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Why Warner Media Group Rose 25.1% in December

By Billy Duberstein - Jan 7, 2021 at 8:00AM

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The company signed a consequential deal with the hottest social media app in the world.

What happened

Shares of Warner Media Group ( WMG -1.88% ) rose 25.1% in December, according to data provided by S&P Global Market Intelligence. Although the company didn't report any financial results during the month, Warner inked a deal with red-hot social media app TikTok, sending shares higher.

A young woman listens to music via headphones while holding her phone while walking.

Image source: Getty Images.

So what

Although lots of people are now streaming music in quarantine, Warner Media Group had a rough go of it in 2020 due to limited new music releases as well as a decline in artist services from in-person performances. As such, it's no surprise that Warner would look for ways to monetize the use of its music in short-form social media videos used on platforms like TikTok, where a great proportion of youths' eyeballs -- or earlobes -- is going.

In an interview, WMG Chief Digital Officer Oana Ruxandra said, "It feels like we've seen years' worth of change and evolution in the course of a handful of months, we want to ensure there's value for our artists across the board, and the goal is to ensure that they make money to live their lives."

Short-form videos have taken the social media world by storm, with leader TikTok counting 800 million monthly active users worldwide, with 85 million in the U.S. Many TikTok content providers use recorded music in their own videos. As TikTok looks to monetize its views, it now appears the music labels will get some of that pie.

Now what

Digital revenue at Warner Music Group was actually up 31.6% last quarter, yet Warner actually saw overall revenue decline by 2.3% as performance, mechanical, and synchronization revenue all fell. Monetizing more digital channels seems essential, as new streaming and social media platforms appear to be where musical experiences are headed.

Details of the negotiations weren't made public, so we'll have to see how much revenue TikTok can really provide music labels over time. Still, it appears to be a great move for Warner -- though not totally unexpected.

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