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Operator
Welcome to the Warner Music Group's third-quarter earnings call for the period ended June 30, 2011.
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 2011 conference call.
Both our earnings press release and the Form 10-Q we filed this morning are available on our website at WMG.com.
Today, CEO, Edgar Bronfman, Jr., will update you on our business performance and strategy.
Executive Vice President and CFO, Steve Macri, will discuss our quarterly financial results and then Edgar and Steve 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.
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 cause actual results to differ materially from those in the forward-looking statements is contained in our earnings press release and Form 10-Q and other SEC filings.
We plan to present certain non-GAAP results during this conference call.
All of the 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
Thanks, Jill.
Hello.
I appreciate everyone joining us today for our first quarterly conference call since the closing of our acquisition by Access Industries on July 20.
Although we are now a private company, we continue to have public debt and plan to continue holding earnings calls for our bondholders in the investment community on a quarterly basis.
For those of you who are new to WMG, welcome.
We also welcome back our longtime bondholders.
I'll take a few minutes to describe recent developments that we see as promising steps forward in the recorded music industry's transition, but first, for the benefit of our new investors, I would like to provide some context.
For the first six months of this year, the industry saw US album unit sales rise, the first time that's happened since 2004, which is an encouraging development.
And in just the past couple of months, we have seen the announcement and introduction of a number of new and exciting digital music services, and the emergence of other products and business models including various cloud-based offerings.
In June, Apple announced its iCloud service and its forthcoming iTunes match feature, which will allow users to access their music collections remotely without having to upload individual tracks.
In July, we saw the US launch of Spotify, the popular European streaming service.
We've also seen governments and technology partners around the world begin to take the kind of concrete steps that many in the content industries have called for to protect copyright.
On the heels of laws to protect copyright already passed in France, South Korea, New Zealand, and the UK, and the announcement in the US from the motion picture industry, the music industry and Internet service providers, of the Copyright Alert System, the groundbreaking program to curb online piracy.
And potentially also important, Baidu, China's biggest search engine, announced that it will offer legitimate music content to its massive user base and introduce new measures to protect copyrighted content.
We have worked hard to help shape these developments and view all of them as encouraging for WMG and for the broader music industry.
That said, we still face the headwinds of a recorded music industry going through a lengthy and complex transition.
Our growth strategy has been to focus intensely on artist development and work to develop new business models to seize on emerging and faster-growing opportunities, such as digital, all while managing costs aggressively.
The core of this management team has run the company from 2004 and since then has navigated the recorded music industry's difficulties and the worst economic downturn since the Great Depression.
Despite those hurdles, we have succeeded in transforming the Warner Music Group.
Consider these highlights.
Today, nearly half of our total revenue comes from businesses that did not exist in 2004.
More than 60% of the artists on our active global recorded music roster are signed to deals with a comprehensive suite of expanded rights.
In 2008, The New York Times reported that Atlantic Records became the first major label in the United States to achieve more than half of its recorded music sales from digital.
We delivered the greatest US total album share growth, up 23% between 2004 and 2010 of any major music group.
In Warner Bros.
records and Atlantic Records, we've had the Number One US Label 4 times since 2004.
Warner Chappell was named BMI's Music Publisher of the Year 3 times since 2004.
And this past May, Atlantic Records was named the UK's Record Company of the Year.
We achieved all of this while growing our OIBDA and OIBDA margin, the best measure of our profitability.
With that as a backdrop, I'll mention a couple of highlights for this quarter before Steve walks through the rest of the financials.
First, we grew OIBDA by 20% over the prior-year quarter and expanded our OIBDA margin more than a percentage point to 11%.
Second, Warner Chappell grew revenue in three key categories -- synchronization, performance and digital.
Third, our US recorded music business grew its digital revenue to 48% of total US Recorded Music revenue, up from 41% last year, and Warner Music Group's total worldwide digital revenue grew by 9%.
Of course, at our core, we are in the business of artist development, and I'm very pleased that our artists continue to deliver incredible music and achieve tremendous success.
Our top sellers for the quarter included Bruno Mars, Superfly, Wiz Khalifa, Hugh Laurie, and Cee Lo Green.
And we are looking forward to upcoming releases from the Red Hot Chili Peppers and Jason Derulo in the fourth quarter.
Recorded Music revenue also benefited from an expansion into faster-growing segments of the music business, including notable success in our European concert promotion businesses.
