Warner Music Group Corp. Q4 FY2020 Earnings Call

Good morning, and welcome to the Warner Music Group’s Fourth Quarter Earnings Call for the Period and Fiscal Year Ended September 30, 2020. At the request of Warner Music Group, today’s call is being recorded for replay purposes. And if you object, you may disconnect at any time. Now, I would like to turn today’s call over to your host, Mr. Kareem Chin, Head of Investor Relations. You may begin.

Good morning, everyone. Welcome to Warner Music Group’s fiscal fourth quarter and 2020 year-end earnings conference call. Both our earnings press release and the Form 10-K we filed this morning are available on our website. On today's call we have our CEO, Steve Cooper, and our Executive Vice President and CFO, Eric Levin, who will take you through our results and then we 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 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 to 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, our Form 10-Q, Form 10-K, and other SEC filings. We plan to present certain non-GAAP 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, unless otherwise noted. And with that, I’ll turn it over to Steve.

Thanks, Kareem. Good morning, everyone, and thanks so much for joining us today. Looking back on the past year, despite the impact of the pandemic on our business, we're proud of everything we've accomplished. We've kept music fans engaged and excited with the flow of really great new releases and we've seen a marked acceleration in early-stage revenue streams such as social media, gaming, fitness, and live streaming. Although effective vaccines may be on the horizon, companies across many different industries are still expecting a prolonged road to recovery. Against that backdrop, we're very fortunate to be in a global business creating something so vital to people's lives all over the world. And music, unlike other forms of entertainment, can be enjoyed wherever you are and whatever you are doing. With that in mind, I'd like to turn to our performance in the fourth quarter. While digital revenue grew 15% year-over-year, our total revenue was down 1%. Digital revenue growth was offset by steep declines in the areas of our business that are most aligned with touring and live appearances and therefore most disrupted by COVID. Specifically, those areas are artist services, expanded rights in recorded music, and performance in music publishing. Excluding revenue from those areas, our growth in Q4 would have been approximately 9%, which clearly demonstrates the ongoing strength at the core of our business. Adjusted EBITDA was up by approximately 33% year-over-year. This highlights the operating leverage in our business, driven by the continuing shift from physical to digital, as well as our focus on operating cost discipline. Our recorded music revenue was down by about 1% as double-digit growth in digital was offset by a 45% decline in artist services and expanded rights revenue. As always, our primary focus is on creating and delivering a constant ever-growing flow of great new music. This quarter, Cardi B and Megan Thee Stallion's WAP became the first female rap collaboration in history to debut at #1 on the Billboard Top-100. There was also an impressive diversity of releases across genres from country's Brett Eldredge to pop's Charlie Puth to rap's Saweetie. On the international front, artists who topped the charts included Germany's Amigos and Kontra K, France's Aya Nakamura, and Brazil's Anitta, whose Me Gusta had more than 140 million streams in just two months. Japan's Aimyon and Twice enjoyed huge successes helping drive our physical revenue from a decline earlier in the fiscal year to essentially flat in Q4. Our top selling artists for the fiscal year also showcased the power and range of our roster. From breakout sensations, Roddy Ricch and Tones and I, to new global icons, Dua Lipa and Lizzo, to megastar Ed Sheeran. Despite a solid overall year, revenue from our music publishing business declined about 3% in the quarter. More importantly, digital revenue in music publishing continued to be strong, growing almost 30% year-over-year. This impressive jump was offset by declines in performance, where revenue was lost from the closing of bars, restaurants, clubs, and concerts. Mechanical and sync were also down. That being said, sync has shown some recovery since fiscal Q3 with a gradual resumption of television and film production. Warner Chappell continued its creative revitalization as its writers contributed to 18 #1 albums on the Billboard 200 Chart during fiscal 2020. This included Pop Smoke's posthumous release Shoot for the Stars, Aim for the Moon. As the result of our aggressive global signing campaign, we attracted a growing number of world-class songwriters, including country star Thomas Rhett, iconic Mexican group Bronco, and the legendary Quincy Jones. The company also renewed its deals with a number of its global superstars, including Spain's Pablo Alborán, Germany's Capital Bra, and Sweden's Miss Li. Since our acquisition by Access in 2011, we've continued to evolve from an Anglo-American company into a global music entertainment enterprise. Today, our hits can come from anywhere and resonate everywhere. Our business now spans over 70 countries, and during COVID, we added to our global reach. Earlier this year, we opened new offices in Vietnam, India, and Turkey, while Warner Chappell opened in Shanghai to capitalize on the exploding Chinese entertainment market. ADA, our independent label services division, expanded into Asia and Latin America. In addition, we forged innovative partnerships with Punjabi music specialist, Ziiki Media in India and with Africori, the largest music distributor in