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Warner Music Group

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shares are down almost 8% in morning trading today after reporting a $46 million fourth-quarter loss, as it struggles with the transition from physical to digital in the recorded music industry.

For the quarter ended September 30, the company saw a loss of $46 million, or 31 cents per diluted share, compared with a loss of $18 million, or 12 cents per diluted share, in the same period a year ago. Losses were greater than analysts' consensus expectation for a loss of 13 cents.

Revenue fell 13.3% to $752 million from $867 million during the quarter, as gains in digital revenue were more than offset by declines in its physical sales revenue.

Total digital revenue grew 7.1% to $197 million from $184 million and represented 29.6% of total recorded music revenue in the fourth quarter, compared with 23.9% in the same period a year ago. Warner Music continues to grow its digital segment as the recorded music industry shifts from physical to digital.

"Our work to diversify revenue, and conservatively manage our costs, continues to help minimize the industry's ongoing recorded music pressures," chairman and CEO Edgar Bronfman said. "We generated strong yields on our artist investments, including our highest U.S. quarterly total album share in 14 years. Our digital and non-traditional revenue grew to a combined nearly 40% of total revenue in the quarter."

Revenue from its recorded music business was down 13.3% to $619 million from $714 million due to weakness in the U.S., Japan and Europe.

Music publishing revenue was down 12.9% to $142 million from $163 million on a 25.3% decline in domestic music publishing revenue and a 1.2% decrease in its international revenue.

For the full year ended September 30, the company saw a loss of $143 million, or 96 cents per share, compared with a loss of $100 million, or 67 cents, in the same period a year ago.

Revenue fell 6.7% to $2.98 billion from $3.2 billion attributed to the continuing transition from physical sales to digital sales.

Recorded music revenue dropped 7.1% to $2.46 billion from $2.64 billion as the company saw an 11.2% drop in U.S. recorded music revenue and a 3.8% decline in international revenue. Major domestic sellers for the year included musical artists Michael Buble, Jay-Z, Linkin Park and Muse, as well as the

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Digital recorded music revenue was up 8.7% to $713 million, representing 29% of the total recorded music revenue, up from 24.8% in 2009.

Music publishing revenue fell 4.5% to $556 million from $582 million due to an 11.6% decrease in domestic music publishing revenue.

Warner Music shares are down almost 8% today to around $5.40.

-- Written by Theresa McCabe in Boston.

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