Warner Music Group Corp. (WMG) Q2 2015 Earnings Report, Transcript and Summary

Welcome to Warner Music Group's Second Quarter 2015 Earnings Call for the period ended March 31, 2015. At the request of the Warner Music Group, today's call is being recorded for replay purposes. And if you have an objection, you may disconnect any time. [Operator Instructions] Now I would like to turn today's call over to your host, Mr. James Steven, Executive Vice President, Communications and Marketing. You may begin.

Good afternoon, everyone. Welcome to Warner Music Group's Fiscal Second Quarter 2015 Conference Call. Both our earnings press release and the Form 10-Q we filed this afternoon are available on our website. Today, our CEO, Steve Cooper, will update you on our business performance and strategy; our Executive Vice President and CFO, Eric Levin, will discuss our financial condition and results; and then both of them will take your questions. Before Steve's comments, let me remind you that this communication includes forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance. All forward-looking statements are made as of today, and we disclaim any duty to update such statements. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and projections will result or be achieved. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties and other factors that can cause actual results that differ materially from our expectations. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our earnings press release and Form 10-Q and other SEC filings. We plan to present certain non-GAAP's results during this conference call. We have provided schedules reconciling these results to our GAAP results in our earnings press release posted on our website. Also, please note that all revenue figures and comparisons discussed today will be presented in constant currency. With that, let me turn it over to Steve Cooper.

