Warner Music posts wider loss

NEW YORK (Reuters) - Warner Music Group Corp. (WMG.N) posted a wider quarterly loss on Tuesday, hurt by soft music sales, and said it would cut about 400 jobs as it shifts resources to boost digital distribution of music and video.

Major sellers in the quarter included titles from Madonna, Red Hot Chili Peppers and Gerald Levert. However, one year ago sales were stronger, powered by releases from James Blunt and Sean Paul.

The world's fourth-largest music company reported a fiscal second-quarter net loss of $27 million, or 19 cents a share, compared with a loss of $7 million, or 5 cents a share, a year earlier.

Excluding one-time items, it lost 10 cents per share, in line with analysts' average forecast, according to Reuters Estimates.

Revenue declined 2 percent to $784 million from $796 million. Digital revenue rose 23 percent to $111 million.

Analysts had expected total revenue of $730 million.

Warner and other record companies have struggled with the transition of the business from compact discs to online music, with copy protection software known as digital rights management (DRM) failing to stop rampant online piracy.

"The recorded music industry remains challenged by piracy and changing consumption patterns in the shift from physical sales to new forms of digital music," the company said in a statement.

Warner Music said it expected sales comparisons to improve progressively over the next two quarters.

By the end of its fiscal year, Warner Music expected to incur restructuring charges of $65 million to $80 million as it cuts costs in order invest in other revenue growth areas such as delivering music and video to mobile phones.

It expects to reduce its head count by about 400 employees. Some of its savings will be offset by new hirings in different areas of the company focused on digital entertainment and other investments.

The financial benefits of the restructuring are seen emerging in the next fiscal year, which starts in October 2007, the company said on a conference call.

"What we're doing in many cases is taking costs out ... then redeploying them back," the company said. "As we take those costs out over next several quarters we'll start to see benefits of that over a couple quarters after that, so certainly early fiscal 2008."

Warner Music's shares slipped 29 cents, or about 1.7 percent, to $17.01 in New York Stock Exchange trading. The stock is down about 26 percent so far this year.