In a recent earnings call, Warner Music Group (WMG) revealed a significant financial challenge. Bryan Castellani, WMG’s EVP/CFO, disclosed that the company will experience a negative impact of approximately $10 million per quarter going forward due to Meta’s decision to no longer license premium music videos for its platforms. This translates to a $40 million decline in revenue compared to the prior year.
What’s interesting is that this impact won’t affect WMG until the next quarter (calendar Q3), so it didn’t impact their streaming figures in calendar Q2. However, Universal Music Group (UMG) faced a different scenario. During UMG’s calendar Q2 earnings call, they explained that Meta’s abandonment of premium music videos led to a 3.9% YoY decline in ad-funded streaming revenues for the quarter, affecting UMG’s overall streaming growth.
To put this in perspective, Warner Music Group’s recorded music division held a 16.8% global market share of digital music industry revenues in 2023, while Universal’s share was nearly double at 32.4%. Given this context, it’s reasonable to assume that Meta’s payments to Universal for premium music videos were significantly larger than the $40 million annual payment implied by Bryan Castellani for WMG over the past year.
UMG’s EVP/CFO, Boyd Muir, clarified that Meta had previously offered premium music videos on Facebook but found them less popular with users compared to other music products. As a result, Meta ceased licensing premium music videos from UMG as of May this year, shifting their focus to other music content areas.