Warner Music Doesn’t See Rumored iRadio as Threat to Downloads

Warner Music Group “would welcome Apple’s entering into the digital radio business,” CEO Stephen Cooper said on the company’s fiscal Q2 earnings call Tuesday, in response to a request for comment about Universal Music’s reported royalty deal with Apple for its as-yet-unannounced streaming music service. Widely published reports indicate that stalled negotiations with Sony Music and Warner over licensing fees for iRadio have slowed the streaming music service’s ramp to market.

While carefully selecting his words Tuesday, Cooper said: “We, I think, as well as the rest of the industry, would welcome Apple’s entering into the digital radio business.” The move by Apple “would lead the charge for other entrants and would accelerate also the growth of simulcast and digital radio from terrestrial participants,” he said. He said he hoped “Universal, Sony, we and others in the industry will come to terms with Apple in the near future.” Apple spokesman Tom Neumayr told us Apple was “going to decline comment on rumor and speculation."

On whether iRadio as a streaming service would be a threat to Warner Music’s download business, Cooper said other prominent digital radio services -- citing Pandora as the leading example -- haven’t resulted in “any meaningful shift in consumer behavior away from collecting music.”

Cooper cited RIAA data from 2012 showing U.S. recorded music revenue slipped less than 1 percent in calendar 2012. Digital revenue grew 14 percent and accounted for 59 percent of total U.S. recorded music revenue for the year, he said. Subscription, streaming and digital radio services generated 15 percent of U.S. recorded music revenue for the year, up from 9 percent in 2011, according to RIAA data. Warner’s track-equivalent album unit sales, meanwhile, grew 7 percent year-over-year for the quarter in the U.S., “significantly outpacing the industry,” which was down 4 percent, Cooper said. Warner’s track-equivalent album share grew two percentage points to 20 percent, its highest quarterly share in 30 months, he said.

Cooper said he “wouldn’t want to assume what Apple’s long-term plans are,” but said Apple continues to “build and complement all of the facets of its ecosphere.” Cooper’s view is that while Apple likely has “more information about consumer behavior and preferences than anybody on the planet,” digital radio “hasn’t eroded the consumer’s preference to collect music and want to control and collect that in their own way.” Further, Cooper said of Apple, “I suspect that they suspect that this will be complementary as opposed to creating erosion in the overall demand for either downloads or the collecting of music in other forms.”

On the Local Radio Freedom Act, now co-sponsored by 133 members of the House and 10 senators, according to the NAB, Warner Music Chief Financial Officer Brian Roberts said Warner is “supportive, clearly, of a performance right in terrestrial radio for the recorded music industry.” From an industry perspective, he said, “We're very supportive of getting that right.”

For fiscal Q2 ended March 31, Warner Music Group posted revenue of $675 million, up 8 percent year-over-year. Digital revenue grew 20 percent over the year-ago quarter to $281 million. The company swung to a profit of $2 million after posting a $36 million loss in fiscal Q2 2012, it said.