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What changed in Warner Music Group Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Warner Music Group Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+494 added−454 removedSource: 10-K (2024-11-21) vs 10-K (2023-11-21)

Top changes in Warner Music Group Corp.'s 2024 10-K

494 paragraphs added · 454 removed · 378 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

104 edited+14 added−17 removed138 unchanged
Biggest changeRepresentative Sample of Recording Artists and Songwriters Our Recorded Music business includes music from: • Global superstars such as Ed Sheeran, Dua Lipa, Coldplay, Cardi B, Bruno Mars, Michael Bublé, Lizzo, Kelly Clarkson, David Guetta, Kenny Chesney, Madonna, Neil Young, Red Hot Chili Peppers, Prince, Green Day, Cher, Pink Floyd, David Bowie, Fleetwood Mac, Aretha Franklin and The Smiths. • Next-generation talent including Zach Bryan, Megan Thee Stallion, Jack Harlow, Lil Uzi Vert, Fred Again.., PinkPantheress, Maria Becerra, Kenya Grace, Gayle and CKay. • International stars such as Burna Boy, Aya Nakamura, King, TWICE, Ninho, Capo Plaza, Pablo Alborán, Udo Lindenberg and Laura Pausini. 18 Our Music Publishing business includes musical compositions by: • Superstars such as Madonna, William Corgan, Belly, Cardi B, Bruno Mars, Anderson Paak, Lizzo, Tones and I, Pablo Alborán, Lin Manuel Miranda, Lil Uzi Vert, Imagine Dragons, Chris Stapleton, Dan + Shay, Tayla Parx, Damon Albarn, Dave Mustaine, Katy Perry and Kacey Musgraves. • International talent such as Jonathan Lee, Tia, Manuel Medrano, Melendi, Bausa, Shy’m, Tove Lo, Joaquin Sabina, Raye, Stromae, Jack & Coke, Marco Borreo, Danna Paola and MZMC. • Songwriting icons like David Bowie, Cole Porter, Grateful Dead, Led Zeppelin, Quincy Jones, George Michael, Marco Antonio Solís, Eric Clapton, Brody Brown, Liz Rose, Justin Tranter, busbee, Zach Bryan, Stephen Sondheim, George & Ira Gershwin and Gamble & Huff.
Biggest changeOur Music Publishing business includes musical compositions by: • Superstars such as Anderson Paak, Belly, Bruno Mars, Cardi B, Chris Stapleton, Damon Albarn, Dan + Shay, Dave Mustaine, Deftones, Dua Lipa, Green Day, Imagine Dragons, Kacey Musgraves, Katy Perry, Lil Uzi Vert, Lil Wayne, Lizzo, Madonna, Pablo Alborán, Radiohead, Tayla Parx, Teddy Swims, Tom Petty, Tones and I, and William Corgan. • International talent such as Aya Nakamura, Angèle, Bausa, Danna Paola, Jack & Coke, Joaquin Sabina, Jonathan Lee, Manuel Medrano, Marco Borreo, Melendi, MZMC, Raye, Shy’m, Stromae, and Tove Lo. • Songwriting icons like Amy Allen, Brody Brown, busbee, Cole Porter, David Bowie, Eric Clapton, Gamble & Huff, George & Ira Gershwin, George Michael, Grateful Dead, Justin Tranter, Led Zeppelin, Lin Manuel Miranda, Liz Rose, Marco Antonio Solís, Mick Jones, Quincy Jones, Stephen Sondheim and Zach Bryan . 18 Competition In our Recorded Music and Music Publishing businesses, we compete based on marketing (including both how we allocate our marketing resources as well as how much we spend on a dollar basis) and on recording artist and songwriter signings.
Also as part of the Phonorecords IV Proceeding, beginning on 9 January 1, 2023, the mechanical royalty rates for physical phonorecords and permanent downloads increased to $0.12 per copy or $0.0231 per minute of playing time or fraction thereof, and include inflation-based adjustments for subsequent years of the rate period. European Union Copyright Directive.
Also as part of the Phonorecords IV Proceeding, beginning on January 1, 2023, the mechanical 9 royalty rates for physical phonorecords and permanent downloads increased to $0.12 per copy or $0.0231 per minute of playing time or fraction thereof, and include inflation-based adjustments for subsequent years of the rate period. European Union Copyright Directive.
Our revenues are generated in digital formats including streaming and downloads, CD format, as well as through historical formats, such as vinyl albums. 14 In connection with the digital distribution of our music, we currently partner with a broad range of digital music services, such as Amazon, Apple, Deezer, KKBox, Spotify, Telefonica, Tencent Music Entertainment Group and YouTube, and are actively seeking to develop and grow our digital business.
Our revenues are generated in digital formats including streaming and downloads, CD format, as well as through historical formats, such as vinyl albums. 14 In connection with the digital distribution of our music, we currently partner with a broad range of digital music services, such as Amazon, Apple, Deezer, KKBox, Spotify, Tencent Music Entertainment Group and YouTube, and are actively seeking to develop and grow our digital business.
In the case of a musical composition with words that is protected by copyright on or after November 1, 2013, EU member states are required to calculate the 19 life of the author plus 70 years term from the date of death of the last surviving author of the lyrics and the composer of the musical composition, provided that both contributions were specifically created for the musical composition.
In the case of a musical composition with words that is protected by copyright on or after November 1, 2013, EU member states are required to calculate the life of the author plus 70 years term from the date of death of the last surviving author of the lyrics and the composer of the musical composition, provided that both contributions were specifically created for the musical composition.
A critical component of our global strategy is to produce an increasing flow of new music by finding, developing and retaining recording artists and songwriters who achieve long-term success. Since 2011, our annual new releases have grown significantly and our catalog of musical compositions has increased to more than one million.
A critical component of our global strategy is to produce an increasing flow of new music by finding, developing and retaining recording artists and songwriters who achieve long-term success. Since 2011, our annual new releases have grown significantly and our catalog of musical compositions has increased to more than one and a half million.
In October 2018, we launched Elektra Music Group in the United States as a standalone label group, which comprises the Elektra, Fueled by Ramen and Roadrunner labels, and in December 2021, we acquired 300 Entertainment and subsequently launched 300 Elektra Entertainment, or 3EE, a frontline label group that brings together the multi-genre power of 300 12 Entertainment and Elektra Music Group.
In October 2018, we launched Elektra Music Group in the United States as a standalone label group, which comprises the Elektra, Fueled by Ramen and Roadrunner labels, and in December 2021, we acquired 300 Entertainment and subsequently launched 300 Elektra Entertainment, or 3EE, a frontline label group that brings together the multi-genre power of 300 Entertainment and Elektra Music Group.
We continually add new musical compositions to our catalog and seek to acquire rights in musical compositions that will generate substantial revenue over the long term. 15 Music publishers generally receive royalties pursuant to public performance, digital, mechanical, synchronization and other licenses.
We continually add new musical compositions to our catalog and seek to acquire rights in musical compositions that will generate substantial revenue over the long term. Music publishers generally receive royalties pursuant to public performance, digital, mechanical, synchronization and other licenses.
In addition to our commercial arrangements with digital music services, we opportunistically invest in some of those services as well as other companies in our industry, including a minority equity stake in Deezer, a French digital music service in which Access owns a controlling equity interest.
Also, in addition to our commercial arrangements with digital music services, we opportunistically invest in some of those services as well as other companies in our industry, including a minority equity stake in Deezer, a French digital music service in which Access owns a controlling equity interest.
Throughout the world, each synchronization license is generally subject to negotiation with a prospective licensee and, by contract, music publishers pay a contractually required percentage of synchronization income to the songwriters or their heirs and to any co-publishers or other rightsholders.
Throughout the world, each synchronization license is generally subject to negotiation with a prospective 15 licensee and, by contract, music publishers pay a contractually required percentage of synchronization income to the songwriters or their heirs and to any co-publishers or other rightsholders.
Most of our physical sales represent purchases by a wholesale or retail distributor. Our sale and return policies are in accordance with wholesaler and retailer requirements, applicable laws and regulations, territory and customer-specific negotiations and industry practice.
Most of our physical sales represent purchases by a wholesale distributor or retailer. Our sale and return policies are in accordance with wholesaler and retailer requirements, applicable laws and regulations, territory and customer-specific negotiations and industry practice.
This includes access to a multitude of songwriters’ rooms and recording studios around the globe with more to come. Marketing and Promotional Firepower We are experts in the art of amplification, with proven specialties in every aspect of marketing and promotion.
This includes access to a multitude of songwriters’ rooms and recording studios around the globe with more to come. 17 Marketing and Promotional Firepower We are experts in the art of amplification, with proven specialties in every aspect of marketing and promotion.
Assembled over decades, our award-winning catalog includes over 150,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative and gospel. Warner Chappell Music also administers the music and soundtracks of several third-party television and film producers and studios.
Assembled over decades, our award-winning catalog includes over 180,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative and gospel. Warner Chappell Music also administers the music and soundtracks of several third-party television and film producers and studios.
We believe our longstanding reputation and relationships in the creative community, as well as our historical success in talent development and management, will continue to attract new recording artists and songwriters with staying power and market potential through the strength and scale of our proprietary capabilities. Strong Financial Profile with Robust Growth, Operating Leverage and Free Cash Flow Generation.
We believe our longstanding reputation and relationships in the creative community, as well as our historical success in talent development and management, will continue to attract new recording artists and songwriters with staying power and market potential through the strength and scale of our proprietary capabilities. Strong Financial Profile with Continued Growth, Operating Leverage and Free Cash Flow Generation.
The U.S. Securities and Exchange Commission (the “SEC”) maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. None of the information contained on, or that may be accessed through our websites or any other website identified herein, is part of, or incorporated into, this filing.
Securities and Exchange Commission (the “SEC”) maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. None of the information contained on, or that may be accessed through our websites or any other website identified herein, is part of, or incorporated into, this filing.
We also sell traditional physical formats through both the online distribution arms of traditional retailers such as target.com and walmart.com and traditional online physical retailers such as amazon.com, bestbuy.com and barnesandnoble.com. Streaming services stream our music on an ad-supported or paid subscription basis. In addition, downloading services download our music on a per-album or per-track basis.
We also sell traditional physical formats through both the online distribution arms of traditional retailers such as target.com and walmart.com and traditional online physical retailers such as amazon.com, bestbuy.com and barnesandnoble.com. Streaming services stream our music on an ad-supported or paid subscription basis. In addition, downloading services sell downloads of our music on a per-album or per-track basis.
Our major trademarks include 300 Entertainment, ADA, Asylum, Atlantic, East West, Elektra, EMP, Erato, Nonesuch, Parlophone, Reprise, Rhino, Roadrunner, Sire, Songkick, SPINNIN’ RECORDS, TenThousand Projects and Warner Chappell, and their respective logos. We also use certain trademarks pursuant to a royalty-free license agreement.
Our major trademarks include 300 Entertainment, ADA, Asylum, Atlantic, East West, Elektra, EMP, Erato, Nonesuch, Parlophone, Reprise, Rhino, Roadrunner, Sire, Songkick, SPINNIN’ RECORDS and Warner Chappell, and their respective logos. We also use certain trademarks pursuant to a royalty-free license agreement.
According to Music & Copyright, in 2022, the three largest recorded music companies were Universal Music Group, Sony Music Entertainment and us, which collectively accounted for approximately 70% of global recorded music revenues. There are many mid-sized and smaller players in the industry that accounted for the remaining approximately 30%, including independent recorded music companies.
According to Music & Copyright, in 2023, the three largest recorded music companies were Universal Music Group, Sony Music Entertainment and us, which collectively accounted for approximately 70% of global recorded music revenues. There are many mid-sized and smaller players in the industry that accounted for the remaining approximately 30%, including independent recorded music companies.
Following the completion of the IPO, Access and its affiliates continue to hold all of the Class B common stock of the Company, par value $0.001 per share (“Class B Common Stock”), representing approximately 98% of the total combined voting power of the Company’s outstanding common stock and approximately 73% of the economic interest.
Following the completion of the IPO, Access and its affiliates continue to hold all of the Class B common stock of the Company, par value $0.001 per share (“Class B Common Stock”), representing approximately 98% of the total combined voting power of the Company’s outstanding common stock and approximately 72% of the economic interest.
We have recently added key new members to our management team, including our CEO, Robert Kyncl, who joined us from YouTube where he served as Chief Business Officer, and our CFO, Bryan Castellani, who joined us from The Walt Disney Company, most recently serving as CFO for Disney Entertainment & ESPN, who together bring fresh perspectives from their tech and entertainment backgrounds to further enhance and evolve our business strategy.
In 2023, we added key new members to our management team, including our CEO, Robert Kyncl, who joined us from YouTube where he served as Chief Business Officer, and our CFO, Bryan Castellani, who joined us from The Walt Disney Company, most recently serving as CFO for Disney Entertainment & ESPN, who together bring fresh perspectives from their tech and entertainment backgrounds to further enhance and evolve our business strategy.
In addition, we have increased organic investment in heavily populated emerging markets by, for example, launching Warner Music Middle East, our recorded music affiliate covering multiple markets across the Middle East and North Africa (“MENA”) with a total population of 493 million people, by acquiring Qanawat, one of the largest independent distributors in MENA, and by investing in Rotana, one of the leading independent labels in MENA.
In addition, we have increased organic investment in heavily populated emerging markets by, for example, launching Warner Music Middle East, our recorded music affiliate covering multiple markets across the Middle East and North Africa (“MENA”) with a total population of approximately 501 million people, by acquiring Qanawat, one of the largest independent distributors in MENA, and by investing in Rotana, one of the leading independent labels in MENA.
According to Music & Copyright, Sony Music Publishing was the market leader in music publishing in 2022 with an approximately 25% share (reflecting its ownership of the EMI music publishing assets). Universal Music Publishing was the second-largest music publisher with an approximately 23% share, followed by us at approximately 12%.
According to Music & Copyright, Sony Music Publishing was the market leader in music publishing in 2023 with an approximately 25% share (reflecting its ownership of the EMI music publishing assets). Universal Music Publishing was the second-largest music publisher with an approximately 23% share, followed by us at approximately 12%.
Our agreements with digital music services generally last one to three years. In fiscal year 2023, Recorded Music revenue earned under our agreements with our top three digital music accounts, Spotify, YouTube and Apple, accounted for approximately 41% of our Recorded Music revenues.
Our agreements with digital music services generally last one to three years. In fiscal year 2024, Recorded Music revenue earned under our agreements with our top three digital music accounts, Spotify, YouTube and Apple, accounted for approximately 41% of our Recorded Music revenues.
We also conduct our Recorded Music business through a collection of additional record labels including Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Nonesuch, Parlophone, Reprise, Sire, Spinnin’ Records, TenThousand Projects, Warner Classics and Warner Music Nashville. Outside the United States, our Recorded Music business is conducted through various subsidiaries, affiliates and non-affiliated licensees.
We also conduct our Recorded 12 Music business through a collection of additional record labels including Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Nonesuch, Parlophone, Reprise, Sire, Spinnin’ Records, Warner Classics and Warner Music Nashville. Outside the United States, our Recorded Music business is conducted through various subsidiaries, affiliates and non-affiliated licensees.
Our business’ distribution operations also includes Alternative Distribution Alliance (“ADA”), which markets, distributes and sells the products of independent labels to retail and wholesale distributors; and various distribution centers and ventures operated internationally.
Our business’ distribution operations also include Alternative Distribution Alliance (“ADA”), which markets, distributes and sells the products of independent labels to retail and wholesale distributors; and various distribution centers and ventures operated internationally.
Human Capital As of September 30, 2023, we employed approximately 5,900 persons worldwide, including temporary and part-time employees as well as employees that were added through acquisitions. As of such date, none of our employees in the United States were subject to a collective bargaining agreement, although certain employees in our non-domestic companies were covered by national labor agreements.
Human Capital As of September 30, 2024, we employed approximately 5,800 persons worldwide, including temporary and part-time employees as well as employees that were added through acquisitions. As of such date, none of our employees in the United States were subject to a collective bargaining agreement, although certain employees in our non-domestic companies were covered by national labor agreements.
With over $4.9 billion in annual recorded music revenues, over half of which are generated outside of the United States, we believe our platform is differentiated by the scale, reach and broad appeal of our music. Our collection of owned and controlled recordings and musical compositions, spanning a large variety of genres and geographies over many decades, cannot be replicated.
With over $5.2 billion in annual recorded music revenues, over half of which are generated outside of the United States, we believe our platform is differentiated by the scale, reach and broad appeal of our music. Our collection of owned and controlled recordings and musical compositions, spanning a large variety of genres and geographies over many decades, cannot be replicated.
In addition, we have benefited, and expect to continue to benefit, from our acquisition by Access in July 2011, which has provided us with strategic direction, M&A and capital markets expertise and planning support to help us take full advantage of the ongoing transition in the music entertainment industry. Expertise in Strategic Acquisitions and Investments That Extend Our Capabilities.