Good afternoon, everyone, and thanks for joining us today. I'm very pleased to say that the first half of our fiscal year has been great. Our strong momentum is reflected in our second quarter results where we grew total revenue by 13%, total digital revenue by 10% and adjusted OIBDA by 17%. It's impressive that revenue growth was widespread in key segments of our business. In particular, Recorded Music, both the U.S. and international and across digital and physical. There are 2 items that bear mentioning when looking at our revenue figures this quarter. First, our release schedule is more front-end loaded this year as compared to last year when the majority of our bigger releases came in the last 6 months; and second, the dollar has strengthened, particularly relative to the euro. However, even taking into account this currency trend, we still made great progress, with total revenue up 4% on an as-reported basis. Although we feel it is more indicative to measure our performance on a full year basis, at this halfway point, it is clear that our artist-development strategy is having a very positive impact in fiscal '15. Before we look more closely at our Recorded Music and Music Publishing results, I want to provide an update on the state of the recorded music industry based on IFPI data for calendar '14. The global recorded music business was essentially flat last year, declining 0.4 of a percent. That's modest compared to the 4% decline in '13. A 39% increase in Streaming revenue nearly offset 8% declines in both physical and download revenue. Streaming comprised nearly 1/3 of overall digital revenue, including 41 million paying subscribers, up 46% from 28 million in 2013 and far in excess of the 8 million subscribers we had in 2010. This jump in Streaming revenue contributed to an important industry landmark. In calendar 2014, digital revenue was on par with physical revenue for the very first time. However, these headline numbers belied the diversity of the music markets around the world. For example, there are many countries where the digital transformation is relatively nascent. In 3 of the 5 largest music markets, Japan, Germany and France, physical still made up the majority of revenue at 78%, 70% and 57%, respectively. There are also markets where digital generates more revenue than Physical, but with download still contributing more than Streaming. This group includes the U.S. and the U.K. to round out the global top 5. There are now over 30 countries where streaming is already the dominant form of music consumption. These include Sweden, Spain and South Korea and even emerging markets such as Brazil and China. There are 2 interesting data points from our second quarter results that highlight our ability to successfully navigate a complex environment where the most popular recorded music format is different from territory to territory. First, our Recorded Music physical business grew on a year-over-year basis for the second quarter running. This quarter, the 21% year-over-year jump in Physical revenue is largely due to the rerelease of Led Zeppelin's Physical Graffiti, heavy CD sales for Kid Rock's new album and big albums from territories that are predominantly physical, such as Matt Pokora's R.E.D, a #1 album in France. Given the long-term industry decline in Physical revenue, we should consider this performance an exception to the norm. It does, however, illustrate our ability to maximize each and every opportunity for our artists in this fast-changing world. Second, our Recorded Music streaming revenue surpassed our download revenue for the first time ever in the quarter, growing 33%. This is an important milestone and impressive considering the strong double-digit growth is coming on top of an increasingly significant base. The rate of this growth has made it abundantly clear to us that in years to come, streaming will be the way that most people enjoy music. Not only that, we are also confident that streaming's ongoing expansion will return the industry to sustainable long-term growth. We'll continue to collaborate with our streaming partners to expand our businesses and, more importantly, to ensure the content owners, artists and songwriters receive appropriate value for their work. As part of our desire to create change, rather than merely embrace it, we are constantly exploring ways to further boost the uptake of streaming. For example, we were the first major music company to premier our artist videos via the new subscription service, Vessel. We are also experimenting with services that have different business models, including Rithm, a music and chat messaging service, now available in the U.S. Most importantly, our artists and songwriters are creating music that is proving hugely popular with audiences on streaming services. Ed Sheeran, the most streamed artist of 2014 on Spotify, recently became the second artist to hit 2 billion streams. Last month Wiz Khalifa and Charlie Puth's massive global hit, See You Again, smashed Spotify records for most streams in 1 week as well as in 1 day. And in March, Warner/Chappell's, Kendrick Lamar set a new Spotify record for most streams of an album on its day of release. Now let's look at our second quarter results in more detail. We'll start with Recorded Music, where we had an impressive showing. Specifically, we grew total revenue by 15%, grew digital revenue by 7% and grew adjusted OIBDA by 31%. I'm proud to say that once again, these results were driven by artist making great music across multiple genres around the world. For example, Jess Glynne built on her success with Grammy winners Clean Bandit, hitting the U.K.'s top 10 with her first 2 solo singles and reaching #1 with Hold my Hand. Robin Schulz followed his global smash, Prayer in C, with 2 more top 10 singles in Germany, including his latest track, Headlights; and up and comers, GALANTIS and Kwabs, celebrated their first #1s, topping the singles charts in the Netherlands and Germany, respectively. In addition, during the quarter, we helped further the careers of several established artists. David Guetta, whose sixth studio album, Listen, went double platinum in France, released Hey Mama, featuring Nicki Minaj and Afrojack. The song became his first #1 on Billboard's Hot Dance and Electronic Songs chart. Kid Rock released his 10th studio album, First Kiss. It was his eighth top 10 in the U.S. and the album also went top 10 in Canada, Austria and Switzerland. Ed Sheeran, who's sophomore album, Multiply, hit the 2 million sales mark in the U.K., has now topped 8 million units worldwide including track and streaming equivalents. The album has remained in the top 10 in the U.K. since its initial release almost a year ago and has recently returned to the top 10 in the U.S. In addition to our artist-development efforts, we have been investing, both in established and emerging markets to grow our presence around the world. In more established markets, we are expanding our A&R activities including: a joint venture with dance company, WePLAY in Germany; the relaunch of Giant Records as a singles label in Sweden; and a partnership with Goma [ph] Studios in Japan. We also continue to build our presence in countries that were rife with piracy and where technology is now permitting us to monetize music consumption. Depending on the market, we are unlocking these opportunities with a mixture of organic investments and acquisitions. We've mentioned our activity in China during previous earnings calls, and there are many others highly populated markets where we believe there are similar exciting possibilities. Three years ago, we saw how smartphone penetration was beginning to create new commercial opportunities in Brazil. We decided to invest more aggressively in local A&R and have since doubled our market share in a country that has become the ninth largest music market in the world. Another region on our radar is Continental Europe, where one of the fastest growing markets is Poland. We were pleased to require EMI's assets there as part of our purchase of PLG. We recently agreed to buy Polskie Nagrania, Poland's oldest record label, which has a catalog of over 30,000 tracks dating back to the 1950s. This latest deal will expand our position as the second largest player in that country. Informa's Music & Copyright recently published its calculation of worldwide recorded music market shares for calendar '14. I'm pleased to say that we had the largest market share gain of the 3 majors, rising nearly a full percentage point to 16.7%, up from 15.8% in '13 and 14.8% in '12. This has further evidenced that our A&R efforts, global strategies and digital initiatives, including our commitment to streaming are contributing to our outperforming the recorded industry as a whole. Now let's turn to Music Publishing. In the second quarter, total revenue increased 5%, digital revenue rose 14% and OIBDA declined 7%, primarily as a result of negative currency trends. These results reflect our ability to attract and nurture global superstars as well as develop songwriters across multiple genres. As an example, we are thrilled to have recently struck a deal to administer Pharrell's pre-2010 song catalog. This includes smashes such as Nelly's Hot in Herre and Gwen Stephani's Hollaback Girl as well as hits that have been recorded by global superstars such as Britney Spears, Justin Timberlake, Jay-Z and Snoop Dogg. This is the material that earned Pharrell #1 spot on Billboard's top producers of the decade list in 2009. We also recently signed former American Idol winner, David Cook, who has sold over 5 million tracks to-date and set a record for the most songs from a single artist on the Billboard Hot 100 chart in a debut week. David is currently working on music for his new album, which is a collection of songs he wrote and self-produced, including the new single, Wait for Me. Also, among the array of talented songwriters who recently joined Warner/Chappell are The Cranberries' Dolores O'Riordan and Noel Hagan (sic) [Noel Hogan] as well as acclaimed Russian composer, Aleksandr Zhurbin. Before I hand the call over to Eric, I want to finish by mentioning some of the industry accolades we and our executives received in recent months. First in Music Publishing, we were recently named Publisher Of The Year at the ASCAP Latin Music Awards. And at the ASCAP Pop Awards, our songwriters picked up 14 most-performed songs wins, while Warner/Chappell songwriters, Patrick Simmons and Tom Johnston of the Doobie Brothers, received one of ASCAP's highest owners, the Voice of Music Award. Last week, the performing rights organization, SESAC presented its Music Visionary Award to our own, Jon Platt, President of Warner/Chappell, North America. We are very proud that Jon has been recognized for outstanding his leadership and contributions to Music Publishing. On the Recorded Music side, our artists were big winners at the Brits Awards in London, including Atlantic's Ed Sheeran for Best Solo Male and Best British album; and Warner Bros. artist Royal Blood for Best British Group. Atlantic also had a fast -- fantastic showing at last month's Music Week Awards. The U.K. team was honored by their peers as Best Record Company, as well as taking home Best Artist Marketing Campaign for Ed Sheeran and Best Promotions Team for a record-breaking 7th-year running. With that, I'll now turn the call over to Eric.

