What changed in this filing

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Item 1. Business

2023-11-21 compared with 2022-11-22 · 83 added, 82 removed, 455 unchanged (27% of the section changed)

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We adapted to streaming faster than other major music entertainment companies and, in 2016, were the first such company to report that streaming was the largest source of our recorded music revenue.

Looking into the future, we believe the universe of opportunities will continue to expand, including through the proliferation of new devices such as smart speakers and the monetization of music on social media, fitness and other platforms.

Looking into the future, we believe the universe of opportunities will continue to expand, including through the proliferation of new hardware devices such as high fidelity speakers and wearables, the expanded monetization of music on social media and wellness and the evolution of new engagement and fandom opportunities on the brink of true revenue potential.

We believe advancements in technology will continue to drive consumer engagement and shape a growing and vibrant music entertainment ecosystem.

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Looking past more than a decade of music entertainment industry transitions, Access and the Company foresaw the opportunities that streaming presented for music.

Over the last eight years, Access has consistently backed the Company’s bold expansion strategies through organic A&R as well as acquisitions.

Over the last twelve years, Access has consistently backed the Company’s bold expansion strategies through organic A&R as well as acquisitions.

These strategies include investing more heavily in recording artists and songwriters, growing the Company’s global reach, augmenting its streaming expertise, overhauling its systems and technological infrastructure, and diversifying into other music-based revenue streams.

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Of the time people spent using short-form video apps, 68% involved music-dependent videos.

In addition, 29% of the surveyed population had watched a music livestream such as a concert in the last 12 months, and in gaming, 31% of gamers have attended a virtual concert on platforms like Fortnite, Roblox, or Minecraft.

Additionally, according to IFPI, in the physical sales space, for the first time in 20 years, there was growth in the physical market.

Revenues increased by 16.1% to $5 billion.

This was partly driven by a recovery in physical retail which had been heavily impacted in 2020 by the COVID-19 pandemic.

Revenues from CDs grew for the first time this millennium and there was particularly strong engagement with the format in Asia.

At the same time, the recent resurgence of interest in vinyl continued with very strong revenue growth in 2021 of 51.3% (up from 25.9% growth in 2020).

In addition, 32% of the surveyed population had watched a music livestream such as a concert in the last month, and in gaming, 44% of gamers have attended a virtual concert on platforms like Fortnite, Roblox, or Minecraft.

Additionally, according to IFPI, growth continued in the physical market.

Revenues increased by 4.0% to $4.6 billion, driven by the continued resurgence of interest in vinyl.

Revenue from Vinyl grew 17.1% in 2022 driven by its strongest performance in Asia with that region accounting for almost half the global revenues for physical, according to IFPI.

Members of older demographic groups are also increasing their music engagement.

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Music permeates our culture across age groups, as evidenced by the footprint that music has across social media.

According to the Recording Industry Association of America (“RIAA”), as of September 2022, 6 out of the top 10 most followed accounts on Twitter belong to musicians, and according to YouTube, the majority of videos that have achieved more than one billion lifetime views as well as the top 10 most watched videos of all time, belong to musicians.

Further, according to MusicWatch Inc., 77% of music consumers across all age groups used social media for music in 2021.

According to Statista, as of September 2022, 5 out of the top 10 most followed accounts on X (formerly Twitter) belong to musicians, and according to YouTube, the majority of videos that have achieved more than one billion lifetime views as well as the top 10 most watched videos of all time, belong to musicians.

According to Luminate (formerly MRC Data/Billboard), 44% of social media users discover music via social media sites/apps.

Furthermore, Gen Z Music listeners are +69% more likely to discover new music via short video clip sites.

The music industry as a whole is currently undergoing a transformation driven by Gen Z.

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Recorded Music

The recorded music industry generated $25.9 billion in global revenue in 2021, according to IFPI, which represents a year-over-year increase of 18.5%, marking the seventh consecutive year of growth.

The recorded music industry generated $26.2 billion in global revenue in 2022, according to IFPI, which represents a year-over-year increase of 9.0%, marking the eighth consecutive year of growth.

According to IFPI, global recorded music revenue has grown at a CAGR of 11% since 2018.

