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DGMI and Warner report first quarter results

May 10, 2007

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Ccontent owner and global leader in the digital distribution of independently owned music and video catalogs Digital Music Group, Inc. (DGMI) has reported results for its first quarter ended March 31, 2007.

Revenue for the first quarter of 2007 totaled $3,392,547, representing an increase of 34% from the first quarter of 2006, when pro forma combined revenue totaled $2,526,085, while total paid downloads (with albums presented as single track equivalents) represented 4,782,200, or 33% greater than the same period last year.

Apple iTunes Store accounted for approximately 70% of the Company’s revenue during this first quarter of 2007, while last year’s first quarter, approximately 89% of the revenue came from Apple iTunes, less than 5% was from subscription services, and no mobile distribution.

“With our acquisition of DRA in September 2006,” DMGI’s Chief Executive Officer, Mitchell Koulouris said “we gained immediate access to mobile channels, and revenue from mobile distribution represented approximately 10% of our total first quarter 2007 revenue. In addition, distribution through subscription services grew to approximately 7% of our total first quarter 2007 revenue. Making more music available at more places will continue to be a key objective for DMGI throughout 2007 and beyond.”

Warner Music Group Corp. has also released their quarterly numbers, posting a wider loss hurt by soft music sales.

Major sellers in the quarter included titles from Madonna, Red Hot Chili Peppers and Gerald Levert. However, one year ago sales were stronger, powered by releases from James Blunt and Sean Paul.

The world’s fourth-largest music company reported a fiscal second-quarter net loss of $27 million, or 19 cents a share, compared with a loss of $7 million, or 5 cents a share, a year earlier.

Excluding one-time items, it lost 10 cents per share, in line with analysts’ average forecast, according to Reuters Estimates.

Revenue declined 2 percent to $784 million from $796 million. Digital revenue rose 23 percent to $111 million. Analysts had expected total revenue of $730 million.

Warner and other record companies have struggled with the transition of the business from compact discs to online music, with copy protection software known as digital rights management (DRM) failing to stop rampant online piracy.

“The recorded music industry remains challenged by piracy and changing consumption patterns in the shift from physical sales to new forms of digital music,” the company said in a statement.

Warner Music said it expected sales comparisons to improve progressively over the next two quarters, althought there is the possibility of cutting about 400 jobs as it shifts resources to boost digital distribution of music and video.

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