Acquisitions

12 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisitions

Acquisitions

TenThousand Projects

On August 25, 2023, the Company purchased 51% of the issued and outstanding equity securities of TenThousand Projects Holdings LLC (“TenThousand Projects”), an independent U.S. record label, pursuant to the terms of the unit purchase agreement of the same date among Warner Music Inc., a wholly-owned subsidiary of the Company, TenThousand Projects LLC, and Ten Thousand Projects Holdings LLC (the “Unit Purchase Agreement”). Cash consideration paid was $110 million which was comprised of the base purchase price of $102 million, as adjusted for final working capital, and cash acquired. The base purchase price included $11 million, which was deferred at the time of acquisition and paid during the fiscal year ended September 30, 2024

The acquisition of TenThousand Projects was accounted for as a business combination in accordance with ASC 805, Business Combinations, using the acquisition method of accounting, as the Company had acquired a controlling financial interest in TenThousand Projects. The results of operations of TenThousand Projects have been included in the Company’s results of operations from the date of the acquisition.

The fair value of the net assets acquired was approximately $19 million and primarily consisted of royalty advances. The fair value of identifiable intangible assets subject to amortization was approximately $152 million and consists of a recorded music catalog, artist and songwriting contracts, and trademarks which have a fair value of $99 million, $48 million, and $5 million, respectively. The weighted-average useful lives of these intangible assets identified are consistent with the average remaining useful lives of such intangible assets previously acquired by the Company as disclosed in Note 9. The fair value of the noncontrolling interest in the acquiree was approximately $105 million and was determined using the implied enterprise value of the business based on the purchase price. The excess of the purchase price over the fair value of net assets acquired, including the amount assigned to identifiable intangibles assets, was approximately $44 million and has been recorded as goodwill. The resulting goodwill has been included in our Recorded Music reportable segment and the Company’s 51% share will be deductible for income tax purposes.

At September 30, 2024, the Company updated and finalized the purchase price allocation recorded at September 30, 2023, which resulted in a net decrease to intangible assets of approximately $1 million, a net increase to goodwill of approximately $1 million, a net decrease to other acquired assets and liabilities of $1 million, and a net increase to the fair value of noncontrolling interest in the acquiree of $1 million.

For the fiscal year ended September 30, 2023, the Company incurred costs related to this acquisition of approximately $3 million, which were expensed as incurred and recorded in selling, general and administrative expenses in the accompanying consolidated statement of operations. The unaudited pro forma revenue and operating income as if the acquisition occurred on October 1, 2021 was not material to the Company’s reported results for the fiscal years ended September 30, 2023 and September 30, 2022.