In addition, we have benefited, and expect to continue to benefit, from our acquisition by Access in July 2011, which has provided us with strategic direction, M&A and capital markets expertise and planning support to help us take full advantage of the ongoing transition in the music entertainment industry. Expertise in Strategic Acquisitions and Investments That Expand Our Business.
Music Publishing (18%, 16% and 14% of consolidated revenues, before intersegment eliminations, for each of the fiscal years ended September 30, 2023, September 30, 2022 and September 30, 2021, respectively) While Recorded Music is focused on marketing, promoting, distributing and licensing a particular recording of a musical composition, Music Publishing is an intellectual property business focused on generating revenue from uses of the musical composition itself.
Music Publishing (19%, 18% and 16% of consolidated revenues, before intersegment eliminations, for each of the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, respectively) While Recorded Music is focused on marketing, promoting, distributing and licensing a particular recording of a musical composition, Music Publishing is an intellectual property business focused on generating revenue from uses of the musical composition itself.
The graphic below sets out the top ten markets and their respective revenue growth for 2022. Source: IFPI We believe the following secular trends will continue to drive growth in the recorded music industry: Streaming Still in Early Stages of Global Adoption and Penetration According to IFPI, global paid music streaming subscribers totaled 589 million at the end of 2022.
The graphic below sets out the top ten markets and their respective revenue growth for 2023. Source: IFPI We believe the following secular trends will continue to drive growth in the recorded music industry: Streaming Still in Early Stages of Global Adoption and Penetration According to IFPI, global paid music streaming subscribers totaled 667 million at the end of 2023.
Other milestones include the Company’s acquisitions of direct-to-audience businesses such as entertainment specialty e-tailer EMP Merchandising, live music application Songkick and youth culture platform UPROXX. Industry Overview The music entertainment industry is large, global and vibrant. The recorded music and music publishing industries are growing, driven by consumer and demographic trends in the digital consumption of music.
Other milestones include the Company’s acquisitions of direct-to-audience businesses such as entertainment specialty e-tailer EMP Merchandising and live music application Songkick. Industry Overview The music entertainment industry is large, global and vibrant. The recorded music and music publishing industries are growing, driven by consumer and demographic trends in the digital consumption of music.
Synchronization revenue is generated from the use of recorded music in advertising, film, video games and television content, and represented 2.4% of global recorded music revenue in 2022. 6 Source: IFPI From a geographical standpoint, the largest markets for recorded music in 2022 were the United States, Japan, the United Kingdom, Germany, China, France, South Korea, Canada, Brazil and Australia.
Synchronization revenue is generated from the use of recorded music in advertising, film, video games and television content, and represented 2.1% of global recorded music revenue in 2023. 6 Source: IFPI From a geographical standpoint, the largest markets for recorded music in 2023 were the United States, Japan, the United Kingdom, Germany, China, France, South Korea, Canada, Brazil and Australia.
We play an integral role in virtually all aspects of the recorded music value chain from discovering and developing talent to producing, distributing and selling music to marketing and promoting recording artists and their music. In the United States, our Recorded Music business is conducted principally through our major record labels—Atlantic Records and Warner Records.
We play an integral role in virtually all aspects of the recorded music value chain from discovering and developing talent to producing, distributing and selling music to marketing and promoting recording artists and their music. In the United States, our Recorded Music business is conducted principally through our major record labels—Atlantic Records, which includes TenThousand Projects, and Warner Records.
Consumer Trends and Demographics Consumers today engage with music in more ways than ever. According to the International Federation of the Phonographic Industry (“IFPI”) Engaging with Music 2022 report, global consumers spent 20.1 hours listening to music each week in 2022. Demographic trends and digital music penetration have been key factors in driving growth in music consumption.
Consumer Trends and Demographics Consumers today engage with music in more ways than ever. According to the International Federation of the Phonographic Industry (“IFPI”) Engaging with Music 2023 report, global consumers spent 20.7 hours listening to music each week in 2023. Demographic trends and digital music penetration have been key factors in driving growth in music consumption.
Younger consumers typically are early adopters of new technologies, including music-enabled devices. According to IFPI’s Engaging with Music 2022 report, in 2022, the rapid emergence of short-form video, livestreaming and in-game experiences drove new opportunities in music. Of the time people spent using short-form video apps, 68% involved music-dependent videos.
Younger consumers typically are early adopters of new technologies, including music-enabled devices. According to IFPI’s Engaging with Music 2023 report, in 2023, the rapid emergence of short-form video, livestreaming and in-game experiences drove new opportunities in music. Of the time people spent using short-form video apps, 82% involved music-dependent videos.
Recorded Music (82%, 84% and 86% of consolidated revenues, before intersegment eliminations, for each of the fiscal years ended September 30, 2023, September 30, 2022 and September 30, 2021, respectively) Our Recorded Music business primarily consists of the discovery and development of recording artists and the related marketing, promotion, distribution, sale and licensing of music created by such recording artists.
Recorded Music (81%, 82% and 84% of consolidated revenues, before intersegment eliminations, for each of the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, respectively) Our Recorded Music business primarily consists of the discovery and development of recording artists and the related marketing, promotion, distribution, sale and licensing of music created by such recording artists.
According to Luminate (formerly MRC Data/Billboard), 44% of social media users discover music via social media sites/apps. Furthermore, Gen Z Music listeners are +69% more likely to discover new music via short video clip sites. The music industry as a whole is currently undergoing a transformation driven by Gen Z.
According to Luminate (formerly MRC Data/Billboard), 42% of social media users discover music via social media sites/apps. Furthermore, Gen Z Music listeners are 71% more likely to discover new music via short video clip sites. The music industry as a whole is currently undergoing a transformation driven by Gen Z.
In advance of trial, the National Music Publishers’ Association (“NMPA”), the Nashville Songwriters Associations International (“NSAI”) and the Digital Media Association (“DiMA”) announced a settlement regarding the U.S. mechanical streaming rates for 2023-2027.
In advance of trial, the National Music Publishers’ Association, the Nashville Songwriters Associations International and the Digital Media Association announced a settlement regarding the U.S. mechanical streaming rates for 2023-2027.
We believe that the continued development of new digital channels for the consumption of music as well as evolving digital asset classes tied to our artists and songwriters present significant promise and opportunity for the music entertainment industry. We are also exploring the benefits of Artificial Intelligence (“AI”) for our business.
We believe that the continued development of new digital channels for the consumption of music as well as evolving digital asset classes tied to our artists and songwriters present significant promise and opportunity for the music entertainment industry. We are also exploring the benefits of AI for our business.
For example, we quickly honed our expertise in securing placement on playlists and other valuable positioning on digital music services. Global Reach and Local Expertise As of September 30, 2023, we employed approximately 5,900 persons around the world.
For example, we quickly honed our expertise in securing placement on playlists and other valuable positioning on digital music services. Global Reach and Local Expertise As of September 30, 2024, we employed approximately 5,800 persons around the world.
Our Music Publishing business, which includes esteemed songwriters such as Twenty One Pilots, Lizzo and Katy Perry, generated $1,088 million of revenue in fiscal 2023, representing 18% of total revenues. We benefit from the scale of our global platform and our local focus. Today, global music entertainment companies such as ours are more important and relevant than ever.
Our Music Publishing business, which includes esteemed songwriters such as Twenty One Pilots, Lizzo and Katy Perry, generated $1,210 million of revenue in fiscal 2024, representing 19% of total revenues. We benefit from the scale of our global platform and our local focus. Today, global music entertainment companies such as ours are more important and relevant than ever.
All website addresses in this Annual Report are intended to be inactive textual references only. 21
All website addresses in this Annual Report are intended to be inactive textual references only. 20
Trademarks We consider our trademarks to be valuable assets to our business. Although we cannot assure you that our trademark applications, even for major trademarks, will register, we endeavor to register our major trademarks in every country where we believe the protection of these trademarks is important for our business.
Although we cannot assure you that our trademark applications, even for major trademarks, will register, we endeavor to register our major trademarks in every country where we believe the protection of these trademarks is important for our business.
According to Statista, as of September 2022, 5 out of the top 10 most followed accounts on X (formerly Twitter) belong to musicians, and according to YouTube, the majority of videos that have achieved more than one billion lifetime views as well as the top 10 most watched videos of all time, belong to musicians.
According to Statista, as of August 2023, 5 out of the top 10 most followed accounts on X (formerly Twitter) belong to musicians, and according to YouTube, the majority of videos that have achieved more than one billion lifetime views as well as 4 out of the top 10 most watched videos of all time, belong to musicians.
In 2023, U.S. mechanical royalties for physical formats (e.g., CDs and vinyl albums) and permanent digital downloads are paid at a rate of 12.0 cents per song per unit or 2.31 cents per minute of playing time (whichever is greater).
In 2024, U.S. mechanical royalties for physical formats (e.g., CDs and vinyl albums) and permanent digital downloads are paid at a rate of 12.4 cents per song per unit or 2.38 cents per minute of playing time (whichever is greater).
Recording Artists’ Contracts Our recording artists’ contracts define the commercial relationship between our recording artists and our record labels. We negotiate recording contracts with recording artists that define our rights to use the recording artists’ music. In accordance with the terms of the contract, the recording artists receive royalties based on sales and other uses of such recording artists’ music.
We negotiate recording contracts with recording artists that define our rights to use the recording artists’ music. In accordance with the terms of the contract, the recording artists receive royalties based on sales and other uses of such recording artists’ music.
Universal Music Group was the market leader with an approximately 31% global market share in 2022 after absorbing the bulk of the recorded music assets of the former EMI in late 2012, followed by Sony Music Entertainment with an approximately 23% share. We held an approximately 16% share of global recorded music revenues in 2022.
Universal Music Group was the market leader with an approximately 32% global market share in 2023 after absorbing the bulk of the recorded music assets of the former EMI in late 2012, followed by Sony Music Entertainment with an approximately 22% share. We held an approximately 16% share of global recorded music revenues in 2023.
Music Modernization Act (“MMA”). In 2018, the enactment of the MMA in the United States resulted in major reforms to music licensing.
In 2018, the enactment of the MMA in the United States resulted in major reforms to music licensing.
Many of our recording artists continue to appeal to audiences long after we cease to release their new music. We have an efficient process for sustaining sales across our catalog releases.
Many of our recording artists continue to appeal to audiences long after we cease to release their new music. We have an efficient process for sustaining sales across our catalog releases. Relative to our new releases, we spend lesser amounts on marketing for our catalog.
Mechanical revenues from traditional physical music formats (e.g., vinyl, CDs, DVDs), accounted for approximately 5% of global revenue in 2022. 8 Global Music Publishing Industry Revenues 2018 to 2022 ($ in billions) Positive Regulatory Trends The music industry has benefited from positive regulatory developments in recent years, which are expected to lead to increased revenues for the music entertainment industry in the coming years.
Mechanical revenues from traditional physical music formats (e.g., vinyl, CDs, DVDs), accounted for approximately 5% of global revenue in 2023. Positive Regulatory Trends The music industry has benefited from positive regulatory developments in recent years, which are expected to lead to increased revenues for the music entertainment industry in the coming years. Music Modernization Act (“MMA”).
Our Recorded Music business is also dependent on technological development, including access to, selection and viability of new technologies, and is subject to potential pressure from competitors as a result of their technological developments.
We believe we currently compete favorably in these areas. Our Recorded Music business is also dependent on technological development, including access to, selection and viability of new technologies, and is subject to potential pressure from competitors as a result of their technological developments.
According to the IFPI, from 2018 through 2022, global recorded music revenue grew at a CAGR of 11%, with streaming revenue growing at a CAGR of 19% and increasing as a percentage of global recorded music revenue from 50% to 67% over the same period.
According to the IFPI, from 2019 through 2023, global recorded music revenue grew at a CAGR of 11%, with streaming revenue growing at a CAGR of 16% and increasing as a percentage of global recorded music revenue from 57% to 67% over the same period.
Revenues increased by 4.0% to $4.6 billion, driven by the continued resurgence of interest in vinyl. Revenue from Vinyl grew 17.1% in 2022 driven by its strongest performance in Asia with that region accounting for almost half the global revenues for physical, according to IFPI. 5 Members of older demographic groups are also increasing their music engagement.
Revenue from 5 Vinyl grew to 17.8% in 2023 driven by its strongest performance in Asia with that region accounting for almost half the global revenues for physical, according to IFPI. Members of older demographic groups are also increasing their music engagement.
While this represents an increase of 16% from 509 million in 2021, it still represents less than 13% of the 4.7 billion smartphone users globally in 2022.
While this represents an increase of 13% from 589 million in 2022, it still represents less than 13% of the 4.6 billion smartphone users globally in 2023.
All website addresses in this Annual Report are intended to be inactive textual references only. 20 Available Information Our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any amendments to those forms are available free of charge through our website (investors.wmg.com) as soon as reasonably practicable after they are filed with or furnished to the SEC.
Available Information Our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any amendments to those forms are available free of charge through our website (investors.wmg.com) as soon as reasonably practicable after they are filed with or furnished to the SEC. The U.S.
Welcoming Talent We offer recording artists and songwriters numerous pathways into our ecosystem. Whether it is an up-and-coming songwriter making music in his or her bedroom, a breakout superstar recording artist selling out stadiums or an icon looking to curate a legacy, we offer the necessary support and resources. We are not just searching for immediate hits.
Whether it is an up-and-coming songwriter making music in his or her bedroom, a breakout superstar recording artist selling out stadiums or an icon looking to curate a legacy, we offer the necessary support and resources. We are not just searching for immediate hits. We scout and sign talent with the market potential for longevity and lasting impact.
It also represents a small fraction of the user base for large, globally scaled digital services such as Facebook, which reported 3.0 billion monthly users as of September 2023, and YouTube, which reported over 2.7 billion monthly users as of June 2023. Additionally, Instagram reported 2.0 billion monthly users while TikTok reported 1.0 billion monthly users.
It also 7 represents a small fraction of the user base for large, globally scaled digital services such as Facebook, which reported 3.3 billion daily active users as of June 2024, and YouTube, which reported over 2.7 billion monthly users as of October 2024.
The music publishing industry is also highly competitive. The three largest music publishing companies collectively accounted for approximately 60% of the global market in 2022 according to Music & Copyright.
The music publishing industry is also highly competitive. Global music publishing revenue topped the $9 billion milestone for the first time in 2023. The three largest music publishing companies collectively accounted for approximately 60% of the global market in 2023 according to Music & Copyright.
In addition, Warner Chappell Music, our global music publishing business, boasts an extraordinary catalog that includes timeless standards and contemporary hits, representing works by over 150,000 songwriters and composers, with a global collection of more than one million musical compositions. Our entrepreneurial spirit and passion for music has driven our recording artist and songwriter focused innovation for decades.
In addition, Warner Chappell Music, our global music publishing business, boasts an extraordinary catalog that includes timeless standards and contemporary hits, representing works by over 180,000 songwriters and composers, with a global collection of more than one and a half million musical compositions.
There are also rates set for interactive streaming and non-permanent downloads based on a formula that takes into account revenues paid by consumers or advertisers with certain minimum royalties that may apply depending on the type of service.
There are also rates set for interactive streaming and non-permanent downloads based on a formula that takes into account revenues paid by consumers or advertisers with certain minimum royalties that may apply depending on the type of service. For 2024, the headline mechanical royalty rate for interactive streaming is 15.2% of revenue, increasing by annual increments to 15.35% in 2027.
By comparison, from fiscal year 2018 to fiscal year 2022, our recorded music streaming revenue grew at a CAGR of 16% and increased as a percentage of our total recorded music revenues from 52% to 64%.
By comparison, from fiscal year 2019 to fiscal year 2023, our recorded music streaming revenue grew at a CAGR of 11% and increased as a percentage of our total recorded music revenues from 55% to 65%.
For example, according to Goldman Sachs, in 2022, approximately 58% of the smartphone users in Sweden, an early adopter market, was paid music subscribers.
For example, according to Goldman Sachs, in 2023, approximately 63% of internet users in Sweden, an early adopter market, were paid music subscribers.
Our management team has successfully designed and implemented our business strategy, delivering strong financial results, releasing an increasing flow of new music and establishing a dynamic culture of innovation.
We believe our financial profile provides a strong foundation for our continued growth. Experienced Leadership Team and Committed Strategic Investor. Our management team has successfully designed and implemented our business strategy, delivering strong financial results, releasing an increasing flow of new music and establishing a dynamic culture of innovation.
According to Luminate, Gen Z is investing more time and money on music when compared to the average music listener. They spend 21% more hours and spend 18% more money on music annually compared to the average music listener. Gen Z listeners are also 28% more likely to pay for premium music subscriptions.
According to Luminate, Gen Z is investing more time and money on music when compared to the average music listener. They spend 25% more hours and spend 9% more money on music annually compared to the average music listener.
