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Operator
Welcome to the Warner Music Group's fiscal third-quarter earnings call for the period ended June 30, 2010.
At the request of Warner Music Group today's call is being recorded for replay purposes, and if you object you may disconnect at any time.
As a reminder, there will be a question-and-answer session following today's presentation.
(Operator Instructions).
Now I would like to turn today's call over to your host, Ms.
Jill Krutick, Senior Vice President of Investor Relations and Corporate Development.
You may begin.
Jill Krutick - SVP - IR and Corporate Development
Thank you very much.
Good morning, everyone.
Welcome to Warner Music Group's fiscal third quarter 2010 conference call.
Both our earnings press release and the Form 10-Q we filed this morning are available on our website.
Today, Chairman and CEO Edgar Bronfman Jr.
will update you on our business performance and strategy.
Executive Vice President and CFO Steve Macri will discuss our early financial results, and then Edgar, Steve, and Michael Fleisher, our Vice Chairman, Strategy and Operations, will take your questions.
Before Edgar's comments, let me remind you that this communication includes forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance.
Words such as estimates, expects, plans, intends, believes, should, and will and variations of such words or similar expressions that predict or indicate future events or trends, or do not relate to historical matters identify forward-looking statements.
Such statements include, but are not limited to, estimates of our future performance such as the success of future albums; projected digital sales, increases and declines in physical sales; expected expansion of the digital music business; success of strategic actions we are taking to accelerate our transformation as we redefine our role in the music industry; the impact general economic conditions may have on us; market share fluctuation; and our intentions to deploy our capital, including the level and effectiveness of future [A&R] investments.
All forward-looking statements are made as of today and we disclaim any duty to update such statements.
Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them.
However, there can be no assurance that management's expectations, beliefs and projections will result or be achieved.
Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that can cause actual results that differ materially from our expectations.
Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our earnings press release and Form 10Q and other SEC filings.
We plan to present certain non-GAAP results during this conference call.
All of the revenue data we will provide on today's call will be on a constant currency basis.
We have provided schedules reconciling these results to our GAAP results in our earnings press release posted on our website.
With that, let me turn it over to Edgar.
Thank you.
Edgar Bronfman - Chairman and CEO
Welcome, everyone.
Thanks for joining us.
This quarter, we continued to focus on our core strength of A&R and the development of new business models to both speed our digital transition and to diversify our revenue mix.
All this activity has occurred while we remain sharply focused on managing costs and generating significant free cash flow.
This quarter's anticipated decline in both revenue and OIBDA reflect our very light release schedule as well as the ongoing effects of the recorded music industry's transition.
With over half of our active global roster of artists signed to expanded rights deals, releasing the right content at the right time in order to maximize profit potential and artist career development has become even more central to our strategy.
I would like to discuss the Company's quarterly performance in four key areas.
First, our A&R marketing and promotional efforts continue to yield success.
Second, we sustained our industry leadership in the digital arena by maintaining a significant digital share advantage over fiscal share in the US in the quarter -- the greatest of any of the major music companies.
Third, we continue to transform the Company by entering into expanded rights deals with new recording artists and building our worldwide artist services business.
And fourth, we continue to invest in our music publishing business by further strengthening our artist roster, business mix and catalog.
Now let's look at the quarter's results more closely.
As expected, given our light release schedule and the challenging industry backdrop, recorded music revenue, which was primarily driven by carryover releases, declined both domestically and internationally off 13% and 22%, respectively.
Still, there are notable bright spots this quarter.
For example, our US share held flat at 21% and grew sequentially by 2 percentage points.
And our disciplined and our investment strategy continues to yield high returns on capital.
Recorded music results benefited from the soundtrack of the motion picture 'Eclipse', the third installment from the hugely popular 'Twilight' series.
Atlantic Records leveraged the movie's promotion and the established 'Twilight' fan base to maximize soundtrack revenue and raise visibility for all our artists, such as Muse, the Black Keys, the Dead Weather, Cee-Lo and Stan Farlow.
In addition, as our policy now requires for all major releases, we offered a deluxe digital version of the soundtrack as an iTunes exclusive pre-order priced at $14.99.
Reinforcing the price [and elasticity] of demand for must-have premium products and consistent with past experience, 96% of the soundtrack pre-orders were for the deluxe version.
In addition, our recorded music results were enhanced by exciting new artists such as Jayson Dorillo, BOB, and UK artists Plan B, as well as carryover in related catalog sales from established global superstar Michael Buble.
