Warner Music suffers cold Christmas

It's meant to be the most wonderful time of the year, and with all those stockings just waiting to be stuffed with CDs, wanted or not, you'd have to be a massive bungler to lose money at a major label in the last quarter of the year.

Warners have managed it though, while managing to rake in nearly a billion dollars in revenue.

At Warners HQ, though, they're just impressed with how well they've done:

"As our stable margins show, we carefully manage our costs and regularly work to adjust our business in order to minimize the impact of a transitioning recorded music market," Steven Macri, Warner Music EVP and CFO, added. "Similar to last year, we expect our release schedule in fiscal year 2010 to be back-end weighted."

You lost seventeen million dollars, Macri. I don't want to go all Micawber on you, but if you're splashing out more than you're bringing in, you don't really have much in the way to boast about carefully managing your costs.

You put a billion dollars in your pocket, but ended up having to borrow the bus fare home. Were I a shareholder, I might not be going "these guys have stabilised margins at a point where we end up with less money than we started out with."

"We are pleased to have delivered stable revenue and OIBDA in our core Recorded Music and Music Publishing businesses despite ongoing recorded music industry pressures and macroeconomic headwinds," said Edgar Bronfman, Jr., WMG Chairman and CEO said in statement released with the SEC fiiling. "Our goals remain focused on delivering strong returns on A&R investments while we develop new business models, diversify our revenue mix and fortify our digital leadership position."

New business models, you say, Edgar? Yes, the idea of cutting albums into bits really will work, just like you can diet simply by taking smaller mouthfulls of cream cake.

The obvious, screaming question, is why Warners are pumping cash into A&R at all. They're not very good at it, it's costly, much of what they do loses money and it all hangs on a hope that sooner or later they'll find an artist who will make ten albums which sell more than a million or so.

Even if they did, as Bronfman admits, they haven't actually got a business model which can produce the returns they need to justify their current structure. So why bother?

Seriously, Edgar: it's like you opened a bed and breakfast on a mountainside, and a mudslide has washed away the only road in. But you're still having helicopters come round delivering eggs and bacon and Corn Flakes - sure, you're filling the cupboards with food nobody will eat, but you better keep on stocking up while you work out a new business model.

In fact, that should have been what Warners announced today: a massive pile of bacon slowly rotting in an empty guesthouse.