For 2023, the headline mechanical royalty rate for interactive streaming is 15.1% of revenue, increasing by annual increments to 15.35% in 2027. 16 “Controlled composition” provisions contained in some recording contracts may apply to the rates mentioned above pursuant to which artist/songwriters license their rights to their record companies for as little as 75% of the statutory rates.
“Controlled composition” provisions contained in some recording contracts may apply to the rates mentioned above pursuant to which artist/songwriters license their rights to their record companies for as little as 75% of the statutory rates.
According to an IFPI survey, users of paid accounts as a percentage of all streaming service users rose from 38% to 46% of those surveyed between 2019 and 2022, with growth seen across all demographics.
According to an IFPI survey, users of paid accounts as a percentage of all streaming service users rose from 46% to 48% of those surveyed between 2022 and 2023, with growth seen across all demographics. Music permeates our culture across age groups, as evidenced by the footprint that music has across social media.
Overall, streaming grew by 11.5% in 2022 as compared to 2021. Physical represented approximately 17.5% of global recorded music revenue in 2022, with growth in vinyl sales. Performance rights revenue represents the use of recorded music by broadcasters and public venues, and represented approximately 9.4% of global recorded music revenue in 2022.
Physical represented approximately 17.8% of global recorded music revenue in 2023, with growth in vinyl sales. Performance rights revenue represents the use of recorded music by broadcasters and public venues, and represented approximately 9.4% of global recorded music revenue in 2023. Downloads and other digital revenue represented approximately 3.1% of global recorded music revenue in 2023.
Our Recorded Music business, home to superstar recording artists such as Ed Sheeran, Bruno Mars, Cardi B and Dua Lipa, generated $4.955 billion of revenue in fiscal 2023, representing 82% of total revenues.
Our entrepreneurial spirit and passion for music has driven our recording artist and songwriter focused innovation for decades. Our Recorded Music business, home to superstar recording artists such as Ed Sheeran, Bruno Mars, Cardi B and Dua Lipa, generated $5.223 billion of revenue in fiscal 2024, representing 81% of total revenues.
According to Music & Copyright, the music publishing industry generated $8.1 billion in global revenue in 2022, representing an approximate 17.7% increase from $6.9 billion in 2021 (following an increase in global music publishing revenues of 17.6% from 2020 to 2021).
According to Music & Copyright, the music publishing industry generated $9 billion in global revenue in 2023, representing an approximate 10.9% increase from $8.1 billion in 2022 (following an increase in global music publishing revenues of 17.7% from 2021 to 2022). 8 Music publishing revenues are classified by Music & Copyright as coming from four main royalty sources: digital, mechanical, performance, and synchronization.
Our longstanding relationships within the creative community also provide our recording artists and songwriters with a wide network of collaborators, which is a vital part of helping them to realize their best work. We provide the investment that gives our recording artists and songwriters the requisite time and space to experiment and flourish.
Creative Partnership Our A&R executives both champion and challenge the talent they sign, empowering them to realize their visions and evolve over time. Our longstanding relationships within the creative community also provide our recording artists and songwriters with a wide network of collaborators, which is a vital part of helping them to realize their best work.
In most other territories, mechanical royalties are based on a percentage of wholesale prices for physical formats and based on a percentage of consumer prices for digital formats. In international markets, these rates are typically determined by multi-year collective bargaining agreements and rate tribunals.
In most other territories, mechanical royalties are based on a percentage of wholesale prices for physical formats and based on a percentage of consumer prices for digital formats.
We use our catalog as a source of material for re-releases, box sets and special package releases, which provide consumers with incremental exposure to familiar music and recording artists. Rhino Entertainment also releases new music from legacy recording artists and markets and promotes the name and likeness of certain artist estates and brands.
We maximize the value of our catalog of recorded music through our Rhino Entertainment business unit and through activities of each of our record labels. We use our catalog as a source of material for re-releases, box sets and special package releases, which provide consumers with incremental exposure to familiar music and recording artists.
Below is an overview of the many creative and commercial services we provide our recording artists and songwriters. Our interests are aligned with theirs. By creating value for our recording artists and songwriters, we create value for ourselves. That philosophy is behind our current momentum, and we believe it will continue to propel our business into the future.
By creating value for our recording artists and songwriters, we create value for ourselves. That philosophy is behind our current momentum, and we believe it will continue to propel our business into the future. Welcoming Talent We offer recording artists and songwriters numerous pathways into our ecosystem.
There also remains substantial opportunity in emerging markets, such as Brazil and India, where paid streaming penetration is low compared to developed markets. According to Goldman Sachs, paid streaming penetration for Brazil and India in 2022 was 15% and 2%, respectively. China, in particular, represents a substantial growth market for the recorded music industry.
According to Goldman Sachs, paid streaming penetration for Brazil and India in 2024 was 14% and 3%, respectively. China, in particular, represents a substantial growth market for the recorded music industry.
Technological changes have focused attention on the need for new legislation that will adequately protect the rights of producers. We actively lobby in favor of industry efforts to increase copyright protection and support the efforts of organizations such as RIAA, IFPI, National Music Publishers’ Association, International Confederation of Music Publishers and the World Intellectual Property Organization.
We actively lobby in favor of industry efforts to increase copyright protection and support the efforts of organizations such as RIAA, IFPI, National Music Publishers’ Association, International Confederation of Music Publishers and the World Intellectual Property Organization. 19 Trademarks We consider our trademarks to be valuable assets to our business.
Short-form music and music-based video content has grown rapidly, driven by the growth of global social video applications such as TikTok, Instagram Reels and YouTube Shorts which feature short videos often set to music. 60% of emerging platform revenues in the music industry last year came from short-form video and social media, which includes TikTok, Instagram Reels, YouTube Shorts, and Snapchat Spotlight.
These technologies represent advancements that are deepening listener engagement and driving further growth in music consumption. Short-form music and music-based video content has grown rapidly, driven by the growth of global social video applications such as TikTok, Instagram Reels and YouTube Shorts which feature short videos often set to music.
The operations of our Music Publishing business are conducted principally through Warner Chappell Music, our global music publishing company headquartered in Los Angeles, and through various subsidiaries, affiliates, and non-affiliated licensees and sub-publishers. We own or control rights to more than one million musical compositions, including numerous global pop hits, standards, folk songs and motion picture and theatrical compositions.
The operations of our Music Publishing business are conducted principally through Warner Chappell Music, our global music publishing company headquartered in Los Angeles, and through various subsidiaries, affiliates, and non-affiliated licensees and sub-publishers.
These investments are made with the purpose of increasing our understanding of local market dynamics and popularizing our current roster of recording artists and songwriters around the world. Embrace Commercial Innovation with New Digital Distributors and Partners. We believe the growth of digital formats will continue to create new and powerful ways to distribute, engage and monetize.
Embrace Commercial Innovation with New Digital Distributors and Partners. We believe the growth of digital formats will continue to create new and powerful ways to distribute, engage and monetize.
According to IFPI, global recorded music revenue has grown at a CAGR of 11% since 2018. IFPI measures the recorded music industry on a global scale based on five revenue categories: streaming, downloads and other digital (excluding streaming), physical, synchronization and performance rights.
IFPI measures the recorded music industry on a global scale based on five revenue categories: streaming, downloads and other digital (excluding streaming), physical, synchronization and performance rights. Streaming is the largest of these categories, generating $19.3 billion of revenue in 2023, representing 67% of global recorded music revenue.
We recognize that music is inherently local in nature, shaped by people and culture. IFPI considers the global recorded music market in seven distinct regions. In 2022, the recorded music market saw growth in every region across the globe.
We recognize that music is inherently local in nature, shaped by people and culture. IFPI considers the global recorded music market in seven distinct regions. Every region had healthy revenue growth in 2023 and five regions posted double-digit percentage gains. Sub-Saharan Africa remained the fastest growing area.
While the duration of the administration rights under contracts may vary, some of our contracts grant us ownership and/or administration rights for the duration of copyright. See “—Intellectual Property—Copyrights.” U.S. copyright law permits authors or their estates to terminate an assignment or license of copyright (for the United States only) after a set period of time.
See “—Intellectual Property—Copyrights.” U.S. copyright law permits authors or their estates to terminate an assignment or license of copyright (for the United States only) after a set period of time. See “Risk Factors—We face a potential loss of catalog to the extent that our recording artists have a right to recapture rights in their recordings under the U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we fail to obtain appropriate relief through the judicial process or the complete enforcement of judicial decisions issued in our favor (or if judicial decisions are not in our favor), if we are unsuccessful in our efforts to lobby governments to enact and enforce stronger legal penalties for copyright infringement or if we fail to develop effective means of protecting and enforcing our intellectual property (whether copyrights or other intellectual property rights such as patents, trademarks and trade secrets) or our music entertainment-related products or services, our results of operations, financial position and prospects may suffer. 28 If we or our service providers do not maintain the security of information relating to our customers, employees and vendors and our music, security information breaches through cyber security attacks or otherwise could damage our reputation with customers, employees, vendors and artists, and we could incur substantial additional costs, become subject to litigation and our results of operations and financial condition could be adversely affected.
Biggest changeThe impact of digital piracy on legitimate music revenues and subscriptions is hard to quantify, but we believe that illegal file sharing and other forms of unauthorized activity, including stream manipulation, have a substantial negative impact on music revenues. 27 If we fail to obtain appropriate relief through the judicial process or the complete enforcement of judicial decisions issued in our favor (or if judicial decisions are not in our favor), if we are unsuccessful in our efforts to lobby governments to enact and enforce stronger legal penalties for copyright infringement or if we fail to develop effective means of protecting and enforcing our intellectual property (whether copyrights or other intellectual property rights such as patents, trademarks and trade secrets) or our music entertainment-related products or services, our results of operations, financial position and prospects may suffer.
All of the shares of Class A Common Stock sold in the IPO were immediately tradable without restriction under the Securities Act except for any shares held by “affiliates,” as that term is defined in Rule 144 under the Securities Act, or “Rule 144.” 35 The remaining shares of Class B Common Stock outstanding subsequent to the consummation of the IPO are restricted securities within the meaning of Rule 144, but will be eligible for resale subject, in certain cases, to applicable volume, manner of sale, holding period and other limitations of Rule 144 or pursuant to an exception from registration under Rule 701 under the Securities Act, or “Rule 701.” Access has the right to require us to register shares of common stock for resale in some circumstances pursuant to a registration rights agreement we entered into with Access.
All of the shares of Class A Common Stock sold in the IPO were immediately tradable without restriction under the Securities Act except for any shares held by “affiliates,” as that term is defined in Rule 144 under the Securities Act, or “Rule 144.” The remaining shares of Class B Common Stock outstanding subsequent to the consummation of the IPO are restricted securities within the meaning of Rule 144, but will be eligible for resale subject, in certain cases, to applicable volume, manner of sale, holding period and other limitations of Rule 144 or pursuant to an exception from registration under Rule 701 under the Securities Act, or “Rule 701.” Access has the right to require us to register shares of common stock for resale in some circumstances pursuant to a registration rights agreement we entered into with Access.
Copyright Act for U.S. rights in musical compositions that are not “works made for hire.” If any of our commercially available sound recordings were determined not to be “works made for hire,” then the recording artists (or their heirs) could have the right to terminate the U.S. federal copyright rights they granted to us, generally during a five-year period starting at the end of 35 years from the date of release of a recording under a post-1977 license or assignment (or, in the case of a pre-1978 grant in a pre-1978 recording, generally during a five-year period starting at the end of 56 years from the date of copyright).
Copyright Act for U.S. rights in musical compositions that are not “works made for hire.” If 26 any of our commercially available sound recordings were determined not to be “works made for hire,” then the recording artists (or their heirs) could have the right to terminate the U.S. federal copyright rights they granted to us, generally during a five-year period starting at the end of 35 years from the date of release of a recording under a post-1977 license or assignment (or, in the case of a pre-1978 grant in a pre-1978 recording, generally during a five-year period starting at the end of 56 years from the date of copyright).
For example, our amended and restated certificate of incorporation and amended and restated by-laws collectively: • authorize two classes of common stock with disparate voting power; • permit different treatment of our Class A Common Stock and Class B Common Stock in a change of control transaction if approved by a majority of the voting power of our outstanding Class A Common Stock and a majority of the voting power of our outstanding Class B Common Stock, voting separately; • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; 37 • provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office once Access ceases to beneficially own more than 50% of the total combined voting power of the outstanding shares of our common stock; • prohibit stockholders from calling special meetings of stockholders if Access ceases to beneficially own more than 50% of the total combined voting power of the outstanding shares of our common stock; • prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders, if Access ceases to beneficially own more than 50% of the total combined voting power of the outstanding shares of our common stock; • establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders; • require the approval of holders of at least 66 2/3% of the total combined voting power of the outstanding shares of our common stock to amend our amended and restated by-laws and certain provisions of our amended and restated certificate of incorporation if Access ceases to beneficially own more than 50% of the total combined voting power of the outstanding shares of our common stock; and • subject us to Section 203 of the DGCL, which limits the ability of stockholders holding shares representing more than 15% of the voting power of our outstanding voting stock from engaging in certain business combinations with us, once Access no longer owns at least 5% of the total combined voting power of our outstanding common stock.
For example, our amended and restated certificate of incorporation and amended and restated by-laws collectively: • authorize two classes of common stock with disparate voting power; • permit different treatment of our Class A Common Stock and Class B Common Stock in a change of control transaction if approved by a majority of the voting power of our outstanding Class A Common Stock and a majority of the voting power of our outstanding Class B Common Stock, voting separately; • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office once Access ceases to beneficially own more than 50% of the total combined voting power of the outstanding shares of our common stock; • prohibit stockholders from calling special meetings of stockholders if Access ceases to beneficially own more than 50% of the total combined voting power of the outstanding shares of our common stock; • prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders, if Access ceases to beneficially own more than 50% of the total combined voting power of the outstanding shares of our common stock; 36 • establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders; • require the approval of holders of at least 66 2/3% of the total combined voting power of the outstanding shares of our common stock to amend our amended and restated by-laws and certain provisions of our amended and restated certificate of incorporation if Access ceases to beneficially own more than 50% of the total combined voting power of the outstanding shares of our common stock; and • subject us to Section 203 of the DGCL, which limits the ability of stockholders holding shares representing more than 15% of the voting power of our outstanding voting stock from engaging in certain business combinations with us, once Access no longer owns at least 5% of the total combined voting power of our outstanding common stock.
In addition, under the provisions of a stockholder agreement entered into with Access (the “Stockholder Agreement”), the relevant terms of which govern the powers afforded the Company under our organizational documents, Access has consent rights with respect to certain corporate and business activities that we may undertake, including during periods where Access holds less than a majority of the total combined voting power of our outstanding common stock.
In addition, under the provisions of a stockholder agreement entered into with Access (the “Stockholder Agreement”), the relevant terms of which govern the powers afforded the Company under our organizational documents, Access has consent rights with respect to 31 certain corporate and business activities that we may undertake, including during periods where Access holds less than a majority of the total combined voting power of our outstanding common stock.
Among the factors that could affect our stock price are: • industry or general market conditions; • domestic and international economic factors unrelated to our performance; • changes in our customers’ preferences; • changes in law or regulation; • lawsuits, enforcement actions and other claims by third parties or governmental authorities; • adverse publicity related to us or another industry participant; • actual or anticipated fluctuations in our operating results; • changes in securities analysts’ estimates of our financial performance or lack of research coverage and reports by industry analysts; • action by institutional stockholders or other large stockholders (including Access), including future sales of our Class A Common Stock; • failure to meet any guidance given by us or any change in any guidance given by us, or changes by us in our guidance practices; • speculation in the press or investment community; • investor perception of us and our industry; • changes in market valuations or earnings of similar companies; • announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships; • war, terrorist acts, epidemic disease and pandemics, including COVID-19; • any future sales of our Class A Common Stock or other securities; • additions or departures of key personnel; and • misconduct or other improper actions of our employees.
Among the factors that could affect our stock price are: • industry or general market conditions; • domestic and international economic factors unrelated to our performance; • changes in our customers’ preferences; • changes in law or regulation; • lawsuits, enforcement actions and other claims by third parties or governmental authorities; • adverse publicity related to us or another industry participant; • actual or anticipated fluctuations in our operating results; • changes in securities analysts’ estimates of our financial performance or lack of research coverage and reports by industry analysts; • action by institutional stockholders or other large stockholders (including Access), including future sales of our Class A Common Stock; • failure to meet any guidance given by us or any change in any guidance given by us, or changes by us in our guidance practices; • speculation in the press or investment community; • investor perception of us and our industry; • changes in market valuations or earnings of similar companies; • announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships; • war, terrorist acts, epidemic disease and pandemics; • any future sales of our Class A Common Stock or other securities; • additions or departures of key personnel; and • misconduct or other improper actions of our employees.