sub-Saharan Africa. If there has been a silver lining to the COVID cloud, it’s been an opportunity to recalibrate our long view, accelerate the pace of change, and position ourselves to emerge from the pandemic stronger than ever. COVID has reinforced the importance of technology across every aspect of our business, from how we sign talent to how we market music and how we pay royalties. It’s made us more agile, efficient, and precise. Just two quick examples. Since January, on a year-over-year basis, we doubled the number of new artists and songwriter signings identified through our proprietary A&R app, Sodatone. In the same timeframe, we've doubled the number of songwriters and tripled the number of recording artists using our royalty portals. Music is being woven into every aspect of our daily lives and we have the unique intellectual property that countless emerging platforms need. We are standing on the threshold of a new golden age of music and the opportunities are everywhere. As a result, we see subscription streaming as just the beginning. It is only one of our many avenues for long-term growth. With this in mind, we wanted to give you a look at what's on our horizon. First, the worlds of social media, gaming, and live streaming. With an expanding number of partnerships, including Facebook, TikTok, and Snap, among others, social media is already a meaningful nine-figure revenue stream and is growing at a rate faster than subscription streaming. Billions of people are able to create the soundtrack of their lives. The creators are the audience and the audience are the creators, producing a massive multiplier effect. Artists and songwriters of all genres and generations have the potential to go global at any moment. Thanks to a recent viral video, Fleetwood Mac's Dreams returned to Billboard's Top 10 more than 40 years after it was first released. COVID has supercharged the demand for 2D and 3D live streaming events and we successfully facilitated virtual concerts on platforms like WaveXR, Roblox, and Fortnite. These platforms enable our artists to engage with audiences through interactive immersive content that defies real-world limitations. Around these experiences, we're also offering digital goods such as in-game avatars. On track to be a several hundred-billion-dollar market by 2025, gaming is among the fastest growing sectors of digital media and we've positioned ourselves to forge meaningful partnerships within the gaming community. Second, we've expanded our involvement in other forms of entertainment content, like TV and podcasting. Especially with the rise of OTT, the demand for music-driven programming, both audio and video, is rapidly increasing. WMG currently produces dozens of podcasts and we've already had some successes such as Digging Deep with Robert Plant. In 2017 we launched a dedicated film and TV division, Warner Music Entertainment. This group has been delivering a slate of fantastic projects such as Spike Lee's acclaimed film and David Byrne's American Utopia. We recently announced a major partnership with Imagine Entertainment, the production company behind movies like 8 Mile and TV shows like Empire. Third, we've created a growing network of owned and operated direct-to-consumer destinations. This makes us unique among the major music companies. We acquired social publishing platform, IMGN and music news site HipHopDX this year. They joined UPROXX, EMP, and Songkick, as ways for us to gain early insight into cultural trends and fan behavior. Our global e-tailer operations have adapted quickly to the new reality of the marketplace. For example, EMP, our European digital merchandiser launched an array of new products including a Stay-At-Home collection. And since the beginning of the pandemic, they have sold nearly half a million branded facemasks. Year-over-year their user base was up 10% and it is showing accelerating growth so far in the current fiscal year. Fourth, we’re seeing explosive activity in the in-home fitness arena most notably through physical products like Peloton and Mirror, but also through virtual reality experiences like Supernatural and Oculus. According to Statista, the global fitness subscription market is already more than $23 billion. These services are still at low market penetration, but they are fueled by music and there’s enormous potential for future growth. I also wanted to give you an update on our diversity, equity, and inclusion initiatives. Maurice Stinnett arrived in August to lead our efforts in this space, working with our teams around the world. These teams include our executive diversity and inclusion council, the employee resource groups, and senior leadership. At the same time, the $100 million Warner Music Group, Blavatnik Family Foundation's Social Justice Fund has gained momentum. The fund is making disbursements to organizations that are doing amazing work on the frontlines of anti-racism, community transformation, musicians’ support, and prisoners’ rights. I also want to note that CC Kurtzman became the newest member of WMG's Board of Directors on October 1. CC brings valuable independent expertise and perspective to the Board. In line with best practices in corporate governance, all the members of the Board, with the exception of myself, are now external. Finally, as we look at 2021, we’re expecting that our release schedule will be back-end weighted with highly anticipated music from some of our global superstars. In this increasingly complex environment, we’re the vital connective tissue between artists, fans, and services. This gives our artists, songwriters, and us the power to entertain the world, shape the course of culture, and satisfy the essential human need for connection and solace. And now, over to Eric.

