Warner Gets A Quarter of Digital Revenue From Streaming
Warner Music Group is getting good growth from streaming services, which now account for 25% of its recorded music digital revenue. The other important news in the company's Thursday earnings call is the recorded music segment's digital growth offset its decline in physical sales. That merits a trumpet sound or two.
If there's a problem, it's that the recorded music division is not getting much help outside of downloads and streaming. Artist services and revenue expanded rights contracts -- which are included in the recorded music segment -- were a drag on revenue, falling 25% to $58 million in the quarter. Performance royalties fell 8% and sync royalties grew 1%, so neither helped Warner gain ground.
Warner did not break out the revenues generated by its artists' expanded rights contracts, but based on information in the earnings call I estimate expanded rights revenue in the quarter totaled $18 million (artist services revenue was another $40 million). In other words, 360 contracts are not providing big revenue or growth. Those numbers are hardly disappointing -- that's an annualized $72 million that didn't exist before 360 deals become the norm. But it goes to show 360 deals are still a small piece of the puzzle.
There's more good news inside Warner's digital revenue. Subscription and streaming services accounted for 25% of the recorded music division's digital revenue in the quarter (which works out to $54 million) and grew at a "significantly higher rate" than download revenue, which is not surprising given the relative maturity of the download market. Subscription and streaming revenue for the music publishing division were characterized as "strong" but no more information was given.
MediaMemo's Peter Kafka called it the Spotify Effect, but one could just as easily call it the Pandora Effect or the YouTube Effect. Included in that $54 million are royalties from on-demand audio services (Spotify, Rhapsody, Muve Music and others), non-interactive digital transmissions (SiriusXM, Pandora and other webcasters) and on-demand video streaming from the likes of YouTube.
But even that good news about streaming seems a little empty. Streaming is still a small part of Warner's recorded music revenue -- just 10.3% -- and can make up for only so much hemorrhaging. Downloads, streaming and expanded rights revenue are doing the heavy lifting. It would be great to see growth in other areas.
A few years ago, then-CEO Edgar Bronfman, Jr. would have been talking about the number of artists Warner has signed to expanded rights contracts, or 360 deals, in order to show how the company was diversifying its business model and adjusting for the future. Streaming is a better story now and that's why it was highlighted during Thursday's earnings call. It will continue to be a good story as long as the bottom doesn't drop out of CD sales and download sales continue on their current trajectory. And it's likely to get better as services get into the hands of more consumers.
Warner Music Group is getting good growth from streaming services, which now account for 25% of its recorded music digital revenue. The other important news in the company's Thursday earnings call is the recorded music segment's digital growth offset its decline in physical sales. That merits a trumpet sound or two.
If there's a problem, it's that the recorded music division is not getting much help outside of downloads and streaming. Artist services and revenue expanded rights contracts -- which are included in the recorded music segment -- were a drag on revenue, falling 25% to $58 million in the quarter. Performance royalties fell 8% and sync royalties grew 1%, so neither helped Warner gain ground.
Warner did not break out the revenues generated by its artists' expanded rights contracts, but based on information in the earnings call I estimate expanded rights revenue in the quarter totaled $18 million (artist services revenue was another $40 million). In other words, 360 contracts are not providing big revenue or growth. Those numbers are hardly disappointing -- that's an annualized $72 million that didn't exist before 360 deals become the norm. But it goes to show 360 deals are still a small piece of the puzzle.
There's more good news inside Warner's digital revenue. Subscription and streaming services accounted for 25% of the recorded music division's digital revenue in the quarter (which works out to $54 million) and grew at a "significantly higher rate" than download revenue, which is not surprising given the relative maturity of the download market. Subscription and streaming revenue for the music publishing division were characterized as "strong" but no more information was given.
MediaMemo's Peter Kafka called it the Spotify Effect, but one could just as easily call it the Pandora Effect or the YouTube Effect. Included in that $54 million are royalties from on-demand audio services (Spotify, Rhapsody, Muve Music and others), non-interactive digital transmissions (SiriusXM, Pandora and other webcasters) and on-demand video streaming from the likes of YouTube.
But even that good news about streaming seems a little empty. Streaming is still a small part of Warner's recorded music revenue -- just 10.3% -- and can make up for only so much hemorrhaging. Downloads, streaming and expanded rights revenue are doing the heavy lifting. It would be great to see growth in other areas.
A few years ago, then-CEO Edgar Bronfman, Jr. would have been talking about the number of artists Warner has signed to expanded rights contracts, or 360 deals, in order to show how the company was diversifying its business model and adjusting for the future. Streaming is a better story now and that's why it was highlighted during Thursday's earnings call. It will continue to be a good story as long as the bottom doesn't drop out of CD sales and download sales continue on their current trajectory. And it's likely to get better as services get into the hands of more consumers.
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