Warner Music CFO Reiterates Call for Streaming Services to Raise Prices: ‘The Industry Can Bear It’
Written by djfrosty on May 22, 2023
Warner Music Group executive vp/CFO Eric Levin reiterated the label’s call for streaming services to raise their prices while speaking at a conference hosted by JP Morgan Chase & Co on Monday (May 22).
Levin, who worked at HBO between 1988 and 2002, told the group of investors and Wall Street analysts that, unlike streaming services, the cable network almost annually raised prices during that period because the company knew customers wanted its content enough to pay a premium.
“I think and I am hopeful now that much of the [streaming] industry has done a round of rate increases successfully…that they start to understand that the industry can bear it,” Levin said.
Levin’s comments echo WMG CEO Robert Kyncl‘s previous call to streaming company hold-outs to raise prices, delivered during a wide-ranging presentation in March that touched on WMG’s growth strategy if streaming growth slows as well as its light release schedule in the first two quarters.
An increase in music streaming revenue, the main driver behind WMG and other major music companies’ double-digit growth in recent years, is expected to decline from 10% growth in 2024 to 3% growth in 2029, according to a recent presentation by MIDiA Research. That projection, which is far gloomier than Goldman’s forecast for a 12% compound annual growth rate for streaming revenue until 2030, prompted several questions to Levin about WMG’s streaming revenue expectations and how it may grow even if the streaming engine slows.
“We still have a lot of conviction that streaming has a lot of growth,” Levin said while noting that growth may come from a series of drivers.
“When we went public three-ish years ago, our growth story really revolved around subscription streaming,” he said. “Now … it includes ad-supported streaming [and] emerging [sources] of streaming, social, fitness, gaming, etc. So the facets of growth have really diversified.”
The industry has seen steady growth in subscription streaming since roughly 2015, and growth in that area remains present in all economic forecasts, Levin added.
Other revenue drivers like ad-supported streaming, he continued, are more impacted by “cyclicality based on slowdowns when the economy slows and rapid recovery when the economy is solid.”
Emerging sources of streaming revenue, such as from social media and short-form video apps, have significant growth potential, Levin said, because “you have potential for multiple products per person in a home — people have multiple social media accounts in one home.”
This month, WMG reported its second straight quarter of basically flat recorded music revenue, driven by a slower first half of the year for music releases. Recorded music streaming revenue declined nearly half a percent from the prior year due to the light release schedule.
Pressed to provide greater detail around why the company is experiencing a modest release slate this year, Levin said the May 5 release of Ed Sheeran‘s – (pronounced Subtract) is expected to be the first in a slate of upcoming releases by prominent artists — and indeed, the company is already showing signs of a second-half rebound. Still, he acknowledged WMG has lost ground to its competitors.
“We lost a little bit of momentum, but we fully expect to get it back,” Levin said.