Warner Chappell continued to build on its impressive roster.
Last month, we signed Grammy award winning songwriter, Brett James, to a co-publishing agreement for all of his future works and signed a worldwide co-publishing agreement with singer-songwriter and actress, Jana Kramer, who stars in the television series, One Tree Hill.
Also, let me congratulate Robert Lopez a Warner Chappell songwriter who cowrote the music for the Broadway Musical, The Book of Mormon, which earned nine Tony Awards this year, including Best Score and Best Musical.
Tony Awards were also awarded to the musicals Anything Goes, Catch Me If You Can, and Priscilla Queen of the Desert, all of which included contributions from Warner Chappell songwriters.
Now I'll turn it over to Steve, who will run through our financials before we take your questions.
Steve Macri - EVP and CFO
Thank you and good morning.
This quarter, we delivered solid performance across our businesses.
Revenue was largely stable, OIBDA grew and OIBDA margins expanded.
Our ongoing cost management efforts continued to provide financial flexibility as we transition to digital and artist services business models.
In addition, we are pleased to be well on our path to cross the digital divide in the US, when digital product sales represent a majority of our Recorded Music revenue.
We reported revenue of $686 million, down just 1% year over year, with international growth of 5%, largely offsetting domestic declines.
Quarterly digital revenue was $203 million, 30% of total revenue.
We saw particularly strong growth in global digital downloads, while newer revenue from streaming businesses such as Spotify also increased.
Given the ongoing recording music industry transition, managing our costs remains a top priority.
As a result, we took quarterly severance charges of $10 million compared to $9 million in the prior-year quarter.
In addition, we targeted cost savings over the next nine fiscal quarters of between $50 million and $65 million.
That includes savings from our transition to a private company and reduced expenses from certain corporate restructuring initiatives.
With these and continued cost management efforts, we will continue to drive efficiency throughout the organization.
Overall, OIBDA rose 20% to $77 million and OIBDA margin expanded more than 1 percentage to 11.2% from 9.8%.
Our OIBDA results for the current and prior-year quarters included the severance costs.
The current quarter also included $12 million in OIBDA from the recording music legal settlement with LimeWire as well as $5 million in costs incurred in the transaction with Access Industries.
Looking at our different business segments for the quarter, Recorded Music revenue was stable at $545 million, due to our continued focus on successful artist development and strength in our concert promotion business.
Recorded Music digital revenue grew 9% for the prior-year quarter to $191 million or 35% of total recorded music revenue.
That is up from 32% in the same period last year.
We saw strong International Recorded Music digital revenue growth of 11% as iTunes and streaming services continue to gain traction outside the US.
Domestic Recorded Music digital revenue rose 7% to $108 million.
That was driven by strength in downloads and newer revenue streams, though partially offset by lower demand for ring tones.
Digital revenue represented 48% of US Recorded Music revenue this quarter compared to 41% in the same period last year.
We are very pleased to approach the 50% digital mark in our US Recorded Music business.
Of course, we do recognize that these results may fluctuate quarter to quarter based on the mix of releases and the ongoing transition of the business.
Recorded Music OIBDA grew 29% to $84 million, while OIBDA margin expanded 3 percentage points to 15%.
These solid results reflect changes in our sales mix, proceeds from the LimeWire Settlement, and lower Recorded Music severance charges.
Turning to Music Publishing, we are pleased with our Music Publishing results this quarter.
Performance, synchronization, and digital revenue all have healthy growth this quarter, highlighting our continuous efforts to enhance and drive the business.
Our growth in performance revenue reflects the improved advertising market, the timing of cash flows and recent acquisitions.
Synchronization strength reflects our focused efforts to drive this business and digital revenue reflected growth in global digital downloads and streaming services.
Overall, Music Publishing revenue fell 3% to $146 million, as growth in these areas was offset by expected declines in mechanical revenue.
The mechanical revenue decline tracks the overall physical Recorded Music market.
Music Publishing OIBDA of $22 million improved 22% from the prior-year quarter and OIBDA margin expanded 2 percentage points to 15%.
The OIBDA results reflect changes in revenue mix, the absence of discontinued low-margin administration deals, and our ongoing cost management efforts.
Turning now to our balance sheet, in connection with the closing of the acquisition by Access Industries, we closed bond offerings totaling about $1.1 billion and refinanced certain of our existing indebtedness.
