Music Ally

Rhino’s David Dorn – just appointed as SVP of global sales and digital – says he doesn’t see subscription music services as a threat to WMG’s catalogue division.

“My feeling is that there are a lot of consumers out there who are going to choose various paths. Some are going to spend money or take ownership of things. When they buy and take ownership of it, they’re really satisfied, like the handmade collectibles. They are also going to be people who say ownership is not for me. Our job to figure out how do we monetize these experiences.”

Dorn’s words could be seen as diverging from the opinions of WMG boss Edgar Bronfman, although it’s fair to say that Bronfman is a big supporter of subscriptions – it’s just free streaming that he’s none too keen on.

He also says sales of the initial batch of iTunes LPs was “very successful”, although he points out that a quirk in iTunes means they don’t always show ahead of the standard editions, which may be costing sales.

WMG boss Edgar Bronfman certainly stirred up a hornet’s nest with his comments on free streaming services this week. Spotify issued a statement (via Twitter) saying that “To be clear WMG is not pulling out of Spotify. Media is taking things out of context”.

But actually, that’s only half true. Here’s the specific Bronfman quote from WMG’s earnings call: “Free streaming services are clearly not net positive for the industry. And as far as Warner Music’s concerned will not be licensed. So this sort of get all the music you want for free and then we maybe we can – with a few bells and whistles move you to a premium price strategy is not the kind of approach to business that we will be supporting in the future.”.

It’s true, Bronfman didn’t say WMG is pulling its catalogue from anyone. Yet. But it’s hard not to read his description of free services with ‘bells and whistles’ as anything other than a reference to Spotify. He likely had the service’s US launch in mind, but it’s not taking anything out of context to wonder what will happen the next time the two companies’ licensing deal is up for renegotiation.

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Last night saw WMG’s quarterly financial results, and as usual, CEO Edgar Bronfman Jr had plenty to say about industry trends. Here’s the biggest zinger: “Digital growth has slowed following iTunes’ introduction of a variable pricing model in April 2009… It couldn’t have come at a worse time.”

The latter comment was referring to a 30% price hike for the top-priced songs just as the economy tanked. “It’s difficult to know, even today, if it is just consumer resistance to a higher price points or if taking a pricepoint of 30 percent more at such a fragile time [is to blame],” said Bronfman.

However, he also had warm words for new models beyond a la carte downloads. “The subscription models that we are promoting will create much more value over time than the per-play or per-purchase models,” he said. “The number of potential subscribers dwarves the number of people purchasing music on iTunes.”

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Warner Music Group’s experience investing in Imeem and iLike appears to have put the label off taking more equity stakes in future music startups.

“I don’t think we’re planning to be investors going forward,” said Stephan Bryan from Warner Music Group, speaking during a Labels & Services panel at MidemNet.

He went on to describe Imeem and Lala as “a unique situation where we were essentially playing a dual role”. However, one startup that WMG is very happy with at the moment is Spotify.

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It looks like Virgin Media may struggle to launch the unlimited MP3 downloads tier of its upcoming MusicFish service, judging by comments made by labels during a panel session at MidemNet today.

Stephan Bryan from Warner Music Group outlined his label’s objections to unlimited download services, saying they don’t “address the broad consumer base that we need to go after” and that such offers “may be appealing to voracious music consumers”, thus cannibalising sales of recorded music to the keenest music buyers.

Meanwhile, Michael Paull from Sony Music Entertainment said the industry should focus on “solving what the consumer needs, rather than come up with a model they’re not asking for”.

Even Simon Wheeler of Beggars Group – who thinks that more unlimited download offerings will launch in the future – described “a huge amount of concerns around getting to an unlimited model”, particularly for indie labels like Beggars, who rely on their keenest customers to a greater extent.

“They’re pretty turned onto technology: they are going to be some of the first ones to buy into these services,” he said. “So you take all our £500 to £1,000-a-year customers and turn them into £100-a-year customers.” Wheeler suggested that the industry needs a controlled trial of unlimited downloads to get more data on customer behaviour.

Lots of YouTube news today. First, the company has announced that it’s running a “small test” of skippable pre-roll adverts – they run before videos, but users can choose to skip them.

“We know what you’re thinking: who would choose to watch an ad when they can skip it? Well, that’s what we’re trying to find out,” says YouTube’s blog post, which goes on to suggest that previous research indicates that 15-second pre-rolls see ‘completion rates’ as high as 85%.

Separately, YouTube has announced plans to up the maximum resolution of video uploads to 1080 pixels – true high-definition – later this week. “For our content creators, we want it to look as good or better than the source’s quality,” says YouTube’s Hunter Walk.

Finally, WMG videos are making their way back onto YouTube, surrounded by the label’s own branding, ads and prominent links through to products. It’s part of the deal negotiated by WMG when relicensing its videos to YouTube recently, in which it secured more control.

YouTube and Warner Music Group have confirmed that the label is to end its nine-month boycott of the video site, but with a deal that alters the way it makes money from YouTube.

WMG will now sell advertising around its music videos, rather than relying on Google. The label will set its own prices and keep the majority of the revenue, giving YouTube a slice. To try and drive up the price of ads, WMG will apparently launch custom channels within YouTube that purely focus on its artists.

Or, as WMG describes it, “a feature-rich high-quality premium player and enhanced channels”. This may include links to artist websites, buy links and integrated chat, according to Billboard.

The question is what this means for Vevo, UMG’s planned premium video site that has already signed up Sony Music Entertainment. If WMG is running its own premium player within YouTube, will this be instead of joining Vevo? However, TechCrunch suggests WMG is still in talks to possibly join Vevo too.

Warner Music Group has become the first major label to sign a pan-European MP3 licensing deal with digital retailer 7digital. It’ll see WMG’s catalogue of DRM-free music rolled out to 7digital’s stores in France, Belgium, Netherlands, Italy and Portugal.

Essentially, it’s an extension of existing single-country deals, though, as WMG tracks are already sold through 7digital’s stores in the UK, Ireland, Spain, France, Austria and Germany. 7digital says it’s now selling MP3s in more European countries than any of its rivals.

There are knock-on effects, too. 7digital has retail partnerships with several music services, including Spotify and Last.fm. They’ll also benefit from the deal with WMG, since they’ll be able to offer click-to-buy buttons for its artists in the countries covered by the new deal.

UPDATE: EMI has contacted Music Ally to point out that it’s had a pan-European deal with 7digital for several years, including DRM-free music.

Having written off its original $16 million investment in music streaming service Imeem, not to mention letting it off $4 million in royalties, you might think WMG would be steering clear from now on. Not so.

US blog All Things Digital is reporting that the label has actually taken MORE equity in Imeem, except this time it’s not stumping up any cash for it. Instead, the larger stake is “in exchange for a renegotiated licensing deal that is supposed to 1) give Imeem a better chance of being able to pay Warner for use of its music and 2) reduce the amount of cash Imeem does pay out to Warner every quarter”.

Startups have been publicly keen for labels to cut them more slack when it comes to licensing costs, but it remains to be seen whether giving up more equity as a result works out well for both parties.

TechCrunch is suggesting that Warner Music Group is hopping mad about its deal with MySpace Music in the US, because the deal “has no per song streaming cost, but includes a revenue share on advertising displayed when the song is played”.

In other words, the rival majors are getting sacks of loot for the billions of song streams on MySpace Music, and WMG isn’t.

We’re sceptical, to say the least – WMG isn’t in the habit of cutting over-generous deals for the likes of MySpace, surely? But TechCrunch says the label is already strapping on the knuckledusters for the negotiations when its deal is up for renewal.