After a nine-year absence, Warner Music Group is planning to return to the public markets in a bet on the streaming-fueled resurgence of the music industry.
In a prospectus filed on Thursday, the company said the industry “has undergone a transformation in the consumption and monetization of content towards streaming over the last five years” and its catalog and roster of artists including Ed Sheeran, Cardi B, and Lizzo “position us to benefit as streaming continues to grow.”
In 2016, Warner Music became the first music company to report that streaming was the largest source of its recorded music revenue.
“The growth of streaming services has not only improved the discoverability and personalization of music, but has also increased consumer willingness to pay for seamless convenience and access,” Warner said. “We believe consumer adoption of paid streaming services still has significant potential for growth.”
Global paid music streaming subscribers totaled 255 million at the end of 2018, up 45% from 2017, but still less than 8% of the 3.2 billion smartphone users globally, according to the prospectus.
Warner Music went private in 2011 when billionaire Len Blavatnik’s Access Industries acquired the company for $3.3 billion in cash. At that time, the Los Angeles Times noted, “the major labels were still reeling from the digital revolution that had turned the business upside down.”
For the first quarter, Warner posted $1.26 billion in sales, a record for the label as a stand-alone company. It said annual revenue has grown at a rate of 12% in each of the past two years and net income increased to $258 million from $149 million over the same period.
Industry-wide revenues grew 18% to $5.4 billion in the first six months of 2019.
The Times suggested market conditions may be ripe for Warner’s IPO, noting that rival Universal Music Group last year sold a 10% stake to Chinese tech giant Tencent for $3.4 billion, valuing the company at nearly $34 billion.
But Forbes said some investors “might be wary of Warner’s significant debt,” which, as of Dec. 31, 2019, totaled nearly $3 billion.
Emma McIntyre/Getty Images for The Recording Academy