Music streaming’s popularity is undeniable, but revenue from streaming music has never overtaken revenue from digital downloads for any of the three major record labels — until now. Warner Music has just announced that last quarter, revenue from streaming services such as Spotify and Pandora (which grew 33 percent quarter-over-quarter) eclipsed revenue from download services such as iTunes.
“The rate of this growth has made it abundantly clear that in years to come, streaming will be the way that most people enjoy music,” said Warner Music CEO Stephen Cooper during the company’s earning’s call according to Recode. “We’ll continue to collaborate with our streaming partners to expand their businesses, and more importantly, to ensure that copyright owners, artists and songwriters receive appropriate value for their work.”
With more users coming on board, digital music in general is on the rise for Warner, including an increase in digital download revenue of 7 percent. But that meager increase couldn’t keep up with the 33 percent rise in streaming revenue, as music streaming continues to claim a larger portion of the overall marketplace.
The streaming music industry is currently in flux with new players popping up (Jay Z’s Tidal and the upcoming Beats-based Apple service leading the pack) alongside debates on the advantages and disadvantages of free, ad-based subscription services. It’s no secret that subscription streaming brings in way more revenue than ad-based models — Spotify makes 90 percent of its revenue from just 25 percent of its listeners who pay the $10/month fee for Spotify Premium, for instance.
Still, while Warner Music and the two other major labels, Universal and Sony, have embraced streaming music out of necessity, Cooper believes that both ad-based and subscription-based services are preferable to the alternative, i.e. nothing at all.
“There are any number of models out there, and all of those models — ad-based, subscription-based or with both — are better than piracy. To be crystal clear: piracy is zero revenue, it’s the theft of intellectual property, and it’s not good for anybody.”
On that point, Cooper disagrees with his Universal CEO counterpart, who wants to limit the amount of free music available on streaming services. Universal’s Lucia Grainge’s reasoning for limiting free, ad-based music is in its meager revenue. And, according to several reports, Apple agrees as the tech giant’s upcoming streaming music service is expected to have only limited music available for free, primarily based around a $10/month subscription tier.
All signs, including this Warner report, have shown that music streaming is on its way to becoming the dominant method for music listening. The next step for the music industry is to decide on the best model for streaming music services. We’re not expecting a decision soon, but the results of Apple’s rapidly approaching entrance into the music streaming marketplace should give us a clue.
