Analysis

WMG boss warns rivals not to burn Spotify-style freemium streaming ‘at the stake’


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Warner Music Group LogoWarner Music Group (WMG) published financial results for the first quarter of 2015 – its fiscal Q2 – with overall revenues up 4% to $677m, and moving from a net loss of $59m in the first quarter of 2014 to a $19m net profit in the first quarter of 2015.

Recorded music revenues rose 5% to $564m including $274m of digital income, while publishing revenues dipped 4% to $117m. And a tipping point: streaming income surpassed download revenues for WMG’s recorded music business for the first time last quarter.

“The rate of this growth has made it abundantly clear to us that in years to come, streaming will be the way that most people enjoy music. Not only that, we are also confident that streaming’s ongoing expansion will return the industry to sustainable, long-term growth,” said CEO Stephen Cooper in WMG’s earnings call with analysts last night, citing the label group’s licensing deals with Vessel and Rithm as evidence of its desire to “create change rather than merely embrace it”.

But Cooper also delivered a warning to fellow rightsholders about the dangers of clamping down on free, on-demand streaming from services like Spotify. “First of all, there are any number of models out there, and all of those models – ad-based, subscription-based or with both are better than piracy,” he said. “To be crystal clear: piracy is zero revenue, it’s the theft of intellectual property, and it’s not good for anybody. So all of these models are better than piracy.”

However, that “create change” maxim applies to the evolution of services like Spotify, with Cooper keen for freemium models to “ encourage the movement of subscribers from ad-based models to subscription-based models over time”.

He explained: “We are working with a number of our digital partners to see in fact if there are ways in which that adoption, that is the movement from the ad-based model to a subscription… can be turbo-charged through modifications of service offerings or more sophisticated approaches to the consumer market.”

Amid reports that Apple has been encouraging major labels to try to do away with free, on-demand streaming in favour of subscription-only services, Cooper notably pushed back at the idea.

“With respect to going to a strictly subscription world, I think that you can find evidence that when music is not generally available, that people will seek out sites on the internet that are in fact will offer up that music for no charges, and in many instances, with no economic model,” he said.

“Before people conclude that freemium should be burnt at the stake, we should think very carefully about the consequences.”

Stuart Dredge

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