Warner Music Group Corp Q1 2026 Earnings Call Transcript

Warner Music Group Corp (NASDAQ: WMG) Q1 2026 Earnings Call dated Feb. 05, 2026

Presentation

Operator

Welcome to Warner Music Group’s first quarter earnings call for the period ended December 31, 2025. 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. Now, I would like to turn today’s call over to your host, Mr. Karim Chin, head of Investor relations. You may begin.

Kareem Chin — Head of Investor Relations

Good afternoon and welcome to Warner Music Group’s fiscal first quarter earnings call. Please note that our earnings press release and snapshot are available on our website and we plan to file our form 10Q on February 9th. On today’s call we have our CEO Robert Kinsel and our CFO Armin Zerza who will take you through our results and then answer your questions before our prepared remarks. I would like to remind you that this communication involves forward looking statements that reflect the current views of Warner Music Group about future events and financial performance. We plan to present certain non GAAP results, including metrics that are adjusted for notable items during this conference call and in our earnings materials and have provided schedules reconciling these results to our GAAP results in our earnings press release.

All of these materials are posted on our website. Also, please note that all revenue figures and comparisons discussed today will be presented in constant currency unless otherwise noted. 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 that 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 as they are subject to a variety of risks, uncertainties and other factors that can cause actual results that materially differ from our expectations.

Information concerning these risk factors is contained in our filings with the S.E.C. and with that, I’ll turn it over to Robert.

Robert Kyncl — Chief Executive Officer

Thanks, Karim, and hello everyone. Greetings from Los Angeles where we celebrated the successes of our artists and songwriters at the Grammys this past weekend. In fact, you just heard songs from our winners Kehlani, fka, Twigs, Turnstile, as well as Bruno Mars who gave two incredible performances at the show. Our momentum continues as we delivered a third consecutive quarter of strong profitable growth. Total revenue increased 7%, led by 9% growth in recorded music subscription streaming on an adjusted basis. Total adjusted OIBDA increased 22% and margin increased 310 basis points. It’s clear that our strategy is working as we continue to deliver on the three key components of our growing our share, growing the value of music, and driving efficiency.

I’ll talk about our progress on each front and then I’ll explain how we plan to leverage AI to further accelerate progress towards each of these three goals. Our strong Q1 results reflect the steady market share improvement we’ve been delivering. We saw approximately 1 percentage point of US streaming market share growth over the prior year quarter with strength across new releases and catalog and our market share on Spotify’s top 200 chart is up 3 percentage points fiscal year to date. We started the year with a bang as we released Zach Bryan’s new album with Heaven on Top, sending it to number one on Billboard 200.

Meanwhile, just after his collaboration with Rose on APT finished at number one on the Billboard year end global chart, Bruno Mars released his new single I Just Might. It quickly jumped to number one on the Billboard Hot 100 and on both the Spotify, US and global charts. Bruno’s long awaited first new solo album in a decade, the romantic, drops on February 27th. Both Zach and Bruno are signed to us for recorded music and Music Publishing, which is a true testament to our One Warner approach outside the us Our focused approach is also paying off with talent resonating across markets, languages and cultures.

We scored number ones in France, Italy, Spain, the Netherlands, Finland, Korea and China and also on the Billboard Latin Airplay chart. Turning to our global catalog division, we’ve taken a new strategic approach that’s also driving our share, including an always on marketing philosophy that ensures we keep artists brands alive and fresh with new generations across all forms of media. And we continue to find powerful sync placements to fuel consumption of our catalog and introduce our iconic catalog to new fans. An example is this season Stranger Things on Netflix, where syncs resulted in major streaming upticks and chart movement for classic songs from legends like Prince, David Bowie and Fleetwood Mac.

Momentum from a placement in the show’s finale drove a more than 600% year over year increase in weekly streams following the premiere of the finale on Prince’s 1984 hit Purple Rain, which led to it re entering the Billboard Hot 100 for the first time in over a decade. Importantly, we’ve seen baseline weekly streams of Purple Rain settle to a new baseline that’s six times higher than before the sink. And for David Bowie’s anthemic Heroes, we saw more than 300% year over year increase in weekly streams and a new baseline that’s two and a half times higher than before the sync.

Amazing results as you can see in publishing, we focused on accelerating our proven ANR strategy by building and acquiring high margin ip, executing admin and sub publishing deals, and growing revenue through AI partnerships. Warner Chapel songwriters contributed to half of the top 10 most streamed songs of 2025 in the US and a huge congrats to Amy Allen who won Songwriter of the Year at the Grammys for the second year in a row. Turning to Growing the Value of Music, we’re now seeing the impact of the deals we’ve reshaped with the DSPS last year. These agreements are finally shifting the industry toward price driven growth that better reflects the ever increasing value of music to users and providing us with greater economic certainty.

