When Warner Music Group hired Armin Zerza as CFO in May 2025, the company was recruiting from a different universe.
Zerza had spent a decade at gaming company Activision Blizzard, where he served as both CFO and Chief Commercial Officer and played a key role in the firm’s $68.7 billion sale to Microsoft.
One year later, with the COO title now added to his remit, Zerza appeared at the JPMorgan Global Technology, Media and Communications Conference on Wednesday (May 20) and made clear that his gaming background is not just a biographical detail – it’s the lens through which he sees the music industry’s future.
Across a 30-minute fireside chat with JPMorgan analyst David Karnovsky, Zerza returned to the comparison repeatedly.
The music industry, at less than $50 billion globally, is a fraction of the size of the $200 billion gaming industry – despite having more consumers. Its subscription price, at an average of USD $4 a month globally and $6 to $8 in developed markets, is “the value of one Starbucks coffee.”
And, unlike gaming, music has been, in Zerza’s view, “a little bit slow to adapt to kind of the digital reality of the business.”
“In my view and in our view as a company, [music has] years of additional productivity to drive going forward,” he told the conference.
That confidence was backed by a set of fiscal Q2 (calendar Q1) results that Warner Music reported on May 7: total revenue of $1.73 billion, up 12.1% YoY at constant currency, with recorded music subscription streaming revenues up 15% YoY.
Here are five things we learned from Zerza’s appearance at the JPMorgan Conference…
1. Catalog is 65% of Warner’s streaming revenue, carries 50%-plus margins – and AI tools for the ‘long tail’ are about to scale
Catalog represents about 65% of Warner Music’s recorded music streaming revenue. But the stat that jumped off the JPMorgan stage was the margin profile. Zerza described catalog as “not only 65% of our business [but] also the most profitable part of our business,” noting that “many of those businesses typically have 50%-plus margins.”
That margin figure is worth holding in mind when considering the multiples being paid for catalog assets across the industry – including Warner’s own recent $300 million-plus acquisition of the Red Hot Chili Peppers’ recorded music catalog via its Bain Capital joint venture.
“[We] developed a proprietary technology, which can not only identify opportunities in this type of catalogs, but also develop marketing assets to drive engagements around those businesses.”
Armin Zerza, Warner Music Group
Zerza explained that the company has split its catalog approach into two halves: “One is what we call our ‘top 200’ catalogs, which represent about 50% of our business. And in that part of the business, we’ve been implementing ‘always-on’ marketing.”
The other half of the catalog business is the long tail – “thousands of catalogs, millions of songs that frankly humans can’t touch every day.”
For that portion of the business, Zerza said: “[We] developed a proprietary technology, which can not only identify opportunities in this type of catalogs, but also develop marketing assets to drive engagements around those businesses.”
2. Zerza called AI ‘the biggest value creation opportunity that this industry has seen for a long time’ – and says DSP premium AI tiers are imminent
Zerza’s framing of AI leaned on the same gaming playbook. In gaming, he argued, interactivity drives spending. AI, he believes, will bring that dynamic to music for the first time.
“AI will enable consumers or fans to directly engage with the content of their favorite artists or bands or songwriters,” he said. “And when you think about that interactivity, we know from other industries like gaming that the more time people spend with content, so the more they engage, the more they actually spend.”
The implication: AI-powered features will not just improve the consumer experience but will “enable us to deliver better economics.”
On the prospect of DSPs launching AI-powered premium tiers, Zerza said that Warner and its DSP partners had “all stepped back and said, hey, how do we make sure that we look at our entire relationship, not just at a new AI tier, so that we can rework this entire relationship.”
He added: “I think I’m pretty confident to say that in the near future, one or two of those DSP partners will launch a premium AI [tier].”
“Less than 5% of our songs represent more than 90% of our revenue on DSPs. That gives you kind of the idea how concentrated consumer behavior really is in music.”
Armin Zerza, Warner Music Group
When asked about the concern that AI-generated tracks flooding platforms could dilute economics for labels, Zerza pushed back, pointing to data from Deezer.
He said that on Deezer, “there are 75,000 songs uploaded daily, there’s AI songs, daily… which represents almost half of the uploads.” But, he added, “those songs represent a very small percentage of the listening behavior, which again reinforces the whole idea that consumers don’t create relationships with songs or artists at scale. They establish relationships on a one-on-one basis and create emotional connections.”
Zerza pointed to a stat from WMG’s own business to underline the point: “Less than 5% of our songs represent more than 90% of our revenue on DSPs. That gives you kind of the idea how concentrated consumer behavior really is in music.”
He argued this dynamic structurally favors the majors and will become more pronounced in the AI era: “As people start to engage with this content with AI, more of the activity will be focused on those specific assets. So that’s why we are really excited about the stewardship of those assets.”
Warner has been forward-leaning in licensing AI music platforms, having struck a deal with Suno in November 2025 and with Udio the same month.
Zerza said that WMG’s AI agreements are “variable and accretive in nature,” meaning “as those platforms grow, we grow and participate in that growth. And in many, we also have equity [stakes] or participation.”
3. WMG is ahead of plan on margins – and Zerza says there are ‘years of productivity to come’
Warner Music Group delivered over 200 basis points of margin expansion in its fiscal Q2. The company subsequently raised its full-year margin expansion target to the high end of 150 to 200 basis points.
In fact, Zerza told the conference that WMG’s fiscal year-to-date margin improvement now stands at 270 basis points – ahead of the raised target.
He attributed the gains to three factors: “One, focused on what we call profitable growth… Number two, cost savings that was primarily driven by a reorganization of the company from what was a very local organization to a global regional local organization. And… now obviously operating leverage.”
WMG has targeted more than $500 million in combined annual savings across rounds of restructuring from 2024 and 2025
“We’ve been able to grow the business while actually spending less in A&R [as a] percent of revenue.”
