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If you needed another nudge on music streaming’s boom times facing their biggest challenge yet, yesterday’s financial results from Warner Music Group may provide it.

That said, there are several caveats to the headline news that WMG’s overall revenues fell by 7.8% year-on-year to $1.49bn in the final quarter of 2022.

One caveat: there was one fewer week in WMG’s fiscal quarter than the year before, which would have had a noticeable impact. It also cited unfavourable foreign currency exchange rates. However other factors were specific to WMG (“a lighter release schedule”) or reflective of wider challenges (“a market-related slowdown in ad-supported revenue”.

WMG’s recorded-music streaming revenues thus fell by 6.7% year-on-year, although the label pointed out that with the lost week factored in, these revenues were up by 0.5%, or 4.8% if constant-currency calculations were used to also account fo rthe exchange-rates issue. Even so, the slowdown in growth is clear.

New CEO Robert Kyncl didn’t dodge this in his first earnings call with analysts. “I want to immediately and clearly acknowledge that this was a tough quarter,” he said at the start of his prepared remarks, while stressing that on the light release-schedule issue, the cavalry (Ed Sheeran, Cardi B, David Guetta, Aya Nakamura and Bebe Rexha) will be arriving soon.

Kyncl also set out his reasons for believing more growth can be unlocked for WMG, and the music industry more widely.

“One, as technology opens up emerging economies, the industry’s addressable market will continue to expand even further,” he said. “Two, innovation is constantly creating new use cases for music, giving us the opportunity to diversify our revenue sources. Three, music is still undervalued, especially when compared to other forms of entertainment like video.”

Kyncl hailed subscription price-rises from Apple, Deezer and Amazon in the latter context. He also – unsurprisingly for a former YouTube executive – stressed his determination to accelerate WMG’s investment in technology and tools for its musicians.

Other points of interest from the call included Kyncl’s response to a question about the potential disruptions from creative AIs and AI-generated music, acknowledging the concerns around AI’s being trained on copyrighted music, and potential cannibalisation of human musicians’ work, while urging that “copyright owners need to work together with the AI platforms”.

Kyncl was also asked about whether TikTok needs to follow YouTube’s playbook of launching a paid music service to become a strong partner to the music industry.

“We [YouTube] looked at this question very closely, and we decided that it was important to us and that’s why we did it. TikTok needs to do that. It’s the right decision for them to evaluate,” he said. “Holistic relationships is what we’re looking for.”

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Stuart Dredge

Music Ally's Head of Insight

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