I’m also pleased to announce we’ve renewed our deal with TikTok, resulting in an improved deal economics moving to our third priority of improving efficiency through our investments in technology over the past few years, such as overhauling our supply chain, building new tools for other songwriters and employees, and rolling out our financial transformation program, combined with our reorganization, we have impressively been able to accelerate growth while cutting costs. This strategic overhaul of our foundational technology infrastructure has not only enabled us to increase efficiency, but has positioned us favorably to leverage AI across our three strategic priorities.

Growing Share, Growing the value of music and efficiency. That, combined with our management team’s deep tech and transformation experience, uniquely positions us to capitalize on this tremendous opportunity. Starting with Growing Share, we’re quickly deploying AI to accelerate new artist discovery and enhance and automate our marketing. This enables us to scale our marketing efforts beyond what’s humanly possible, a transformational step for a large rights holder like us. We have an attractive opportunity to better monetize one of our most cherished assets, our extensive music catalog of over a million recordings that includes some of the most iconic songs ever recorded.

With the use of AI, we can quickly and inexpensively generate assets like motion art and music videos and others that stimulate greater exposure and engagement with our catalog at scale. At the same time, we’re developing tools to amplify the creativity of our artists and we’ve been hosting workshops and songwriting camps to help our creators leverage the latest technologies to hone their work, cut through the noise and build fandom in today’s fast moving world, we also see a clear and tangible opportunity to leverage AI against our second priority, which is to increase the value of music by leaning into partnerships with new entrants such as SUNO and Udio as well as our digital service providers.

That provides fans with the opportunity for deeper engagement at higher priced tiers and we’re already in discussions with some of them. By taking an early and aggressive approach to embracing new technologies, we are authoring ethical guidelines that will enable us to protect and super serve artists and songwriters while creating incremental opportunities for the entire ecosystem. To reiterate on my blog post from November, WMG is harnessing AI as fuel for music industry growth guided by several non negotiable principles. 1 our partners must commit to license models, 2 the economic terms must properly reflect the value of Music&3 artists and songwriters must have a choice to opt in to any use of their name, image, likeness and voice in new AI generated recordings.

The latest example of these principles in action is our recently signed deal with suno, the leader in AI music. And when it comes to our third pillar, efficiency. As I mentioned earlier, over the last three years we laid the infrastructure foundation for us to effectively deploy AI across many different departments across the company. This includes departments such as Legal, Finance and hr. To further increase our efficiency and effectiveness, AI is leading to an explosion in creative and commercial possibilities that will create even greater demand for original talent. Shifts in culture and tastes have and will always be defined by real artistry, identity and vision that define the strongest creative brands.

In adhering to our principles, we are protecting and supporting our artists and songwriters original creativity, increasing fan engagement and unlocking even greater value for the entire industry. We are well positioned to capitalize on a healthy and growing industry. Momentum is strong and we’re seeing creative success that is translating to steady market share improvement, progress in economic terms with major DSPs and deals with existing and new innovative platforms that will leverage the use of AI to drive a step change in the value creation for the industry. And finally, we have a steady stream of releases from new and established stars dropping every week.

For the rest of Q2, be sure to look out for new music from Bruno Mars, Charlie xcx, Kehlani, Hilary Duff, Somber, Alex Warren, Fred again, Charlie Puth, Tiesto and many more. And now I’ll pass it over to Armin.

Armin Zerza — EVP and Chief Financial Officer

Thank you Robert and good afternoon everyone. I’d like to thank our teams for a very strong start to the year. It’s rare to see a company undergo such significant transformation in such a short time frame while delivering accelerated growth and profitability. Yet we’ve accomplished just that and it’s a testament to the incredible work of our employees. It’s an exciting time at the company with lots of momentum and opportunities ahead of us. When I arrived, we committed to delivering against three key metrics which we view as essential to creating shareholder value. First, accelerating revenue and share growth second, driving margin expansion and third, improving cash flow.

This is now our third consecutive quarter of profitable growth, underpinned by healthy margin expansion and cash flow generation. Encouragingly, our performance was broad based, demonstrating strength across divisions and market share gains in key regions. And by consistently delivering on a sustainable growth model which is anchored in high single digit total revenue growth, double digit adjusted EBITDA growth, and 50 to 60% operating cash flow conversion, we’ve established a solid baseline for how we expect our business to perform. In short, we’re doing exactly what we promised and are just getting started. I will provide details on how we will accelerate on this solid foundation in a moment, but first I want to talk about the key drivers of Our performance in Q1 Total revenue growth of 7% reflects solid performance across recorded music and music publishing.

This was highlighted by sequential improvement in recorded music streaming led by subscription streaming growth of 11% or 9% when adjusted for notable items. AD Supported streaming grew 4% driven by strong performance from traditional DSPs. Physical declined 11% due to a difficult comparison in the prior year quarter which saw releases from Linkin park as well as in Japan and Korea. Artists services and expanded rights revenue increased 13% driven by concert promotion revenue, primarily in France. Music publishing revenue grew 9% which reflects the impact of MLC historical matched royalties in the prior year quarter. Adjusting for this notable item, publishing grew 15% and saw double digit growth across performance, mechanical sync and streaming.