As a result of the refinancings, our consolidated annual interest expense will increase from $195 million to $227 million.
In connection with the closing, we also entered into a new $60 million revolving credit agreement, which is currently undrawn.
In addition, we pushed out our earliest maturities from 2014 to 2016.
We are comfortable with our cash position and our ability to generate cash.
As of June 30, 2011, our cash balance amounted to $290 million, down from $319 million at March 30, 2011.
Free cash flow was negative $36 million compared to positive $29 million in the prior-year quarter.
That reflected the differential and year-over-year timing of sales and collections in the Recorded Music business, as well as higher cash used for investments.
It was partially offset by lower capital expenditures.
Free cash flow was calculated by taking cash used by operating activities of $11 million, less capital expenditures of $12 million and cash used for investments of $13 million.
Turning to taxes, we had a tax expense of $15 million and net cash taxes of $7 million on a pretax loss of $31 million.
In the prior-year quarter, we had a tax expense of $9 million and net cash taxes of $5 million on a pretax loss of $46 million.
The higher tax expense this quarter relates to increases in tax reserves and foreign earnings subject to tax in certain jurisdictions.
Overall, we were pleased with the way the business operated this quarter.
We are confident that our combination of carefully crafted artist development, cost management, and business transformation initiatives position us well for the future.
With that, operator, please open the line for questions.
Operator
(Operator Instructions).
Bishop Cheen, Wells Fargo.
Bishop Cheen - Analyst
Hi, everyone.
Thanks for taking the question and for the update.
So pro forma, the big recap that was completed in July, could you just give us the layers on the debt, the secured debt, the op-co debt, and the hold-co debt?
Hello?
Steve Macri - EVP and CFO
Sure, good morning, Bishop.
This is Steve.
So, what we did on the refinancing, we added another $150 million mirror note to the senior secureds.
We -- the hold-co note went from roughly $250 million to $150 million.
Bishop Cheen - Analyst
Right.
Steve Macri - EVP and CFO
And then the delta was the senior unsecured notes that we raised.
Bishop Cheen - Analyst
Okay.
So, just go through the numbers.
Total secured debt now is pro forma -- is what?
Steve Macri - EVP and CFO
$1.069 billion.
Bishop Cheen - Analyst
Okay.
And total op-co debt is (multiple speakers)
Steve Macri - EVP and CFO
That's the old notes of $1.069 billion.
We raised another $157 million of senior secureds to 9.5%.
Bishop Cheen - Analyst
Right.
Steve Macri - EVP and CFO
Raised $747 million of senior unsecured notes.
Bishop Cheen - Analyst
Right.
Steve Macri - EVP and CFO
And we raised $150 million of hold-co notes.
Bishop Cheen - Analyst
Okay.
All right.
Just I'm in the ballpark.
I just wanted to --
Steve Macri - EVP and CFO
You'll be able to see that in our -- the 10-Q we filed this morning, all that detail is in there.
Bishop Cheen - Analyst
Okay, great.
Then I will not waste time and I will pass it along for the rest of the [tone].
Thank you.
Operator
Aaron Watts, Deutsche Bank.
Aaron Watts - Analyst
Thanks.
New era for the company here -- I figured I would take a crack at this.
Can you give us any thoughts on the release slate for you guys for the rest of the year?
Edgar Bronfman - Chairman and CEO
So, it's Edgar.
Aaron, we don't divulge our release slate by quarter or by year, but we do occasionally mention releases that are coming in the quarter when we have already released a single, and therefore, you know the album is coming.
So, we've got Red Hot Chili Peppers being released this quarter.
We've got Jason Derulo being released this quarter, and obviously a number of artists in local markets around the world.
But generally speaking, we feel we've got a good release schedule for this year and obviously into 2012, but there are variations quarter to quarter and our business and we try not to flag releases because, quite honestly, it puts a lot of pressure on our artists only did that and we think it's counterproductive ultimately to both our artist on the one hand and the market itself.
So as I said, we don't really flag releases except for when we know they are coming and a single is already in the market.
Aaron Watts - Analyst
Okay.
And then on the Publishing side of the house, clearly, good traction in most areas there except mechanical.
How should we think about the mechanical declines going forward relative to the physical declines in the business?
I think if I remember right, the mechanical revenues kind of lagged behind the declines in physical for a long time.