Jayson Dorillo, an expanded rights artist like virtually all of our new artists has become a worldwide sensation selling more than 10 million tracks worldwide or the equivalent of 1 million albums during the rollout of his Eponymous debut album.
Nominated for three Teen Choice awards, this Warner Bros.
artist is growing his fan base as our touring and record sales climb international.
To get a better look at how our long-term strategy has become part of our D&A, let me tell you about the collaborations we have helped to create a month a number of emerging Atlantic artists.
BOB is a new Atlantic artist whose debut album spent its first week at number 1 on the Billboard 200 and has party launched three hit singles collectively selling nearly 8 million tracks to date.
Another Atlantic artist, Lupe Fiasco, helped BOB reach a new audience by having BOB support his recent sold-out US tour.
Atlantic is creatively building the profile and popularity of yet another expanded rights artist, Bruno Mars.
Bruno doesn't even have an album out yet, but he has already been prominently featured on two big recent Atlantic singles, both of which he co-wrote and produced.
'Nothing on You' from BOB and 'Billionaire' from Travis McCoy.
Our efforts to build the careers of these developing artists are at the core of our Companywide A&R strategy, which aims to establish sustained creative success for artists across all genres that we believe will yield strong returns across their many revenue streams.
Our international recorded [business] saw some solid performances from both local and international artists in the strong digital business.
However we saw declines in recorded music revenue across most major European territories, as well as the Asia-Pacific region.
Bucking this trend in the third largest music market in the world, our UK company was a standout.
Our UK business continues to benefit from our consistent investments in A&R and executive talent over the last few years.
As with the March quarter, in the June quarter, Warner Music UK again achieved the greatest year-on-year unit share growth of all the music majors, up 3.2 percentage points to 15.5%.
Warner Music UK has been impressive, delivering sequential unit share growth in each of the past four quarters, driving growth in both revenue and profits.
Contributing to these results was Plan B's recent breakthrough album, which has been the highest selling new release of the year in the UK.
Taking a closer look at our digital business we recognize both our challenges and our opportunity.
Industrywide, US digital download unit sales grew 5% over the prior year quarter consistent with the rate in the December and March quarters.
Our US units grew 6% for the quarter despite our light release schedule.
We continued to post solid growth in our international digital revenue which increased 12% year over year.
This grewth (sic) was boosted by our implementation of variable pricing for downloads; the international demand for iTunes and iPhones; and new business development activities around [access] models.
Achieving healthy digital gains remains the top priority and is one of the key elements of our long-term growth strategy.
Based on industry developments, we continue to believe that the rate of digital growth can improve.
The key to that growth is the development of well-crafted business models that cater to consumer demands and fairly compensate content owners.
In addition to our focus on expanding our digital revenue, we continue to transform our place within the music value chain and to diversify our revenue mix in the music industry, including sponsorship, fan club, artist websites, merchandising, touring, ticketing, and artist management, among others.
An important ongoing element of this diversification strategy is our focus on direct-to-consumer initiatives, where we continue to work on more fully monetizing our artist websites and maximizing the promotional value and revenue which we derive from our growing video content network.
We remain proud of having built the most artist-centric video strategy in the business.
As part of that strategy, in June, we announced a partnership with MTV Network.
Going forward in the US, our online advertising inventory will be handled by MTV Network substantial and industry-leading ad sales team.
In addition, MTV Network will provide our artist with exclusive promotional opportunities across all its properties, including its leading cable networks, websites, mobile sites, and apps.
This agreement with MTV Network allows us to focus all of our energy on developing our artist [friends] while offering an opportunity to generate revenue from the value of our video content.
Now let's turn to expanded rights deals and artist services.
This quarter, we once again expanded our international artist services offerings and continued to demonstrate our successful territory-specific approach to those investments.
Seizing the opportunity to further extend the breadth of our touring presence in France, we recently acquired New Productions, a major concert promotion company in France.
This acquisition complements our January '08 acquisition of Camus Productions, another leading tour production, promotion, and booking company in France.
While Camus focuses on French artist, New Productions has hosted and produced concerts in France for many major international acts including the Black Eyed Peas and Katy Perry, as well as Warner music artists like Metallica, Red Hot Chili Peppers and Green Day.
Let's turn to Warner Chappell music.
As we've said before the music publishing business enjoys very attractive financial attributes, such as the high conversion rate of OIBDA to free cash flow and favorable working capital dynamic.
