Warner Music’s deal with global private investment firm Bain Capital is a big one. The partners aim to purchase up to $1.2 billion in music catalogues across both recorded music and music publishing.
At the same time, Warner Music, along with other industry giants, is negotiating licensing deals with two startups that could set a new precedent for how songs are used and how artists are paid for remixes generated by artificial intelligence (AI).
WARNER MUSIC GROUP (Nasdaq symbol WMG; www.wmg.com) began trading on June 3, 2020, following its IPO.
Warner Music is one of the world’s leading music entertainment companies. Its record labels include Atlantic Records, Warner Records, and Elektra Records. Musicians recording on these labels include Bruno Mars, Lizzo, Ed Sheeran, Cardi B, Katy Perry, Madonna, Metallica, Neil Young and Led Zeppelin.
The company also owns Warner Chappell Music, a music publishing company representing more than 80,000 songwriters and composers.
In the three months ended March 31, 2025, Warner Music’s revenue fell slightly, to $1.48 billion from $1.49 billion a year earlier.
Earnings in the latest quarter fell 62.5%, to $36.0 million, or $0.07 a share, from $96.0 million, or $0.18. However, most of the rise was driven primarily by one-time items. For instance, the impact of exchange rates on the company’s euro-denominated debt resulted in a loss of $34 million in the latest quarter compared to a gain of $21 million a year ago.
Warner Music has a strong balance sheet: it holds cash of $637.0 million, and its $4.0 billion in long-term debt is a manageable 25% of its market cap. The stock yields 2.3% for investors.
New revenue streams are on the horizon for Warner Music
Warner Music, as well as Universal Music Group and Sony Music Group, are now negotiating licensing deals with two startups that could set a new precedent for how songs are used and how artists are paid for remixes generated by artificial intelligence (AI).
[ofie_ad]
The three companies want to be compensated by startups Suno and Udio when music by artists they represent is used to train generative AI models and produce new music. They want the startups to develop fingerprinting and attribution technology—similar to YouTube’s content ID.
In addition, the music companies want to be active participants in the music-related products that the AI companies release, including having a say in which products are developed and how they work.
Each label is negotiating with the startups individually, and the talks are at different stages of progression.
A challenge for the music labels is how to come to commercial terms to license their catalogs at scale in a way that not only protects artists’ work but also garners broad support among musicians, some of whom may be wary. The labels are also seeking provisions for artists to be able to opt out of certain use cases.
Agreements would also likely involve the music companies taking stakes in the AI companies. Music companies often take stakes as part of licensing agreements with startups. Universal, Warner and Sony had stakes in Spotify when the music-streaming service launched.
Meanwhile, Warner Music and global private investment firm Bain Capital are launching a joint venture to for the purchase of up to $1.2 billion in music catalogues across both recorded music and music publishing.
Warner Music and Bain will together source and acquire the catalogues, while Warner Music will manage all aspects of marketing, distribution, and administration. The deal combines Warner Music’s infrastructure and relationships with Bain Capital’s global resources and financial capabilities.
Meanwhile, Warner Music will lay off an unspecified number of employees as part of a months-long restructuring plan to cut costs. The moves, which are aimed at “future proofing” the company, includes reducing annual costs by roughly $300 million, with $170 million of that coming from “headcount rightsizing for agility and impact.” The additional $130 million in costs will come from administrative and real estate expenses.
In 2024, Warner Music laid off 600 employees, or approximately 10% of its workforce, and in 2023, 270 jobs were cut.
Recommendation in Power Growth Investor: Warner Music Group Corp. is a buy.