Adjusted OIBDA rose by 22% and our margin increased by over 300 basis points, reflecting the operating leverage that is inherent in our business as well as the benefit of our cost savings program and favorable movement in FX rates. These factors also drove robust operating cash flow growth of 33% for a conversion ratio of nearly 100% of adjusted OIBDA. Accordingly, we saw a significant increase in our cash balance which grew by more than $200 million since last quarter to $751 million. These results are just the beginning and our focus is on accelerating growth via strategic priorities and initiatives which include first, investing into our core organically and inorganically.

Second, expanding opportunities for music monetization by continuing to work with traditional streaming partners and building the capabilities, forging the partnerships and making the investments necessary to win with AI and third, driving margin and cash flow through a combination of top line growth, operating leverage and cost efficiencies. First, on investments in our core, our refined approach to capital allocation and investment is clearly working as we are seeing more consistent, broad based results driven by resilient and growing market share. As we have said in the past, we are using MA as an accelerant with a focus on high quality accretive catalog acquisitions.

We have a robust and growing pipeline of opportunities which has led us to increase the capacity of our joint venture with Bain. As detailed in the 8K we filed earlier today, WMG and Bain have increased our equity commitments by $100 million each and expect to maintain the existing equity to debt ratio which will increase the JV’s total capacity from $1.2 billion to approximately $1.65 billion. You can expect some exciting announcements coming in the near future as we plan to deploy a significant portion of the JV’s total capacity by the end of this fiscal year. This combination of organic and inorganic investments will fortify our core, giving us greater scale to capitalize on favorable industry trends as well as emerging opportunities like AI that will lean heavily on iconic content, which leads me to expanding opportunities for monetization.

Now that we have fortified our core business through more favorable terms with traditional streaming partners, we are focused on leveraging AI to drive significant incremental top and bottom line growth to the benefits of our artists, songwriters and shareholders. Understandably, this topic has been a focus of investor attention with a wide range of views. Robert and I believe that AI is a tremendous opportunity for the music industry when executed ethically and responsibly. Our priorities have been to first invest into and forge partnerships to establish terms early and in a way that artists, songwriters, labels and publishers are protected and fairly compensated.

Second, design business models with our partners that are consumption based and accretive to current ones and third, build the capabilities to drive increased engagement with our treasure trove of recordings and compositions. Our recently completed AI deals with Suno, Stability, Clay and UDIO are based on these principles and have the potential to unlock significant incremental revenue at accretive economics. Importantly, in all of our deals we’ll be compensated on a consumption basis ensuring that our economics scale as our partners business grow. Also, our partners offerings will result in higher arpus reflecting the interactive nature of the platforms.

We were the first major label to sign a deal with suno, the market leader in generative AI music content. SUNO is already earning several hundred million dollars in annual revenue and is empowering music fans to create and play with music in groundbreaking ways. Through an innovative partnership we entered into last fall, we, Suno, and most importantly our artists and songwriters will begin to reap the benefits of AI music in fiscal year 26 while also showing what the future of music looks like. We expect this partnership to be a material top and bottom line growth driver starting in fiscal 2027.

Our goal is to maximize fans ability to engage more deeply with the music they love. So of course we are also exploring opportunities with our large DSP partners to incorporate AI tools that will enhance their consumer offerings. Doing so in ways that are consistent with our principles for ethical and responsible use of AI represents the potential for significant industry value creation and as Robert mentioned, the impact from AI generated assets that spike engagement with the catalog can be a significant one. Using AI to quickly and cost effectively create motion art which can boost attractive exposure on DSPs and marketing and other assets that are derived from our catalog such as remixes and music videos will enable us to drive incremental revenue much more effectively.

Finally, AI will be an advantage for us on the cost side as well, aligning with our initiatives to operate more efficiently to accelerate margin and cash flow growth. The use cases will range from music production where many of our artists and songwriters already leveraging these tools, to more analytically driven precise deployment of marketing dollars as well as more real time forecasting and analytics. Further on driving efficiency, I’m pleased that our cost savings plan is delivering on schedule and is on track to contribute 150 to 200 basis points to margin in fiscal 26 as we work to drive even greater efficiency through the use of AI in improving the operating leverage in our business.

We believe that a margin in the mid-20s is achievable in the short term and have a longer term goal to deliver margins in the high 20s. We will provide you with an update on our path to meaningful margin expansion as our plans evolve in the upcoming quarters. One housekeeping item I’d like to note with the rollout of BMG Digital Distribution revenue now largely completed, we intend to provide year over year adjustments for the remainder of the fiscal 2026. As disclosed in our Notable items table in the earnings press release, the impact in Q1 is $6 million and we estimate the impact for the remainder of the fiscal year to be approximately $10 million each in quarter two, three and four.