Thank you, Steve, and good morning everyone. As you know, our fiscal year ended on September 30 and we released preliminary estimates of our results on October 19 in conjunction with the bond offering we launched at that time. COVID has obviously created a unique set of challenges since taking hold in early March and has impacted certain areas of the business in the months that followed. Moving to our performance. In the quarter, our total revenue was down approximately 1% on a constant currency basis and effectively flat on an as-reported basis compared against the prior year quarter. Artist services and expanded rights and recorded music and performance in music publishing were the most affected areas due to the cancellation or postponement of touring. If you exclude those revenue streams, our revenue grew 9% on a constant currency basis and 11% on an as-reported basis compared to the prior year quarter. For the full-year, our total revenue was about flat on both a constant currency and as-reported basis. Excluding revenue streams from artist services and expanded rights and performance, our revenue grew 4% on both a constant currency and as-reported basis compared to the prior year. We saw significant growth in both adjusted OIBDA and adjusted EBITDA in the fourth quarter and full-year. In Q4, adjusted OIBDA increased approximately 35% to $174 million with margins improving from 11.5% to 15.5%. This improvement was driven by an increase in contribution from higher margin streaming revenue, lower variable compensation expense, and active cost management initiatives. Adjusted EBITDA increased 33% to $177 million with margins improving from 11.8% to 15.7%. The increase was largely due to the same factors that drove our adjusted OIBDA performance in addition to higher pro forma savings that we expect to realize from our transformation initiatives and the pro forma impacts of certain transactions closed in the quarter. For the full-year adjusted OIBDA and adjusted EBITDA increased 11% and 14% respectively, driven by a mix shift towards higher margin streaming revenue as well as lower operating costs. Adjusted OIBDA excludes one-time costs related to our IPO, non-cash stock-based compensation expense, COVID-related expenses, the company’s Los Angeles office consolidation, restructuring, and other transformation initiatives. Adjusted EBITDA excludes these items and includes pro forma savings that we expect to realize from our transformation initiatives and add-backs for certain transactions. Please refer to our press release for calculations and reconciliations. In recorded music, Q4 revenue decreased by just under 1% over the prior year quarter. Digital revenue grew almost 13% driven by a 16% increase in streaming revenue which benefited from growth in revenue from emerging digital platforms and a significant recovery in ad-supported streaming revenue compared to Q3. Physical revenue was flat and licensing revenue declined 6%. The decline in licensing revenue reflects the decrease in broadcast fees and synchronization revenue from lower advertising, television, and film deal activity due to the impact of COVID. Artist services and expanded rights revenue, which includes merchandising, declined 45%. For Q4, recorded music adjusted OIBDA increased 35% over the prior year quarter to $161 million due to a revenue mix shift towards digital and overall cost savings. Adjusted OIBDA margin increased 4.3 percentage points to 16.8%. For the full year, recorded music revenue declined slightly as growth in digital was more than offset by declines in physical, artist services, expanded rights, and licensing revenue. Adjusted OIBDA increased by 12%, with margin improving to almost 20%. Music publishing revenue declined 3% in Q4 as digital revenue grew by 28% driven by increases in streaming revenue and timing of digital deals, which was more than offset by declines in performance and sync as well as a decrease in mechanical revenue. Music publishing adjusted OIBDA decreased by $1 million and margins remained flat. For the full-year, music publishing revenue increased by 3% and adjusted OIBDA decreased by 4%. In the fourth quarter, operating cash flow increased 17% to $176 million compared to $151 million in the prior year quarter due to timing of working capital, including payments from certain digital services. Free cash flow decreased to $44 million compared to $115 million in the prior year quarter largely because of increased CapEx to support transformation initiatives and increased investment and acquisition activity partially offset by the higher operating cash flow. For the full-year, operating cash flow increased by 16% and free cash flow increased to $244 million from $24 million in the prior year. This reflected the acquisition of EMP for $183 million in fiscal 2019 which was entirely financial debt. CapEx in the fourth quarter was $37 million compared to $22 million in the prior year quarter and was $85 million for the full year. The increase over the prior year quarter is related to our previously announced plans to upgrade our IT and finance infrastructure. We expect to invest approximately $20 million of the costs associated with this program in fiscal 2021, and annualized run rate savings from the program should be about $35 million to $40 million once fully implemented. For fiscal 2021, we expect total CapEx to be in the range of $90 million to $100 million. Cash taxes were $81 million in fiscal 2020 and we expect they will be in the $90 million to $95 million range in 2021. On September 1, we paid our quarterly dividend of $0.12 per share, and on November 13, we announced our next quarterly dividend of $0.12 per share to be paid on December 1. As of September 30, we had a cash balance of $553 million and net debt of approximately $2.6 billion. On November 2, we completed a $250 million tack-on to our 3% senior secured notes due 2031. The proceeds of this financing in conjunction with the cash on hand of approximately $90 million were used to fund two acquisitions of music and music-related assets for aggregate cash consideration of $338 million. As we look ahead to the rest of fiscal 2021, while we don't give guidance, our expectations for full-year revenue and adjusted EBITDA performance remained largely in line with our internal expectations at the time of the IPO. However, certain areas will be impacted by COVID. While our objective is to have a steady flow of great new music, there will always be lumpiness in our release schedule. Even without COVID, our release schedule would have been back half weighted. The COVID situation has complicated the situation with the logistical and recording challenges it has created. That said, we expect streaming growth to continue to be strong through ‘21. So there are no material changes to our expectations for streaming, which represents about 60% of our total revenue today. We expect some slippage on our blockbuster albums to the back half of the year. We also expect our artist services and expanded rights revenue, as well as performance revenue from bars and concerts, will be second half weighted as economies reopen, since it's starting to recover, but should remain impacted in the first half of fiscal ‘21 due to film and TV production delays. The latest data show that film permits in LA grew by 24% in October versus September, and that filming activity is just under 50% of what is normal. Physical should see some bounce back, but overall, we expect to see continued decline. In 2020, we returned to the public equity markets in the midst of a global pandemic that has challenged us to re-imagine our business. We look forward to continuing to drive music through all of the places and platforms where it touches our lives. We thank you for joining our call today, and we'll now open the call for questions.