We engage in a wide array of online activities globally and are thus subject to a broad range of related laws and regulations including, for example, those relating to privacy, consumer protection, data retention and data protection, online behavioral advertising, geo-location tracking, text messaging, e-mail advertising, mobile advertising, content regulation, defamation, age verification, the protection of children online, social media and other Internet, mobile and online-related prohibitions and restrictions.
We engage in a wide array of online activities globally and are thus subject to a broad range of related laws and regulations including, for example, those relating to privacy, consumer protection, data retention and data protection, online behavioral advertising, AI, geo-location tracking, text messaging, e-mail advertising, mobile advertising, content regulation, defamation, age verification, the protection of children online, social media and other Internet, mobile and online-related prohibitions and restrictions.
The effects of CCPA and these other recently adopted laws includes an increased ability of individuals to control the use of their personal data; heightened transparency obligations, increased obligations of companies to maintain the security of data; and increased exposure to fines or damages for companies that do not accord individuals their specified privacy rights, that experience data breaches or that do not maintain cybersecurity at certain levels of quality.
The effects of CCPA and these other recently adopted laws includes an increased ability of individuals to control the use of their personal data; heightened transparency obligations, increased obligations of companies 28 to maintain the security of data; and increased exposure to fines or damages for companies that do not accord individuals their specified privacy rights, that experience data breaches or that do not maintain cybersecurity at certain levels of quality.
Because of the 20-to-1 voting ratio between the Class B Common Stock and Class A Common Stock, the holders of Class B Common Stock collectively continue to control a majority of the total combined voting power of our outstanding common stock and therefore be able to control all matters submitted to our stockholders for approval, so long as the outstanding shares of Class B Common Stock represent at least approximately 10% of the total number of outstanding shares of common stock.
Because of the 20-to-1 voting ratio between the Class B Common Stock and Class A Common Stock, the holders of Class B Common Stock collectively continue to control a majority of the total combined voting power of our outstanding common stock and therefore be able to control all matters submitted to our stockholders for approval, so long as the outstanding shares 33 of Class B Common Stock represent at least approximately 10% of the total number of outstanding shares of common stock.
This reliance subjects us to risks arising from the loss of control over processes, changes in pricing that may affect our operating results, and potentially, termination of these services by our suppliers. A failure of our service providers to perform services in a satisfactory manner may have a significant adverse effect on our business.
This reliance subjects us to risks arising from the loss of control over processes, changes in pricing that may affect our operating results, and potentially, termination of these services by our 25 suppliers. A failure of our service providers to perform services in a satisfactory manner may have a significant adverse effect on our business.
Access could elect to cause us to enter into business combinations or other transactions with any business or businesses in our industry that Access may acquire or control, or we could become part of a group of companies organized 33 under the ultimate common control of Access that may be operated in a manner different from the manner in which we have historically operated.
Access could elect to cause us to enter into business combinations or other transactions with any business or businesses in our industry that Access may acquire or control, or we could become part of a group of companies organized under the ultimate common control of Access that may be operated in a manner different from the manner in which we have historically operated.
We may outsource other back-office functions in the future, which would increase our reliance on third parties. 26 We have engaged in substantial restructuring activities in the past, and may need to implement further restructurings in the future and our restructuring efforts may not be successful or generate expected cost savings.
We may outsource other back-office functions in the future, which would increase our reliance on third parties. We have engaged in substantial restructuring activities in the past, and may need to implement further restructurings in the future and our restructuring efforts may not be successful or generate expected cost savings.
In performing our annual tests and determining whether indications of impairment exist, we consider numerous factors including actual and projected operating results of each reporting unit, external market factors such as market prices for similar assets and trends in the music entertainment industry.
In performing our annual tests and 24 determining whether indications of impairment exist, we consider numerous factors including actual and projected operating results of each reporting unit, external market factors such as market prices for similar assets and trends in the music entertainment industry.
The inability to receive dividends from our subsidiaries could have a material adverse effect on our business, financial condition, liquidity or results of operations. 30 The subsidiaries of the Company have no obligation to pay amounts due on any liabilities of the Company or to make funds available to the Company for such payments.
The inability to receive dividends from our subsidiaries could have a material adverse effect on our business, financial condition, liquidity or results of operations. The subsidiaries of the Company have no obligation to pay amounts due on any liabilities of the Company or to make funds available to the Company for such payments.
These grants represent compensation for board service for the period from the grant date until the Company’s regularly scheduled annual shareholder meeting, at which time the restricted stock will be vested. Directors are entitled to dividends on this restricted stock during the vesting period.
These grants represent compensation for board service for the period from the grant date until 34 the Company’s regularly scheduled annual shareholder meeting, at which time the restricted stock will be vested. Directors are entitled to dividends on this restricted stock during the vesting period.
Affiliates of our controlling stockholder engage in transactions with us. Further, Access may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us, and they may either directly, or through affiliates, also maintain business relationships with companies that may directly compete with us.
Affiliates of our controlling stockholder engage in transactions with us. Further, Access may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us, and they may either directly, or through affiliates, also maintain business relationships with companies that may 32 directly compete with us.
The principal effect of the limitation on liability provision is that a stockholder will be unable to prosecute an action for monetary damages against a director unless the stockholder can demonstrate a basis for liability for which indemnification is not available under the DGCL.
The principal effect of the limitation on liability provision is that a stockholder will be unable to prosecute an action for monetary damages against a director unless the stockholder can demonstrate a basis for liability for which indemnification is not 37 available under the DGCL.
If growth in streaming revenue levels off or fails to grow as quickly as it has over the past several years, our business may experience reduced levels of revenue and operating income. 22 We are substantially dependent on a limited number of digital music services for the online distribution and marketing of our music, and they are able to significantly influence the pricing structure for online music stores and may not correctly calculate royalties under license agreements.
If growth in streaming revenue levels off or fails to grow as quickly as it has over the past several years, our business may experience reduced levels of revenue and operating income. 21 We are substantially dependent on a limited number of digital music services for the online distribution and marketing of our music, and they are able to significantly influence the pricing structure for online music stores and may not correctly calculate royalties under license agreements.
If a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, results of operations and financial condition. 39 ITEM 1B.
If a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, results of operations and financial condition. 38 ITEM 1B.
We derive an increasing portion of our revenue from the licensing of music through digital distribution channels. We are currently dependent on a small number of leading digital music services. In fiscal year 2023, revenue earned under our license agreements with our top three digital music accounts, Spotify, Google/YouTube and Apple, accounted for approximately 41% of our total revenue.
We derive an increasing portion of our revenue from the licensing of music through digital distribution channels. We are currently dependent on a small number of leading digital music services. In fiscal year 2024, revenue earned under our license agreements with our top three digital music accounts, Spotify, Google/YouTube and Apple, accounted for approximately 41% of our total revenue.
In the 36 past, following periods of volatility in the market price of a company’s securities, class action litigation has often been instituted against the affected company.
In the past, following periods of volatility in the market price of a company’s securities, class action litigation has often been instituted against the affected company.
As a result, our results can be affected not only by general industry trends, but also by trends, developments or other events in individual countries, including: • limited legal protection and enforcement of intellectual property rights; • restrictions on the repatriation of capital; • fluctuations in interest and foreign exchange rates; • differences and unexpected changes in regulatory environment, including environmental, health and safety, local planning, zoning and labor laws, rules and regulations; • varying tax regimes which could adversely affect our results of operations or cash flows, including regulations relating to transfer pricing and withholding taxes on remittances and other payments by subsidiaries and joint ventures; • imposition of a global minimum tax rate, including by the Organization of Economic Co-operation and Development (“OECD”); • exposure to different legal standards and enforcement mechanisms and the associated cost of compliance; • difficulties in attracting and retaining qualified management and employees or rationalizing our workforce; • tariffs, duties, export controls and other trade barriers; • global economic and retail environment; • longer accounts receivable settlement cycles and difficulties in collecting accounts receivable; 23 • recessionary trends, inflation and instability of the financial markets; • higher interest rates; and • armed conflicts or political instability.
As a result, our results can be affected not only by general industry trends, but also by trends, developments or other events in the United States and in other countries, including: • limited legal protection and enforcement of intellectual property rights; • restrictions on the repatriation of capital; • fluctuations in interest and foreign exchange rates; • differences and unexpected changes in regulatory environment, including environmental, health and safety, local planning, zoning and labor laws, rules and regulations; • varying tax regimes which could adversely affect our results of operations or cash flows, including regulations relating to transfer pricing and withholding taxes on remittances and other payments by subsidiaries and joint ventures; • imposition of a global minimum tax rate, including by the Organization of Economic Co-operation and Development; • exposure to different legal standards and enforcement mechanisms and the associated cost of compliance; • difficulties in attracting and retaining qualified management and employees or rationalizing our workforce; • tariffs, duties, export controls and other trade barriers; • global economic and retail environment; 22 • longer accounts receivable settlement cycles and difficulties in collecting accounts receivable; • recessionary trends, inflation and instability of the financial markets; • higher interest rates; and • armed conflicts or political instability.
We performed an annual assessment, at July 1, 2023, of the recoverability of our goodwill and indefinite-lived intangibles as of September 30, 2023, noting no instances of impairment. However, future events may occur that could adversely affect the estimated fair value of our reporting units.
We performed an annual assessment, at July 1, 2024, of the recoverability of our goodwill and indefinite-lived intangibles as of September 30, 2024, noting no instances of impairment. However, future events may occur that could adversely affect the estimated fair value of our reporting units.
As a result, we may not be paid appropriately for our music. Failure to be accurately paid our royalties may adversely affect our business, results of operations and financial condition. Our business operations in some foreign countries subject us to trends, developments or other events which may affect us adversely.
As a result, we may not be paid appropriately for our music. Failure to be accurately paid our royalties may adversely affect our business, results of operations and financial condition. Our business operations in the United States and in some foreign countries subject us to trends, developments or other events which may affect us adversely.
These translations could result in significant changes to our results of operations from period to period. Prior to intersegment eliminations, 54% of our revenues related to operations in foreign territories for the fiscal year ended September 30, 2023. From time to time, we enter into foreign exchange contracts to hedge the risk of unfavorable foreign currency exchange rate movements.
These translations could result in significant changes to our results of operations from period to period. Prior to intersegment eliminations, 55% of our revenues related to operations in foreign territories for the fiscal year ended September 30, 2024. From time to time, we enter into foreign exchange contracts to hedge the risk of unfavorable foreign currency exchange rate movements.
Risks Related to Our Leverage Our substantial leverage on a consolidated basis could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our indebtedness. We are highly leveraged.
Risks Related to Our Leverage Our substantial leverage on a consolidated basis could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our indebtedness. We have substantial indebtedness.
A substantial portion of our revenue comes from the distribution of music which is potentially subject to unauthorized consumer copying and widespread digital dissemination without an economic return to us, including as a result of “stream-ripping.” In its Engaging with Music 2022 report, IFPI surveyed 44,000 people to examine the ways in which music consumers engaged with recorded music across 22 countries.
A substantial portion of our revenue comes from the distribution of music which is potentially subject to unauthorized consumer copying and widespread digital dissemination without an economic return to us, including as a result of “stream-ripping.” In its Engaging with Music 2023 report, IFPI surveyed 43,000 people to examine the ways in which music consumers engaged with recorded music across 26 countries.
If the value of the acquired goodwill or acquired indefinite-lived intangible assets is impaired, our operating results and shareholders’ equity could be adversely affected. We also had $2.353 billion of definite-lived intangible assets as of September 30, 2023.
If the value of the acquired goodwill or acquired indefinite-lived intangible assets is impaired, our operating results and shareholders’ equity could be adversely affected. We also had $2.359 billion of definite-lived intangible assets as of September 30, 2024.
Of those surveyed, 30% had used illegal or unlicensed methods to listen to or download music, and 17% had used unlicensed social media platforms and mobile apps for music purposes, the leading form of music piracy. Organized industrial piracy may also lead to decreased revenues.
Of those surveyed, 29% had used illegal or unlicensed methods to listen to or download music, and 20% had used unlicensed social media platforms and mobile apps for music purposes, the leading form of music piracy. Organized industrial piracy may also lead to decreased revenues.
Further, Access owns shares representing approximately 73% of the economic interest of our outstanding common stock.
Further, Access owns shares representing approximately 72% of the economic interest of our outstanding common stock.
Unfavorable currency exchange rate fluctuations could adversely affect our results of operations. As we continue to expand our international operations, we become increasingly exposed to the effects of fluctuations in currency exchange rates. The reporting currency for our financial statements is the U.S. dollar. We have substantial assets, liabilities, revenues and costs denominated in currencies other than U.S. dollars.
As we continue to expand our international operations, we become increasingly exposed to the effects of fluctuations in currency exchange rates. The reporting currency for our financial statements is the U.S. dollar. We have substantial assets, liabilities, revenues and costs denominated in currencies other than U.S. dollars.
Financial Accounting Standards Board (“FASB”) ASC Topic 360-10-35 (“ASC 360-10-35”) requires companies to review these assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. No such events or circumstances were identified during the fiscal year ended September 30, 2023.
FASB ASC Topic 360-10-35 (“ASC 360-10-35”) requires companies to review these assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. No such events or circumstances were identified during the fiscal year ended September 30, 2024.
Such third party may have conflicts of interest with the interests of other stockholders. 34 Risks Related to Our Common Stock The dual class structure of our common stock and the existing ownership of Class B Common Stock by Access have the effect of concentrating voting control with Access for the foreseeable future, which will limit or preclude the ability of our other stockholders to influence corporate matters.
Risks Related to Our Common Stock The dual class structure of our common stock and the existing ownership of Class B Common Stock by Access have the effect of concentrating voting control with Access for the foreseeable future, which will limit or preclude the ability of our other stockholders to influence corporate matters.
However, there is no assurance that we would be able to raise sufficient cash by these means. This could materially and adversely affect our ability to pay our obligations or pay dividends, which could have an adverse effect on the trading price of our common stock.
However, there is no assurance that we would be able to raise sufficient cash by these means. This could materially and adversely affect our ability to pay our obligations or pay dividends, which could have an adverse effect on the trading price of our common stock. Our debt agreements contain restrictions that limit our flexibility in operating our business.
As of September 30, 2023, our total consolidated indebtedness, net of premiums, discounts and deferred financing costs, was $3.964 billion, all of which ranks senior to our Class A Common Stock.
As of September 30, 2024, our total consolidated indebtedness, net of premiums, discounts and deferred financing costs, was $4.014 billion, all of which ranks senior to our Class A Common Stock.
As of September 30, 2023, the Company has granted members of its Board of Directors a total of 280,945 shares of restricted and unrestricted common stock pursuant to the Omnibus Incentive Plan.
As of September 30, 2024, the Company has granted members of its Board of Directors a total of 309,341 shares of restricted and unrestricted common stock pursuant to the Omnibus Incentive Plan.
See “—Unfavorable currency exchange rate fluctuations could adversely affect our results of operations.” Furthermore, financing may not be available in countries with less than investment-grade sovereign credit ratings. As a result, it may be difficult to create or maintain profitable operations in various countries. In addition, our results can be affected by trends, developments and other events in individual countries.
See “—Unfavorable currency exchange rate fluctuations could adversely affect our results of operations.” Furthermore, financing may not be available in countries with less than investment-grade sovereign credit ratings. As a result, it may be difficult to create or maintain profitable operations in various countries.
Decreases in royalty rates, rates of revenue sharing or changes to other terms of these license agreements may materially impact our business, operating results and financial condition. Digital music services generally accept and make available all of the music that we deliver to them.
Decreases in royalty rates, detrimental changes to other material terms of these license agreements, or the inability to come to terms with services leading to removal of our music, may materially impact our business, operating results and financial condition. Digital music services generally accept and make available all of the music that we deliver to them.
Additionally, if Access privately sells a significant equity interest in us, we may become subject to the control of a presently unknown third party.
Additionally, if Access privately sells a significant equity interest in us, we may become subject to the control of a presently unknown third party. Such third party may have conflicts of interest with the interests of other stockholders.
The indentures governing our outstanding notes and the credit agreements governing the Senior Credit Facilities will not prohibit us, Holdings or our subsidiaries from incurring additional indebtedness under certain circumstances. We, Holdings or our subsidiaries may be able to incur substantial additional indebtedness, which may increase the risks created by our current substantial indebtedness.
We may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. The indentures governing our outstanding notes and the credit agreements governing the Senior Credit Facilities will not prohibit us, Holdings or our subsidiaries from incurring additional indebtedness under certain circumstances.
Our amended and restated certificate of incorporation contains provisions permitted under the action asserting a claim arising under the DGCL relating to the liability of directors.
Our amended and restated certificate of incorporation includes provisions limiting the personal liability of our directors for breaches of fiduciary duty under the DGCL. Our amended and restated certificate of incorporation contains provisions permitted under the action asserting a claim arising under the DGCL relating to the liability of directors.