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Overall, streaming grew by 11.5% in 2022 as compared to 2021.

Physical represented approximately 19% of global recorded music revenue in 2021, with growth in both vinyl and CD sales.

Physical represented approximately 17.5% of global recorded music revenue in 2022, with growth in vinyl sales.

Performance rights revenue represents the use of recorded music by broadcasters and public venues, and represented approximately 9.4% of global recorded music revenue in 2022.

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Synchronization revenue is generated from the use of recorded music in advertising, film, video games and television content, and represented 2.4% of global recorded music revenue in 2022.

Global Recorded Music Industry Revenues 2017 to 2021 ($ in billions)

From a geographical standpoint, the largest markets for recorded music in 2021 were the United States, Japan, the United Kingdom, Germany, France, China, South Korea, Canada, Australia and Italy.

From a geographical standpoint, the largest markets for recorded music in 2022 were the United States, Japan, the United Kingdom, Germany, China, France, South Korea, Canada, Brazil and Australia.

The graphic below sets out the top ten markets and their respective revenue growth for 2022.

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According to IFPI, global paid music streaming subscribers totaled 589 million at the end of 2022.

While this represents an increase of 19% from 443 million in 2020, it still represents less than 14% of the 3.9 billion smartphone users globally in 2021, according to Newzoo.

It also represents a small fraction of the user base for large, globally scaled digital services such as Facebook, which reported 3.0 billion monthly users as of September 2022, and YouTube, which reported over 2.5 billion monthly users as of September 2022.

While this represents an increase of 16% from 509 million in 2021, it still represents less than 13% of the 4.7 billion smartphone users globally in 2022.

It also represents a small fraction of the user base for large, globally scaled digital services such as Facebook, which reported 3.0 billion monthly users as of September 2023, and YouTube, which reported over 2.7 billion monthly users as of June 2023.

Additionally, Instagram reported 2.0 billion monthly users while TikTok reported 1.0 billion monthly users.

On-demand audio streaming reached 1.13 trillion streams in the United States in 2021, according to Luminate (formerly MRC Data/Billboard).

Total (audio and video) streaming reached 617 billion streams in the United States in 2022, up 14% from 2021 according to Luminate.

The potential of global paid streaming subscriber growth is demonstrated by the penetration rates in early adopter markets.

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According to Goldman Sachs, paid streaming models are at an early stage in China, with an estimated 11% paid streaming penetration rate in 2021.

Despite its substantial population, China was the world’s sixth-largest music market in 2021, having only broken into the top 10 in 2017.

Despite its substantial population, China was the world’s fifth-largest music market in 2022, having only broken into the top 10 in 2017.

Opportunities for Improved Streaming Pricing

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Streaming services are already at the early stages of experimenting with price increases.

For example, in 2021 Spotify increased prices in the United States, the UK and other European markets.

Spotify has reported positive early results, having seen no meaningful impacts to churn or customer intake in these markets.

In 2022, Apple Music increased prices of its student plans in the United States, the UK and Canada, and Amazon Music Unlimited increased the prices of both its individual and family subscription plans.

For example, in 2023 Spotify increased prices in 65 countries for the individual, duo, family and student plans.

For the second time in 12 months in 2023 Deezer increased prices for all new premium and family subscriptions in key territories including France, UK, Spain, Italy and the Netherlands.

YouTube increased prices of its individual and family plan tiers on both YouTube Premium and YouTube Music in the United States in 2023.

In 2022, Apple Music increased prices of its individual and family plans in the United States, and Amazon Music Unlimited increased the prices of both its individual and family subscription plans.

We believe the value proposition that streaming provides to consumers supports premium product initiatives.

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These technologies represent advancements that are deepening listener engagement and driving further growth in music consumption.

Short-form music and music-based video content has grown rapidly, driven by the growth of global social video applications such as TikTok, which features short videos often set to music.

Short-form music and music-based video content has grown rapidly, driven by the growth of global social video applications such as TikTok, Instagram Reels and YouTube Shorts which feature short videos often set to music.

60% of emerging platform revenues in the music industry last year came from short-form video and social media, which includes TikTok, Instagram Reels, YouTube Shorts, and Snapchat Spotlight.