Our first question comes from Ben Swinburne with Morgan Stanley.

Hey, good morning, guys. One for Steve and one for Eric, please. Steve, you've been talking for years about price points and subscription streaming, and it looks like we're starting to see prices move up based on what Spotify has talked about. Granted it's only seven markets. But key to this, I'm sure you would agree is that the competitors don't start discounting for share and driving prices, offsetting that trend upward with sort of a pricing war in the industry. So I'm wondering, what are your thoughts as someone who has been obviously focused on this for a while on the implications of Spotify's decision to start raising prices? And do you have any expectations for what the broader industry may do as its competitive set as a reaction? And then I'll just ask Eric. Eric, you guys completed a bunch of acquisitions in the quarter. I think based on the 8-K, there was a modest revenue impact, but a more substantial EBITDA impact. I wonder if you could just give us a little bit of color on what's going on there and what you guys acquired? Thanks.

Okay. Hey, Ben, good morning, and happy holidays. So, first of all, we do think this is good news that Spotify is beginning to take more seriously upward-bound pricing and the news that they're going to be testing in a number of countries was well received at least by us. I think that as subscription strength grows and as these services offer more verticals, it is likely that we continue to see across a number of the more substantial players exercising their ability to raise prices. I'm sure you know, when Amazon added their high-def tier, they raised the prices there. I think the other services, given that Spotify is essentially a pure play, will look at this as an opportunity to also test the market and follow along. I don't see any massive shift of subscribers from Spotify to other services. They obviously have created their playlists. They have their routines on Spotify. And as we said during the IPO, ultimately, the value of the years has to begin to catch up with the value of the eyeballs. I think this is a start. I’m very hopeful that it will be a successful start and I believe this will give the other services the opportunity to follow.