If those net undiscounted cash flows do not exceed the carrying amount, we would perform the next step, which is to determine the fair value of the asset, which could result in an impairment charge.
If those net undiscounted cash flows do not exceed the carrying amount, we would perform the next step, which is to determine the fair value of the asset, which could result in an impairment charge. Any impairment charge recorded could negatively affect our operating results and shareholders’ equity.
We compete with other music entertainment companies and other companies for top talent, including executive officers. Our success depends, in part, upon the continuing contributions of our executive officers, however, there is no guarantee that they will not leave.
Our ability to operate effectively could be impaired if we fail to attract and retain our executive officers. We compete with other music entertainment companies and other companies for top talent, including executive officers. Our success depends, in part, upon the continuing contributions of our executive officers, however, there is no guarantee that they will not leave.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. As of September 30, 2023, we had 138,344,724 outstanding shares of Class A Common Stock and 377,650,449 outstanding shares of Class B Common Stock.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. As of September 30, 2024, we had 142,559,174 outstanding shares of Class A Common Stock and 375,380,313 outstanding shares of Class B Common Stock.
These additional covenants are currently suspended. These covenants will be reinstated if Acquisition Corp.’s Total Indebtedness to EBITDA Ratio increases above 3.50:1.00 and the term loans do not achieve an investment grade rating. Our ability to borrow additional amounts under the Revolving Credit Facility depends upon satisfaction of these covenants.
These additional covenants are currently suspended. These covenants will be reinstated if Acquisition Corp.’s Total Indebtedness to EBITDA Ratio increases above 3.50:1.00 and the term loans do not achieve an investment grade rating.
Therefore, although reductions in our debt ratings may not have an immediate impact on the cost of debt or our liquidity, they may impact the cost of debt and liquidity over the medium term and future access at a reasonable rate to the debt markets may be adversely impacted. 32 Risks Related to Our Controlling Stockholder Access continues to control us and may have conflicts of interest with other stockholders.
Therefore, although reductions in our debt ratings may not have an immediate impact on the cost of debt or our liquidity, they may impact the cost of debt and liquidity over the medium term and future access at a reasonable rate to the debt markets may be adversely impacted.
Dividends and other distributions from the Company’s subsidiaries are the principal sources of funds available to the Company to pay corporate operating expenses, to pay stockholder dividends, to repurchase stock and to meet its other obligations.
The Company is a holding company for all of our operations and is a legal entity separate from its subsidiaries. Dividends and other distributions from the Company’s subsidiaries are the principal sources of funds available to the Company to pay corporate operating expenses, to pay stockholder dividends, to repurchase stock and to meet its other obligations.
Restructuring activities can create unanticipated consequences and negative impacts on the business, and we cannot be sure that any ongoing or future restructuring efforts will be successful or generate expected cost savings.
Our inability to structure our operations based on evolving market conditions could impact our business. Restructuring activities can create unanticipated consequences and negative impacts on the business, and we cannot be sure that any ongoing or future restructuring efforts will be successful or generate expected cost savings.
In addition, privacy and data security laws and regulations around the world are being implemented rapidly and evolving. These new and evolving laws (including the European Union General Data Protection Regulation effective on May 25, 2018) have resulted in greater compliance burdens for companies with global operations.
In addition, privacy and data security laws and regulations around the world are being implemented rapidly and evolving. These new and evolving laws have resulted in greater compliance burdens for companies with global operations.
For example, our business may be further adversely affected by technological developments that facilitate the piracy of music, by an inability to enforce our intellectual property rights in digital environments and by a failure to further develop successful business models applicable to a digital environment. 24 Our ability to operate effectively could be impaired if we fail to attract and retain our executive officers.
For example, our business may be further adversely affected by technological developments, including AI, that facilitate the piracy of music, by an inability to enforce our intellectual property rights in digital environments and by a failure to further develop successful business models applicable to a digital environment.
Our failure to comply with the restrictive covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of all of our indebtedness. Any such event of default or acceleration could have an adverse effect on the trading price of our common stock.
Our failure to comply with the restrictive covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of all of our indebtedness.
Events beyond our control can affect our ability to meet these covenants. In addition, under the credit agreement governing the Revolving Credit Facility, a financial maintenance covenant is applicable if at the end of a fiscal quarter the outstanding amount of loans and letters of credit is in excess of $105 million.
In addition, under the credit agreement governing the Revolving Credit Facility, a financial maintenance covenant is applicable if at the end of a fiscal quarter the outstanding amount of loans and letters of credit is in excess of $140 million.
We may, from time to time, refinance our existing indebtedness, which could result in the agreements governing any new indebtedness having fewer or less restrictive covenants.
We may, from time to time, refinance our existing indebtedness, which could result in the agreements governing any new indebtedness having fewer or less restrictive covenants. Despite our indebtedness levels, we may be able to incur substantially more indebtedness, which may increase the risks created by our substantial indebtedness.
Streaming revenue is important because it has offset declines in downloads and physical sales and represents a growing area of our business. According to IFPI, streaming revenue, which includes revenue from ad-supported and subscription services, accounted for approximately 95% of digital revenue in 2022, up approximately 2% year-over-year.
Streaming revenue is important because it has offset declines in downloads and physical sales and now represents the substantial majority of our business, which continues to grow. According to IFPI, streaming revenue, which includes revenue from ad-supported and subscription services, accounted for approximately 96% of digital revenue in 2023.
Any litigation of this type brought against us could result in substantial costs and a diversion of our management’s attention and resources, which could materially and adversely affect our business, results of operations and financial condition.
Any litigation of this type brought against us could result in substantial costs and a diversion of our management’s attention and resources, which could materially and adversely affect our business, results of operations and financial condition. 35 Due to the nature of our business, our results of operations, cash flows and the trading price of our common stock may fluctuate significantly from period to period.
As of September 30, 2023, we had $1.993 billion of goodwill and $149 million of indefinite-lived intangible assets.
As of September 30, 2024, we had $2.021 billion of goodwill and $152 million of indefinite-lived intangible assets.
The success of our business depends on our ability to obtain, maintain, protect and enforce our trademarks, copyrights and other intellectual property rights.
Risks Related to Intellectual Property and Data Security Failure to obtain, maintain, protect and enforce our intellectual property rights could substantially harm our business, operating results and financial condition. The success of our business depends on our ability to obtain, maintain, protect and enforce our trademarks, copyrights and other intellectual property rights.
During the current fiscal year, we have hedged a portion of our material foreign currency exposures related to royalty payments remitted between our foreign affiliates and our U.S. affiliates. However, these hedging strategies should not be expected to fully eliminate the foreign exchange rate risk to which we are exposed.
During the current fiscal year, we have hedged a portion of our material foreign currency exposures related to royalty payments remitted between our foreign affiliates and our U.S. affiliates.
All of these restrictions could affect our ability to operate our business or may limit our ability to take advantage of potential business opportunities as they arise, and may have an adverse effect on the trading price of our common stock.
If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness or will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all. 30 All of these restrictions could affect our ability to operate our business or may limit our ability to take advantage of potential business opportunities as they arise, and may have an adverse effect on the trading price of our common stock.
We cannot be certain that we will not be required to implement further restructuring activities, make additions or other changes to our management or workforce based on other cost reduction measures or changes in the markets and industry in which we compete. Our inability to structure our operations based on evolving market conditions could impact our business.
Impairment charges recognized primarily relate to the winding down of the Company’s O&O Media Properties. We cannot be certain that we will not be required to implement further restructuring activities, make additions or other changes to our management or workforce based on other cost reduction measures or changes in the markets and industry in which we compete.
In addition, on October 7, 2023, Hamas led attacks against Israel. In response to the attacks, Israel formally declared war on Hamas and the armed conflict in Israel and Gaza is ongoing.
In response to the attacks, Israel formally declared war on Hamas and the armed conflict in Israel and Gaza is ongoing with additional conflicts throughout the Middle East.
Our ability to incur secured indebtedness is subject to compliance with certain secured leverage ratios that are calculated as of the date of incurrence.
We, Holdings or our subsidiaries may be able to incur substantial additional indebtedness, which may increase the risks created by our current substantial indebtedness. Our ability to incur secured indebtedness is subject to compliance with certain secured leverage ratios that are calculated as of the date of incurrence.
Globally, many government and consumer agencies have also called for new regulation and changes in industry practices with respect to information collected from consumers, electronic marketing and the use of third-party cookies, web beacons and similar technology for online behavioral advertising. 29 Our business, including our ability to operate and expand internationally, could be adversely affected if laws or regulations are adopted, interpreted or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices.
Globally, many government and consumer agencies have also called for new regulation and changes in industry practices with respect to information collected from consumers, electronic marketing and the use of third-party cookies, web beacons and similar technology for online behavioral advertising.
There can be no assurance that in the future country-specific trends, developments or other events will not have a significant adverse effect on our business, results of operations or financial condition. Unfavorable conditions can depress revenues in any given market and prompt promotional or other actions that adversely affect our margins.
There can be no assurance that in the future country-specific trends, developments or other events, either in the United States or elsewhere, including following the 2024 United States federal elections, will not have a significant adverse effect on our business, results of operations or financial condition.
Consequently, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of NASDAQ corporate governance rules and requirements.
Consequently, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of NASDAQ corporate governance rules and requirements. Our status as a controlled company could make our Class A Common Stock less attractive to some investors or otherwise harm our stock price.
Any impairment charge recorded could negatively affect our operating results and shareholders’ equity. 25 If we acquire, combine with or invest in other businesses, we will face risks inherent in such transactions.
If we acquire, combine with or invest in other businesses, we will face risks inherent in such transactions.
Conflicts of interest may arise because affiliates of our controlling stockholder have continuing agreements and business relationships with us. Access holds approximately 98% of the total combined voting power of our outstanding common stock and approximately 73% of the economic interest of our outstanding common stock.
Access holds approximately 98% of the total combined voting power of our outstanding common stock and approximately 72% of the economic interest of our outstanding common stock.
Our business may be adversely affected by competitive market conditions, and we may not be able to execute our business strategy.
However, these hedging strategies should not be expected to fully eliminate the foreign exchange rate risk to which we are exposed. 23 Our business may be adversely affected by competitive market conditions, and we may not be able to execute our business strategy.
Further, we would have been able to borrow up to $298 million under our Revolving Credit Facility (as defined later in this Annual Report) as of September 30, 2023 (after giving effect to approximately $2 million of letters of credit outstanding under our Revolving Credit Facility as of September 30, 2023).
As of September 30, 2024, our total consolidated indebtedness, net of premiums, discounts and deferred financing costs, was $4.014 billion. Further, we would have been able to borrow up to $350 million under our Revolving Credit Facility (as defined later in this Annual Report) as of September 30, 2024.
To satisfy our obligations under our indebtedness and to fund planned capital expenditures, we must continue to execute our business strategy. If we are unable to do so, we may need to reduce or delay our planned capital expenditures or refinance all or a portion of our indebtedness on or before maturity.
To satisfy our obligations under our indebtedness and to fund planned capital expenditures, we must continue to execute our business strategy.
On February 24, 2022, the geopolitical situation in Eastern Europe intensified with Russia's invasion of Ukraine, and the sanctions and other measures imposed in response to this conflict have increased global economic and political uncertainty. We own Recorded Music and Music Publishing businesses within Russia and, on March 10, 2022, the Company announced a suspension of these operations.
Unfavorable conditions can depress revenues in any given market and prompt promotional or other actions that adversely affect our margins. On February 24, 2022, the geopolitical situation in Eastern Europe intensified with Russia's invasion of Ukraine, and the sanctions and other measures imposed in response to this conflict have increased global economic and political uncertainty.
As a holding company, the Company depends on the ability of its subsidiaries to transfer funds to it to meet its obligations. The Company is a holding company for all of our operations and is a legal entity separate from its subsidiaries.
Any such event of default or acceleration could have an adverse effect on the trading price of our common stock. 29 As a holding company, the Company depends on the ability of its subsidiaries to transfer funds to it to meet its obligations.
To address these implementation requirements, we are deploying our new technology platform in a wave-based approach. In 2023, we successfully launched certain components of our new technology platform in select territories in two successful waves in April and August and will continue to deploy the platform to remaining territories through fiscal year 2024 and into fiscal year 2025.
We have launched certain components onto our new technology platform in select territories and will continue to deploy the technology platform to additional territories over time.
Removed
We are continuing our financial transformation initiative, launched in August 2019, to upgrade our information technology and finance infrastructure, including related systems and processes. The timing of global deployment has been delayed as the size and scale of this global system implementation requires rigorous system testing and data validation to ensure go-live readiness.
Added
We own Recorded Music and Music Publishing businesses within Russia and, on March 10, 2022, the Company announced a suspension of these operations which, along with the ongoing sanctions, limits our activities there. In addition, on October 7, 2023, Hamas led attacks against Israel.
Removed
In March 2023, we announced a restructuring plan, primarily consisting of headcount reductions, for which we incurred restructuring charges of approximately $40 million.
Added
Climate change may adversely affect our business. The impact of climate change has caused, and may continue to cause, changes in weather patterns, resulting in more severe and more frequent weather-related disasters such as floods and heat waves.
Removed
Fulfilling our obligations incident to being a public company is expensive and time-consuming, and any delays or difficulties in satisfying these obligations could have a material adverse effect on our future results of operations and our stock price.
Added
Failure to adapt the Company's operations and supply-chain to respond to climate change related extreme weather events, rising temperatures, and natural disasters could potentially result in lost revenue and/or higher costs due to operational disruptions, property damage, increased cooling costs, as well as financial losses, and/or penalties for insurance deductibles, increased insurance premiums or loss of access to insurance coverage for company facilities and regulatory compliance.
Removed
We are subject to the reporting, accounting and corporate governance requirements applicable to issuers of listed equity, including the listing standards of NASDAQ and the Sarbanes-Oxley Act.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+4 added−1 removed8 unchanged
Biggest changeStarting with the 2023 fiscal year, the quarterly intervals below are based on the Company’s modified fiscal year in which each reporting period ends on the last day of the calendar quarter. 41 The comparisons in the graph below are based on historical data and are not indicative of, nor intended to forecast, future performance of our Class A Common Stock. 6/3/20 6/26/20 9/25/20 12/24/20 3/26/21 6/25/21 9/24/21 12/31/21 4/1/22 7/1/22 9/30/22 12/31/22 3/31/23 6/30/23 9/30/23 Warner Music Group Corp. $ 100 $ 102 $ 91 $ 126 $ 114 $ 127 $ 149 $ 148 $ 136 $ 99 $ 95 $ 121 $ 116 $ 91 $ 111 S&P 500 Index 100 98 108 119 127 134 139 146 141 125 119 123 132 143 137 NASDAQ Composite Index 100 102 116 129 132 142 149 156 148 125 120 113 136 156 152 Securities Authorized for Issuance Under Equity Compensation Plans See Item 12.
Biggest changeStarting with the 2023 fiscal year, the quarterly intervals below are based on the Company’s modified fiscal year in which each reporting period ends on the last day of the calendar quarter. 41 The comparisons in the graph below are based on historical data and are not indicative of, nor intended to forecast, future performance of our Class A Common Stock. 6/3/20 6/26/20 9/25/20 12/24/20 3/26/21 6/25/21 9/24/21 12/31/21 4/1/22 7/1/22 9/30/22 12/31/22 3/31/23 6/30/23 9/30/23 12/31/23 3/31/24 6/30/24 9/30/24 Warner Music Group Corp. $ 100 $ 102 $ 91 $ 126 $ 114 $ 127 $ 149 $ 148 $ 136 $ 99 $ 95 $ 121 $ 116 $ 91 $ 111 $ 127 $ 118 $ 110 $ 113 S&P 500 Index 100 98 108 119 127 134 139 146 141 125 119 123 132 143 137 153 168 175 185 NASDAQ Composite Index 100 102 116 129 132 142 149 156 148 125 120 113 136 156 152 173 188 203 207 Repurchase Program On November 14, 2024, the Company’s board of directors authorized a new $100 million share repurchase program, which is intended to offset dilution from the Omnibus Incentive Plan.
The following graph shows a comparison of the cumulative total return on our Class A Common Stock from June 3, 2020 (the date our Class A Common Stock commenced trading on the Nasdaq Global Select Market) through September 30, 2023 with the cumulative total return of the Standard & Poor’s 500 Index (“S&P 500 Index”) and the Nasdaq Composite Index over the same period, assuming the investment of $100 in our Class A Common Stock and in each index on June 3, 2020 and the reinvestment of dividends in each of our Class A Common Stock and each index.
The following graph shows a comparison of the cumulative total return on our Class A Common Stock from June 3, 2020 (the date our Class A Common Stock commenced trading on the Nasdaq Global Select Market) through September 30, 2024 with the cumulative total return of the Standard & Poor’s 500 Index (“S&P 500 Index”) and the Nasdaq Composite Index over the same period, assuming the investment of $100 in our Class A Common Stock and in each index on June 3, 2020 and the reinvestment of dividends in each of our Class A Common Stock and each index.