All the other notable items in fiscal 26 have been disclosed previously and as usual, you can find these items in our press release. In summary, we are very optimistic about the road ahead. With greater certainty around TSP deal terms, more consistent market share performance and a refined approach to capital allocation, our path to accelerating growth in 2026 and beyond is clear. The key components of this will include a strong release slate anchored by big new releases from Bruno Mars, Zach Bryan and many others contractual PSM increases starting in Q2 and laying in throughout the balance of fiscal 2026 acquisitions of high quality accretive catalogs as well as of bolt on capabilities that will accelerate our distribution, e commerce businesses and AI partnerships and initiatives resulting in material contribution to revenue and margin in fiscal 2027.

We look forward to providing regular updates as we continue to achieve our goals. With that, we’ll take your questions.

Question & Answers

Operator

Thank you. If you would like to ask a question, please press Star one on your telephone keypad. If you would like to withdraw your question, simply press Star one again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Michael Morris with Guggenheim. Your line is open.

Michael Morris — Analyst, Guggenheim

Thank you. Good afternoon. I’d like to ask each of you for some more detail about your AI comments. Robert first, can you expand a bit on your philosophy as it relates to the deals that you have made with those AI partners you referenced? I’m particularly interested in how your approach differs from the approaches of some of your peers and why you’ve chosen that path. And for Armin, can you provide some more detail about the financial impact that you’re expecting to see from the deals? Regarding the economic terms, can you clarify, are these per stream payments similar to DSPs or Will Warner Music participate in the subscription revenue of the AI platforms themselves? It’d be great to get some clarity on that.

Thank you.

Robert Kyncl — Chief Executive Officer

Thanks Mike. So I’m not going to comment on what our competitors are doing, but I’ll explain what we do. And let me take one step back, which is everything we do in AI is not just about deals. It’s actually going against all three of our priorities of growing share, growing the value of music, and growing our efficiency. And I highlighted some of that in the monologue earlier on. But there’s a lot of work that we are doing to grow our share using AI around assets and discovery, catalog monetization and creativity. In terms of increasing the value of music, we clearly see the path to audience segmentation because creativity is the ultimate creation is the ultimate expression of fandom.

So for us, the superfan tiers of the future will all include AI functionality to create. And our partnerships with the four companies that we mentioned are key to establishing how we would like see this market to evolve and what it is that we do with our existing partners, with whom we obviously have to take our holistic relationship into consideration as well to make sure the business grows healthily for all of us. And the third party is efficiency that we touched on earlier as well. We are, you know, we have deployed AI across finance, legal, marketing, HR and more.

There’s a lot more to do, but we’re humming across the company and against all three of our priorities as it relates to double clicking on the deals very clearly. We’ve outlined our principles, which is ethical models. The companies have to license, have licensed models. They have to reflect properly the value of music, which means we have to be really happy with the commercial terms which we are. And three, artists have to have the right to opt in for the use of their name, image, likeness and voice and derivative content. And that is what drives us.

The important thing here is that if you want this market to grow and evolve healthily, it is important to strike the right balance. What I mean by that is not being black and white and how we see the world, but actually finding the shades of gray of the right equilibrium between what the user wants and what we, the rights holders and artists and songwriters want. And if you get that right, then you actually build a very large business and create a lot of value. And if you are black and white about it, then likely you won’t.

And there are past attempts in the space of media that kind of prove that. One of those examples is the TV Everywhere initiative roughly 20, 25 years ago where all the media companies had a very sort of rigid and dogmatic approach to how their content would show up on the Internet. And that obviously didn’t work. And in the meantime it allowed companies like Netflix, where I worked at that time, to run faster and gain market share basically online. And two, DRM and music basically slowed down the adoption of streaming services. So the decline post Napster era could have been shorter.

Have we been a little bit more flexible about it? So we at Warner have learned from the past. We believe we found the right equilibrium in our deals and we’re very much focused on making sure that we’re protecting our artisan strongholders rights and that we’re creating tremendous value for our shareholders. So this is the opportunity that we’re seizing and we do believe that we have it right.

Armin Zerza — EVP and Chief Financial Officer

Thanks Robert. I’m going to start with where you closed. We believe this is one of the. Biggest opportunities for value creation. It allows us to provide better experiences to our fans who will now be able to interact with our content. It actually allows us to deliver better services to artists and songwriters as Robert mentioned. And it allows us to actually deliver better economics. You all know that music is one of the most under monetized industries in the world. And this is a tremendous opportunity now that fans engage more with our content to increase Apple. You know I’ve worked in gaming for about a decade and we had a similar experience in gaming.