This quarter, Warner Chappell's mechanical revenue grew, but this was more than offset by declines in each of the other revenue components.
Digital revenue was affected by the timing of cash collection, and the music publishing industry synchronization and performance revenue has yet to feel the benefit of the nascent recovery in the ad market.
In contrast, mechanical revenue was better than expected, rising 19% in the quarter.
Warner Chappell's mechanical revenue benefited from a heavier mix of physical recorded music product, primarily relating to Michael Jackson, Susan Boyle, and Michael Buble, as well as a shift to accrual-based accounting for a US collection society.
We continue to selectively invest in songwriters as we build out our music publishing catalog.
Warner Chappell recently extended its administration agreement with rock legends Van Halen, which includes all of the group's past and future work.
In May, Warner Chappell was named BMI's Pop Publisher of the Year.
That award recognizes Warner Chappell's songwriters and publishers as making the most significant contribution to the top BMI pop songs played on US radio and television.
In addition, Warner Chappell songwriters received recognition with 12 BMI pop awards for their 2009 hit songs.
Before moving onto our financials, let me take a moment to describe a couple of recent developments related to intellectual property protection.
In May, Vice President Biden made a firm public statement against intellectual property piracy, stating simply that piracy is theft.
The Vice President was joined by US intellectual property enforcement coordinator Victoria Espinel, who recently released the National Strategic Plan on Intellectual Property Enforcement.
This report contains over 30 recommendations on how the US can better protect its intellectual property.
Vice President Biden also emphasized that cooperation between the content community and ISPs is an essential component to achieving protection for intellectual property.
We are pleased to see the US government focusing on the vital issue of protecting the creative works of its citizens.
And reaching a workable solution to protect intellectual property requires the government's continued determination.
IP is one of America's leading economic and creative exports.
To further America's interest in this area will require a collaborative approach between content owners and ISPs.
While litigation is rarely our preferred course of action, it is sometimes necessary to protect our artists and copyrights.
We are gratified that in May, the four recorded music majors achieved a significant victory when LimeWire was found to be liable for copyright infringement and further LimeWire's founder was held personally liable.
There is a jury trial scheduled for January 2011 to determine damages in the LimeWire case.
Steve will now run through the financials before Michael, Steve, and I take your questions.
Steve Macri - President and CFO
Thank you and good morning.
For the three months ended June 30, 2010, we reported revenue of $652 million, down 15% year over year.
As expected, our revenue was affected by our very light release schedule and the continued impact of the recording music industry transition.
For the quarter, domestic revenue declined 11% while international fell 19%.
Our quarterly digital revenue grew 1% to $179 million or 27% of total revenue.
That is up from 23% in the prior year quarter.
Strength and international download performance was partially offset by our light release schedule and decline to mobile revenue, primarily related to ring tone demand.
Digital revenue was down 9% sequentially, due to our release schedule and the seasonal pattern of digital sales.
We continue to view cost management as a top priority.
In the quarter, we incurred $9 million of severance charges compared to $3 million in the prior year quarter.
As a result of the severance charges and decreased revenue, our operating income before depreciation and amortization or OIBDA fell 29% and our OIBDA margins contracted to 10% from 12%.
Efforts to manage costs and to leverage our highly variable cost structure will help us to mitigate the pressures from the ongoing recording music industry transition.
Looking at our different business segments for the quarter.
Recorded music revenue fell 18% to $519 million.
Recorded music digital revenue grew 2% from the prior year quarter to $169 million or 33% of total recorded music revenue.
That is up from 26% in the same period last year.
The increase in recorded music digital revenue was more than offset by contracted demand for physical product, and lower revenue from our European [concert] promotion business.
Nontraditional revenue amounted to about 10% of our recorded music revenue in the quarter.
International recorded music digital revenue grew 12% giving strong iTunes momentum outside of the US.
Domestic recorded music digital revenue declined 3% to $102 million.
This represents 41% of domestic recording music revenue as compared to 37% in the same period last year.
Recording music OIBDA fell 24% year over year, due to lower revenue in the severance costs I just mentioned.
Moving on to our music publishing business.
Music publishing revenue of $139 million was down 4% versus the prior year quarter.
Synchronization revenue declined 17% and performance revenue fell by 11% as we have yet to benefit from the ad market pickup.