Thank you, Steve, and good afternoon, everyone. Our strong second quarter results reflect the success of our artist-development activities, the momentum in our digital transformation and the expansion of our global footprint. We continue to carefully manage our costs so that we can balance investment in the business with growth on the bottom line. Total revenue grew 13%, driven by a slate of new releases and strong carryover sales. As Steve mentioned, foreign exchange was a significant factor. Total revenue rose 4% on an as-reported basis. In our filings, we provided some additional information on the effect that currency had on our revenue this quarter. From an OIBDA perspective, certain adjustments are necessary to make the year-over-year comparisons more meaningful. We have highlighted these in our press release, but let me walk you through them. In the quarter, we had $1 million in PLG-related expenses, which is down significant from the $33 million in the prior year quarter and $3 million in expenses related to other cost savings initiatives. Backing out of these items, we saw double-digit growth in adjusted OIBDA, up 17% to $125 million and adjusted OIBDA margin rose 2.1 percentage points to 18.5%. Our adjusted OIBDA margin benefited from revenue growth as well as prudent cost management. We have recently implemented a series of cost-containment initiatives, targeting back office overhead, from which we expect annualized savings of over $20 million with the majority expected to be realized this fiscal year. We expect the costs associated with the initiatives identified to be -- to-date, to be under $10 million, most of which have already been incurred. The integration of PLG is now complete, and I'm pleased to say we have realized the full projected $70 million in annual savings. In Recorded Music, we delivered 15% revenue growth. Physical revenue rose 21%, aided by a number of strong releases from Led Zeppelin, Kid Rock and Matt Pokora. Digital revenue grew 7%, reflecting strong growth in Streaming revenue, which more than offset the declines in download revenue. Recorded Music licensing revenue was $78 million, up 56%, benefiting from synced deals as well as the inclusion from the first time of broadcast fee income for PLG repertoire across certain European territories. Artist Services and Expanded Rights revenue was flat, with growth in the U.S. Expanded Rights revenue offset by declines in international Artist Services revenue due to the timing of European concert tours. Recorded Music adjusted OIBDA rose 31% to $94 million and Recorded Music adjusted OIBDA margin was up 3.2 percentage points to 16.7%. The improvement in adjusted OIBDA and adjusted OIBDA margin was largely driven by revenue growth and cost management. Music Publishing revenue rose 5%. Mechanical revenue was flat, reflecting the ongoing industry shift towards digital. Performance revenue rose modestly, driven by the timing of collection of society distributions. Digital was a standout, aided by continued market evolution, and sync benefited from time. OIBDA was down $4 million or 7% to $51 million, with margin down 1.5 percentage points to 43.6% due to the as-reported revenue decline and timing of spend. The company's operating cash flow was $107 million compared with $131 million in the prior year quarter. This was largely driven by the timing of digital payments. As of March 31, 2015, our cash balance was $218 million, and we had a 0 balance on our revolver. CapEx came in at $15 million for the quarter, which was $3 million lower than in the prior year. Although we have been making continued investments in IT, the run rate should be lower for fiscal 2015. Six months into the fiscal year, I am pleased with our progress and have every confidence we can deliver growth. With that, operator, please open the line for questions.

