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Warner Music's Losses Widen

Warner Music Group Corp., home to artists such as Madonna, Red Hot Chili Peppers and Linkin Park, reported a wider fiscal second-quarter loss on Tuesday, the result of a decline in revenue and costs related to a restructuring plan that includes the elimination of some 400 jobs.

The New York-based recording company lost $27 million, or 19 cents per share, in the three months ended March 31, compared with a loss of $7 million, or 5 cents per share, a year ago.

Excluding one-time items, losses totaled 10 cents per share in the latest quarter.

Total revenue fell 2 percent to $784 million from $796 million in the year-ago quarter, which included stronger recorded music sales. Analysts were looking for a loss of 9 cents per share on revenue of $738.1 million, according to a Thomson Financial poll.

The company said it expects to record one-time charges of $65 million to $80 million by the end of the fiscal year due to its restructuring plan.

Warner noted that the job cuts would come from positions related to sales of CDs and other physical formats. The restructuring, however, is not expected to result in major savings because the company plans to boost hiring in new business areas, such as digital music and video.

The layoffs are expected to be completed by the end of the company's fiscal year.

"This realignment ... is an essential component of our ongoing effort to refocus and retool our company to best seize on growth opportunities in digital sales, mobile and many others," Edgar Bronfman Jr., WMG's chairman and chief executive, said during a conference call with Wall Street analysts.

The company said piracy and the shift in consumption from physical sales to new forms of digital music are a continued challenge for the music industry.

Bronfman said the company faced tough comparisons against its strong performance in the year-ago period.

Still, despite lagging CD sales, the company saw overall digital revenue rise to $111 million, up 23 percent from $90 million a year ago and comprising 14 percent of total revenue.

Revenue from recorded music overall fell 4 percent to $648 million, compared with $676 million in the year-ago quarter.

The decline was driven primarily by softer sales in Britain, France, Canada and Latin America, the company said.

Domestic recorded music sales declined 1 percent to $358 million, while international recorded music sales fell 8 percent to $290 million.

Albums by Madonna, Pretty Ricky, Red Hot Chili Peppers, Gerald Levert and Musiq Soulchild were among Warner's biggest sellers during the quarter.

Digital recorded music sales, including online downloads and mobile music, totaled $105 million, up 22 percent from the prior-year quarter, and represented 16 percent of total recorded music revenue.

Warner's music publishing revenue rose 11 percent to $143 million, compared to $129 million in the 2006 quarter.

Digital sales from music publishing totaled $6 million, representing 4 percent of total music publishing revenue, the company said.

Warner has undertaken several steps the past few months to focus resources into other media platforms such as online video, computer gaming, and mobile in hopes of finding new sources of revenue amid the decline of CD sales.

On Monday, the company announced it created a new division to produce video programming for network television, home video and the Internet.

Bronfman said the company plans to debut a new type of interactive music video compact disc that comes loaded with a full album of music and bonus media playable on a computer.

Warner was ranked third in U.S. music sales as of the end of April behind Universal Music Group and Sony BMG Music Entertainment, according to data compiled by Nielsen SoundScan.

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