Streaming has been the driver behind eight consecutive quarters of revenue growth for Warner Music Group, which reported its latest strong financials yesterday.
However, CEO Steve Cooper says that WMG is keen for streaming services to up their efforts to make subscription tiers more appealing to listeners than free, ad-supported music.
Cooper told analysts in WMG’s earnings call that labels “must work with digital services to create greater differentiation between subscription and ad-supported models” although he pointed out that with streaming revenue up more than 60% for recorded-music and more than 80% in publishing, it “remains our largest and fastest-growing source of revenue”
Those figures: WMG’s total revenues were up 13.1% to $917m in the second quarter of this year, including a 30.2% rise in digital revenues to $496m – 54% of the total. The label reported a $143 net profit for the quarter.
Streaming generated $360m of recorded-music revenues for WMG last quarter, up 58.6% year-on-year. Download sales fell by 27% to $88m. Warner/Chappell’s revenues were up 12% to $150m, with $50m of that being digital.
Cooper is confident that streaming growth can continue at its current rate. “As we see it, the industry is still in the early stages of its recovery,” he said. “There remains an enormous amount of untapped potential for subscription streaming to achieve global scale.”
He pointed to the fact that less than 2% of the global population – and less than 5% of smartphone users – currently pay for a music subscription.
Asked by one analyst how high the former percentage could rise in the coming years, Cooper was optimistic.
“If you look at the Nordics you see climbing double-digit penetration. When you look at the United States, it’s now in low double-digits. It’s that way in much of Western Europe, and we’re beginning to see the consumption of music grow in emerging markets,” he said.
“I think that over the long haul to expect meaningful double-digit penetration globally, obviously with different economic models, is not an unrealistic expectation.”
Cooper also praised the emergence of voice-activated technology – devices like Amazon’s Echo – “which we believe will make the mainstream adoption of streaming even easier”. But on the thorny question of ongoing licence renewals with Spotify and other services, he said WMG will continue to be a tough negotiator.
“We only agree to terms that are net-positive for our recording artists and songwriters. At the same time, we want to stimulate a healthy and competitive ecosystem,” he said.
“We’ve had very productive discussions with all of our partners whose deals have either expired or are going to expire in the near-term, and pretty confident that between what they’ve requested and between what we’ve requested, we’ll get to an amicable meeting of the minds in a relatively near-term horizon.”