When gaming moved from physical to a digital experience and gamers started to interact with games more and communicate more with each other. Then we had an opportunity not only to engage but our players more. But we also had the opportunity to introduce multiple different business models. And that’s what we, that’s what our partners are intending to do here. And you see that the services that. Have been launched or about to launch they will all will happen at multiple subscription tiers. They will all introduce digital items services over time as a consequence upward on industry will dramatically increase. In fact as Robert mentioned, we don’t think it will only happen just with our new innovative AI partners. We also believe that our current partners will start to introduce higher tiers. In fact when you think about engagement with content, that’s the best opportunity to engage a super fan and superfan typically spend more time, engage more and spend more on our content. So net we believe is a tremendous opportunity.

And then to a question Mike on the deals. First, we believe the impact next fiscal year will be material for us. Why we have signed a deal with a largest partner. Their revenue is already multiple hundred million dollars. They continue to grow and our revenue share is strong. So we will see a material impact next fiscal year. Second, the deals have been designed on. A variable and accretive basis as I mentioned where because we will grow as those platforms grow and accretive because we’ll grow Arpu. And last but not least, we have designed this in a way to protect our artists and songwriters who all will benefit from all the increase in revenue and the accretive nature of that revenue. So that’s how we think about it.

Michael Morris — Analyst, Guggenheim

Thank you very much, I appreciate it.

Operator

The next question comes from Peter Cipino with Wolff Research. Your line is open.

Peter Supino — Analyst, Wolff Research

Hi, good afternoon everybody. Couple of related questions on your financial outlook. I wondered if you could talk in greater detail about the coming year from two perspectives. First, about your paid streaming growth and how that outlook corresponds to your BSP deals inked in 2025 and then in parallel on the financial outlook. If you could talk about potential growth accelerants that may be in your plan and how much incremental growth those could contribute to the outlook. Thank you.

Armin Zerza — EVP and Chief Financial Officer

Yeah, thanks, Peter. I’ll answer that question first. As we discussed in our prepared remarks, we’re very happy with the progress that we are making and I want to thank our teams again for the excellent work they have been doing. Despite the major reorganization, we now delivered. Three quarters of consistent high single digit. Growth in revenue and streaming. And obviously we have grown share, which means we’re winning in the marketplace now. At the same time, we have improved margin and cash flow. And why is that important for us? Because I committed to you that we’re going to improve shareholder value creation. And we do that by accelerating revenue growth, improving margin and improving our cash flow productivity. Now, looking forward, as you know, we’re not providing guidance, but we have many opportunities to accelerate growth from here. First, we know now with the PSM increases that we are starting to see that volume led subscription streaming growth will evolve to volume and value led growth.

And on top of that, we believe this is the best opportunity now with AI to introduce super premium tiers. Secondly, we’re making strong progress with our investments in organic business, but we’re also making strong progress with ma. As we announced today, we’re increasing the capacity of our joint venture with Bain from 1.2 billion to about 1.7 billion. And we’re doing that because we have developed a very, very strong pipeline which we’ll start to announce in the remainder of this calendar year. Thirdly, we have opportunity to grow in areas that we haven’t grown fast frankly in the past.

One is distribution and the other one is dtc. So direct to consumer, both in physical and merchandising. We’ve talked this in the last call. So I’m not going to detail this this time. And then last but not least, we have a tremendous opportunity to step change growth in this industry with AI, as I mentioned before. So net, we are very, very confident about our momentum and the growth that we can deliver for our shareholders, but also for artists and songwriters and our employees.

Peter Supino — Analyst, Wolff Research

That’s great. Thank you.

Operator

The next question comes from Ian Moore with Bernstein. Your line is open.

Ian Moore — Analyst, Bernstein

Thank you. Robert, you’ve been delivering market share improvement for several consecutive quarters now. Can you maybe talk to us a little about what you’re doing differently to drive that consistent growth and how sustainable you you believe that performance is. Thanks.

Robert Kyncl — Chief Executive Officer

Sure. Thanks, Ian. So first I want to repeat that it’s actually the positive thing here is that it’s broad based, it’s happening across regions and business units. The place where we have the most amount of work to do still is Asia. And obviously there we’ve changed leadership both in Japan as well as across the entire region. So we know what to do. We got the right people there, but it takes some time. But we’re working on that hard. But other than that, all of our business units are growing at a very, very healthy clip and it’s showing up in the results.

If you go back to 2024, we’ve done significant restructuring back then and at that time we told you that we would reinvest the proceeds of that restructuring into growth through technology and investments, into ANR, and those materialized through fiscal 25. And so you’re starting to see the results of that. Then when you layer on top of it the much sharper capital allocation that Armin mentioned earlier, our strong pipeline of initiatives that we’re managing across the company, our leadership overhaul in many business divisions, it is, you know, it does start paying dividends and that’s where we are.

That’s why we’re very pleased to see our consistent performance. You know, we’re really, you know, firing on most cylinders that there are. And, you know, all of it is underpinned by our incredible ability of artist development that is showing up through the fact that we consistently are finding new, amazing artists that break through the clutter in a very noisy world on a global stage. Alex Warren, Maria Somber, etc. And on top of it, we have an incredible slate. You know, just even if you look at Q2, right, with Bruno Mars, Zach, Brian, Charlie XCX, Kilani, Hilary Duff, Don Toliver, Charlie Booth, etc.

