.com would not even count as a new revenue stream had WMG been involved in its debut. Recorded music is already a revenue stream. What Bronfman talked about last week was adding new revenue streams such as management, booking and merchandise. He did not say when those items would impact the bottom line. Obviously it will be a long-term transition and analysts are going to need some proof that the re-building will have a positive impact on earnings.
You’re right Glenn about Amazon not contributing much to WMG’s bottom line but on Wall Street if a company – who they have doubts about anyway – fails to take advantage of high profile opportunities (and in this case hangs on to DRM) they may choose to punish the stock. What other explanation do you suggest?