Warner Music Group Corp. Reports Second-Quarter 2008 Results for the Period Ended March 31, 2008

Warner Music Group Corp. (NYSE: WMG)

--  Total revenue of $800 million increased 2% from $784 million in the
    prior-year quarter, and declined nearly 4% on a constant-currency basis.

--  Digital revenue was $164 million, or 21% of total revenue, up 16%
    sequentially from $141 million in the first quarter of fiscal 2008 and up
    48% from $111 million in the prior-year quarter.

--  Operating income from continuing operations increased 47% to $28
    million from $19 million in the prior-year quarter. The prior-year quarter
    included $16 million of restructuring-related charges in connection with
    the company's fiscal 2007 realignment initiatives.

--  Operating income before depreciation and amortization (OIBDA) from
    continuing operations grew 20% to $96 million from $80 million in the prior-
    year quarter, which included the $16 million in restructuring-related
    charges.

--  Loss from continuing operations of $0.23 per diluted share increased
    from a loss of $0.19 per diluted share in the prior-year quarter.
    

Warner Music Group Corp. (NYSE: WMG) today announced its second-quarter 2008 financial results for the period ended March 31, 2008 and in an effort to increase its financial flexibility has suspended its previous policy of paying a regular quarterly dividend.

"Warner Music continues to outperform the industry and gain share in key markets, which is a testament to our commitment to investing in A&R and leading the recorded music industry's transition through innovation and creativity," said Edgar Bronfman, Jr., Warner Music Group's Chairman and CEO. "While an uncertain economic backdrop and evolving recorded music industry make a conservative approach to our balance sheet a prudent strategy, we remain excited about the long-term prospects for our business. In particular, we are gratified by WMG's excellent digital results this quarter, which highlight our leadership position in driving this critical segment of the music business."

Michael Fleisher, Warner Music Group's Executive Vice President and CFO, added, "We regularly evaluate our capital deployment strategy. Our Board and our management believe it is sensible to maximize capital flexibility, given the vagaries of both the economy and recorded music market, by suspending our dividend to build cash reserves and reduce net debt. This action will give us the freedom to maintain our level of A&R investment, while enhancing shareholder returns over time."

Second-Quarter Results

For the second quarter 2008, revenue grew 2.0% to $800 million from $784 million in the prior-year quarter, and fell 3.6% on a constant-currency basis. This performance was tempered by the ongoing transition in the recorded music industry characterized by a shift in consumption patterns from physical sales to new forms of digital music and the continued impact of digital piracy. Domestic revenue declined 13.8% while international revenue grew 19.9%, and grew 6.7% on a constant-currency basis. On a constant-currency basis, revenue grew in Europe, Asia-Pacific, Latin America and Canada.

Operating income from continuing operations grew 47.4% to $28 million from $19 million in the prior-year quarter and operating margin from continuing operations increased 1.1 percentage points to 3.5%. OIBDA from continuing operations increased 20.0% to $96 million from $80 million in the prior-year quarter and OIBDA margin from continuing operations grew 1.8 percentage points to 12.0%. Operating income, OIBDA, operating margin and OIBDA margin for the second quarter of fiscal 2007 reflected $16 million in restructuring-related charges in connection with the company's fiscal 2007 realignment initiatives.

Loss from continuing operations was $34 million, or $0.23 per diluted share for the quarter. Loss in the prior-year quarter was $27 million, or $0.19 per diluted share.

As of March 31, 2008, the company reported a cash balance of $249 million, total long-term debt of $2.27 billion and net debt (total long-term debt minus cash) of $2.0 billion.

For the quarter, net cash provided by operating activities was $132 million. Free Cash Flow (defined as cash flow from operations less capital expenditures and cash paid for investments) amounted to $99 million, compared to Free Cash Flow of $49 million in the comparable fiscal 2007 quarter. Unlevered After-Tax Cash Flow (defined as Free Cash Flow excluding cash interest paid) was $128 million, compared to Unlevered After-Tax Cash Flow of $73 million in the comparable fiscal 2007 quarter (see below for calculations and reconciliations of Free Cash Flow and Unlevered After-Tax Cash Flow).

Below is the business segment discussion for the quarter.

Recorded Music

Revenue from the company's Recorded Music business increased 0.6% from the prior-year quarter to $652 million, and was down 4.4% on a constant-currency basis. The decline in constant-currency revenue primarily reflected strength in Europe, Asia-Pacific, Latin America and Canada, more than offset by declines in domestic revenue. Year-over-year revenue increased in the international physical Recorded Music business and the global digital Recorded Music business on a constant-currency basis.