According to Sensor Tower, TikTok was the most downloaded app globally in the first half of 2023, surpassing 4.5 billion all-time downloads.

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Music publishing revenues are classified by Music & Copyright as coming from four main royalty sources:

and synchronization.

In 2021, digital, which accounted for approximately 57% of global revenue, represented the largest component of industry revenues, while synchronization, which accounted for approximately 18%, represented the second-largest and fastest-growing component of industry revenues.

Performance accounted for approximately 17% of global revenue in 2021.

digital, mechanical, performance, and synchronization.

In 2022, digital, which accounted for approximately 59% of global revenue, represented the largest component of industry revenues, while performance, which accounted for approximately 18%, represented the second-largest and fastest-growing component of industry revenues.

Synchronization accounted for approximately 17% of global revenue in 2022.

Mechanical revenues from traditional physical music formats (e.g., vinyl, CDs, DVDs), accounted for approximately 5% of global revenue in 2022.

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In 2018, the enactment of the MMA in the United States resulted in major reforms to music licensing.

The MMA improves the way digital music services obtain mechanical licenses for musical compositions, requires the

payment of royalties to recording artists for pre-1972 sound recordings streamed on digital radio services such as SiriusXM and Pandora, and provides for direct payments of royalties owed to producers, mixers and engineers when their original works are streamed on non-interactive webcasting services.

C opyright Royalty Board (“CRB”).

In 2018, the CRB issued its determination of royalty rates and terms, significantly increasing the mechanical royalty rates paid for musical compositions in the United States from 2018 through 2022.

In August 2020, following an appeal of that decision by some digital music services, the decision was vacated in part and the case was remanded to the CRB for further proceedings.

The MMA improves the way digital music services obtain mechanical licenses for musical compositions, requires the payment of royalties to recording artists for pre-1972 sound recordings streamed on digital radio services such as SiriusXM and Pandora, and provides for direct payments of royalties owed to producers, mixers and engineers when their original works are streamed on non-interactive webcasting services.

In 2018, the CRB issued its determination of royalty rates and terms, significantly increasing the royalty rates paid for sound recordings in the United States by SiriusXM from 2018 through 2022, and the MMA extended that increase through 2027.

In 2022, The National Music Publishers’ Association (“NMPA”), the Nashville Songwriters Associations International (“NSAI”) and the Digital Media Association (“DiMA”) announced a settlement regarding the U.S.

In 2018, the CRB issued its determination of royalty rates and terms, significantly increasing the mechanical royalty rates paid for the streaming of musical compositions in the United States from 10.5% in 2018 to 15.1% in 2022 (the “Phonorecords III Proceeding”).

In August 2020, following an appeal of that decision by some digital music services, the decision was vacated in part and the case was remanded to the CRB for further proceedings.

In June 2023, the CRB issued its final determination after remand in the Phonorecords III Proceeding, which retroactively upheld the headline royalty rates initially determined in 2018, and those rates were published in the Federal Register in August 2023.

In 2022, the CRB commenced the process of determining the royalty rates and terms for the mechanical reproduction of musical compositions in the United States for 2023 through 2027 (the “Phonorecords IV Proceeding”).

In advance of trial, the National Music Publishers’ Association (“NMPA”), the Nashville Songwriters Associations International (“NSAI”) and the Digital Media Association (“DiMA”) announced a settlement regarding the U.S.

mechanical streaming rates for 2023-2027.

The agreement sets the headline royalty rate for this period at 15.35% of total revenue, which will be introduced gradually over the course of the five-year term.

Earlier in 2022, songwriters and publishers won a raise in streaming headline royalty rates from 10.5% to 15.1% over the 2018-2022 period.

The headline rates escalate from 15.1% of total revenue in 2023 to 15.2% in 2024 and then a half a percentage point increase in each of the remaining three years, peaking at 15.35% in 2027.

This settlement will also change other important factors in U.S.

mechanical streaming rates, including increases to per-subscriber minimums and Total Content Costs (“TCC”).

According to the joint announcement of the deal, this also “modernizes” the way music streaming-related product and service bundles are treated and has updated its rules on how streaming services can incentivize potential subscribers.