[Operator Instructions] Our first question coming from the line of Aaron Watts of Deutsche Bank.

A few questions for me. That was encouraging, your comments on Streaming revenue surpassing your download revenue for the first time in the quarter. Can you just talk about -- is that a trend you expect to kind of we'll see play out over the next few quarters? Or was there anything kind of one-off in nature in this quarter you just reported that bumped up the Streaming for some reason in this particular quarter?

No, there were no real unusual elements here. And we think that Streaming will continue to see very meaningful growth quarter-over-quarter, year-over-year. And that while we are hopeful that the contraction of downloads slows, we would expect that as people move from downloading to streaming that you should expect to see this, not only for the balance of this year, but for the foreseeable future. I mean, nothing leads me to conclude that this trend is going to change.

Okay. All right, great. And just remind me, and I'm sorry. I know I've ask you this in the past, but just as we think about kind of your margins on the Streaming revenues versus downloads and Physical, just again, please just remind me what that's going to look like.

Well, Aaron, this is Eric. And it's a fair assumption that digital has higher margins than Physical given the lower production and distribution costs. We see comparable margins on average between the downloads and Streaming. That said, the margins on Streaming vary depending on the release schedule, mix of revenue in period and individual contracts. For some streaming models, our margins are superior to those on downloads. And then for others, they're slightly less, so it differs. But Streaming is at least comparable for download.

Okay, that's helpful. And then one quick one. Just to clarify, on your Recorded business with the licensing revenues, the broadcast fee you're getting in Europe, is that a one-time bump in the quarter? Or is that something that going forward you will get those fees in the door?

It will be ongoing. We should note of that for Parlophone, there was a change in accounting from accrual to cash. So now we see that rolling on, but it will continue to be an ongoing revenue stream into the future.

Okay, just a couple more for me. On the release slate, I know you don't like to give any specifics, you did say that this year you're a little more front-end loaded. How should we think about the back half of the year relative to last year's back half of the year? I mean, is there -- is it significantly lighter? Relatively in line? Just -- how should we think about that?

