Warner Music (WMG): Next Year Will Be Awful

Warner Music doesn’t formally offer guidance to Wall Street. But read between the lines from its just-concluded Q4 earnings call and it’s pretty clear that WMG is going to have a lousy 2008:

• Physical music sales are going to continue to plummet, and retailers are indeed going to cut back on the shelf space they devote to music, which will compound the decline. WMG’s Edgar Bronfman Jr. is more optimistic than some: He predicts that recorded music sales will only drop in the “mid-teens”.

• Digital sales growth, which Warner has been counting on to counter the drop in CD sales, has been slower than expected. And there’s no reason to think that pace will pick up next year.

• Mobile sales, which have been bailing out WMG and the rest of the business, are “weaker than we’d like to see,” Bronfman said, in large part because “ringtones have lost their luster”. And the stuff that was supposed to replace them — over the air music downloads and gimmicks like “ringback tones” — has yet to take off.

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