So across the company, you know, we’re going for it.

Ian Moore — Analyst, Bernstein

Thank you.

Operator

The next question comes from Cameron Manson Perrone with Morgan Stanley. Your line is open.

Cameron Mansson-Perrone

Thank you. 2. If I could first, trying to maybe approach some of what you’ve discussed already from a different angle. Both of you have kind of talked about AI tools and a premium or a super fan offering as being potentially tied together or related. I’m curious, you know, when you think about your traditional DSP partners, whether you’re having conversations with those partners to that effect already or how those conversations might be evolving. And then separately, you know, there’s been some pricing announcements recently from Spotify and from Amazon. Maybe if we take Spotify as an example, given their scale, you know, how do you expect to benefit from that pricing this year? And then I think they left the basic tier pricing unchanged.

Whether there’s any consideration in terms of impact to Warner from that dynamic, I appreciate it.

Robert Kyncl — Chief Executive Officer

Sure. So on the first part of the question, we’re in discussions with our partners. As we mentioned before, AI provides a tremendous opportunity for engagement of users or listening to music to now create and basically audience segmentation strategy and premium tiers. Again, it was very important for us to establish our terms with independent players in the market, which we’ve done with four of them. There was a very clear strategic move on our part. And so we are ready to engage and we are talking to our partners, our DSP partners. As it relates to the second part of it, our strategy is always to.

Sorry, when I started I was always saying music is undervalued, we need to increase prices and it’s valued at half the rate of video. So whenever we see a price increase, obviously we’re happy, obviously we’re grateful. However, our job is to create certainty, the certainty of our rates. And that’s what we told you last year that we would do. And that’s exactly what we did. And we now did it with four of our top five DSPs. And if a year ago I also told you it was actually on this earnings call, if I also told you.

That. A year later, we would consistently be growing at high single digits before any of those PSM increases kick in, you would probably put a massive premium on our valuation because it’s an incredible feat that we’ve accomplished that. So we’re really excited about our relationship with our partners, both existing as well as new. We’re excited about the direction of the industry, both in terms of volume as well as price with the audience segmentation strategy. And we just think we can create a lot of value together.

Cameron Mansson-Perrone

Very helpful, thanks.

Operator

The next question comes from Benjamin Black with Deutsche Bank. Your line is open.

Benjamin Black — Analyst, Deutsche Bank

Good evening. Thank you for taking my questions. Maybe a two parter for arming. So the recent results demonstrate that your investment philosophy is working. So you know, how are you approaching capital allocation differently when evaluating deals? And secondly, can you provide an update on your MA plans? Why did you increase the capacity of your Bain jv and how much do you expect to deploy this fiscal year? It seems like a lot of of the major labels have announced financing partnerships. Sony umg for instance. So, you know, what does all of this capital flowing into the space actually signal?

Armin Zerza — EVP and Chief Financial Officer

Thank you. I guess it chose the opportunity Ben, but. Hi Ben. On the investment philosophy, you know, you and I have talked this before, but for the audience here, we have moved from basically looking at individual deals to looking at our entire deal portfolio. And why is it important if you’re an investor? We want to understand the landscape of opportunities out there. That’s exactly what we do with our deal portfolio. We do thousands of deals a year. So it’s really important for us to understand what deals are the best ones for us to put our money behind. But we also bought these are the most promising ones to put our money behind. We have now created a deals office that has a view of all those deals over multiple years, which not only allows us to prioritize the best deals but also gives us much better visibility of what the impact of those deals are on future revenue, some future growth and share growth, on future margin and future cash flow, which in turn allows us to optimize our investment flow over time.

That’s why you see the results. You’re seeing growth, share growth, margin expansion and cash flow productivity. Now obviously we’re doing all of this in collaboration with our creative teams and operators. This is not just a financial exercise. We review bi weekly now with our creative teams and our operators and our leaders in the regions, our entire deal portfolio and ensure that their creative and operating voices are heard. And number two, obviously this is behind our strategy to invest into the core business. So really focused on making and ensuring that all of our investments are focused either organically or inorganically to our core business.

Now on ma, which is the inorganic part of that, we are seeing tremendous opportunities around the world to invest into highly attractive and margin accretive catalog businesses both on the RM and NP side. Because of the pipeline that we have been developing, which is very attractive for us, we’ve expanded basically the scope of the JV from 1.2 to $1.7 billion as I said. Also I have to say that we have a great partner with Bain. You know, the leader who is working with us has experience in the industry to identify opportunities and work on them together, which gives us really a competitive edge relative to some of the other partners that are out there.

So net net, we are very, very. Happy with the progress and you see it in our results.

Benjamin Black — Analyst, Deutsche Bank

Wonderful. Thank you so much.

Armin Zerza — EVP and Chief Financial Officer

Thank you.