Armin Zerza, Warner Music Group
Zerza described his approach as a “flywheel” in which margin improvement and cash productivity create “fuel to invest and at the same time to continue to expand margin and productivity.” He said: “That’s a flywheel that we have started to implement now about 12 months ago and it’s really working well for us.”
He said the company is “very confident about our high 20s margin,” and suggested the runway extends well beyond the current fiscal year.
Here, again, the gaming comparison was present. Zerza said the music industry, in his view, had not fully adapted to “the digital reality of the business” – and that WMG now has “a globally integrated data architecture, and operating processes that are standardized so we can automate them and put AI on top of them.”
On capital allocation, Zerza said Warner now evaluates its A&R investments on “a rolling 12 to 36-month basis” across its entire portfolio rather than looking at individual projects in isolation. The result, he said, is that WMG has been able to “grow the business while actually spending less in A&R [as a] percent of revenue.”
4. Zerza says WMG’s public valuation ‘does not reflect our underlying value’ – and namechecked Bill Ackman’s interest in the sector
Asked about the gap between private-market multiples for music catalogs and public-market valuations for music companies, Zerza was direct: “We agree with you that our public valuation does not reflect our underlying value, especially given the results that we have been delivering and will continue to deliver.”
He then made a reference that was hard to miss: “Fairly sophisticated investors around the world agree with that, and you’ve heard that recently from one large investor as they looked at our industry.”
That was surely a nod to Bill Ackman’s Pershing Square, which in April launched a bid to acquire Universal Music Group in a deal that valued the company at $64 billion.
Ackman has argued that UMG’s stock price “has languished” for reasons unrelated to the performance of its music business. Ackman’s projections suggest that UMG could be worth over $100 billion within a few years.
Zerza’s point was broader: that private market investors continue to value music assets at multiples that imply confidence in the sector’s trajectory, even as public markets remain more cautious. He said it was “actually great to see that private valuations hold up because it shows that investors continue to value music as an attractive asset class.”
“It’s actually great to see that private valuations hold up because it shows that investors continue to value music as an attractive asset class.”
Armin Zerza, Warner Music Group
His observation lands at a time when private market activity in music rights has reached a fever pitch. Sony Music Publishing agreed this month to acquire Blackstone’s Recognition Music Group – the former Hipgnosis portfolio – in a deal reportedly valued at up to $4 billion. And BMG and Concord confirmed their merger in late April, creating a combined entity valued at close to $15 billion.
Zerza argued that AI will only increase the value of the catalogs held by companies like Warner: “As people start to engage with this content with AI, more of the activity will be focused on [iconic catalogs and key artists]. So that’s why we are really excited about the stewardship of those assets and the assets that we own because it will actually favor the majors.”
As for closing the gap between WMG’s public valuation and its underlying value, Zerza said the answer was execution: “It’s really by delivering consistent results. And you can see that over the past four quarters, we’ve delivered consistent results and our share price is up significantly, and we plan to continue to do the same in the future.”
5. Publishing and distribution are positioned as ‘underappreciated’ growth vectors – and WMG insists on margin discipline in its indie distribution push
Zerza made the case that both Warner Chappell Music and WMG’s distribution business are undervalued by the market.
On publishing, he said: “I actually believe that music publishing as a business has been underappreciated for a long time.”
He pointed to Warner Chappell’s track record over the past five years under the leadership of Guy Moot and Carianne Marshall: “When I look at what our [publishing] team did when we did our [recent] strategic review, they doubled the business in five years. So they grew 15%-plus every single year over those five years, by the way, top and bottom line, just to be clear.”
He added: “They continue to grow double-digit on average every quarter, which is great to see, including last quarter.”
Going forward, Zerza said Warner Chappell will “double down on what’s working” while activating new growth pillars, including regional expansion – with Latin America highlighted as a territory “where we see big opportunities for us, given the strong recorded music business we have there.” Publishing will also benefit from WMG’s M&A and AI deals, he said, “because publishing is, of course, part of all of those deals.”
On distribution – a business Zerza said “represents about 45% of our industry” – the message was that WMG intends to compete, but only on terms that protect its margin profile.
“It’s an area we have to play in, but we have to play in a way that’s profitable given our focus on profitable growth overall,” he said.
“they grew 15%-plus every single year over those five years, by the way, top and bottom line.”
Armin Zerza on Guy Moot and Carianne Marshall‘s record running Warner Chappell
The emphasis on profitability ran throughout his distribution comments. He revealed that WMG appointed its Latin America leader – Alejandro Duque – to run the global distribution effort specifically because that team had “grown that business on average 15% every single year for the past five years at almost company average margins.”
He stressed: “That second part is really important. So we wanted to make sure that the leader we put on that business can grow distribution, but do it in a profitable way.”
On the technology side, the acquisition of Revelator – announced in April – is designed to give WMG the infrastructure to serve independent artists and labels at scale without eroding margins in the process.
Zerza described the deal as “basically an acqui-hire for us, there’s not a lot of revenue attached to it,” but said it “will allow us to ingest content highly efficiently, but also serve artists and labels in a highly efficient way.”
He was direct about why efficiency matters in this segment: “When you work on [a] business that’s by nature lower margin [like distribution], you need to have a very efficient operating structure.”
Beyond organic growth and distribution, the Bain Capital joint venture continues to be a contributor. Zerza confirmed the JV has deployed about $650 million so far, with investments focused on “iconic high-margin catalogs where we have an ability to grow that business.”
The return thresholds for this premium catalog M&A line are 15% in developed markets and 20% in developing markets.
Zerza noted, however, that “most of our growth will still come from organic growth,” versus M&A.Music Business Worldwide
…){kind=link}