It seems to have finally caught up.
I guess just more, when do you think that turns a corner relative to the physical sales decline?
And how do we think about the degree of declines in the mechanical part of the publishing business?
Steve Macri - EVP and CFO
Hi, so this is Steve here.
First, let me just tell you about the Q3 decline in mechanical revenue.
In the prior year, we had a $10 million benefit moving from a cash basis to an accrual basis, accounting for a particular US collection society.
So that year-over-year decline in the mechanical revenue, the lion's share of that relates to just the change in accounting this quarter versus the prior-year quarter.
In general, absent that unusual item, the mechanical revenue will track the overall declines in the physical recording music market.
And you are correct, there is somewhat of a delay because the publishing business is on a cash basis -- it's -- you can think about it somewhere around a 12- to 18-month time frame between the physical declines on the Recorded Music side versus those in the mechanical side.
Aaron Watts - Analyst
Okay.
That's helpful.
And last one for me -- a lot of good buzz around Spotify, and I was curious if you've got any early sort of thoughts on how successful that launch has been.
And maybe also in your mind, how much of the subscriber base there ultimately will have to be a premium or a paying subscriber base for it to be a valuable distribution platform or revenue generator and cash flow generator for you?
Thank you.
Edgar Bronfman - Chairman and CEO
So, this is Edgar.
We're only a couple of weeks into the Spotify launch, and I think frankly, we should leave it to Spotify to release the numbers rather than us doing that for them.
But I will say that the early traction has been very encouraging, and we are very pleased with the progress so far.
And I would further tell you to the last part of your question, without giving you a specific percentage number, the kinds of levels that Spotify is currently achieving in Europe with regard to moving free users to premium paid consumers is also extremely encouraging, and if that keeps up, I think they will be a very profitable business themselves and obviously will generate significant profit to Warner and to the larger music industry.
Aaron Watts - Analyst
Okay, great.
Thank you.
Operator
Andrew Finkelstein, Barclays.
Andrew Finkelstein - Analyst
Good morning.
Just wanted to ask about the US recorded business.
It did look a little light.
I was wondering if you could tell us how you guys think you did against the industry here in the quarter.
And I think you guys have usually given us a market share update for Warner.
Edgar Bronfman - Chairman and CEO
Yes, so I think the answer is, this quarter, we didn't fare that well from a market share standpoint.
As I said, we've been able to increase share over the past six or seven years steadily and to a greater degree than any other major music company.
We are going through a transition at Warner Bros.
Records, one of our two major labels, and we did have a slightly lighter release schedule in the quarter.
So both of those things reflected a lower share for us this quarter than we're used to.
And we have every expectation we will be able to continue our long-term share increased performance, but we were light in terms of our share this quarter in the US for sure.
Andrew Finkelstein - Analyst
Okay.
And then one more for me -- just on the investment side, I don't know if there was anything specific in that quarter, and maybe just looking ahead, you can tell us generally where you think the investment line is going to be, how we should think about that over the next few quarters.
Steve Macri - EVP and CFO
Yes, so the investments in the current quarter relate to -- largely relate to the acquisition of music publishing rights.
From a use of cash or investments in the near term, we will continue to look at, as we have in the past, relatively small music publishing copyrights and/or businesses.
So I wouldn't expect to have anything significant from an investment line standpoint.
Andrew Finkelstein - Analyst
Okay, great.
Thanks.
Operator
Thomas Cubeta, UBS.
Thomas Cubeta - Analyst
I had a quick question for you guys.
First on product costs -- I just wondered why those went up year over year.
I would've thought with the digital transition, they would have been flat or down.
And then secondly, in regards to Spotify and iCloud, I'm sure you won't give specifics, but can you just give us a sense, are these fixed rate -- are you receiving a flat rate every year plus incentives?
Or is it all variable?
And just give us an idea of how the economics work.
Thank you.
Steve Macri - EVP and CFO
Good morning, Thomas.
This is Steve here.
Your hypothesis is correct.
In the transition from physical to digital, provides roughly a 20-point margin benefit on average.
But in particular in this particular quarter, what flows through the product costs is our European cost promotion business.
And so all the costs related to the promotional of that particular concert flows through product costs.
So absent that, you would see an improvement because of our revenue mix.
Edgar Bronfman - Chairman and CEO
This is Edgar, Thomas.