In contrast, mechanical revenue grew 19% as a result of Warner Chappell's compositions being used in a heavier mix of physical product and a benefit from the shift to accrual-based accounting for the US collection society.
Digital revenue declined to $13 million from $15 million or 9% of music publishing revenue.
This reflects the timing of cash collections.
Music published in OIBDA dropped 36% to $18 million over the prior year quarter.
And OIBDA margins contracted to 13%.
This decline is primarily the result of our revenue mix as mechanical revenue tends to have a lower margin and other music publishing revenue streams.
Turning to our balance sheet and cash position.
We continue to execute in our effective balance sheet strategy.
We ended the quarter with a cash balance of $400 million, up sequentially from $383 million at March 31, 2010.
We achieved a growing cash balance despite our increased semiannual cash interest payments.
As we have discussed, as a result of our May 2009 refinancing, all of our cash interest payments are now made semi-annually in the fiscal first and third quarters.
Previously under our now retired credit agreement, interest payments were made quarterly.
In addition, the Company senior discount notes have now accreted to their full principal amount.
As such the Company made the first cash semiannual interest payment of $12 million on June 15, 2010.
Therefore, our June quarter included $88 million in cash interest compared with $43 million in the prior year quarter.
Free cash flow grew to $29 million from $11 million in the prior year quarter.
Our free cash flow calculated by taking cash provided by operating activities of $49 million less capital expenditures of $15 million and cash used for investments of $5 million.
The increase in operating cash flow was primarily related to the timing of sales and collections versus the prior year quarter.
Our cash taxes continue to benefit from our tax planning strategy.
We had a tax revision of $9 million and net cash taxes of $5 million on a pretax loss of $46 million.
In the prior year period, we had a tax provision of $4 million and net cash taxes of $20 million on a pretax loss of $32 million.
We generated a net loss of $55 million or $0.37 per diluted share compared to a net loss of $37 million or $0.25 per diluted share in the prior year quarter.
Severance charges had a $0.06 per diluted share impact in the current quarter and a $0.02 per diluted share impact in the prior year quarter.
Also, interest expense in the prior year quarter included $18 million or $0.12 per diluted share of previously unamortized deferred financing fees, related to the Company's senior secured credit facility.
These fees were written off in the prior year quarter when the Company repaid the credit facility in full in conjunction with our May 2009 refinancing.
As a matter of policy, we do not provide financial guidance.
As you know, this business traditionally includes fluctuations based on recorded music release schedule and associated marketing and promotional expenses.
Now I will turn the call back to Edgar for closing remarks.
Edgar Bronfman - Chairman and CEO
Thanks, Steve.
I am gratified by our ability to continue to leverage our highly variable cost structure and be proactive in reducing our fixed cost [space] as we work to transform our business and leave the industry's transition to new offerings and expanded business models.
I would like to highlight the critical strategies on which we continue to focus.
Manage our balance sheet by generating significant free cash flow while controlling our overhead costs and other expenses.
Diversify our revenue streams by growing our digital business, our number of expanded rights deals, our artist services business and our Warner Chappell business, and invest in A&R marketing and promotion which remain the core strengths of our recorded music and music publishing businesses.
We are proud of our team which, in the face of significant and prolonged challenges, has consistently proven his ability to not only maintain focus and discipline in our core businesses, but also to innovate.
We are developing compelling new digital products, unique and powerful partnerships, and a revenue mix that is far more diversified than the one we had when we arrived six years ago.
Michael, Steve, and I look forward to answering your questions.
Thank you.
Operator, please open it up for Q&A.
Operator
(Operator instructions).
Bishop Cheen from Wells Fargo.
Bishop Cheen - Analyst
Edgar, I'm not trying to put you into a give us guidance situation, but can you give us color?
Because so much has been put into the release schedule which, we understand is not even throughout the year, but you are in your traditional, historical sweet spot being the summer and then going right through to the December quarter.
As you look out, can you tell us what we can look forward to the release schedule and your efforts at direct to consumers and investments in A&R and artists, okay, the benefits that can bring?
Edgar Bronfman - Chairman and CEO
Sure.
We, I think, had tried to be very clear that we knew the third quarter was going to be extremely light in terms of our release schedule.
The only major release, frankly, that we had in the quarter was the 'Eclipse' soundtrack which compares to last year when we had a number of major releases including Green Bay.
So we anticipated a very light release schedule in this quarter.
But coming -- we are very pleased with what we have got from now, frankly, through December and in Q4 we will be releasing a new album from the iconic rock band Linkin Park.
