Warner Music Group’s shares fell as much as 7.3 percent in their market debut on Wednesday, after the initial public offering priced well below the expected range, on concerns about the impact that digital music would have on the future of record companies.
While digital music has grown exponentially over the last several years, analysts noted that there is no proven time horizon for established record companies to profit from that growth, when physical CD sales still account for as much as 98 percent of music sales, by some estimates.
“When can you be confident that the growth in the digital side of the business will offset the declines in the physical business? No one has an answer to that question. And investors are responding accordingly,” said Fulcrum Global Partners analyst Richard Greenfield.
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