Warner Music Group (NASDAQ:WMG) stock fell 0.12% (As on June 5, 11:42:44 AM UTC-4, Source: Google Finance) after Atlantic Equities downgraded the company to Neutral from Overweight and cut its price target of $26.00 from $39.00. The firm mentioned two key developments over the past six months: (1) loss of streaming share means recorded music streaming revenues are growing slower than expected, and (2) the rapid development of AI-created music is placing a major cloud over the whole sector. They added that when the firm upgraded WMG six months ago, AI was not seen as an issue. However, since then, AI has dominated the headlines, and songs and tracks mimicking existing artists have become commonplace. As per the analysts, WMG and other music labels insist they should be paid for any AI-created track that is derived from their artists’ work, yet the primary defence appears to be regulation, which could take years to pass into law.

Meanwhile, during the second quarter, total revenue grew 5% and adjusted EBITDA increased 8%. Recorded music revenue increased 3% and streaming grew 2%, reflecting ongoing weakness in the ad market and modest growth in the United States. Music Publishing had another impressive quarter with revenue growth of 15%. WMG’s strategy at Warner Chappell continues to deliver long lasting relationships with a wide array of global and local talent while expanding the services to songwriters and creating new opportunities for catalogs.

The company has announced an approximately 4% reduction in the work force that will yield annual savings of $49 million. The company will see approximately $20 million of savings in the remainder of this fiscal year. This March, IFPI released a list of fastest growing recorded music markets. The recorded music industry’s fastest growing region in 2022 was with sub-Saharan Africa, jumping 35%. Therefore, key moves have included acquiring Africa’s leading independent distributor Africa at the start of last year. The company is now contend for market leadership, driven by the success of artists like CK, Burna Boy, Master KG, and in Cubbies as well. The next three fastest growing regions for the recorded music industry in 2022 were China, up 28%; MENA, up 24%; and Latin America, up 26%. In both China and MENA, the revenue growth outperformed the market in Q2 and in Latin America, and the company is taking the necessary steps to catch up and gain share.