Because many of our shares of Class A Common Stock are held by brokers and other institutions on behalf of individuals and entities, we excluded the total number of beneficial owners represented by these record holders. As of November 15, 2023, there were 8 stockholders of record of our Class B Common Stock.
Because many of our shares of Class A Common Stock are held by brokers and other institutions on behalf of individuals and entities, we excluded the total number of beneficial owners represented by these record holders. As of November 15, 2024, there were 8 stockholders of record of our Class B Common Stock.
The Company's Class B Common Stock is not listed on any stock exchange nor traded on any public market. Holders of Record As of November 15, 2023, there were approximately 15 stockholders of record of the Company's Class A Common Stock.
The Company's Class B Common Stock is not listed on any stock exchange nor traded on any public market. Holders of Record As of November 15, 2024, there were approximately 15 stockholders of record of the Company's Class A Common Stock.
Removed
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. ITEM 6. [RESERVED] 42
Added
Under this authorization, the Company may, from time to time, purchase shares of its Class A Common Stock through open market transactions, privately negotiated transactions, forward, derivative, or accelerated repurchase transactions, tender offers or otherwise, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act.
Added
The $100 million share repurchase authorization does not obligate the Company to purchase any shares. We may commence such repurchases immediately, subject to compliance with applicable securities laws. We may enter into a pre-arranged stock trading plan in accordance with the guidelines specified under Rule 10b5-1 to effectuate all or a portion of the share repurchase program.
Added
We expect to finance any repurchases from a combination of cash on hand and cash provided by operating activities. The timing and method of any repurchases, which will depend on a variety of factors, including market conditions, are subject to our results of operations, financial condition, liquidity and other factors.
Added
The authorization for the share repurchase program may be suspended, terminated, increased or decreased by the board of directors at any time. Securities Authorized for Issuance Under Equity Compensation Plans See Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. ITEM 6. [RESERVED] 42

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBusiness Segment Results Revenues, operating income (loss) and OIBDA by business segment were as follows (in millions): For the Fiscal Year Ended September 30, 2023 vs. 2022 2022 vs. 2021 2023 2022 2021 $ Change % Change $ Change % Change Recorded Music Revenues $ 4,955 $ 4,966 $ 4,544 $ (11) — % $ 422 9 % Operating income 875 796 733 79 10 % 63 9 % OIBDA 1,080 1,023 936 57 6 % 87 9 % Music Publishing Revenues 1,088 958 761 130 14 % 197 26 % Operating income 200 139 89 61 44 % 50 56 % OIBDA 293 231 174 62 27 % 57 33 % Corporate expenses and eliminations Revenue eliminations (6) (5) (4) (1) 20 % (1) 25 % Operating loss (285) (221) (213) (64) 29 % (8) 4 % OIBDA (251) (201) (195) (50) 25 % (6) 3 % Total Revenues 6,037 5,919 5,301 118 2 % 618 12 % Operating income 790 714 609 76 11 % 105 17 % OIBDA 1,122 1,053 915 69 7 % 138 15 % Recorded Music Revenues 2023 vs. 2022 Recorded Music revenue decreased by $11 million to $4,955 million for the fiscal year ended September 30, 2023 from $4,966 million for the fiscal year ended September 30, 2022.
Biggest changeNoncontrolling interest 2024 vs. 2023 There was $43 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2024, an increase of $34 million, from $9 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2023, driven by higher income from non-wholly-owned subsidiaries in the current year, primarily due to the impact of the Licensing Extension. 2023 vs. 2022 There was $9 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2023, an increase from $4 million of income attributable to noncontrolling interest for the fiscal year ended September 30, 2022, driven by higher income from non-wholly-owned subsidiaries in the fiscal year ended September 30, 2023. 59 Business Segment Results Revenues, operating income (loss) and Adjusted OIBDA by business segment were as follows (in millions): For the Fiscal Year Ended September 30, 2024 vs. 2023 2023 vs. 2022 2024 2023 2022 $ Change % Change $ Change % Change Recorded Music Revenues $ 5,223 $ 4,955 $ 4,966 $ 268 5 % $ (11) — % Operating income 916 875 796 41 5 % 79 10 % Adjusted OIBDA 1,282 1,094 1,046 188 17 % 48 5 % Music Publishing Revenues 1,210 1,088 958 122 11 % 130 14 % Operating income 238 200 139 38 19 % 61 44 % Adjusted OIBDA 330 296 233 34 11 % 63 27 % Corporate expenses and eliminations Revenue eliminations (7) (6) (5) (1) 17 % (1) 20 % Operating loss (331) (285) (221) (46) 16 % (64) 29 % Adjusted OIBDA loss (180) (155) (130) (25) 16 % (25) 19 % Total Revenues 6,426 6,037 5,919 389 6 % 118 2 % Operating income 823 790 714 33 4 % 76 11 % Adjusted OIBDA 1,432 1,235 1,149 197 16 % 86 7 % Recorded Music Revenues 2024 vs. 2023 Recorded Music revenue increased by $268 million to $5,223 million for the fiscal year ended September 30, 2024 from $4,955 million for the fiscal year ended September 30, 2023.
A reconciliation of consolidated OIBDA to operating income (loss) and net income (loss) attributable to Warner Music Group Corp. is provided in our “Results of Operations.” 43 Use of Constant Currency As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue and OIBDA on a constant-currency basis in addition to reported results helps improve the ability to understand our operating results and evaluate our performance in comparison to prior periods.
A reconciliation of consolidated Adjusted OIBDA to operating income (loss) and net income (loss) attributable to Warner Music Group Corp. is provided in our “Results of Operations.” Use of Constant Currency As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue and Adjusted OIBDA on a constant-currency basis in addition to reported results helps improve the ability to understand our 43 operating results and evaluate our performance in comparison to prior periods.
Events of Default Events of default under the Revolving Credit Facility, the New Senior Term Loan Facility and the Secured Notes Indenture include, as applicable, nonpayment of principal when due, nonpayment of interest or other amounts, inaccuracy of representations or warranties in any material respect, violation of covenants, cross default and cross acceleration to other material debt, certain bankruptcy or insolvency events, certain ERISA events, certain material judgments, actual or asserted invalidity of security interests in excess of $50 million, or $75 million in the case of the Secured Notes Indenture, in each case subject to customary thresholds, notice and grace period provisions. 70 Change of Control Upon the occurrence of a change of control triggering event, which is defined in the Secured Notes Indenture, each holder of the Secured Notes has the right to require Acquisition Corp. to repurchase some or all of such holder’s Secured Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
Events of Default Events of default under the Revolving Credit Facility, the New Senior Term Loan Facility and the Secured Notes Indenture include, as applicable, nonpayment of principal when due, nonpayment of interest or other amounts, inaccuracy of representations or warranties in any material respect, violation of covenants, cross default and cross acceleration to other material debt, certain bankruptcy or insolvency events, certain ERISA events, certain material judgments, actual or asserted invalidity of security interests in excess of $50 million, or $75 million in the case of the Secured Notes Indenture, in each case subject to customary thresholds, notice and grace period provisions. 73 Change of Control Upon the occurrence of a change of control triggering event, which is defined in the Secured Notes Indenture, each holder of the Secured Notes has the right to require Acquisition Corp. to repurchase some or all of such holder’s Secured Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
We have integrated the marketing of digital content into all aspects of our business, including A&R and distribution. Our business development executives work closely with A&R departments to ensure that while music is being produced, digital assets are also created with all distribution channels in mind, including streaming services, social networking sites, online portals and music- 44 centered destinations.
We have integrated the marketing of digital content into all aspects of our business, including A&R and distribution. Our business development executives work closely with A&R departments to ensure that while music is being produced, digital assets are also created with all distribution channels in mind, including streaming services, social networking sites, online portals and music-centered destinations.
Revolving Credit Facility On January 31, 2018, Acquisition Corp. entered into the revolving credit agreement (as amended by the amendment dated October 9, 2019 and as further amended, amended and restated or otherwise modified from time to time, the “Revolving Credit Agreement”) for a senior secured revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto (the “Revolving Credit Facility”).
Revolving Credit Facility On January 31, 2018, Acquisition Corp. entered into the revolving credit agreement (as amended by the amendment dated October 9, 2019 and as further amended, amended and restated or otherwise modified from time to time, the “Revolving Credit 67 Agreement”) for a senior secured revolving credit facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto (the “Revolving Credit Facility”).
Accounting for Goodwill and Other Intangible Assets We account for our goodwill and other indefinite-lived intangible assets as required by FASB ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”). We test goodwill for impairment at the reporting unit level and have concluded that our reporting units are generally the same as our reportable segments.
Goodwill and Other Intangible Assets We account for our goodwill and other indefinite-lived intangible assets as required by FASB ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”). We test goodwill for impairment at the reporting unit level and have concluded that our reporting units are generally the same as our reportable segments.
Constant-currency information compares revenue and OIBDA between periods as if exchange rates had remained constant period over period. We use revenue on a constant-currency basis as one measure to evaluate our performance. We calculate constant currency by calculating prior-year revenue using current-year foreign currency exchange rates.
Constant-currency information compares revenue and Adjusted OIBDA between periods as if exchange rates had remained constant period over period. We use revenue and Adjusted OIBDA on a constant-currency basis as one measure to evaluate our performance. We calculate constant-currency by calculating prior-year revenue and Adjusted OIBDA using current-year foreign currency exchange rates.
We also work side-by-side with our online and mobile partners to test new concepts. We believe existing and new digital businesses will be a significant source of growth and will provide new opportunities to successfully monetize our assets and create new revenue streams.
We also work side-by-side with our online and mobile partners to test new concepts. We believe existing and new digital businesses will be a significant source of growth and will provide new opportunities to successfully monetize our assets 44 and create new revenue streams.
We are unable to accurately predict when these amounts will be realized or released. * Because the timing of payment, and even whether payment occurs, is dependent upon the timing of delivery of albums and musical compositions, the timing and amount of payment of these commitments as presented in the above summary can vary significantly. 75 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The SEC’s Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggests companies provide additional disclosure and commentary on those accounting policies considered most critical.
We are unable to accurately predict when these amounts will be realized or released. * Because the timing of payment, and even whether payment occurs, is dependent upon the timing of delivery of albums and musical compositions, the timing and amount of payment of these commitments as presented in the above summary can vary significantly. 78 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The SEC’s Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggests companies provide additional disclosure and commentary on those accounting policies considered most critical.
Our ability to borrow funds under the Revolving Credit Facility may depend upon our ability 71 to meet the leverage ratio test at the end of a fiscal quarter to the extent we have drawn a certain amount of revolving loans.
Our ability to borrow funds under the Revolving Credit Facility may depend upon our ability to meet the leverage ratio test at the end of a fiscal quarter to the extent we have drawn a certain amount of revolving loans.
Additionally, during any twelve month period prior to July 15, 2023, the 2.750% Senior Secured Notes may be redeemed pursuant to a Secured Notes Redemption. 68 3.000% Senior Secured Notes On August 12, 2020, Acquisition Corp. issued $550 million in aggregate principal amount of its 3.000% Senior Secured Notes under the Senior Secured Base Indenture, as supplemented by the Third Supplemental Indenture, dated as of August 12, 2020, among Acquisition Corp., the guarantors party thereto and the Trustee (the “3.000% Supplemental Indenture”).
Additionally, during any twelve month period prior to July 15, 2023, the 2.750% Senior Secured Notes may be redeemed pursuant to a Secured Notes Redemption. 71 3.000% Senior Secured Notes On August 12, 2020, Acquisition Corp. issued $550 million in aggregate principal amount of its 3.000% Senior Secured Notes under the Senior Secured Base Indenture, as supplemented by the Third Supplemental Indenture, dated as of August 12, 2020, among Acquisition Corp., the guarantors party thereto and the Trustee (the “3.000% Supplemental Indenture”).
Assembled over decades, our award-winning catalog includes over 150,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative and gospel. Warner Chappell Music also administers the music and soundtracks of several third-party television and film producers and studios.
Assembled over decades, our award-winning catalog includes over 180,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative and gospel. Warner Chappell Music also administers the music and soundtracks of several third-party television and film producers and studios.
Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 82% and 18% of total revenues for the fiscal year ended September 30, 2023, respectively, and 84% and 16% of total revenues for the fiscal year ended September 30, 2022, respectively.
Prior to intersegment eliminations, Recorded Music and Music Publishing revenues represented 82% and 18% of total revenues for the fiscal year ended September 30, 2023, respectively, and 84% and 16% of total 49 revenues for the fiscal year ended September 30, 2022, respectively.
These obligations have been presented based on the principal amounts due as of September 30, 2023. Amounts do not include any fair value adjustments, bond premiums, discounts or unamortized deferred financing costs. (2) Operating lease obligations primarily relate to the minimum lease rental obligations for our real estate and operating equipment in various locations around the world.
These obligations have been presented based on the principal amounts due as of September 30, 2024. Amounts do not include any fair value adjustments, bond premiums, discounts or unamortized deferred financing costs. (2) Operating lease obligations primarily relate to the minimum lease rental obligations for our real estate and operating equipment in various locations around the world.
The Company’s revenue recognition process involves several applications that are responsible for the initiation and processing of transactions in order to recognize revenue in accordance with the Company’s policy and ASC 606. 76 Revenues from the sale or license of Recorded Music products through digital distribution channels are typically recognized when sale or usage occurs based on usage reports received from the customer.
The Company’s revenue recognition process involves several applications that are responsible for the initiation and processing of transactions in order to recognize revenue in accordance with the Company’s policy and ASC 606. 79 Revenues from the sale or license of Recorded Music products through digital distribution channels are typically recognized when sale or usage occurs based on usage reports received from the customer.
There are no financial covenants included in the Revolving Credit Agreement, other than a springing leverage ratio of 5.00:1.00 (with no step-down), which is not tested, unless at the end of a fiscal quarter the outstanding amount of loans and drawings under letters of credit which have not been reimbursed exceeds $105 million.
There are no financial covenants included in the Revolving Credit Agreement, other than a springing leverage ratio of 5.00:1.00 (with no step-down), which is not tested, unless at the end of a fiscal quarter the outstanding amount of loans and drawings under letters of credit which have not been reimbursed exceeds $140 million.
GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Accordingly, Adjusted EBITDA should be considered in addition to, not as a substitute for, net income (loss) and other measures of financial performance reported in accordance with U.S. GAAP. 72 The following is a reconciliation of net income, which is a U.S.
GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Accordingly, Adjusted EBITDA should be considered in addition to, not as a substitute for, net income (loss) and other measures of financial performance reported in accordance with U.S. GAAP. 75 The following is a reconciliation of net income, which is a U.S.
Revenue and Cost Recognition Revenues Recorded Music As required by FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when, or as, control of the promised services or goods is transferred to our customers and in an amount that reflects the consideration the Company is contractually due in exchange for those services or goods.
Revenue Recognition Recorded Music As required by FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when, or as, control of the promised services or goods is transferred to our customers and in an amount that reflects the consideration the Company is contractually due in exchange for those services or goods.
Revenue on a constant-currency basis, as we present it, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with U.S. GAAP. BUSINESS OVERVIEW We are one of the world’s leading music entertainment companies.
Revenue and Adjusted OIBDA on a constant-currency basis, as we present it, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with U.S. GAAP. BUSINESS OVERVIEW We are one of the world’s leading music entertainment companies.
In addition, the reconciliation includes the calculation of the Senior Secured Indebtedness to Adjusted EBITDA ratio, which we refer to as the Leverage Ratio, under the Revolving Credit Agreement for the most recently ended four fiscal quarters, or the twelve months ended September 30, 2023. The terms and related calculations are defined in the Revolving Credit Agreement.
In addition, the reconciliation includes the calculation of the Senior Secured Indebtedness to Adjusted EBITDA ratio, which we refer to as the Leverage Ratio, under the Revolving Credit Agreement for the most recently ended four fiscal quarters, or the twelve months ended September 30, 2024. The terms and related calculations are defined in the Revolving Credit Agreement.
The Company’s Revolving Credit Facility does not impose any “leverage ratio” maintenance requirement on the Company when the aggregate principal amount of borrowings and drawings under letters of credit, which have not been reimbursed under the Revolving Credit Facility, is less than or equal to $105 million at the end of a fiscal quarter.
The Company’s Revolving Credit Facility does not impose any “leverage ratio” maintenance requirement on the Company when the aggregate principal amount of borrowings and drawings under letters of credit, which have not been reimbursed under the Revolving Credit Facility, is less than or equal to $140 million at the end of a fiscal quarter.
Synchronization revenue is typically recognized as revenue when control of the license is transferred to the customer in accordance with ASC 606. Accounting for Royalty Costs and Royalty Advances The Company incurs royalty costs that are payable to our recording artists and songwriters generated from the sale or license of our Recorded Music catalog and Music Publishing copyrights.