Seal will be releasing his follow-up to 'Soul', which was a huge seller.
We just released 'Avenge Sevenfold' which just debuted at number 1 on the Billboard charts.
We will also release new albums from Phil Collins and Eric Clapton and Zach Brown and (inaudible), all in our fiscal 4th quarter and that is before we even get to our December schedule.
So this was just an unusually light release schedule.
I think we have tried to let the market know that just the way releases fell, it was particularly light.
But it is an anomaly and our release schedule strengthens in Q4 and Q1.
Bishop Cheen - Analyst
Concurrent with that, do you see any rebounding on the consumer front in Europe?
Edgar Bronfman - Chairman and CEO
Well, I think, as I mentioned, our UK business continues to be very strong and we can anticipate that that can continue.
I think, frankly, European businesses are a mix of reasonably strong markets like France and even Germany, with much weaker markets like Italy and Spain.
Fortunately our business in the UK, Germany and France is much larger than our business imminently in Spain.
But, again, those markets are reasonably dependent on a robust release schedule and we just -- as I said, not only for international releases but even for domestic releases and particularly in France and Germany had very light release schedules in Q3.
But I don't think this was -- as I said this is an anomaly in terms of release schedule.
It doesn't -- the fundamental underlying trends that we have seen for some time have not really changed.
Bishop Cheen - Analyst
All right.
Thank you.
Operator
[Marla Backer] from Hudson Square.
Marla Backer - Analyst
I'm wondering if you could provide a little bit more granularity on some of the markets on the European -- in Europe, that seem to be a little stronger?
You mentioned France and Germany.
And from what I've read the UK has not only been strong for you, but strong overall.
What are the -- are there any factors you can cite that create greater strength there that you can import to your US operations?
Edgar Bronfman - Chairman and CEO
Yes.
I think the environment in Europe particularly in those countries is generally better for the industry though, and I'd like to point out that in those markets, particularly in France and especially in the UK, we continue to gain share in a business that is doing better than the US.
I think the fundamental difference is probably twofold.
One additional strength that we're seeing in Europe is the result of, frankly, the digital businesses being introduced somewhat later there.
So the growth is off of a somewhat smaller base in Europe than it is in the US.
And secondly, there remains a far more robust retail footprint for physical product in those markets than exists in the US, where the physical footprint has contracted far more dramatically.
And so we see a stronger, though not robust, but a stronger fiscal business in those markets than we see in the US and as I mentioned, we are earlier on the digital growth curve in those markets as well.
Marla Backer - Analyst
So does that imply that those markets may weaken before they stabilize again?
Edgar Bronfman - Chairman and CEO
I actually think that those markets will continue to perform pretty much as they have.
It's been 10 years since the physical business started to decline.
And those retail footprints have held quite strong.
And as a matter of fact, we saw that overall music sales in the UK were actually up in 2009.
So I don't see any deterioration in the physical footprint in those markets.
And I actually think digital growth, as I mentioned in my remarks, has the opportunity to return to more robust growth rate as we see the introduction of more broadly of access models and new business models beyond the iTunes model.
Marla Backer - Analyst
Okay.
And then one other question about seeking new revenue models.
Sony, last year, had the Michael Jackson 'This Is It' concert and then this year, earlier this year, they had a Kenny Chesney concert which they showed in movie theaters.
Are you thinking in terms of other venues other than live events are taking some of the live events and repurposing them for movie theaters or for television or other venues that could also help with branding, promotional and revenue opportunities?
Thank you.
Edgar Bronfman - Chairman and CEO
Yes.
I think, rather than looking at those one-offs, what we have employed is a much broader expanded rights through a 350 dual partnership with our artists.
And I think it is important to note that our growing share in the recorded music industry comes as we require our artist assigned, really, only expanded rights deals with artists.
The other record companies do not manage that process as stringently as we do.
So I would sort of point out that it's our share growth is even more remarkable by the fact that we only sign expanded rights deals when we signed new artists.
And the reason we do that is that we are the risk capital that create (sic) the opportunity for an artist to have a career which, of course, in success reaches across many revenue streams.
Whether that's video, audio, or live and all the streams from those as well as online.
And we share, as a result in all of those streams.
There is no question that video content is becoming more important.
I'm not sure that concert films in theaters is particularly -- going to be a particularly robust part of the overall revenue picture forward.