Well, I'm hopeful that our second half will remain strong. We had some of our more significant artists releasing in the second half of last year. That being said, we've got some -- they've either begun their rollout or they've come out -- some great artists the second half of this year. We've got Josh Groban. And last week, he was #1 in the U.K. where we dropped the album. Flo Rida is coming out with more singles through the balance of the year. twenty one pilots will be releasing an album, as will Adam Lambert and other new artists that both Atlantic the U.K. and Warner Bros. have signed, Aaron. So while the names may not be as recognizable as the latter half of last year, we've got some absolutely fantastic music being driven by some young, but very, very exciting artists.

Got it. Okay, that's helpful. One question related to when you made your acquisition of PLG, I think as part of that, you were required to sell some assets to appease kind of the regulators. Can you give us an update on where you're at with that process, and if there's kind of material proceeds you expect out of that?

Well, we are working through the process. We have been in discussions with representatives of IMPALA/Merlin. The agreement is confidential, so I can't give you any specifics. But we do expect to be adequately compensated for the assets that we dispose of, and we believe that, that will be a meaningful number. I can't really go beyond that because of the confidentiality agreements, Aaron.

Sure. As you think about any proceeds that do come in, any sense for what you might use of them for at this point?

Well, we have obviously alternatives including: one, reinvesting in the business, which we always look at; two, how we expand our footprint, both by investing internally or through acquisition; and c, pay down of the debt. As you know, we've always had a philosophy of marching towards a conservative balance sheet, but at the same time wanting to ensure that we have a strong growth trajectory with smart investing. So we'll look at the alternatives that we have at that time and determine the best way to put that money to work.

All right, great. Last one for me, I promise, and I will go away. I couldn't help but think of you guys as a saw the valuations being put on Spotify. I believe you and the other majors own a stake in Spotify as part of your arrangements with them. Have you ever kind of clarified exactly what your percentage ownership is at Spotify?

No, and that is confidential as well.

Our next question coming from David Farber of Crédit Suisse.

A couple of questions that you guys haven't touched on yet I wanted to ask about. First, just on the flow-through in the quarter was pretty solid, better than we had thought. And it seemed like some of it had come from the SG&A line, which came down. So just curious to hear what you guys are seeing, and how should we think about SG&A maybe going forward? You were running, I don't know, 275, 300. And this quarter was close to 250. So a pretty big decline. So just your thoughts there, and I have a couple of follow-ups.

So thanks, David. So on SG&A, I think there's a few pieces there. Some of that is PLG-related expenses coming down from prior years. Some of that is related to foreign expenses, some of our expenses are overseas. But we also balance that with strong cost management and making sure that we are evaluating our costs and making sure that we put it through stringent tests. And that any of our general administrative expenses are kept as lean as possible, and we've gone through that exercise.

And do you think that this is a good run rate going forward? Were you guys -- were able to put on through this recent quarter?

Yes, we do. I think this is programmable [ph].

Great. How much of the quarter in your mind you think was release-driven, if you could? And then I just want to make sure I understood you guys in your prepared remarks, but it sounds like you guys are -- will be comp-ing into difficult back half of the year last year. Is that what you were saying?

Well, first of all, virtually all of our revenue is release-driven, either releases during the quarter, carryovers or catalogs. So the revenue was driven by our music. We had some very, very nice releases. The first half of the year, we've had good carryover. But as I just mentioned, we've got some very, very exciting new artists and some incredible, incredible music that we're going to be releasing in the second half. And while the names may not be as recognizable as some of our releases in the comparable period last year, I'm still hopeful that the music that we are presenting will be very, very well received. So I am not prepared to concede that our second half isn't going to continue to show very nice momentum.

Okay, very good. And then I didn't get a chance to look at the whole Q, but I did notice that the LTM pro forma covenant EBITDA was up a touch, but the reported EBITDA was obviously up considerably. So just curious, what's driving that? Is that because the cost savings are getting realized and they don't get added back anymore? Just walk through us that, and then I have one big-picture question.