Synchronization revenue is typically recognized as revenue when control of the license is transferred to the customer in accordance with ASC 606. Royalty Costs and Royalty Advances The Company incurs royalty costs that are payable to our recording artists and songwriters generated from the sale or license of our Recorded Music catalog and Music Publishing copyrights.
Additionally, at any time prior to December 1, 2024, the 3.750% Senior Secured Notes may be redeemed pursuant to an Equity Redemption at a redemption price equal to 103.750% of the principal 69 amount of the 3.750% Senior Secured Notes redeemed, plus accrued and unpaid interest, subject to the same provisos as the 3.875% Senior Secured Notes Equity Redemption.
Additionally, at any time prior to December 1, 2024, the 3.750% Senior Secured Notes may be redeemed pursuant to an Equity Redemption at a redemption price equal to 103.750% of the principal 72 amount of the 3.750% Senior Secured Notes redeemed, plus accrued and unpaid interest, subject to the same provisos as the 3.875% Senior Secured Notes Equity Redemption.
If the outstanding aggregate principal amount of borrowings and drawings under letters of credit which have not been reimbursed under our Revolving Credit Facility is greater than $105 million at the end of a fiscal quarter, the maximum leverage ratio permitted under the Revolving Credit Facility is 5.00:1.00.
If the outstanding aggregate principal amount of borrowings and drawings under letters of credit which have not been reimbursed under our Revolving Credit Facility is greater than $140 million at the end of a fiscal quarter, the maximum leverage ratio permitted under the Revolving Credit Facility is 5.00:1.00.
There were no drawdowns on the Revolving Credit Facility during the fiscal years ended September 30, 2023, September 30, 2022 and September 30, 2021. Liquidity Our primary sources of liquidity are the cash flows generated from our subsidiaries’ operations, available cash and equivalents and funds available for drawing under our Revolving Credit Facility.
There were no drawdowns on the Revolving Credit Facility during the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022. Liquidity Our primary sources of liquidity are the cash flows generated from our subsidiaries’ operations, available cash and equivalents and funds available for drawing under our Revolving Credit Facility.
On May 4, 2021, certain covenants set forth in our Revolving Credit 73 Facility were suspended, including the restriction on incurring certain additional indebtedness, based on the determination that the total indebtedness to EBITDA ratio is below the required threshold specified therein.
On May 4, 2021, certain covenants set forth in our Revolving Credit Facility were 76 suspended, including the restriction on incurring certain additional indebtedness, based on the determination that the total indebtedness to EBITDA ratio is below the required threshold specified therein.
We test our goodwill and other indefinite-lived intangible assets for impairment on an annual basis in the fourth quarter of each fiscal year as of July 1. We performed a qualitative assessment for our reporting units and other indefinite-lived intangible assets in fiscal 2023.
We test our goodwill and other indefinite-lived intangible assets for impairment on an annual basis in the fourth quarter of each fiscal year as of July 1. We performed a qualitative assessment for our reporting units and other indefinite-lived intangible assets in fiscal 2024.
This section provides an analysis of our results of operations for the fiscal years ended September 30, 2023, September 30, 2022 and September 30, 2021. This analysis is presented on both a consolidated and segment basis. • Financial condition and liquidity.
This section provides an analysis of our results of operations for the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022. This analysis is presented on both a consolidated and segment basis. • Financial condition and liquidity.
In addition, Warner Chappell Music, our global music publishing business, boasts an extraordinary catalog that includes timeless standards and contemporary hits, representing works by over 150,000 songwriters and composers, with a global collection of more than one million musical compositions. We classify our business interests into two fundamental operations: Recorded Music and Music Publishing.
In addition, Warner Chappell Music, our global music publishing business, boasts an extraordinary catalog that includes timeless standards and contemporary hits, representing works by over 180,000 songwriters and composers, with a global collection of more than one and a half million musical compositions. We classify our business interests into two fundamental operations: Recorded Music and Music Publishing.
In addition, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, we may seek to refinance the Senior Credit Facilities or our outstanding debt or debt securities with existing cash and/or with funds provided from additional borrowings. 74 Contractual and Other Obligations Firm Commitments The following table summarizes the Company’s aggregate contractual obligations at September 30, 2023, and the estimated timing and effect that such obligations are expected to have on the Company’s liquidity and cash flow in future periods.
In addition, from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, we may seek to refinance the Senior Credit Facilities or our outstanding debt or debt securities with existing cash and/or with funds provided from additional borrowings. 77 Contractual and Other Obligations Firm Commitments The following table summarizes the Company’s aggregate contractual obligations at September 30, 2024, and the estimated timing and effect that such obligations are expected to have on the Company’s liquidity and cash flow in future periods.
Loss on extinguishment of debt 2023 vs. 2022 We recorded a loss on extinguishment of debt in the amount of $4 million for the fiscal year ended September 30, 2023, which represents the remaining unamortized discount and deferred financing costs in connection with the redemption of Senior Term Loan Facility Tranche H loans.
For the fiscal year ended September 30, 2023, we recorded a loss on extinguishment of debt in the amount of $4 million related to the repayment of Senior Term Loan Facility Tranche H loans. 2023 vs. 2022 We recorded a loss on extinguishment of debt in the amount of $4 million for the fiscal year ended September 30, 2023, which represents the remaining unamortized discount and deferred financing costs in connection with the redemption of Senior Term Loan Facility Tranche H loans.
GAAP measure of our operating results, to Adjusted EBITDA as defined, for the most recently ended four fiscal quarters, or the twelve months ended September 30, 2023, for the twelve months ended September 30, 2022 and for the three months ended September 30, 2023 and September 30, 2022.
GAAP measure of our operating results, to Adjusted EBITDA as defined, for the most recently ended four fiscal quarters, or the twelve months ended September 30, 2024, for the twelve months ended September 30, 2023 and for the three months ended September 30, 2024 and September 30, 2023.
This section provides an analysis of our cash flows for the fiscal years ended September 30, 2023, September 30, 2022 and September 30, 2021, as well as a discussion of our financial condition and liquidity as of September 30, 2023.
This section provides an analysis of our cash flows for the fiscal years ended September 30, 2024, September 30, 2023 and September 30, 2022, as well as a discussion of our financial condition and liquidity as of September 30, 2024.
We own or control rights to more than one million musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions.
We own or control rights to more than one and a half million musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions.
The financial data for fiscal years ended September 30, 2023, 2022 and 2021 have been derived from our consolidated financial statements included elsewhere herein.
The financial data for fiscal years ended September 30, 2024, 2023 and 2022 have been derived from our consolidated financial statements included elsewhere herein.
The Company paid cash dividends to stockholders and participating security holders of $340 million, $318 million and $265 million for the fiscal years ended September 30, 2023, 2022 and 2021, respectively. Covenant Compliance The Company was in compliance with its covenants under its outstanding notes, the Revolving Credit Facility and the Senior Term Loan Facility as of September 30, 2023.
The Company paid cash dividends to stockholders and participating security holders of $361 million, $340 million and $318 million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively. Covenant Compliance The Company was in compliance with its covenants under its outstanding notes, the Revolving Credit Facility and the Senior Term Loan Facility as of September 30, 2024.
(4) We have minimum funding commitments and other related obligations to support the operations of various investments, which are reflected in the table above. Other long-term liabilities, which are not included in the table above, include $13 million and $8 million of liabilities for uncertain tax positions as of September 30, 2023 and September 30, 2022, respectively.
(4) We have minimum funding commitments and other related obligations to support the operations of various investments, which are reflected in the table above. Other long-term liabilities, which are not included in the table above, include $10 million and $13 million of liabilities for uncertain tax positions as of September 30, 2024 and September 30, 2023, respectively.
Recent Accounting Pronouncements Refer to Note 2 to our consolidated financial statements included elsewhere herein for more information regarding recently issued accounting pronouncements. 77
Recent Accounting Pronouncements Refer to Note 2 to our consolidated financial statements included elsewhere herein for more information regarding recently issued accounting pronouncements. 80
We had $2,219 million and $1,918 million of royalty payables in our balance sheet at September 30, 2023 and September 30, 2022, respectively. In many instances, the Company commits to pay our recording artists and songwriters royalties in advance of future sales. The Company accounts for these advances under the related guidance in FASB ASC Topic 928, Entertainment—Music (“ASC 928”).
We had $2,549 million and $2,219 million of royalty payables in our balance sheet at September 30, 2024 and September 30, 2023, respectively. In many instances, the Company commits to pay our recording artists and songwriters royalties in advance of future sales. The Company accounts for these advances under the related guidance in FASB ASC Topic 928, Entertainment—Music (“ASC 928”).
We generally refer to such amounts calculated on a constant-currency basis as “excluding the impact of foreign currency exchange rates.” This revenue should be considered in addition to, not as a substitute for, revenue reported in accordance with U.S. GAAP.
We generally refer to such amounts calculated on a constant-currency basis as “excluding the impact of foreign currency exchange rates.” Revenue and Adjusted OIBDA on a constant-currency basis should be considered in addition to, not as a substitute for, revenue and Adjusted OIBDA reported in accordance with U.S. GAAP.
We had $1,101 million and $875 million of advances in our balance sheet at September 30, 2023 and September 30, 2022, respectively. We believe such advances are recoverable through future royalties to be earned by the applicable recording artists and songwriters.
We had $1,344 million and $1,101 million of advances in our balance sheet at September 30, 2024 and September 30, 2023, respectively. We believe such advances are recoverable through future royalties to be earned by the applicable recording artists and songwriters.
There was no loss on extinguishment of debt for the fiscal year ended September 30, 2022. 2022 vs. 2021 There was no loss on extinguishment of debt for the fiscal year ended September 30, 2022.
There was no loss on extinguishment of debt for the fiscal year ended September 30, 2022.
Music Publishing revenues were $582 million and $513 million, or 53% and 54% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2023 and 60 September 30, 2022, respectively.
U.S. Music Publishing revenues were $582 million and $513 million, or 53% and 54% of consolidated Music Publishing revenues, for the fiscal years ended September 30, 2023 and September 30, 2022, respectively.
Financing Activities Cash used in financing activities was $325 million for the fiscal year ended September 30, 2023 compared to cash provided by financing activities of $188 million for the fiscal year ended September 30, 2022 and cash used in financing activities of $61 million for the fiscal year ended September 30, 2021. 64 The $325 million of cash used in financing activities for the fiscal year ended September 30, 2023 consisted of cash paid to settle deferred consideration related to prior year acquisitions of music publishing rights and music catalogs of $133 million, repayment of Senior Term Loan Facility Tranche H loans of $150 million, dividends paid of $340 million, deferred financing costs of $3 million, distributions to noncontrolling interest holders of $12 million, redemption of noncontrolling interest of $1 million and repayment of Term Loan Mortgage of $1 million, partially offset by proceeds from the Senior Term Loan Facility Tranche G loans of $149 million, proceeds from the Senior Term Loan Facility Tranche H loans of $147 million and proceeds from the Term Loan Mortgage of $19 million.
The $325 million of cash used in financing activities for the fiscal year ended September 30, 2023 consisted of cash paid to settle deferred consideration related to prior year acquisitions of music publishing rights and music catalogs of $133 million, repayment of Senior Term Loan Facility Tranche H loans of $150 million, dividends paid of $340 million, deferred financing costs of $3 million, distributions to noncontrolling interest holders of $12 million, redemption of noncontrolling interest of $1 million and repayment of Term Loan Mortgage of $1 million, partially offset by proceeds from the Senior Term Loan Facility Tranche G loans of $149 million, proceeds from the Senior Term Loan Facility Tranche H loans of $147 million and proceeds from the Term Loan Mortgage of $19 million.
There were no loans outstanding under the Revolving Credit Facility at September 30, 2023.
There were no loans outstanding under the Revolving Credit Facility at September 30, 2024.
Other income for the fiscal year ended September 30, 2022 primarily includes foreign currency gains on our Euro-denominated debt of $151 million, currency exchange gains on our intercompany loans of $34 million and unrealized gains on hedging activity of $10 million, partially offset by aggregate realized and unrealized losses of $49 million related to equity investments. 2022 vs. 2021 Other income for the fiscal year ended September 30, 2022 primarily includes foreign currency gains on our Euro-denominated debt of $151 million, currency exchange gains on our intercompany loans of $34 million and unrealized gains on hedging activity of $10 million, partially offset by aggregate realized and unrealized losses of $49 million related to equity investments.
Other expense for the fiscal year ended September 30, 2023 primarily includes foreign currency losses on our Euro-denominated debt of $61 million, partially offset by currency exchange gains on the Company’s intercompany loans of $24 million. 2023 vs. 2022 Other expense for the fiscal year ended September 30, 2023 primarily includes foreign currency losses on our Euro-denominated debt of $61 million, partially offset by currency exchange gains on the Company’s intercompany loans of $24 million. 58 Other income for the fiscal year ended September 30, 2022 primarily includes foreign currency gains on our Euro-denominated debt of $151 million, currency exchange gains on our intercompany loans of $34 million and unrealized gains on hedging activity of $10 million, partially offset by aggregate realized and unrealized losses of $49 million related to equity investments.
Investing Activities Cash used in investing activities was $300 million for the fiscal year ended September 30, 2023 compared to $824 million for the fiscal year ended September 30, 2022 and $638 million for the fiscal year ended September 30, 2021.
Investing Activities Cash used in investing activities was $311 million for the fiscal year ended September 30, 2024 compared to $300 million for the fiscal year ended September 30, 2023 and $824 million for the fiscal year ended September 30, 2022.
Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 11% for the fiscal year ended September 30, 2023 from 12% for the fiscal year ended September 30, 2022. 2022 vs. 2021 Music Publishing selling, general and administrative expense increased to $112 million for the fiscal year ended September 30, 2022 from $100 million for the fiscal year ended September 30, 2021.
Expressed as a percentage of Music Publishing revenue, Music Publishing selling, general and administrative expense decreased to 10% for the fiscal year ended September 30, 2024 from 11% for the fiscal year ended September 30, 2023. 2023 vs. 2022 Music Publishing selling, general and administrative expense increased to $117 million for the fiscal year ended September 30, 2023 from $112 million for the fiscal year ended September 30, 2022.
Based on the Senior Secured Indebtedness to EBITDA Ratio of 2.84x at September 30, 2023, the applicable margin for Eurodollar loans would be 1.375% instead of 1.875% and the applicable margin for ABR loans would be 0.375% instead of 0.875% in the case of 2020 Revolving Loans (as defined in the Revolving Credit Agreement).
Based on the Senior Secured Indebtedness to EBITDA Ratio of 2.05x at September 30, 2024, the applicable margin for SOFR loans and RFR loans would be 1.375% instead of 1.875% and the applicable margin for ABR loans would be 0.375% instead of 0.875% in the case of 2020 Revolving Loans (as defined in the Revolving Credit Agreement).
It could also be affected by the severity and duration of geopolitical conflicts or natural or man-made disasters, including pandemics such as COVID-19.
It could also be affected by the severity and duration of geopolitical conflicts or natural or man-made disasters, including pandemics.
Based on contractual obligations and the Company’s expected release schedule, off-balance sheet aggregate firm commitments to such talent approximated $383 million at September 30, 2023. The aggregate firm commitments expected for the next twelve-month period based on contractual obligations and the Company’s expected release schedule approximates $236 million at September 30, 2023.
Based on contractual obligations and the Company’s expected release schedule, off-balance sheet aggregate firm commitments to such talent approximated $558 million at September 30, 2024. The aggregate firm commitments expected for the next twelve-month period based on contractual obligations and the Company’s expected release schedule approximates $329 million at September 30, 2024.
The overall increase in Music Publishing revenue was driven by growth in digital, performance and mechanical revenue, partially offset by lower synchronization revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above. 2022 vs. 2021 Music Publishing revenues increased by $197 million, or 26%, to $958 million for the fiscal year ended September 30, 2022 from $761 million for the fiscal year ended September 30, 2021.
The overall increase in Music Publishing revenue was driven by growth in digital, performance and synchronization revenue, partially offset by lower mechanical revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above. 2023 vs. 2022 Music Publishing revenues increased by $130 million, or 14%, to $1,088 million for the fiscal year ended September 30, 2023 from $958 million for the fiscal year ended September 30, 2022.
Product costs as a percentage of revenue increased to 24% for the fiscal year ended September 30, 2023 from 23% for the fiscal year ended September 30, 2022.
Product costs as a percentage of revenue decreased to 23% for the fiscal year ended September 30, 2024 from 24% for the fiscal year ended September 30, 2023.
Cost of revenues Music Publishing cost of revenues was composed of the following amounts (in millions): For the Fiscal Year Ended September 30, 2023 vs. 2022 2022 vs. 2021 2023 2022 2021 $ Change % Change $ Change % Change Artist and repertoire costs $ 681 $ 620 $ 493 $ 61 10 % $ 127 26 % Total cost of revenues $ 681 $ 620 $ 493 $ 61 10 % $ 127 26 % 2023 vs. 2022 Music Publishing cost of revenues increased by $61 million, or 10%, to $681 million for the fiscal year ended September 30, 2023 from $620 million for the fiscal year ended September 30, 2022.