In December 2022, the CRB published final regulations adopting those headline rates, which escalate from 15.1% of total music revenue in 2023 to 15.2% in 2024 and then a half of a tenth of a percentage point increase in each of the remaining three years, peaking at 15.35% in 2027.

Other significant components of the rate formulae for digital phonorecords, which serve as alternatives to the percent of revenue rates, also increased, including the per-subscriber minimums and the percentage of “Total Content Cost (TCC)” calculations referencing amounts that music service licensees pay to record labels.

Also as part of the Phonorecords IV Proceeding, beginning on

January 1, 2023, the mechanical royalty rates for physical phonorecords and permanent downloads increased to $0.12 per copy or $0.0231 per minute of playing time or fraction thereof, and include inflation-based adjustments for subsequent years of the rate period.

European Union Copyright Directive.

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We are developing local talent to achieve regional, national and international success.

We have expanded our global footprint over time by acquiring independent recorded music and music publishing businesses, catalogs and recording artist and songwriter rosters in China, Indonesia, Poland, Russia and South Africa, among other markets.

In addition, we have increased organic investment in heavily populated emerging markets by, for example, launching Warner Music Middle East, our recorded music affiliate covering 17 markets across the Middle East and North Africa (“MENA”) with a total population of 472 million people, by acquiring Qanawat, one of the largest independent distributors in MENA, and by investing in Rotana, one of the leading independent labels in MENA.

In addition, we have increased organic investment in heavily populated emerging markets by, for example, launching Warner Music Middle East, our recorded music affiliate covering multiple markets across the Middle East and North Africa (“MENA”) with a total population of 493 million people, by acquiring Qanawat, one of the largest independent distributors in MENA, and by investing in Rotana, one of the leading independent labels in MENA.

We have also strengthened our Warner Music Asia executive team with new appointments and promotions.

With every region around the world at different stages in transitioning to digital formats, we believe establishing creative hubs by opening new regional offices and partnering with local players will achieve our objective of building local expertise while delivering maximum global impact for our recording artists and songwriters.

For example, we recently acquired one of South Africa’s

leading independent music labels, Coleske, and music from this influential label’s recording artists and songwriters will join our repertoire and receive the support of our wide-ranging global expertise, including distribution and artist services.

For example, we recently acquired one of South Africa’s leading independent music labels, Coleske, and music from this influential label’s recording artists and songwriters will join our repertoire and receive the support of our wide-ranging global expertise, including distribution and artist services.

Differentiated Platform of Scale with Top Industry Position.

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Our collection of owned and controlled recordings and musical compositions, spanning a large variety of genres and geographies over many decades, cannot be replicated.

As one of three major music entertainment companies, our industry position remains strong and poised for continued growth.

As reported in Music & Copyright, our global recorded music market share has increased approximately 8% from 2011 to 2021, growing from 15.1% to 16.3%.

In addition, according to Nielsen, Atlantic Records was the No.

1 record label on the Billboard 200 in the United States in 2017, 2018 and 2019.

Star-Making, Culture-Defining Core Capabilities.

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At the same time, our management team has driven an increase in operating margins and cash flow through an improved revenue mix to higher-margin digital platforms and overhead cost management, while maintaining financial flexibility to both organically invest in the business and pursue strategic acquisitions to diversify our revenue mix.

Our Recorded Music and Music Publishing businesses are led by entrepreneurial and creative individuals with extensive experience in discovering and developing recording artists and songwriters and managing their creative output on a global scale.

We have recently added key new members to our management team, including our CEO, Robert Kyncl, who joined us from YouTube where he served as Chief Business Officer, and our CFO, Bryan Castellani, who joined us from The Walt Disney Company, most recently serving as CFO for Disney Entertainment & ESPN, who together bring fresh perspectives from their tech and entertainment backgrounds to further enhance and evolve our business strategy.

Our Recorded Music and Music Publishing businesses continue to be led by entrepreneurial and creative individuals with extensive experience in discovering and developing recording artists and songwriters and managing their creative output on a global scale.

In addition, we have benefited, and expect to continue to benefit, from our acquisition by Access in July 2011, which has provided us with strategic direction, M&A and capital markets expertise and planning support to help us take full advantage of the ongoing transition in the music entertainment industry.

