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Change in Mindset

WMG CEO Hails Streaming Price Hikes, Says Music Remains 'Undervalued'

The biggest change in the music industry in the past decade is streaming, but the biggest change at Warner Music Group was a change in “mindset,” said outgoing WMG CEO Steve Cooper on the company’s Q4 FY ‘22 earnings call Tuesday.

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Cooper cited the evolution of Warner Music from an Anglo-American music company to a “global music entertainment platform” that offers fans access to “unlimited, ubiquitous music in every way, shape and form” in real and virtual worlds. Robert Kyncl, who will become WMG CEO Jan. 1, has a track record of “championing change” at YouTube and Netflix, Cooper said, and his command of technology will “unlock new opportunities” for the company.

Through a deal with The Sandbox, a gaming metaverse, Warner Music was the first major music label to “plant a flag and build on virtual real estate,” with WMG Land, Cooper said. “We’ve moved way beyond thinking in terms of singles, albums and videos,” helping artists create immersive interactions with their music in real and virtual worlds, he said.

Chief Financial Officer Eric Levin said WMG is engaged in several market experiments in the emerging Web3 space, referencing the Sandbox partnership and “others in flight” that are “quite promising” over time. “Music is no longer reliant on any one format or distribution channel: It is an essential part of every form of entertainment,” Levin said.

WMG is pleased with recent price hikes by Apple Music and Deezer, “and the opportunity for more to come,” Levin said. Cooper said music “remains undervalued,” but WMG is optimistic about future increases and reports of subscriber growth. Developed markets continue to grow by double digits, and emerging markets are growing at higher percentages, he said.

The revenue growth curve of emerging streaming platforms continues to outpace more established formats, Cooper said. The company expects monetization to follow growing engagement with music, he said, noting a recent deal with Meta produced $370 million in revenue in the quarter. “We look forward to the continued evolution of our deals as these platforms harness the power of user-generated content, not just for music discovery, but for marketing and monetization.”

On the industry debate over the value of music labels and publishers in a world where artists have a number of distribution alternatives, Cooper said, “While distribution has been democratized, talent never will be.” Genuine talent is “rare and difficult to find, but discovery is just the beginning,” he said, citing the resources, financial investment, global infrastructure, creative expertise and technological skills WMG brings to artists that “builds careers for the long haul.”

Revenue for the quarter ended Sept. 30 grew 9% year on year to $1.5 billion, the company reported. Music revenue grew 6% to $1.2 billion; digital revenue rose 7% to $989 million, it said. For the year, revenue rose 11.7% to $5.9 billion. Fiscal ’23 is off to a “solid start,” Levin said, but “softness” remains in the online advertising market, which he called a “temporary dislocation.”