Warner Music: Demand for Streaming Music Remains Healthy

While Warner Music’s fiscal fourth-quarter results came in shy of our estimates, they beat consensus on the top and bottom lines as the improving demand for streaming music accelerated year-over-year growth. In the future, we think the firm will continue to benefit from the digital service providers’ higher prices. We also think that an adjusted revenue share model that Warner Music and some of its peers including Universal Music have launched with digital service provider Deezer and the continuing increase in demand for their content from consumers will drive growth. Regarding the bottom line, we expect further margin expansion driven by revenue growth, additional content monetization options, and benefits from restructuring.