Great. And let me take your second question, Ben, and by the way, Happy Thanksgiving, everyone. The two deals that we closed this quarter were a combination of music publishing and recorded music, domestic both catalog and go-forward rights. I think part of your question is by bringing up the revenue of $6 million and the EBITDA of $37 million, some of these assets or many of these assets were ones where we had a partial position in and it allows us to consolidate those rights in those assets, so that we are having a significant weighted upside even though the revenue impact is less.

I see. Thank you both. Thanks.

Our next question comes from Heath Terry with Goldman Sachs.

Great, thanks. I was curious if we could elaborate on the new revenue opportunities you mentioned earlier, especially in relation to social media platforms like Twitch and TikTok. When considering the monetization framework for these platforms, do you have any comparisons in mind? Given the passive nature of song selection for most users, does this shift your approach to licensing models compared to streaming models? How should we assess the potential in this area? If it’s a completely new approach, where do you envision it falling along the spectrum as it develops? Additionally, in terms of this category as a whole, can you provide any quantifiable insights, either in terms of users or, more ideally, hours consumed that would align it with where streaming was a few years ago? This would help us understand your perspective on the maturity of this opportunity at the current stage.

Steve, do you want me to take that, Steve?

Sure. Go ahead, Eric, and then I'll chime in if there's anything I could add.

Fantastic. So, Heath, that's a really interesting question. The first part of your question is whether this looks more like streaming or licensing. It actually resembles streaming more closely. We view licensing as typically a case-by-case situation, while these agreements provide access to a full catalog along with new music, much like streaming does. The use cases can vary significantly, whether it’s for social services, fitness applications, or even within social platforms. The content is curated, allowing access to a wide range of catalog that is continuously updated with new music, which aligns more closely with streaming. Each case is unique, and the deal structure reflects the best way to monetize music according to its value in relation to the overall content, with evaluations and negotiations necessary as business models develop and clarify the monetization strategies and the role of music players. Determining the value compared to streaming can be tricky, but I can provide some insights. With streaming, it's relatively easy to quantify by assessing the Total Addressable Market or TAM, which you can derive by looking at smartphone penetration. In contrast, it's more challenging with social fitness or live gaming services. Generally, with streaming services, you expect one per household, competing for as many homes as possible. However, within social and fitness services, multiple subscriptions can exist within a home. For example, one person might be on TikTok while another uses Instagram or has a Peloton. This dramatically increases the total addressable market as multiple services can coexist within individual homes, along with new services emerging that frequently incorporate music. To give you an idea of market scale: gaming is already a $100 billion industry, and fitness ranges from $10 billion to $30 billion and is expanding rapidly. Our revenue streams from these areas have grown significantly over the last three years from almost nothing to $100 million annually, and the growth is accelerating. If I were to compare this to streaming, I would say we're in the early days of streaming when people were just starting to discover its potential, and it was growing quickly. We anticipate this sector will continue to be a high-growth area for quite some time, with substantial growth potential, but unfortunately, I cannot provide more precise numbers due to the complexities of the total addressable market, which we believe is amplified by the potential for multiple services used within homes.

Heath, I would just supplement that with a thought, particularly with TikTok. When you look at this service, the creators are the audience and the audiences are the creators. The way TikTok users are utilizing that service, from at least our perspective, increases the ability of music to go viral. And it goes viral because for these users, it's not a social platform; it's a game where they're the creators trying to attract their fellow creators and vice versa. The utilization of music, the utilization of these contests, these dares, not all of them safe at times, has just produced from our perspective a tremendous multiplier effect by way of utilization, and we see that continuing for the foreseeable future.

Great, thank you both.

Our next question comes from Brian Russo with Credit Suisse.