So generally that's right. I mean, a lot of the PLG-related LTM pro forma EBITDA results are getting realized. So those get built into EBITDA, that's correct. And obviously, our underlying EBITDA is -- our underlying OIBDA and EBITDA are getting stronger.

Then just lastly, on some of the noise in royalty rates, I was curious to hear how you guys think about it. Anything you can sort of share with us on the Fair Play, Fair Act (sic) [Fair Play, Fair Pay Act]? Or maybe just any thoughts around the royalty rates going into December's discussion? Then that's it for me.

Well, let me start with the CRB process. The proceeding, as you know, just started in late April. I believe, April 27 to be precise, David. And that proceeding will last until June. I believe early June, at which time the judges will do what judges do and render a decision in December, because as you know, the next 5-year period starts January 1, I believe, 2016. We are very happy with the case that Soundscan has developed and -- SoundExchange, sorry, has developed and is presenting. And having rates that adequately compensate the content owners, our artists and our writers, is very important to us particularly in a world that's moving to streaming. So I'm hopeful that the judges will recognize that and that we will get that the rates that we, on the content side of the industry, are hoping for. So that's on the CRB. On the Fair Play, Fair Pay, as you know for terrestrial radio, that's really "a willing buyer and a willing seller" standard. And I think it's premature to comment on it, other than the fact that we are very pleased that the Congressman Nadler is looking to address long-standing inequities in the current U.S. music-licensing system. And so hopefully, his proposed legislation will move forward, and we are obviously supportive of that position.

Our next question coming from the line of Davis Hebert of Wells Fargo Securities.

There's been a lot of debate about the freemium versus a premium model, especially with Apple's, I guess, pending launch of a premium product. Do you feel like the industry is in a position to more proactively move away from the ad-supported model? And second question to that is, Spotify and others have said if that's the case, that there would be a resurgence of piracy. And I'm just curious if you believe that.

Well, let me start with the -- let me start with just our particular point of view as opposed to an industry point of view. You'd have to cast a much wider net to get the industry point of view, Davis. First of all, there are any number of models out there. And all of those models, ad-based, subscription-based or with both, are better than piracy. To be crystal clear, piracy is 0 revenue. It's the theft of intellectual property, and it's not good for anybody. So all of these models are better than piracy. That's number one. Number two, the freemium models, if they encourage the adoption of subscribers, if they encourage the movement of subscribers from ad-based models to subscription-based models over time, we, at Warner, believe that's good news. We are working with a number of our digital partners to see, in fact, if there are ways in which that adoption, that is the movement from the ad-based model to a subscription, if you're an individual user on the ad-based model, moving that person to subscription, if than can be turbocharged through modifications of service offerings or more sophisticated approaches to the consumer market. So we don't believe that there is a just a one size that fits all. With respect to going to a strictly subscription world, I think that you can find evidence that when music is not generally available, that people will seek out sites on the Internet that, in fact, will offer up that music for no charges, and in many instances, with no economic model where income flows to the content owners, the artists or the writers. So I think that before -- and this is not our point of view, but before people conclude that freemium should be burnt at the stake, we should think very carefully about the consequences.

Understood, very, very good commentary. And you mentioned interest in potential acquisitions. Just curious, Liberty Media mentioned on its earnings call last week its interest in audio investments as well. Just curious what the M&A environment looks like for you. Is it more record labels outside of your footprint? Is it publishing? Where do you see the best opportunities for growth there?

Well, I think it's all of the above. We are constantly looking at opportunities on the recorded music side, on the publishing side, on expanding our relationships with our digital partners, any and all of the above. And I think the watchword for the Warner Music Group is that it has to be thoughtful, well-structured investments that make economic and financial sense from our perspective, Davis. We just don't -- we're not in the game of acquiring market share on uneconomic and on unthoughtful financial bases. We -- that's not a game that we choose to play.