But certainly the iPAD, as Rupert Murdoch said yesterday, is a game-changer.
I agree with him.
It is going to put more of an emphasis on video content and -- rather than just audio content.
And I think, given our partnerships with our artists and the products that we are building and creating, we are in a very good position to capitalize on that growth.
Marla Backer - Analyst
Okay.
Thank you.
Operator
Ingrid Chung from Goldman Sachs.
Ingrid Chung - Analyst
So Edgar, I was wondering if you would tell us whether you see anything on the horizon as being a game-changer for digital?
Do you see perhaps maybe the launch of Google music later this year as a catalyst for the music industry?
And then just as a follow-up, I was wondering if you could give us some color around the European concert promotion weakness in the quarter?
Was that a function of having fewer artists tour?
Or was that due to the macro environment?
Thanks.
Edgar Bronfman - Chairman and CEO
Let me answer the second question first.
That was simply due to having fewer artists tour, not to the macro environment.
I believe last summer we had a Johnny Holiday tour in France, which we didn't have this year.
And just given the still relatively narrow size of our touring footprint, things like that can skew our results more dramatically.
But the underlying European concert business is just fine.
In terms of game-changers for digital, you know, Google has yet to make any announcements about its music plan.
And I certainly don't want to preempt those.
But I would say that as the -- in general, as the economic hierarchy in the mobile space or -- the perhaps better said, the wireless space has yet to be written, there are a number of companies jockeying for position.
So if you think about the economic hierarchy in the computer world, both PC- and Mac-based, it is pretty much clear who the winners and losers in that world are and their positions in that world are relatively clear.
If not necessarily absolutely stable.
I think that's not at all true in the non-wired world.
And companies like Apple, like Google, like Microsoft network operators, device manufacturers, Sony, etc., all recognize that that economic hierarchy is yet to be established.
And in that race to establish a position in the hierarchy in that much larger world than the computer world, we see a great deal of opportunity.
Because, quite frankly, we think content and music, specifically, is a critical enabler to those companies that seek to have a permanent and profitable position in that hierarchy.
So without being specific about Google's plans or other people's plans, are we optimistic about the next 12 to 18 to 24 months?
As the struggle for supremacy in that hierarchy occurs among major corporations, we are really quite optimistic about the role we can play in that regard.
Ingrid Chung - Analyst
Okay.
Perfect.
Thank you.
Operator
Tuna Amobi from Standard & Poor's Equity Group.
Tuna Amobi - Analyst
So I wanted to get a little bit more color on the MTV deal.
You know, I am a little surprised that you decided to go on the exclusive side.
So I guess the question is what kind of guarantees if any did you get?
And you know, if you can provide some color on how you expect that deal to scale over time, any color on the term, on the length of the deal, etc.
would be helpful.
Edgar Bronfman - Chairman and CEO
Well, first of all it's not an exclusive deal in the sense that MTV really has the first opportunity to sell our video content.
You know and it's really to be said exclusivity exists.
It is really only around the right to sell advertising inventory.
That actually puts us in a much better position than we were without [Rigor], which is a fine company and did a good job for us, but had a salesforce approximately 1/10 of the size of MTV Network.
In addition, as a result of the agreement to have MTV selling our video content, we have a broad-based agreement with them across all of their properties, including their cable networks for increased promotion and visibility for our artists.
As we talked about from day one, our video strategy is very artist-centric.
We think there is ultimately more value in promoting our artists as brand, than having our artists serve as promoters for a unified brand.
And we -- that is simply not our strategy.
A unified brand has the opportunity to sell advertising.
We think the individual brands have the opportunity to aggregate advertising revenue, but to sell much more in terms of their regular commerce, whether that is merchandising, ticketing or other opportunities.
So we think actually it is a more -- it's a better strategy from a monetary standpoint than trying just to create a single brand across a single revenue stream.
And MTV Network allows us to monetize that strategy without us having to build our own resources.
It is not a long-term deal, but it is an important partnership for us.
We are very grateful that we have been able to reach that agreement with MTV Network.
And, frankly, in success we will extend that deal and we have every expectation that such an occurrence will be the case.
Tuna Amobi - Analyst
Thanks for the clarification.
Edgar Bronfman - Chairman and CEO
Thanks very much and thanks, everyone, for taking the call.
I know it's a busy morning and we appreciate the time and attention.
See you next quarter.
Thanks.
Operator
That concludes today's conference.
You may disconnect at this time.