As we head into uncertain economic times, Warner Music is full steam ahead with encouraging news.
Some fascinating insights have been shared by Warner Music Group CEO Steve Cooper in the company’s quarterly update where he’s painted a promising and positive outlook for the company and the wider music industry over the next 12 - 18 months.
Acknowledging the effects both 2020 and 2021 had on the business, he has also noted that these significant challenges inspired the company to innovate and diversify beyond recorded music.
Music is an essential need of humanity and will do well in turbulent times
“As the pandemic proved music as an essential need for humanity. This need has and will continue to make the music sector more resilient than many other industries” according to Warner Music CEO Steve Cooper.
This is encouraging given the current macro economic environment and talks of a potential upcoming recession, and is consistent with what we hear from other music related companies like Live Nation.
Substantial growth in streaming expected to continue, with new revenue opportunities including sync in social media, gaming, NTFs, Vinyl, and a new Revenue Share Partnership with Meta
“Streaming, our largest revenue source, has a long runway, and there's substantial headroom for both subscriber growth and subscription fee increases.”
“We continue to see an explosion of new opportunities in sync social media gaming and NFT's as well as the resurgence of vinyl sales and the bounce back in touring related revenue.”
“Over the long term, we're no longer reliant on any single format.” The recognition and revolution of multi-format revenue streams will provide the industry with various paths to increase bottom lines. A multi-format approach means music now lives beyond its recorded format only and will allow it to become more accessible to fans across platforms that suit their needs and preferences best.
As the world becomes more digital, music becomes more valuable
“Today, music propels and monetizes across every form of entertainment. In the digital age, artists have more ways than ever to engage and excite fans, which magnifies the importance and value of music companies such as ours.”
Digitization is allowing for greater artist-to-fan connection meaning fans can connect with the music and artists they love through various entertainment platforms.
Cardi B, Lizzo, Panic at the Disco, Paulo Londra, CKay and Aespa expected to significantly drive Warner’s streaming revenue in Q4
“I'd like to note, we expect an uplift in our Q4 recorded music streaming revenue, driven by a very strong release late including new music from Cardi B, Lizzo, Panic! at the Disco, and Argentina's Paulo Londra.”
“But, in addition, we have recently signed new deals with Meta that will deliver additional revenue in Q4. Our new deals include an expanded revenue sharing model that will open up additional opportunities for both frontline and catalog artists.”
Macro economic trends in advertising drove a slowdown in ad supported revenue
Cooper notes, “Q4 macro advertising trends resulting in a slowdown in ad supported revenue”. As economic conditions worsen globally, ad spend is being reduced dramatically as marketers become more savvy around the spend of their budgets. This points to the signs that ad revenue cannot be so heavily relied upon as 2022 continues and we look forward to 2023.
Music will continue to do well in the uncertain times ahead, but what is even more exciting is the long term future of music
Despite macro economic forecasts looking ominous, Warner Music’s quarterly update points to the fact that music will continue to do well in periods of economic slowdown and recession.
Whilst still being an affordable and accessible form of entertainment in such times, it also puts it on the path for continued growth while many other industries will stall.
Cooper says, “I know that in this current macro economic climate, everyone is being inundated with information about short term trends.”