Hi, thanks for taking the questions. I've got two for Steve on the publishing business, and then one for Eric. So for Steve, you recently made a significant catalog purchase. And given all of the headlines around sort of Taylor Swift and the friction between her and the owners of her IP, I was just hoping you could talk about how you ensure that Warner Chappell maintains a positive relationship with the artists? That's one. The second question on publishing is, is that we're clearly seeing a lot of capital being put to work buying up catalogs. So maybe you could talk a little bit about what value Warner can bring to a catalog, such that when you make an acquisition, you can generate healthy and attractive returns even in the current climate of rising valuations? And then last for Eric, right now the Street is expecting your total revenue growth to improve next year, and adjusted EBITDA to grow more or less right along with it roughly the same pace. So the question is, is that a reasonable expectation for adjusted EBITDA do you think? Maybe you could highlight for us any swing factors that might prevent adjusted EBITDA from growing around the same pace as your revenue next year? Thanks.

Thank you, Brian, for your questions. Regarding publishing assets and artist relations, in our recent acquisition, we were approached by an artist who wanted to sell part of their rights. We were able to reach an agreement that satisfied both parties. Typically, we don't sell rights; more often, we acquire them, and we are very sensitive to how our artists feel about these transactions. We have declined opportunities when artists were not supportive because our focus is on long-term artist development. In situations like the ongoing issues between Taylor Swift and Braun or Taylor and Shamrock, we aim to avoid such conflicts. One reason we engage in these transactions is that we have a platform capable of not only managing copyrights but also amplifying the success of our artists. We provide full services, including working on sync opportunities, inviting writers to camps, and matching songs with artists seeking new material. Our goal is to collaborate with artists to create more momentum and success instead of letting their work remain unused for many years. Other organizations investing in this market appear to focus mainly on financial returns rather than on positively engaging with artists to optimize their songwriting outcomes. We operate differently; we are hands-on with our artists rather than functioning as an investment firm seeking to generate fixed-income returns.

Makes sense.

I will address the question on growth. As you know, we do not provide guidance, so I will answer in a general manner to the best of my ability. First, we prioritize managing our business for growth and strive to achieve strong growth. One of the metrics we mentioned during the call was that our Q4 revenue growth, excluding artist services and performance in Warner Chappell, increased by 9%. Despite the challenges posed by COVID, our underlying business continues to demonstrate robust growth. The future impact of COVID, especially related to touring and the revenues generated from artist services and performance in publishing, remains uncertain for next year. However, we see opportunities to focus on areas that are available for growth and leverage them effectively. Once the effects of COVID diminish, we will be well-positioned to capitalize on areas that are returning to growth; for example, we have already noticed improvements in ad-supported streaming, physical sales, and early signs of synchronization revenue recovery. We aim to seize these opportunities in 2021, irrespective of when these revenue streams start to rebound. Additionally, we remain committed to driving bottom-line growth, similar to our approach in 2020 when we managed costs and allocated resources to maximize results. We plan to continue this strategy in 2021, concentrating on expenditure in areas that can create a significant impact while actively managing those with less potential. Furthermore, we will implement our cost containment initiatives starting in fiscal 2021, with plans for gradual expansion. Thank you, Brian.

Understood, thanks guys.

Our next question comes from Rich Greenfield with LightShed Partners.

Hi, thanks for taking the question. There has been a lot of discussion about what is happening in the video game industry, with platforms like Twitch facing takedown notices. It seems similar to what the music industry achieved with YouTube years ago. I was wondering if you could provide some insight into the future of the video game space? How do you see this evolving over time, and what could the potential revenue look like for the industry, particularly for Warner?

So, Eric, why don't I start and then you can add in anything you want. So I think there are actually two ways that we're looking at this Rich. One is the point you touched on, which is, obviously, when people are utilizing our music or anyone else's music, we believe that should be licensed. So in many respects, you're right, this looks like the early days of YouTube. But we and the gaming world are not much better organized than they were 15 or 20 years ago. So, fact of the matter is, Twitch is talking to the industry about licensing the music and obviously based upon the use cases, that license will be narrow, it will be broad it will be on terms and conditions that support the use cases and support the growth of those use cases. So that's one avenue. The second avenue that we see as being as or more productive, is partnering with gaming companies. So that inside of the immersive worlds they're creating, Warner Music has the right sort of beachfront properties, so to speak, where we are inside of those games, in conjunction with our artists or artists' avatars, are providing entertainment, are holding concerts, are bringing people to the Warner Music arena for other events. It's an opportunity to sell virtual goods. It's an opportunity to sell real-world goods. And it's an opportunity to create a broader Canvas for our artists to paint on. So we are looking at gaming as a multidimensional opportunity for Warner Music and for our artists in the years ahead. Eric, you may want to add to that.