Expertise in Strategic Acquisitions and Investments That Extend Our Capabilities.

Since 2011 when Access became our controlling shareholder, we have completed more than 15 strategic acquisitions.

Since 2011 when Access became our controlling shareholder, we have completed a number of strategic acquisitions.

The acquisition of PLG in 2013 significantly strengthened our worldwide roster, global footprint and executive talent, particularly in Europe.

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These transactions showcase the growing breadth of our platform across the music entertainment ecosystem and have increased our direct access to fans of our recording artists and songwriters.

In addition to our commercial arrangements with digital music services, we opportunistically invest in some of those services as well as other companies in our industry, including minority equity stakes in Deezer, a French digital music service in which Access owns a controlling equity interest, and Tencent Music Entertainment Group, the leading online music entertainment platform in China.

In addition to our commercial arrangements with digital music services, we opportunistically invest in some of those services as well as other companies in our industry, including a minority equity stake in Deezer, a French digital music service in which Access owns a controlling equity interest.

Acquiring and investing in businesses that are highly complementary to our existing portfolio further enables us to potentially derive incremental and new revenue streams from different business models in new markets.

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IFPI considers the global recorded music market in seven distinct regions.

In 2021, five out of these seven regions achieved double-digit growth with MENA being the fastest growing region at 35% revenue growth followed by Latin America at 31% revenue growth.

In 2022, the recorded music market saw growth in every region across the globe.

Four regions posted double-digit gains, outpacing the overall growth rate of 9.0% and Sub-Saharan Africa overtook MENA as the fastest growing area, followed by Latin America at 25.9% revenue growth.

One of our vital business functions is to help our recording artists and songwriters solve the complexities associated with a fragmented, global market of mixed musical tastes.

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Embrace Commercial Innovation with New Digital Distributors and Partners.

We believe the growth of digital formats will continue to create new and powerful ways to distribute and monetize our music.

We believe the growth of digital formats will continue to create new and powerful ways to distribute, engage and monetize.

We were the first major music company to strike landmark deals with important companies such as Apple, YouTube, Peloton, Twitch and Tencent Music Entertainment Group, as well as with pure-play music technology companies such as MixCloud, SoundCloud and Audiomack.

We believe that the continued development of new digital channels for the consumption of music and increasing access to digital music services present significant promise and opportunity for the music entertainment industry.

We are also focused on investing in emerging music technologies, demonstrated by our launch of WMG Boost, a seed-stage investment fund for start-ups in the music entertainment industry and through partnerships with entrepreneurial incubators such as TechStars.

We intend to continue to extend our technological reach by executing deals with new partners and developing optimal business models that will enable us to monetize our music across various platforms, services and devices.

We believe that the continued development of new digital channels for the consumption of music as well as evolving digital asset classes tied to our artists and songwriters present significant promise and opportunity for the music entertainment industry.

We are also exploring the benefits of Artificial Intelligence (“AI”) for our business.

We are working with a network of partners, including both generative AI engines and distribution platforms to explore impactful ways to use AI to benefit us and our artists and songwriters, while ensuring proper protections and monetization.

We continue to work with early stage technology companies that are helping us to build music’s future and have invested resources behind these partnerships to codify preferred partnerships.

We also intend to continue to support and invest in emerging technologies, including artificial intelligence, artificial reality, virtual reality, high-resolution audio and other technologies to continue to build new revenue streams and position ourselves for long-term growth.

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We plan to continue selectively pursuing acquisition opportunities while maintaining financial discipline to further improve our growth trajectory and drive operating efficiencies with increased free cash flow generation.

With respect to our Music Publishing business, we have the opportunity to generate significant value by acquiring other music publishers and extracting cost savings (as acquired catalogs can be administered with little incremental cost), as well as by increasing revenues

through more aggressive monetization efforts.

We will also continue to evaluate opportunities to add to our catalog or acquire or make investments in companies engaged in businesses that we believe will help to advance our strategies.

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In the United States, our Recorded Music business is conducted principally through our major record labels—Atlantic Records and Warner Records.

