Warner Music Group Corp. priced its 77-million-share IPO at $25 per share, and the stock opened higher Wednesday at $27.
As a company returning to the public markets, investors have plenty to ask about Warner, and CEO Stephen Cooper was a guest on CNBC's "Squawk on the Street" to address some of the questions.
Warner's Margin Profile
Some investors are worried Warner Music's margins didn't improve as much as they should amid a shift from physical to digital music, CNBC's David Faber said. The CEO answered said the "spread" in margins between physical and digital is around 15 points.
The company prioritized much of its free cash flow generation in building out the business, he said.
The end result was margins improving "nicely" in 2019, and management has a game plan to continue improving margins in the future, Cooper said.
Streaming Music Decelerating
The streaming music industry as a whole is undergoing a decelerating growth phase, but this is due to the maturing market, Cooper said.
Outside of the U.S., especially in emerging markets, streaming music has room for "meaningful growth," he said.
Based on the ratio of streaming music listeners to total smartphone devices, it is clear the industry is still in the "early stages," the CEO said.
Music is the "only global language" on the planet, so streaming growth will continue across the world, in his view.
Relationship With Streaming Providers
Apple Inc. (NASDAQ:AAPL) and Spotify Technology SA (NYSE:SPOT) represent 27% of Warner Music's revenue, and the company has a "very good relationship" with its streaming partners, Cooper said. The economic model has a "high degree of stability," he said.
"There are new models that utilize music as one of their foundational building blocks emerging every day."
Distribution through streaming partners and others will continue to be fragmented, new use cases will pop up "virtually every day" and that will drive the growth of the utilization of music, Cooper concluded.
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