Cost of revenues Music Publishing cost of revenues was composed of the following amounts (in millions): For the Fiscal Year Ended September 30, 2024 vs. 2023 2023 vs. 2022 2024 2023 2022 $ Change % Change $ Change % Change Artist and repertoire costs $ 763 $ 681 $ 620 $ 82 12 % $ 61 10 % Total cost of revenues $ 763 $ 681 $ 620 $ 82 12 % $ 61 10 % 2024 vs. 2023 Music Publishing cost of revenues increased by $82 million, or 12%, to $763 million for the fiscal year ended September 30, 2024 from $681 million for the fiscal year ended September 30, 2023.
Total digital revenues after intersegment eliminations increased by $327 million, or 9%, to $3,866 million for the fiscal year ended September 30, 2022 from $3,539 million for the fiscal year ended September 30, 2021, which includes $38 million in downloads and other digital revenue from the Copyright Settlement.
Total digital revenues after intersegment eliminations increased by $123 million, or 3%, to $3,989 million for the fiscal year ended September 30, 2023 from $3,866 million for the fiscal year ended September 30, 2022, which includes $38 million in downloads and other digital revenue from the Copyright Settlement.
Music Publishing OIBDA increased by $62 million, or 27%, to $293 million for the fiscal year ended September 30, 2023 from $231 million for the fiscal year ended September 30, 2022 largely due to the factors that led to the increase in Music Publishing operating income noted above.
Music Publishing Adjusted OIBDA increased by $63 million, or 27%, to $296 million for the fiscal year ended September 30, 2023 from $233 million for the fiscal year ended September 30, 2022 largely due to the factors that led to the increase in Music Publishing operating income noted above.
Fiscal Year Ended September 30, 2023 2022 2021 Cash provided by (used in): Operating activities $ 687 $ 742 $ 638 Investing activities (300) (824) (638) Financing activities (325) 188 (61) Operating Activities Cash provided by operating activities was $687 million for the fiscal year ended September 30, 2023 compared to $742 million for the fiscal year ended September 30, 2022 and $638 million for the fiscal year ended September 30, 2021.
Fiscal Year Ended September 30, 2024 2023 2022 Cash provided by (used in): Operating activities $ 754 $ 687 $ 742 Investing activities (311) (300) (824) Financing activities (396) (325) 188 Operating Activities Cash provided by operating activities was $754 million for the fiscal year ended September 30, 2024 compared to $687 million for the fiscal year ended September 30, 2023 and $742 million for the fiscal year ended September 30, 2022.
Our business’ distribution operations also includes ADA, which markets, distributes and sells the products of independent labels to retail and wholesale distributors; and various distribution centers and ventures operated internationally.
Our business’ distribution operations also include Alternative Distribution Alliance (“ADA”), which markets, distributes and sells the products of independent labels to retail and wholesale distributors; and various distribution centers and ventures operated internationally.
Accordingly, the results of operations for the fiscal year ended September 30, 2023 reflect 365 days, compared to 371 days for the fiscal year ended September 30, 2022 and 364 days for the fiscal year ended September 30, 2021.
Accordingly, the results of operations for the fiscal year ended for September 30, 2024 and September 30, 2023 reflect 366 and 365 days, respectively, compared to 371 days for the fiscal year ended September 30, 2022.
Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the fiscal years ended September 30, 2023 and September 30, 2022. 2022 vs. 2021 Total selling, general and administrative expense increased by $141 million, or 8%, to $1,862 million for the fiscal year ended September 30, 2022 from $1,721 million for the fiscal year ended September 30, 2021.
Expressed as a percentage of revenue, distribution expense remained constant at 2% for each of the fiscal years ended September 30, 2024 and September 30, 2023. 2023 vs. 2022 Total selling, general and administrative expense decreased by $36 million, or 2%, to $1,826 million for the fiscal year ended September 30, 2023 from $1,862 million for the fiscal year ended September 30, 2022.
Existing Debt as of September 30, 2023 As of September 30, 2023, our long-term debt, all of which was issued by Acquisition Corp., was as follows (in millions): Revolving Credit Facility (a) $ — Senior Term Loan Facility due 2028 1,295 2.750% Senior Secured Notes due 2028 (€325 face amount) 343 3.750% Senior Secured Notes due 2029 540 3.875% Senior Secured Notes due 2030 535 2.250% Senior Secured Notes due 2031 (€445 face amount) 471 3.000% Senior Secured Notes due 2031 800 Term Loan Mortgage 18 Total long-term debt, including the current portion $ 4,002 Issuance premium less unamortized discount and unamortized deferred financing costs (38) Total long-term debt, including the current portion, net $ 3,964 ______________________________________ (a) Reflects $300 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $2 million at September 30, 2023.
Existing Debt as of September 30, 2024 As of September 30, 2024, our long-term debt, all of which was issued by Acquisition Corp., was as follows (in millions): Revolving Credit Facility (a) $ — Senior Term Loan Facility due 2031 1,295 2.750% Senior Secured Notes due 2028 (€325 face amount) 363 3.750% Senior Secured Notes due 2029 540 3.875% Senior Secured Notes due 2030 535 2.250% Senior Secured Notes due 2031 (€445 face amount) 497 3.000% Senior Secured Notes due 2031 800 Mortgage Term Loan due 2033 18 Total long-term debt, including the current portion $ 4,048 Issuance premium less unamortized discount and unamortized deferred financing costs (34) Total long-term debt, including the current portion, net $ 4,014 ______________________________________ (a) Reflects $350 million of commitments under the Revolving Credit Facility with no letters of credit outstanding at September 30, 2024.
On August 14, 2023, the Company’s board of directors declared a cash dividend of $0.17 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid on September 1, 2023.
On August 15, 2024, the Company’s board of directors declared a cash dividend of $0.18 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid on September 4, 2024.
Interest on the Term Loan Mortgage will accrue at a rate of 30-day Secured Overnight Financing Rate (“SOFR”) plus the applicable margin of 1.40% subject to a zero floor. Equal principal installments and interest are due monthly.
Interest on the Term Loan Mortgage will accrue at a rate of 30-day Secured Overnight Financing Rate (“SOFR”) plus the applicable margin of 1.40% subject to a zero floor. Equal principal installments and interest are due monthly. The outstanding balance for the Term Loan Mortgage as of September 30, 2024 was $18 million.
The decrease of $15 million in income tax expense is primarily due to the impact of lower pre-tax income in the current year and benefit of R&D credits.
The decrease of $15 million in income tax expense is primarily due to the impact of lower pre-tax income in the fiscal year ended September 30, 2023 and benefit of R&D credits.
As of September 30, 2023, we had recorded goodwill in the amount of $1.993 billion, including $1.529 billion and $464 million for our Recorded Music and Music Publishing businesses, respectively, primarily related to the Merger and PLG Acquisition. As of September 30, 2023, we had recorded indefinite-lived intangible assets of $149 million.
As of September 30, 2024, we had recorded goodwill in the amount of $2.021 billion, including $1.557 billion and $464 million for our Recorded Music and Music Publishing businesses, respectively, primarily related to the Merger and PLG Acquisition. As of September 30, 2024, we had recorded indefinite-lived intangible assets of $152 million.
Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to Warner Music Group Corp. and other measures of financial performance reported in accordance with United States generally accepted accounting principles (“U.S. GAAP”). In addition, our definition of OIBDA may differ from similarly titled measures used by other companies.
Accordingly, Adjusted OIBDA should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) attributable to Warner Music Group Corp. and other measures of financial performance reported in accordance with United States generally accepted accounting principles (“U.S. GAAP”).
The loans outstanding under the Senior Term Loan Facility mature on January 20, 2028. In addition, the Senior Term Loan Credit Agreement provides the right for individual lenders to extend the maturity date of their loans upon the request of the Term Loan Borrower and without the consent of any other lender.
In addition, the Senior Term Loan Credit Agreement provides the right for individual lenders to extend the maturity date of their loans upon the request of the Term Loan Borrower and without the consent of any other lender.
The overall increase in Music Publishing revenue was driven by growth across all revenue types, including digital, performance, synchronization and mechanical revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
The overall increase in Music Publishing revenue was driven by growth in digital, performance and mechanical revenue, partially offset by lower synchronization revenue, as described in the “Total Revenues” and “Revenue by Geographical Location” sections above.
Net gain on divestiture 2023 vs. 2022 During the fiscal year ended September 30, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million, which was recorded as a net gain on divestiture in the accompanying consolidated statement of operations.
Net gain on divestitures 2024 vs. 2023 During the fiscal year ended September 30, 2024, the Company recorded a pre-tax gain of $32 million in connection with the divestiture of certain sound recording and publishing rights and the divestitures of certain non-core O&O Media Properties. 2023 vs. 2022 During the fiscal year ended September 30, 2023, the Company sold its interest in certain sound recording rights and recorded a pre-tax gain of $41 million, which was recorded as a net gain on divestiture in the accompanying consolidated statement of operations.
Net income 2023 vs. 2022 Net income decreased by $116 million to $439 million for the fiscal year ended September 30, 2023 from $555 million for the fiscal year ended September 30, 2022 as a result of the factors described above. 56 2022 vs. 2021 Net income increased by $248 million to $555 million for the fiscal year ended September 30, 2022 from $307 million for the fiscal year ended September 30, 2021 as a result of the factors described above.
Net income 2024 vs. 2023 Net income decreased by $39 million to $478 million for the fiscal year ended September 30, 2024 from $439 million for the fiscal year ended September 30, 2023 as a result of the factors described above. 2023 vs. 2022 Net income decreased by $116 million to $439 million for the fiscal year ended September 30, 2023 from $555 million for the fiscal year ended September 30, 2022 as a result of the factors described above.
For the fiscal year ended September 30, 2023, the Executive Transition Costs were approximately $7 million, which mainly consisted of severance for our previous CEO and CFO.
During the fiscal year ended September 30, 2023, the Company incurred Executive Transition Costs of $7 million, which mainly consisted of severance for our previous CEO and CFO. 2023 vs. 2022 During the fiscal year ended September 30, 2023, the Company incurred Executive Transition Costs of $7 million, which mainly consisted of severance for our previous CEO and CFO.
Expressed as a percentage of revenue, total selling, general and administrative expense decreased to 31% for the fiscal year ended September 30, 2022 from 32% for the fiscal year ended September 30, 2021.
Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 29% for the fiscal year ended September 30, 2023 from 31% for the fiscal year ended September 30, 2022.
This division includes a rebranded WEA commercial services and marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors, as well as acting as the Company’s media and creative content arm.
This division includes a rebranded WEA commercial services and marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors.
Income tax expense 2023 vs. 2022 Our income tax expense decreased by $15 million to $170 million for the fiscal year ended September 30, 2023 from $185 million for the fiscal year ended September 30, 2022.
Income tax expense 2024 vs. 2023 Our income tax expense decreased by $47 million to $123 million for the fiscal year ended September 30, 2024 from $170 million for the fiscal year ended September 30, 2023.
Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2021 were composed of U.S. revenues of $1,769 million and international revenues of $1,772 million, or 50% of total digital revenues for each of U.S. and international revenues.
Prior to intersegment eliminations, total digital revenues for the fiscal year ended September 30, 2023 were composed of U.S. revenues of $1,993 million and international revenues of $1,998 million, or 50% of total digital revenues for both U.S. and international revenues.
We consider OIBDA to be an important indicator of the operational strengths and performance of our businesses. However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses.
However, a limitation of the use of Adjusted OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses.
Depreciation expense 2023 vs. 2022 Our depreciation expense increased by $11 million to $87 million for the fiscal year ended September 30, 2023 from $76 million for the fiscal year ended September 30, 2022.
Depreciation expense 2024 vs. 2023 Our depreciation expense increased by $16 million to $103 million for the fiscal year ended September 30, 2024 from $87 million for the fiscal year ended September 30, 2023.
Expressed as a percentage of Recorded Music revenue, cost of revenues remained constant at 50% for each of the fiscal years ended September 30, 2022 and September 30, 2021. Artist and repertoire costs as a percentage of revenue decreased to 27% for the fiscal year ended September 30, 2022 from 28% for the fiscal year ended September 30, 2021.
Expressed as a percentage of Recorded Music revenue, cost of revenues remained constant at 50% for each of the fiscal years ended September 30, 2024 and September 30, 2023. Artist and repertoire costs as a percentage of revenue remained constant at 27% for each of the fiscal years ended September 30, 2024 and September 30, 2023.
This compares to $3.732 billion of debt (which is net of $41 million of premiums, discounts and deferred financing costs), $584 million of cash and equivalents (net debt of $3.148 billion) and $152 million of Warner Music Group Corp. equity at September 30, 2022. Cash Flows The following table summarizes our historical cash flows (in millions).
This compares to $3.964 billion of debt (which is net of $38 million of premiums, discounts and deferred financing costs), $641 million of cash and equivalents (net debt of $3.323 billion) and $307 million of Warner Music Group Corp. equity at September 30, 2023. Cash Flows The following table summarizes our historical cash flows (in millions).
Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 29% for the fiscal year ended September 30, 2023 from 31% for the fiscal year ended September 30, 2022. 2022 vs. 2021 Recorded Music selling, general and administrative expense increased by $121 million, or 9%, to $1,529 million for the fiscal year ended September 30, 2022 from $1,408 million for the fiscal year ended September 30, 2021.
Expressed as a percentage of Recorded Music revenue, Recorded Music selling, general and administrative expense decreased to 27% for the fiscal year ended September 30, 2024 from 29% for the fiscal year ended September 30, 2023. 2023 vs. 2022 Recorded Music selling, general and administrative expense decreased by $105 million, or 7%, to $1,424 million for the fiscal year ended September 30, 2023 from $1,529 million for the fiscal year ended September 30, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of September 30, 2023, the Company had no outstanding hedge contracts. Interest Rate Risk We had $4.002 billion of principal debt outstanding at September 30, 2023, of which $1.313 billion was variable-rate debt and $2.689 billion was fixed-rate debt. As such, we are exposed to changes in interest rates.
Biggest changeAs of September 30, 2024, the Company had no outstanding hedge contracts. Interest Rate Risk We had $4.048 billion of principal debt outstanding at September 30, 2024, of which $1.313 billion was variable-rate debt and $2.735 billion was fixed-rate debt. As such, we are exposed to changes in interest rates.
As of September 30, 2023, other than as described below, there have been no material changes to the Company’s exposure to market risk since September 30, 2022. Foreign Currency Risk Within our global business operations we have transactional exposures that may be adversely affected by changes in foreign currency exchange rates relative to the U.S. dollar.
As of September 30, 2024, other than as described below, there have been no material changes to the Company’s exposure to market risk since September 30, 2023. Foreign Currency Risk Within our global business operations we have transactional exposures that may be adversely affected by changes in foreign currency exchange rates relative to the U.S. dollar.
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases for services. Our inability or failure to do so could harm our business, financial condition or results of operations. 78
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases for services. Our inability or failure to do so could harm our business, financial condition or results of operations. 81
Further, as of September 30, 2023, based on the amount of the Company’s fixed-rate debt, a 25 basis point increase or decrease in the level of interest rates would decrease the fair value of the fixed-rate debt by approximately $32 million or increase the fair value of the fixed-rate debt by approximately $33 million.
Further, as of September 30, 2024, based on the amount of the Company’s fixed-rate debt, a 25 basis point increase or decrease in the level of interest rates would decrease the fair value of the fixed-rate debt by approximately $32 million or increase the fair value of the fixed-rate debt by approximately $33 million.
At September 30, 2023, 67% of the Company’s debt was at a fixed rate. In addition, as of September 30, 2023, we have the option under all of our floating rate debt under the Senior Term Loan Facility to select a one, two, three or six month SOFR rate.
At September 30, 2024, 68% of the Company’s debt was at a fixed rate. In addition, as of September 30, 2024, we have the option under all of our floating rate debt under the Senior Term Loan Facility to select a one, two, three or six month SOFR rate.
Based on the level of interest rates prevailing at September 30, 2023, the fair value of the Company’s fixed-rate and variable-rate debt was approximately $3.525 billion.
Based on the level of interest rates prevailing at September 30, 2024, the fair value of the Company’s fixed-rate and variable-rate debt was approximately $3.836 billion.
Removed
To manage interest rate risk on $1,313 million of U.S. dollar-denominated variable-rate debt, the Company has entered into an interest rate swap to effectively convert the floating interest rate to a fixed interest rate on a portion of its variable-rate debt. As a result, as of September 30, 2023, 80% of the Company’s debt was effectively at a fixed rate.

Other WMG 10-K year-over-year comparisons