Operator

The next question comes from Katgun Maral with Evercore isi. Your line is open.

Kutgun Maral — Analyst, Evercore Isi

Good afternoon. Thanks for taking the questions. Armin, I want to follow up on the margin color you provided. I think it’d be helpful if you could provide a Bridge on how you get to your longer term margin target. You know, what are the building blocks and how do you expect them to contribute? And then given this outlook, why is 50 to 60% operating cash flow conversion the right target? You know, is it possible that you could deliver more? Thanks.

Armin Zerza — EVP and Chief Financial Officer

Well, thank you, Kutgaan. You know, first I want to reiterate. That our focus is on driving total shareholder return. So while we are improving margin and cash flow, you know, obviously one of our key priorities also accelerate revenue growth and delivering against that too. And I don’t want to lose the fact that we’re really making sure that we want to be balanced across all of those three priorities. Now on the margin progress, we are very, very happy with the progress. In fact, we’re making progress faster than I expected. You saw our first quarter result where our margin is up more than 300 basis points to 25%. And it’s really driven by three key items. One is the reorganization and cost savings related to that. Two is the acceleration of high margin streaming growth and three is the operating leverage we get behind that. Now as we look forward, we’ll work on the same drivers, but there are. Also new drivers that we can leverage. The first one is the DSP pricing and tiering that Robert just mentioned. The second one is the high margin catalog MNA that I just talked about. And the third one is, and my view is going to be one of the most discontinuous one is accretive AI revenue that will continue to accelerate over the next few years. So we’re really, really bullish about our margin. And I think a margin target in the mid to high twenties is very realistic for industry. And by the way, it’s important for us. Why? Because it will give us and gives us today more flexibility to invest into the business. On your MA question, I alluded to. That when I talked about Bain. We are really excited about the opportunities around the world. As I travel around the world, there are opportunities everywhere in every corner of the market and that, you know, we’ll do that both in terms of. Working. With our partner Bain, but we’re also looking at other opportunities including opportunities where we acquire capabilities to accelerate some of our business. So net, we feel very, very good in that area too.

Kutgun Maral — Analyst, Evercore Isi

That’s great. Thanks so much. And I just wanted to make sure to follow up and sorry if I missed it. Anything in more detail around the 50 to 60% operating cash flow conversion as we look out further and if you could out deliver on that, possibly

Armin Zerza — EVP and Chief Financial Officer

on. Cash flow. It’S Interesting. We delivered almost 100% cash flow conversion in the first quarter which shows you how strong our capital location model works. And there’s also some benefit from lower capital spending as we normalize some of the tech sector spending we did in. The past that Robert did a little. Bit to get ready for this AI push that we are doing now. Looking forward, we will continue to work on those drivers but also continue to improve margin which will improve cash flow. Now is there an opportunity that on a quality basis we’ll see higher conversion than the 50 to 60% target that we declared for sure and you’ve seen it just last quarter. But at the same time we want to retain some flexibility to invest into the business to accelerate growth. We have so many opportunities to invest into as I mentioned before and while we’re very disciplined, we want to create, we want to maintain that flexibility.

So at this point we’re not changing that target. May change over time, possibly, but at this point we’re not ready to do that.

Kutgun Maral — Analyst, Evercore Isi

Very helpful. Thanks Armin.

Operator

The next question comes from Batya Levy with ubs. Your line is open.

Batya Levi — Analyst, Ubs

Great, thank you. Can you, can you talk about the underlying performance that you’re seeing at Music publishing? I think you mentioned the One Warner approach and how we should think about longer term growth for this business And a second one, maybe a follow up. Can you give us a sense on the response from artists and their willingness to opt in opportunities with AI platforms And maybe some thoughts on how you get comfortable with an open studio approach that you have with the Suno deal versus a walled garden to protect attribution and to to and measurement.

Thank you.

Armin Zerza — EVP and Chief Financial Officer

Well, thank you Bhatia. I’ll take the first part of your question and Robert will take the second part. On publishing, we’re very, very happy with the performance.

Armin Zerza — EVP and Chief Financial Officer

In fact we just did a strategic review of the business and if you look at the business over the long term, for the past five years we have doubled the business top and bottom line and I want to take the opportunity to thank the entire team but also our leadership at publishing. So Guy and Carrie Ann, who you know are leading this business for the tremendous achievements they’ve had over the past five years. Now looking at the more recent past then we’ve seen double digit growth on publishing for the past three quarters and. As you see last quarter, if you. Take out a one time item from. Last year with a little bit 15% growth. So again, amazing, amazing performance. Looking forward, reviewed the plan as part of this strategic review with the team and they have many, many opportunities to. Continue that growth profile, but also accelerate it. The first one is we will double. Down like we do in other parts of our business on the proven ANR. Strategy that the team has. And by the way, we have now more firepower to do that than in the past. Secondly, we’ll double down in regions, specifically developing regions, where we have seen strong tractions behind investment we’ve been doing, specifically Latin America. Thirdly, we’ll also obviously leverage our bainchorn venture and the increased capacity we have also in our publishing business. There’s highly attractive catalog in that area too. And last but not least, that business will also benefit from acceleration in growth by the AI partnerships we are doing. So in summary, we’re really confident that we can continue to deliver double digit growth in that business and by the way, also continue to improve margins.

