Warner Music Group

Warner Music Group published its latest quarterly financials yesterday, with its revenues up 10.4% year-on-year to $1.06bn, including 12.5% growth in its digital revenue to $648m – 61.2% of the total. Within that, WMG’s recorded-music revenue grew by 13.8% to $913m, but its publishing revenue actually fell by 7.5% to $147m – “lower market share and loss of administration rights in certain catalogues” were cited as two of the reasons for that.

It was interesting to see CEO Steve Cooper pushing back against any assumptions that WMG’s growth is all about streaming. “To say that streaming is responsible for the recovery of our business is an oversimplification,” he said in his statement accompanying the financials. “Without the talent and creativity of our artists and songwriters, and all of the investment and expertise that we put behind them, there would be no growth.”

It’s a point he expanded on in his prepared remarks for WMG’s earnings call later in the day. “The sheer volume of music being released on these platforms is actually making it harder for great artists and songwriters to get noticed. In the streaming era, consumers have 50 million tracks at their fingertips, growing at a rate of over 40,000 tracks per day. That’s why our recording and publishing businesses are more relevant than ever. We cut through the noise,” said Cooper, before making what seemed like a clear reference to ongoing licence-renewal negotiations with Spotify.

“We provide the streaming services with a steady flow of great new music, while helping to empower startups, new business models, and entrepreneurs that benefit the creative community. At the same time, we must ensure that music is appropriately valued to protect our artists and songwriters’ livelihoods. Getting that balance and compromise right with our global distributors is never easy, and it sometimes means making strategic decisions that don’t necessarily align with the choices our competitors are making.”

Cooper’s comments fit a recent pattern for senior WMG executives to be quite hawkish in public regarding streaming. Witness SVP of global business development and strategy Tracy Gardner’s open warning at Midem that the label wants a more direct relationship with music fans: “With the streaming services, they now have the direct relationship with the fan, and I would like for us to take that back.” Then, she also talked about the need for “finding ways to protect against dilution of our market share on the services by putting in protections” in streaming contracts – specifically citing “things competing for listeners’ attention, like podcasts”.

‘Major label talks tough on streaming while negotiating with the most prominent streaming service’ is hardly a shock though. Cooper was clear that streaming will continue to play an important (if not the only!) role in WMG’s growth. “We’re optimistic about the near-term future. My view is we’ll be able to continue to successfully manage our growth. I don’t think it will be precisely linear, but I think with the continuing growth of streaming, even though it’s moving into emerging markets, that we will continue to incrementally grow,” he said. “Maybe at not as bullish a rate that we’ve been growing over the last few years. But I think the near-term future should be fine.”

(MBW has been crunching some numbers on streaming’s growth across the three majors, though: in the first half of 2019, they added $709m of streaming revenues from recorded music, yet that’s less than the $877m they added in the first half of 2018. That said, the majors are still making just over $23m from streaming between them every day.)

One final note: Cooper played a straight bat to one analyst’s question about whether yesterday’s news on Vivendi’s talks with Tencent to acquire up to 20% of Universal Music Group might spur WMG to take a new strategic investment or even a public offering, in order to fund its own M&A ambitions. “At the moment our view is status quo is the way to go, but look, there’s nothing absolutely certain about the future,” said Cooper. “Other than the fact that we intend on continuing to show the world that we are the absolutely best music destination for artists and songwriters.”

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