WMG Sees Opportunities in Global Music, Fitness, Metaverses, Says CEO

Streaming music revenue potential has a long runway relative to smart device penetration, before reaching market saturation, said Warner Music Group CEO Stephen Cooper on a Thursday virtual investor event. Spotify’s experiments with pricing in developed and emerging markets and Amazon’s efforts with higher priced tiers and added functionality are “good news” for WMG, said Cooper. New business models -- social platforms, fitness and metaverses -- “are just getting started.” Those fast-growing categories are delivering revenue of $150 million per year, he said.

In emerging markets, pricing and average revenue per user are less than in developed markets, but WMG believes “50% of something is better than 100% of nothing.” Taking a longer view, streaming services are “changing people’s habits.” WMG recently opened offices in Turkey, Vietnam and India, Cooper said. It partnered with global distributors in Africa and India and is expanding its Alternative Distribution Alliance that distributes indie and stand-alone artists, he said.

WMG sees its physical, merchandise and live performance businesses that took a hit from the pandemic “springing back.” It expects revenue opportunities to come from a lot of different areas.

Artists and repertoire (A&R) budgets at WMG have “increased meaningfully” in correlation with revenue as the company moves from an “Anglo-centric” to a “far-more global’ music company, said Cooper, citing the internet as the enabler. “The internet doesn’t recognize geographic boundaries” or “start and stop at certain genres,” Cooper said. “The internet is indifferent to where things come from and where they go to, and we’ve had to respond both by way of our geographic and partnership footprint with appropriate upsizing of A&R because great music, great artists, can come from anywhere and resonate everywhere.”

On whether he sees disintermediation occurring in the music business in the way direct-to-consumer streaming services are proliferating in the over-the-top video market, Cooper said the concept is “always on our radar screen,” but “doesn’t present a substantial risk.” The music model is different from the long-form video model because it requires “ubiquity,” said the executive. Warner’s artists “want their music to be everywhere,” he said. He cited a “backlash” in the past few years when some streaming services tried exclusivity as a strategy for artists, events and approaches.

“It just backfired because artists want their music to be accessible to everyone,” Cooper said. The long-form video model, by contrast, is about exclusivity. Disney expanding from content to distribution and Netflix growing from distribution to content are examples of "far more vertical integration than I believe one will ever see in music.” WMG’s music, along with libraries from Universal and Sony, span decades, and those libraries “are absolutely essential” to any streaming service, he said.

The possibility of disintermediation in the music world also is “quite low” due to competition and relationships, Cooper said. The relationships between content providers and demand-side platforms “are at a place where … it works for both sides, and there really is no incentive to disrupt that.” There’s incentive to continue to work together and provide an ongoing stream of great new artists and music “in a world where the music ecosphere’s becoming far more complex,” he said. Labels and publishers are needed to “create those lanes for truly great music and truly great artists to be heard.”

On the role of music labels in promotion and driving discovery in the digital space, Cooper said Warner gets data from all the streaming providers as a data aggregator. Individual services have their own data, “but Spotify doesn’t have Apple’s data, Apple doesn’t have Amazon, Amazon doesn’t have Google. We have it all.” Warner can see through the aggregation “a far broader, deeper picture than any one service,” he said.

From data flowing into WMG’s Sodatone analytics tool, the company can see which music is “generating heat” on a given pipeline, and it can see whether activity is “a fluke, is it gathering momentum, is it going to cross genres… who’s it appealing to?” Cooper said. It also has the Opus music intelligence system which unifies tools and data so if artists post to social media, the company sees the impact the posts have on their fan bases "and on the movement of their music” in real time, he said. That allows the label to make better marketing and promotional decisions, he said. “It points us to where we should be investing."