Warner, Billion Dollar Startup?
November 29, 2007
Mathew Ingram paraphrased Edgar Bronfman’s comments about Warner Music’s latest financial results saying, “We’re totally screwed!” Matthew continues,
According to a rundown of the news and the related conference call at PaidContent, Warner’s revenue was essentially flat, while earnings fell by almost 60 per cent to just $5-million — and that’s on total sales of almost $900-million, which works out to a profit margin of about .5 per cent. In other words, virtually non-existent. And the near future looks as though it’s likely to be as bad or worse.
Update: According to Valleywag had it not been for a $12MM legal settlement Warner received their paultry profit would have been a $7MM loss.
Ironically this may be a huge opportunity for Warner. They have almost nothing to lose by funadmentally changing their business model. Doing business as usual has resulted in almost no profit for Edgar’s shareholders. Earlier this month Edgar suggested,
“We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and as a result of course, consumers won.”
When the numbers are this bad it can free you up to make changes an otherwise healthy business would never consider. My thoughts? Buy! Warner Music Group is listed on the NYSE:WMG (wait for the stock to drop tomorrow and start dollar cost averaging over the next 30 days). Good luck!