Okay, understood. And with regard to acquisitions, where do you -- Eric, where would you like to see leverage sort of trend over the next 12 months and how that dovetails with potential M&A?

Well, obviously, although we're comfortable with where we are, we continue to work diligently, organically to grow our revenue and OIBDA and pro forma EBITDA to continue to manage the leverage ratio down. When it comes to acquisitions, as Steve said, we look very focused at them on an economic-return basis, but also their ability to deliver earnings and be accretive. And so from that basis, we're very focused on driving growth and making sure all the key metrics are moving in the right direction.

Okay, very helpful. And last one for me. You have some very high coupon bonds, 13%-plus handles at the whole co level that are callable this year. I'm just curious of your intention to potentially refinance those, and what is your interest level to do that at the WMG Acquisition Corp level?

Well, on that -- so we are extremely -- we continue to carefully assess and evaluate our options with regard to potential refinancing and activity related to our high-interest debt -- higher-interest debt. So we are extremely aware of that, and we continue to manage our cash flow. And we will determine what to do as we go forward. And it is something we consider on an ongoing basis.

Our next question is coming from the line of Michael McCaffery of Shenkman Capital.

Just a follow-up on Davis' last question, would you consider -- is one of the options you're considering retiring those bonds as cash as opposed to a refi at all?

Well, we consider all of our options and, obviously, that would be one possible. So we wouldn't want to talk specifically about what we will or won't do, but we're certainly investigating all possible options.

Great. And then I guess a couple of the other questions that had come up earlier regarding how the back half looks as far as release schedule. Can you help me understand, with the acceleration you're seeing in Streaming right now, how much of the Streaming revenue is really driven by new releases as opposed to older catalog hits? I guess, what I'm trying to understand is the extent that Streaming continues to accelerate it can serve as somewhat of a hedge against lumpiness in terms of when key new releases are issued.

The statistics that I've seen, Michael, indicates that, I don't know, something greater than 50%. I think that something in the 60% area is typically what we see by way of the breakdown between new releases and older releases/catalog when it comes to Streaming revenue. That being said, I can tell you that when you look at some of the records that we mentioned, with respect to these last few weeks, when you look at the Furious 7 soundtrack and the music from Wiz and Charlie, it's burning up Streaming. When you look at Ed's Multiply, that has been just an enormous driver of streams. So I think that with current music, they tend to run very hot and then begin to level off. But catalog, I think, for the foreseeable future will also continue to play a major role in the Streaming revenue pie, Michael.

So if I'm understanding that, then should I think about the strong releases you've had over the last, say, 2 quarters continue to have good legs in the Streaming revenue line probably to the back half of this year?

I would think so. I mean, it's the number -- a number of our artists and their music are just white-hot at the moment. And I have an expectation that while it may drop off a bit, it's going to continue at a fairly good rate.

Okay. And then you had mentioned -- you had made reference to the Vessel partnership in your prepared remarks. And during the last conference call, you had indicated 3 other major partnerships, Tencent, Interlude, Snapchat. Can you just comment, as we think about the back half of this year, if any of those 4 are going to have any material contribution to revenue and maybe Warner in the year ago period?

Well, Tencent will have -- relative to China, that will have an impact that's relatively meaningful when you look at our China revenue year-over-year. I don't believe -- if you look at Interlude and if you look at Snapchat, Snapchat in particular, music is not central to their business. And while we have a very nice relationship with Snapchat and we are working with them with respect to their discovery channels, I don't expect that to be a needle mover with respect to revenue, and the same is true of Interlude. Both in all of them, Vessel, Interlude, Snapchat, bring unique things to the Warner Music Group and vice versa, and those unique attributes with these proprietary relationships go beyond just revenue.

At this time, we don't have questions on queue. Now I will turn back the call over to Steve Cooper. Sir, you may proceed.

Thanks, everybody, for your time this afternoon. Everybody, have a wonderful summer, and we'll talk to you in a few months. Bye-bye.

Thank you. And that concludes the conference. Thank you, all, for joining. You may now disconnect.