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New Warner Music boss discusses reasons to be cheerful despite a “tough quarter”

By | Published on Friday 10 February 2023

Warner Music

Warner Music’s new CEO – former YouTube exec Robert Kyncl – did his first investor call yesterday as the music major put out its latest quarterly financial report. Although the top line figures in that report were not as upbeat as normal, the new boss was nevertheless upbeat about the future direction of the music rights business at large and Warner Music’s position within it.

He honed in three reasons for optimism. First, “as technology opens up emerging economies, the industry’s addressable market will continue to expand even further”. Second, “innovation is constantly creating new use cases for music, giving us the opportunity to diversify our revenue sources”. And third, “music is still undervalued, especially when compared to other forms of entertainment, like video”.

That latter statement is a long term talking point in the music community, of course. Most recently said conversation has mainly focused on the need for music streaming subscription prices to increase, alongside much chatter about TikTok not paying enough into the music industry.

Kyncl has interesting perspectives on both those elements of the ‘music is undervalued’ conversation, having worked at YouTube when it was the platform everyone accused of under-paying for the music it utilised.

And before YouTube, he was at Netflix. That’s relevant because Netflix has increased its subscription fees several times over the years, while in most markets Spotify is still charging the same as when it launched in the late 2000s.

That is likely to change this year, not least because Spotify’s rivals in music streaming have started instigating increases on their headline pricing. And the Kyncl-led Warner Music is likely to join the other majors in pushing for more regular price rises in the future.

As for the TikTok situation, according to Billboard he talked to investors about how YouTube had evolved its relationship with the music industry by launching its standalone music service and refining the Google platform’s Content ID system and advertising strategies.

“At YouTube, we looked at this problem very closely, and we decided that music was very important to us, and that’s why we did it”, he said of that evolution and the strained relationship with the labels that motivated it.

TikTok needs to similarly look into the problem, he added. ”It’s the right decision for them to evaluate. And you can see from YouTube’s execution what the results of the finding was for us. But I can’t speak to what TikTok finds. That’s up to them. But my answer is, a holistic relationship is what we’re looking for”.

Total revenues for Warner Music during the last quarter of 2022 were down 3% year-on-year on a constant currency basis, which is depressing given the majors have become used to reporting decent growth in recent years. However, the slip in revenue was partly due to a reporting technicality which meant the 2022 quarter being reported was a week shorter than the same reporting period a year earlier.

However, Kyncl nevertheless admitted it had been a “tough quarter”, partly due to a dip in income from ad-funded streaming and a relatively light release schedule. But let’s not allow any of that to diminish all of Kyncl’s upbeat optimism about the future. Yay optimism!