In October 2018, we launched Elektra Music Group in the United States as a standalone label group, which comprises the Elektra, Fueled by Ramen and Roadrunner labels, and in December 2021, we acquired 300 Entertainment and subsequently launched 300 Elektra Entertainment, or 3EE, a frontline label group that brings together the multi-genre power of 300 Entertainment and Elektra.

Our Recorded Music business also includes Rhino Entertainment, a division that specializes in marketing our recorded music catalog primarily through reissuances of previously released music and video titles and releasing previously unreleased material from our vault.

We also conduct our Recorded Music business through a collection of additional record labels including Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Nonesuch, Parlophone, Reprise, Sire, Spinnin’ Records, Warner Classics and Warner Music Nashville.

Entertainment and Elektra Music Group.

Our Recorded Music business also includes Rhino Entertainment, a division that specializes in marketing our recorded music catalog through compilations, reissuances of previously released music and video titles and releasing previously unreleased material from our vault.

Outside the United States, our Recorded Music business is conducted through various subsidiaries, affiliates and non-affiliated licensees.

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In certain smaller markets, we license the right to distribute and sell our music to non-affiliated third-party record labels.

Our Recorded Music business’ distribution operations include WEA Corp., which markets, distributes and sells music and video products to retailers and wholesale distributors;

Alternative Distribution Alliance (“ADA”), which markets, distributes and sells the products of independent labels to retail and wholesale distributors;

Our Recorded Music business’ operations include WMX, a new generation services division that connects artists with fans and amplifies brands in creative, immersive, and engaging ways.

The division includes a rebranded WEA commercial services and marketing network (formerly Warner-Elektra-Atlantic Corporation, or WEA Corp.), which markets, distributes and sells music and video products to retailers and wholesale distributors, as well as acting as the Company’s media and creative content arm.

Our business’ distribution operations also includes Alternative Distribution Alliance (“ADA”), which markets, distributes and sells the products of independent labels to retail and wholesale distributors;

and various distribution centers and ventures operated internationally.

In addition to our music being sold in physical retail outlets, our music is also sold in physical form to online physical retailers, such as amazon.com, barnesandnoble.com and bestbuy.com, and distributed in digital form to an expanded universe of digital partners, including streaming services such as those of Amazon, Apple, Deezer, SoundCloud, Spotify, Tencent Music Entertainment Group and YouTube, radio services such as iHeart Radio and SiriusXM and download services.

In addition to our music being sold in physical retail outlets, our music is also sold in physical form to online physical retailers, such as amazon.com, barnesandnoble.com and bestbuy.com, and distributed in digital form to an expanded universe of digital partners, including streaming services such as those of Amazon, Apple, Deezer, SoundCloud, Spotify, Tencent Music and YouTube, radio services such as iHeart Radio and SiriusXM and other download services.

We have diversified our revenues beyond our traditional businesses by entering into expanded-rights deals with recording artists in order to partner with such artists in other aspects of their careers.

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Increasingly, we are also expanding our participation in image and brand rights associated with artists, including merchandising and sponsorships.

Our labels scout and sign talent across all major music genres, including pop, rock, jazz,

classical, country, R&B, hip-hop, rap, reggae, Latin, alternative, folk, blues, gospel and other Christian music.

Our labels scout and sign talent across all major music genres, including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, alternative, folk, blues, gospel and other Christian music.

Internationally, we market and sell U.S.

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The operations of our Music Publishing business are conducted principally through Warner Chappell Music, our global music publishing company headquartered in Los Angeles, and through various subsidiaries, affiliates, and non-affiliated licensees and sub-publishers.

We own or control rights to more than one million musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions.

We own or control rights to more than one million musical compositions, including numerous global pop hits, standards, folk songs and motion picture and theatrical compositions.

Assembled over decades, our award-winning catalog includes over 150,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative and gospel.

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In the United States, public performance income is administered and collected by music publishers and their performing rights organizations and in most countries outside the United States, collection, administration and allocation of both mechanical and performance income are undertaken and regulated by governmental or quasi-governmental authorities.

Throughout the world, each synchronization license is generally subject to negotiation with a prospective licensee and, by contract, music publishers pay a contractually required percentage of synchronization income to the songwriters or their heirs and to any co-publishers.

