Venkatakrishnan

Venkatakrishnan from Barclays challenged Warner Music Group on why AI isn't an equal threat, given its potential to use existing content for model training and theoretically bypass content creators in the long term. He also requested more financial details on underlying operating leverage trends, excluding M&A and cost savings, in the context of next year's margin expansion guidance.

Answer

CEO Robert Kyncl acknowledged the inherent threats with any technological change but asserted that WMG focuses on turning these into advantages, citing the past example of distribution. He argued that the value of large music companies is rising, as they possess the capabilities and scale to navigate complex interactions with large technology companies, ensuring beneficial outcomes for artists, songwriters, and shareholders. CFO Armin Zerza clarified that the margin guide is a net margin guide after investments, driven by the $200 million cost savings program and organic margin growth. He highlighted accelerating high-margin streaming business and PSM price increases as the biggest organic drivers for margin improvement.

CS Venkatakrishnan challenged Robert Kyncl on why AI isn't an equal threat, given the potential for content to train models and bypass creators, and asked Armin Zerza for more detail on the underlying trends and operating leverage driving margin expansion, excluding M&A and cost savings, given that most implied EBITDA growth seems to come from cost cuts.

Answer

CEO Robert Kyncl acknowledged the inherent threats with any technological change but asserted that the value and contribution of large music companies are rising, not declining, especially in navigating complex big business-to-big business interactions. He emphasized WMG's role in shaping the industry to benefit artists, songwriters, and shareholders. CFO Armin Zerza clarified that the margin guide is a net figure after investments, driven by both cost savings and organic margin growth. The primary organic drivers are the acceleration of the high-margin streaming business and DSP price increases flowing directly to the bottom line.