But, Stephen, just before you move on just I’d love the answer. When you look at Roblox going public, will we start to get a flavor of part two, as people start to dig into Roblox, will we see some of what you're talking about?

Well, fingers crossed that you will, because these games and these gaming worlds have to continue to expand their offerings to continue to attract and hold at the players in their games and their universe so to speak Rich. So just like we can't stay static, they can't stay static. Partnering with people like Warner Music gives them an opportunity to bring some of the world's greatest music, some of the world's greatest artists into their main events, which is good for them and good for us because these type of events attract millions upon millions of gamers and they add flavor to the game that would be absent without music and our artists. So the answer is yes, in the future you should expect to see more of our participation in the gaming world and participating in a way that we create value for artists. We create value for the game companies and we create value for Warner Music.

And just to put a button on that, one of our artists, Ava Max just recently had a live stream event on Roblox, so we're already at work, actively working with that platform and agree with everything Steve said this is a vital robust area that's more and more fully.

Thank you both for the detailed answer. I appreciate it.

Our next question comes from Jessica Reif Ehrlich with BOA Securities.

Thank you, good morning. I have three questions. First, Steve, you emphasized the importance of going global. Can you share where you currently stand compared to your long-term goals and what proportion of your top revenue comes from local repertoire versus Anglo? Is there a difference in margins between Anglo and other regions? My second question is about live events. We're all optimistic about the potential vaccine and returning to normalcy, but how do you foresee live events returning at scale and what financial risks do you anticipate, especially with live touring being pushed to 2022 instead of summer 2021? Lastly, regarding marketing, Spotify is testing a new discovery mode that allows artists and labels to influence song selection based on seasonal or royalty payouts. How does this impact your marketing strategy, and how do you view the importance of marketing in that ecosystem compared to promoting music through other channels? Thank you.

So Eric, I'll take the kind of the global and the marketing and you can take the couple in between. Thanks for your questions, Jessica. Our ambition is, we've said historically, music is the only universal language on the planet and our ambition is to be able to be speaking that music in every language on the planet. As we mentioned during our IPO process, we have expanded tremendously over the last seven or eight years, our global footprint and it was an intentional expansion to turn this from an Anglo-centric to a truly global music entertainment company. That expansion is going to continue. We are constantly looking at opportunities outside of, well, we're looking at opportunities inside the U.S., inside the U.K., but also in the rest of the world, because when you look at streaming or you look at gaming, or you look at TikTok, they are global enterprises and the people that utilize them are an army of global citizens. We want to be in that same place where we are global and we are an army of music content deliverers to people around the world that are looking not only for music in English, but music in their local languages. One of the reasons we are so intent upon this expansion is that typically more than 50% of the music listened to in any local area is the local music. So that while Anglo music travels well globally, and is a powerful mover of culture, at the local level, the predominant form of music is local music. And therefore, you've got to be better because we are global and we want to be able to speak music in all of the languages of the globe.

I would say in general our economies of scale in our domestic business, similar margins. There are other countries that are likely more dominantly local music, and the International is less a piece of the pie. And in every business, virtually every business where we do business, we're producing significant amounts of local language, local music. One thing about Anglo in global operations, marketing often happens in this post-market. When it goes overseas, although there is marketing in other markets, it does take advantage of the initial marketing, in its home market release when it goes globally and their candy, kind of called it scale or reap benefits of marketing for the music that goes global, whereas local music always needs to be marketed locally to make sure we do everything we can to break that artist and that music locally. So the differences are often in marketing more than anything else and where the marketing spend is to break individual pieces of music.