Warner Chappell Music acquires copyrights or portions of copyrights and administration rights from songwriters or other third-party holders of rights in musical compositions.

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• Streaming and download services

• Social media and short-form video platforms

• Graphic design and editing software and other creator tools

sale of recorded music in various physical formats

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• Licensing of copyrights for use in printed sheet music

In the United States, mechanical royalties are collected directly by music publishers, from recorded music companies or via The Harry Fox Agency, a non-exclusive licensing agent affiliated with the Society of European Stage Authors and Composers (“SESAC”), while outside the United States, mechanical royalties are collected directly by music publishers or from collecting societies.

In the United States, mechanical royalties are collected directly by music publishers, from recorded music companies, via The Harry Fox Agency, a non-exclusive licensing agent affiliated with the Society of European Stage Authors and Composers (“SESAC”), or The Mechanical Licensing Collective (“The MLC”), while outside the United States, mechanical royalties are collected directly by music publishers or from collecting societies.

Once mechanical royalties reach the publisher, percentages of those royalties are paid or credited to the writer or other rightsholder of the copyright in accordance with the underlying rights agreement.

Mechanical royalties are paid at a rate of 9.1 cents per song per unit in the United States for physical formats (e.g., CDs and vinyl albums) and permanent digital downloads (recordings in excess of five minutes attract a higher rate).

In 2023, U.S.

mechanical royalties for physical formats (e.g., CDs and vinyl albums) and permanent digital downloads are paid at a rate of 12.0 cents per song per unit or 2.31 cents per minute of playing time (whichever is greater).

The current U.S.

statutory mechanical royalty rates for physical goods and permanent downloads will be adjusted annually as of January 1 based on the Consumer Price Index.

There are also rates set for interactive streaming and non-permanent downloads based on a formula that takes into account revenues paid by consumers or advertisers with certain minimum royalties that may apply depending on the type of service.

For 2023, the headline mechanical royalty rate for interactive streaming is 15.1% of revenue, increasing by annual increments to 15.35% in 2027.

“Controlled composition” provisions contained in some recording contracts may apply to the rates mentioned above pursuant to which artist/songwriters license their rights to their record companies for as little as 75% of the statutory rates.

The current U.S.

statutory mechanical rates will remain in effect through December 31, 2022.

In most other territories, mechanical royalties are based on a percentage of wholesale prices for physical formats and based on a percentage of consumer prices for digital formats.

In international markets, these rates are determined by multi-year collective bargaining agreements and rate tribunals.

In international markets, these rates are typically determined by multi-year collective bargaining agreements and rate tribunals.

Throughout the world, performance royalties are collected by publishers directly or on behalf of music publishers and songwriters by performance rights organizations and collecting societies.

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(“BMI”) in the United States;

Mechanical-Copyright Protection Society and The Performing Right Society in the United Kingdom;

The German Copyright Society in Germany and the Japanese Society for Rights of Authors, Composers and Publishers in Japan.

PRS for Music Ltd in the United Kingdom;

and Société des auteurs, compositeurs et édituers de musique (“SACEM”) in France.

The societies pay a percentage (which is set in each country) of the performance royalties to the copyright owner(s) or administrators (i.e., the publisher(s)), and a percentage directly to the songwriter(s), of the composition.

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Our Recorded Music business includes music from:

• Global superstars such as Ed Sheeran, Cardi B, Bruno Mars, Lizzo, Coldplay, Dua Lipa, Michael Bublé, Kelly Clarkson, David Guetta, Kenny Chesney, Madonna, Neil Young, Red Hot Chili Peppers, Prince, Pink Floyd, David Bowie, Fleetwood Mac, Aretha Franklin and The Smiths.

• Next-generation talent including Megan Thee Stallion, Jack Harlow, Roddy Ricch, Saweetie, Paulo Londra, Burna Boy, Bebe Rexha, Zach Bryan, Ashnikko, PinkPantheress and CKay.

• International stars such as Anitta, Aya Nakamura, TWICE, Ava Max, Charlie Puth, Capo Plaza, Pablo Alborán, Udo Lindenberg and Laura Pausini.

