About a year ago, when it became clear the pandemic was here for a while, there were some question marks over the impact it would have on streaming. Would people listen to more recorded music? And would more people subscribe to music streaming platforms – or would they act more cautiously?
The answer now, from a major label perspective at least, is fairly clear: more people spent money on streaming, and they spent a lot more time consuming licensed music on platforms that have grown during the pandemic, like gaming and short video.
With 27% overall growth, and $781 million in revenue from streaming, Warner Music Group’s third quarter (which ended 30th June) was a fruitful one for the company, and a useful one too, considering it’s just over a year since WMG became a publicly traded company. (It’s also the second strong quarter in a row.)
It’s important to note that year-on-year comparisons are – as CEO Steve Cooper acknowledged in the accompanying earnings call – a little misleading due to Covid’s impact in 2020, but he was keen to talk up the impact of new revenue streams, not just an intra-covid bounce: “Entertainment consumption habits have been changing swiftly during COVID and the growth in new business models have been accelerating.“
Indeed, digital revenue overall increased by over 20%, and not all of this was from increased streaming subscriptions. Cooper said that revenue from recorded music used on non-traditional streaming platforms like Facebook, TikTok, and Peloton is “running at roughly $235m on an annualised basis.”
Money coming in from DSPs is not only increasing due to more subscribers – but also because some of those subscribers are paying more. Eric Levin, Chief Financial Officer of WMG, praised Spotify’s recent price increases, and nudged other DPS to follow their lead: “we are really pleased that Spotify is taking the initiative and starting to take really positive steps there […] we would be highly supportive of other DSPs evaluating their subscriber base and looking at taking similar steps that are appropriate to their platform.”
There was excitement around the opportunities that emerging streaming markets provide. Cooper pointed to Bella Porch’s appearance in Fortnite, Bebe Rexha’s Sims music festival appearance, and virtual artist Ha Jiang, signed recently by WMG’s China-based label Whet Records. He thinks these virtual stars provide huge possibilities, comparing their connection with fans to that of “Marvel movie[s] – you’re talking about characters that don’t exist in real life […] we’re determined to lead the crossovers of these virtual being into the world of music.”
The other notable spoken revenue came from physical sales – with growth of over 136%, driven by global demand for vinyl, as well as increasing retail sales as the world slowly opens up again. Publishing revenue increased, too, by 26.8% to $189m, with growth across digital, synch and mechanical revenues.
The report paints a rosy picture for WMG, and Cooper took the opportunity to reaffirm wheat he sees as the strengths of a major label in the modern market: “somewhere between 0.5 million to 0.75 million tracks a week are being uploaded. The value a label brings to an artist is the ability to help them cut through the noise.”
In a time where labels’ dominant position is being challenged by, amongst others, the UK Government, strong income growth may be one of the trump cards that majors choose to play if they are asked to justify their roles.