For Warner Music Group, concert promotion and tour merchandise are part of our artist services. These generate significant revenue but have a smaller impact on our bottom line as they tend to operate at lower margins. We will manage costs effectively, and while we expect revenue growth, the actual profit impact will be minimal. As live tours resume, we anticipate revitalizing our tour merchandise and concert promotion efforts in select markets. However, these areas still represent a small fraction of our overall revenue and an even smaller share of our profits, which we believe will improve over time as touring restarts. Thank you, Jessica.

Thank you.

And our last question comes from Matthew Thornton with Truist Securities.

Hi, good morning, everybody. Thanks for taking the question. Maybe one for Steve and then two clarifications for Eric, if I could. Steve, coming back to live here just for a second, given the reach of DSPs at this point and given the rise of live streaming here during COVID, I'm curious your thoughts as to how you're leaning into the opportunity or if you think there is an opportunity here to really accelerate, when we come out of COVID to re-accelerate live as it relates to your touring business, your merchandising performance on the music publishing side? I'm curious to hear your latest thoughts there. And then just Eric, maybe two points of clarification. First, you talked about 9% growth in the revenue lines not impacted by COVID, but I think that's still includes advertisers. So I'm curious, is advertising fully recovered in your view or do we still have some ways to go there, and then just paraphrase your commentary on fiscal ‘21 just to make sure that we got it right, it sounds like you're looking for results. I assume that means revenue and adjusted OIBDA, adjusted EBITDA, largely in line with kind of what you articulated coming out of the IPO process. It sounds like maybe it's a little more second half weighted, but otherwise largely consistent. Guys I want to make sure that we kind of heard that all correctly. Thanks, guys. I appreciate it.

Great, so just to be crystal clear Matt, we see live in a couple of ways. First of all, we think there's a very reasonable probability that this last 7, 8, 9 months and the continuing COVID assault has begun and has changed a number of people's habits. So when we talk about live and we talk about touring, our intent is to continue to invest in live streaming, live concerts, VR concerts, and continue to support not only new habits but the marketplace for this sort of entertainment at home. Because we believe at least, even with the announcement of the vaccines, the distribution is going to be very difficult for the foreseeable future. And we think that there is going to be an ongoing market for live streaming, for VR concerts, so on and so forth. When it comes to live touring per se, based upon the success of any of these potential vaccines and the way people are thinking at that point in time, will determine how successful the return to live is. My own personal view is that there are going to be, there's going to be some change in thinking about packing yourself into stadiums or arenas. I think there's some concern about returning to a mass for this society and I'm not smart enough to know how all of this is going to play out. But what I do believe is that the new normal, whether it's the summer, whether it's later in ‘21, or it's deferred to ‘22, the new normal is going to look different than the old normal that we were all used to in 2017, 2018, and 2019. How it plays out, I think is highly uncertain. But what I do know, as people's habits are changing, our intent is to identify these trends and ensure that whichever way the wind blows, we are there to support them with our music and our artists, that much I do know.

Let me address Matthew's last two questions, and thank you for bringing them up. They are important for clarification. We reported a 9% revenue growth in Q4, which excludes artist services and performance in Warner Chappell. The core business, even with COVID's impact, is still demonstrating strong growth. We can't predict what will happen with COVID next year, particularly concerning touring revenues related to artist services and publishing, which may be affected in parts of next year. However, we believe there are opportunities to concentrate on growth areas and achieve significant growth. Once the impact of COVID diminishes, we want to be ready to take advantage of the returning growth opportunities. In Q4, we noted improvements in ad-supported streaming, physical sales, and early signs of sync revenue recovery. We are already witnessing positive trends in key revenue areas, and in 2021, we will seize these opportunities regardless of when they begin to materialize. We are also dedicated to driving bottom-line growth as we did in 2020, focusing on managing costs and allocating our resources for optimal market performance. We plan to continue this approach in 2021, emphasizing spending in impactful areas and managing where necessary. Additionally, our cost containment initiatives will begin in fiscal 2021 and will expand over time. Thank you.

Thanks everyone for taking the time out of what I'm sure you're busy schedules to join us today, and I hope that everyone has a safe and wonderful Thanksgiving and I hope that we all stay not only safe but sane. So, we'll talk to you in a few months. Thanks, everybody and happy holidays.

Ladies and gentlemen, this concludes today's presentation. We thank you for your participation. You may all disconnect and have a wonderful day. Speakers, please standby.