So we’re very, very confident about the business and the leadership we have there.

Robert Kyncl — Chief Executive Officer

All right, I’ll take the second part, I guess. Two questions there. One on the artists and songwriter engagement. It’s been surprisingly high. It’s a, you know, if you think about it, a lot of artists and songwriters are curious about the future. They hear and read about these things and many of them want to get involved early on. So just the other day I had two of them to separate them, visit in the office and talk about how they would get it, how they can get involved and kind of be, you know, sort of in, in the detail of it with us.

We are talking to many of our artists, their attorneys, their managers, etc. To make sure that they understand everything as they have questions. So our outreach has been quite extensive and we think that underpins what we do. We need to be in constant communication, make sure that we’re clear that we’re making sense of things and that we’re offering the tools to those who want to use them. So we’ve been pleasantly surprised with the engagement. In terms of your question on Wall Gardens, I think this issue is getting painted too much in black and white, which is what I mentioned before.

From my experience both working at Netflix and YouTube over 20 years, having gone through a bunch of changes and lots of difficult decisions and understanding the industries beyond music. Black and white is never the answer. If you’re building lots of value, strong consumer offerings, you have to find the right point, right equilibrium point in the shades of gray. And that is the art. That is what we do. And you know, in our company, you know, we obviously have the benefit of that experience, but it is, you know, we’re focused on value creation for artists, songwriters, us, our shareholders.

And we’re focused on protection of our artists and songwriters. And we’re focused on making sure that users can engage with them in ways that they. That they want. And it’s never easy, but it is worth it to do the hard work of finding the equilibrium that creates this value. And we think we got it right. So. And again, I would just repeat what I said before, which is there are plenty of examples from the past where the black and white solutions failed, and so we’re focused on getting it right.

Batya Levi — Analyst, Ubs

Got it. Thank you.

Operator

The next question comes from Steven Lashczick with Goldman Sachs. Your line is open.

Stephen Laszczyk — Analyst, Goldman Sachs

Hey, great. Thanks for taking the questions. Robert, you mentioned the renewal of the deal with TikTok in your prepared remarks. I was curious if you’d be willing to speak maybe more about some of the priorities that you feel like you advanced in the new deal. And then as you look out ahead here, was curious if there was any other deals of this kind where you feel like you might be able to meaningfully advance the narrative in favor of your artists. Thank you.

Robert Kyncl — Chief Executive Officer

Thank you. So first, I want to say that we’re very happy with our partnership with TikTok in general. There’s a lot of collaboration between us around our artist releases. You know, many of our artists are extremely popular on TikTok, and we utilize it quite a lot as we’re launching new records. And we’re very happy with our new deal. Obviously, I cannot disclose the deal terms of it, but it contains structural changes that better reflect the value of music, which we’re happy about. And also, our deals are never just about money. They’re also about data, promotion, insights, and all the things that can help advance our business overall.

But having said all that, as a percentage of revenue, it’s in lower single digits for the company, so it’s not material to our fortunes every day.

Stephen Laszczyk — Analyst, Goldman Sachs

Okay, thank you. And then any deals on the horizon of similar kind that you feel like you might be able to advance on the back of TikTok?

Robert Kyncl — Chief Executive Officer

Nothing immediately on the horizon. We’re very focused on advancing our AI initiatives across the board. As I said, we see as a great value creation tool and making sure that we get things right with our current DSP partners, taking our holistic relationship with them into consideration, making sure we deliver on, obviously our second priority with them, which is increasing the value of music on a consistent basis. And as part of that, adding AI into the mix to further accelerate that.

Stephen Laszczyk — Analyst, Goldman Sachs

Great, thank you.

Operator

That is all the time we have for questions. I’ll turn the call to Robert Kinsel for closing remarks.

Robert Kyncl — Chief Executive Officer

Okay. Well, I want to thank you for spending time with us today. I want to reiterate our happiness with the company being in steady state, consistent delivery 3/4 in a row with strong outlook, strong initiative pipeline. And that through many of the things that are happening, you realize that we do what we say, whether it’s PSM increases, whether it’s margin expansion, whether it’s consistent growth. We said what we would do and we did it. And we continue to do it and we’ll continue, continue to do that. So it is, it’s a pleasure to be able to say that and have the confidence say that.

And the reason I have it is Armin and I went through it on the call. There’s so many things that we have improved in the company. All the work that we’ve done over the past few years is starting to pay off, and we’re incredibly excited about the future. So thank you for your time and have a great day.

Operator

This concludes today’s conference call. Thank you for joining. You may now disconnect. It.