• Global superstars such as Ed Sheeran, Dua Lipa, Coldplay, Cardi B, Bruno Mars, Michael Bublé, Lizzo, Kelly Clarkson, David Guetta, Kenny Chesney, Madonna, Neil Young, Red Hot Chili Peppers, Prince, Green Day, Cher, Pink Floyd, David Bowie, Fleetwood Mac, Aretha Franklin and The Smiths.

• Next-generation talent including Zach Bryan, Megan Thee Stallion, Jack Harlow, Lil Uzi Vert, Fred Again.., PinkPantheress, Maria Becerra, Kenya Grace, Gayle and CKay.

• International stars such as Burna Boy, Aya Nakamura, King, TWICE, Ninho, Capo Plaza, Pablo Alborán, Udo Lindenberg and Laura Pausini.

Our Music Publishing business includes musical compositions by:

• Superstars such as Madonna, William Corgan, Belly, Cardi B, Bruno Mars, Anderson Paak, Lizzo, Tones and I, Pablo Alborán, Lin Manuel Miranda, Chris Stapleton, Dan + Shay, Tayla Parx, Damon Albarn, Dave Mustaine, Katy Perry and Kacey Musgraves.

• International talent such as Jonathan Lee, Tia Ray, Manuel Medrano, Melendi, Bausa, Shy’m, Tove Lo, Joaquin Sabina and Jack & Coke.

• Songwriting icons like David Bowie, Cole Porter, Grateful Dead, Led Zeppelin, Quincy Jones, George Michael, Marco Antonio Solís, Eric Clapton, Brody Brown, Liz Rose, Justin Tranter, busbee, The-Dream, Dr.

Dre, Stephen Sondheim, George & Ira Gershwin and Gamble & Huff.

• Superstars such as Madonna, William Corgan, Belly, Cardi B, Bruno Mars, Anderson Paak, Lizzo, Tones and I, Pablo Alborán, Lin Manuel Miranda, Lil Uzi Vert, Imagine Dragons, Chris Stapleton, Dan + Shay, Tayla Parx, Damon Albarn, Dave Mustaine, Katy Perry and Kacey Musgraves.

• International talent such as Jonathan Lee, Tia, Manuel Medrano, Melendi, Bausa, Shy’m, Tove Lo, Joaquin Sabina, Raye, Stromae, Jack & Coke, Marco Borreo, Danna Paola and MZMC.

In our Recorded Music and Music Publishing businesses, we compete based on marketing (including both how we allocate our marketing resources as well as how much we spend on a dollar basis) and on recording artist and songwriter signings.

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The EU also harmonized the copyright term for joint musical works.

In the case of a musical composition with words that is protected by copyright on or after November 1, 2013, EU member states are required to calculate the life of the author plus 70 years term from the date of death of the last surviving author of the lyrics and the composer of the musical composition, provided that both contributions were specifically created for the musical composition.

In the case of a musical composition with words that is protected by copyright on or after November 1, 2013, EU member states are required to calculate the

life of the author plus 70 years term from the date of death of the last surviving author of the lyrics and the composer of the musical composition, provided that both contributions were specifically created for the musical composition.

We are largely dependent on legislation in each territory in which we operate to protect our rights against unauthorized reproduction, distribution, public performance or rental.

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Although we cannot assure you that our trademark applications, even for major trademarks, will register, we endeavor to register our major trademarks in every country where we believe the protection of these trademarks is important for our business.

Our major trademarks include 300 Entertainment, ADA, Asylum, Atlantic, East West, Elektra, EMP, Erato, Nonesuch, Parlophone, Reprise, Rhino, Roadrunner, Sire, Songkick, SPINNIN’ RECORDS and Warner Chappell, and their respective logos.

We also use certain trademarks pursuant to a royalty-free license agreement.

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We continually invest in our employees’ career growth and provide employees with a wide range of development opportunities, including learning, mentoring, coaching and development programs.

To support employee well-being in response to the COVID-19 pandemic and the transition to full-time work from home, we established a number of programs, including flexible work schedule options, and provided employees with a home office stipend and other benefits and support to care for themselves or family members impacted by COVID-19.

Corporate Information

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business