To the second part of your question, again, without being specific, Spotify and iCloud operate somewhat differently, but there are some similarities.
We, as an industry, receive a certain percentage of the revenues from Spotify as well as a certain percentage based on a per-stream rate from Spotify.
And then, that industry pool that's created from Spotify is then apportioned on a share rate based on what's being streamed on the Spotify service.
So whatever the overall pool is in the music industry, Warner would receive its share based on the number of streams that were on the Spotify service that quarter.
With apple, we have a strict confidentiality agreement, so we can't get into the terms, but just to say again, we have a retail/wholesale relationship with Apple, which is, on iCloud, not a dissimilar relationship to the one that we have in the digital download marketplace.
Thomas Cubeta - Analyst
And just on the Spotify, is there a minimum guarantee?
Or is it all variable?
Edgar Bronfman - Chairman and CEO
It is entirely variable.
And having said that, Spotify pays advances, which we recoup against the revenue that is earned.
But given the -- we're very pleased with the arc of Spotify's growth.
Thomas Cubeta - Analyst
Okay.
Thank you.
Operator
Bob Kricheff, Credit Suisse.
Bob Kricheff - Analyst
A quick question for you -- you have had the multitiered pricing for a while out there on iTunes and elsewhere.
Have you noticed any elasticity, an elasticity in being able to offer the different prices?
And then the second question, and if you touched on this earlier, I apologize -- was there any impact from Japan in the quarter on the international sales?
Edgar Bronfman - Chairman and CEO
Just briefly, Japan was a slight positive in the quarter this year again.
I caution against anybody reading too much into one quarter in any particular market, just given the vagaries of release schedules, et cetera, but in this quarter, Japan was a positive.
In terms of iTunes pricing, Bob, what we have noticed is that increasing pricing, increased pricing is not a barrier to consumer purchase; in fact, quite the contrary.
When we offer albums at a standard price, at a premium price and at a super premium price, what we see is that the vast majority of albums acquired at least in the first month are super premium level.
That's because generally, fans of a particular artist want as much content from that artist as they can get.
On the other side, what we have seen is that where we have lowered price on songs to $0.69 has not driven any real increase in volume.
And that's pretty understandable because if you don't particularly want a song, there's really not a price at which you are going to buy it.
It's not something that's driven by value.
It's just driven by desire.
Bob Kricheff - Analyst
Okay, great.
Thanks for the color.
Operator
Adam Spielman, PPM America.
Adam Spielman - Analyst
Thank you.
First, a very quick housekeeping question, and I haven't gone through the whole Q, so if this isn't there, please reference it.
But what's the cash balance pro forma the new debt offering?
And how much is held at the holding company?
Steve Macri - EVP and CFO
So how much is held -- well, we do disclose in the Q, you will be able to see what's that holding in parent as of the June 30 quarter close.
From a pro forma standpoint, we haven't closed what those balances are.
But what I can tell you is we did use a certain amount of cash for the transaction.
So as of June 30, the cash balance was $290 million, and a portion of that cash was used to fund part of the transaction and transaction fees.
Adam Spielman - Analyst
Okay.
And then just onto the business, just trying to understand some of the trends in publishing, and maybe if you just refresh me again.
On the performance side, what -- are we still lapping something that's driving changes?
And is there still any -- is there like a royalty change out there that we're waiting on?
Steve Macri - EVP and CFO
This is the first quarter since the last four quarters that you no longer have the overhang in a prior year from the low-margin administration deals that we chose not to renew.
And so, the performance -- the underlying performance business has been strong, but masked by our option not to renew that low-margin business, so you can see in this particular quarter, performance revenue was up 7% year over year.
There is a rate negotiation that is currently taking place on the performance revenue side, but that's yet to be determined and settled.
Adam Spielman - Analyst
Okay.
And then just one final one here, in your recent bond offering, you had a new kind of EBITDA definition, adding back all these charges.
Do you have just a comparison on that basis?
It looks like the press release, you are still just kind of reporting the old OIBDA.
Steve Macri - EVP and CFO
Yes, in our press release, we will continue to report our OIBDA that we have tracked historically since we've gone public, as well as the reconciliation from that OIBDA to the GAAP measures.
We will not be reporting adjusted EBITDA per the indentures.
However, the indentures are filed with the SEC and all the relevant details that calculate that adjusted EBITDA -- you can find them online.
