iPod's Double Profits For Warner Music
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Despite their concerns about music piracy, the recording industry is making a motza from digital downloads.

The Warner Music Group almost doubled its first-quarter profits thanks to a Christmas Day downloading frenzy according to reports. The thing which will cheer recording industry execs more than their eggnog was that profits were up so much despite lower revenues.

Warner Music profits for the three months to December 31 rose to US$69 million, from US$36 million a year prior.

“Our digital revenue was up dramatically year-on-year, especially after MP3 players went live on December 25,” Michael Fleischer, chief financial officer, told Reuters. Fleischer revealed that costs for the quarter fell 6 per cent from a year earlier to $900 million, while revenue from the company’s recorded music business fell 2 per cent to $920 million, and revenue from music publishing fell 15 per cent to $131 million.

But the high margin digital music business more than made up any shortfall. With virtually no distribution costs digital sales rose to US$69 million (an amount equal to the company’s entire profit for the quarter). This was an increase of 30 per cent from the prior quarter and triple what the company sold in digital music a year earlier.

The company said that sales spiked significantly on December 25th as new iPod (and other MP3 player) owners hit the Internet to top up their new toys. The US accounted for 70 per cent of Warner’s digital music sales.

Digital revenues were almost equally split between song downloads ringtones, said Fleischer.