Adam Spielman - Analyst
Okay.
Thank you.
Operator
Ian Whittaker, Liberum.
Ian Whittaker - Analyst
Thanks very much.
Just a few things -- first of all, so that you mentioned that you had lost share in Q2 and obviously we can't just look at one quarter.
When you look on the full-year basis, do you think that you'll be able to maintain your share in the US market, recorded music market, or do you think as a whole you will lose share?
And I'd be just quite interested to hear your thoughts on whether you think any of your competitors have a particularly strong schedule that you can see.
The second question just has to do with markets generally.
In the music industry, we've been through some false storms before where we think that maybe the declines are starting to hold.
Are there any markets out there where you are pretty confident that things have turned on a permanent basis, and that really we have really seen the [off and go] of those markets?
Edgar Bronfman - Chairman and CEO
So I think, first of all, we don't predict market share, and so I don't really want to get into a forecasting -- into forecasting our shares other than to sort of fall back on what I said earlier, which is we've been able to increase our share over the past six or seven years or seven plus years.
We think we'll be able to continue to do that.
Whether that happens in any given year or any given quarter, it is really a forecast that I think is not -- is counterproductive for us to do.
We are going through a transition at Warner Bros.
Records.
That has affected some of our share, but we've got a fantastic new management team out there and very confident about their ability to gain traction and keep us over time on the same kind of market share growth trajectory we've been on in the past.
I don't comment on competitors' release schedules, so I leave it to the competitors to do what they do, we will do what we do, and we will fight for share in the marketplace, but I try not to compare or comment.
In terms of markets, I think while -- first of all, I have steadfastly refused since we've been here to call the bottom because I'm just not a clairvoyant, but what I will say is that regardless of the positive physical trends in the US in the first six months, if you look at our digital revenue, which is essentially now half of our US revenue -- as that becomes even a larger part of our revenue and digital is growing -- it will begin to out outweigh declines of physical.
Obviously, that will depend on the rate of growth of digital, the rate of decline of physical and their relative shares of our revenue base.
But you can see the turn that was not necessarily at hand in this quarter.
You can see the turn in the US coming as digital becomes a larger percent of our revenue.
And while Europe is anywhere from 18 to 24 months behind that, we think that trend is inexorable.
I think the other thing I would mention is all of that has happened pretty much up against one business model which is digital downloads, and pretty much one digital download provider overwhelming everyone else.
And now what we are seeing is the expansion that we've been calling for and suggesting would happen, but it's taken much longer, frankly, than we had hoped.
Many new digital business models, many new digital services -- which as I mentioned include both iCloud and other cloud-based services, and Spotify which, in a sense, is a cloud service as well.
With the sort of advent of the cloud, I think you're going to see significantly broader music service introduction, broader strategic distribution, and therefore, I hope a reacceleration of overall digital growth beyond the growth of the digital downloads, which is what the industry has really been living on since their introduction in early 2004.
Ian Whittaker - Analyst
Okay.
And just one quick follow-up -- do you have any [data] that you could share with us just on the general consumer and what their spending patterns are in terms of what they spend on music?
Edgar Bronfman - Chairman and CEO
I don't think we have -- we don't have specific data on what US or other consumers around the world have spent in the past as a percentage of their consumer expenditures on music from one year to the next.
But obviously, music is not immune from a slowdown in the general world economy.
And, as economies fail to grow or are in recession or are growing much more slowly than countries are used to, it will have an effect on all consumer expenditures, including ultimately, music.
There's been a, I think, a misperception that music is immune from recessions and economic turns.
I think that was based on data when you track recessions in the '80s and '90s, but those recessions really were during the CD boom, and I think the CD boom masked the effect that general economic conditions have on all industries, including the music industry.
It may not have the same -- the effect to the same degree as it does on, obviously on commodities and others, but it will have some effect.
But we don't have specific consumer information year to year on music as a percentage of their expenditures.
Ian Whittaker - Analyst
Thank you very much.
Edgar Bronfman - Chairman and CEO
Thank you, Ian.
Thank you, everyone, for joining us.
We really appreciate your interest in the company.
We will endeavor to be as open and transparent to you as we were when we were a publicly-listed company and look forward to not only talking to you next quarter, but being available to you between now and then.
Thanks, again, very much.
Operator
That concludes today's conference.
You may disconnect at this time.