Warner Music Shoots Self In Head; Says No More Free Streaming

from the you-can't-be-serious dept

A few years back, it seemed like Warner Music actually had a better handle on where the music industry was heading than its 3 major label rivals. In the last two years, however, it seems like WMG has consistently gone further and further in the opposite direction. It may have hit a new low today with the announcement that it will pull out of all free streaming music licensing offers. Yes, Warner Music just told the one thing that was effectively competing with unauthorized downloads to shove off. Brilliant.


“Free streaming services are clearly not net positive for the industry and as far as Warner Music is concerned will not be licensed.

“The ‘get all your music you want for free, and then maybe with a few bells and whistles we can move you to a premium price’ strategy is not the kind of approach to business that we will be supporting in the future.”

And thus, WMG will go out of business that much more quickly. That is the model that the market is moving to, and Bronfman and WMG appear to have decided to ignore what the market wants, to cover their eyes, stick fingers in their ears and go down with a ship that could easily be righted. Incredible.

Now, Warner may be a bit gun-shy after its investment in iMeem (a free online music streaming service) became a total disaster, but what Warner doesn’t seem to realize is that a big part of why it failed was the ridiculous demands Warner put on iMeem in terms of how much it demanded in payment per stream. The problem is that WMG has totally unrealistic expectations of how much money should be paid per stream, and that’s because the company’s top execs still don’t seem to handle basic economic modeling particularly well. And thus, the company will fail.

You don’t compete with “free” by taking your ball and going home. You don’t compete with “free” by pretending that old artificial scarcities are coming back after the wall has been broken down. You don’t compete with “free” by suing customers. You don’t compete with “free” by shunning those who have business models that work. You compete with free by offering a better product and a better business model. WMG is choosing to go in the other direction. Best of luck to them…

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Companies: imeem, last.fm, spotify, warner music group, we7

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Comments on “Warner Music Shoots Self In Head; Says No More Free Streaming”

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80 Comments
Ima Fishsays:

It's time for a classic...

Conversation between two music executives…

Young guy: Have you heard the news, there’s this new thing called radio. They’re going to play and promote our music for free. People will start buying our music by the bushel.

Old idiot: Free?! So they’re not paying us anything?

Young guy: No, you don’t get it. They’re giving us free advertising. People across the nation will hear our label’s music and will buy it. We’ll make a fortune!

Old idiot: I don’t know, we’d better have the lawyers file a lawsuit against this “radio.” It sounds like they’re leaching off of our hard work.

Young guy: No, you’re still not getting it. Right now no one is hearing our music. We have to spend a fortune promoting our artists to get the word out, but these radio folks will do it for free. We’ll make more money if we let them play it.

Old idiot, on phone to legal department: Have you guys heard about this new thing called radio? I want you guys to sue them into the ground. In fact, sue the individual owners personally too, because they’re just as guilty.

Young guy: Face palms in disbelief.

Ima Fishsays:

Re: Re: It's time for a classic...

Isn’t that basically what they did when radio came along?

Actually, back then the music industry lined up to pay money to the radio stations to get their music to the masses. It was called payola. From the Straight Dope:

Paying somebody to place a song before the public dates to the early days of the modern popular music industry. At the height of the scandal Billboard magazine claimed that payola in various forms had been common during the big band era of the 1930s and 40s and in the vaudeville business in the 1920s.

Anonymoussays:

Re: Re: Re: It's time for a classic...

Vaudeville! Did you know that at one point in American history that vaudeville was the money-maker for entertainment.

But then, almost overnight, vaudeville stopped being the money-maker for entertainment as competition from the “talkies” and radio and such became to much to bear on poor, old vaudeville.

Then it simply disappeared. Sound familiar?

Richardsays:

Re: Re: Re: It's time for a classic...

“”Isn’t that basically what they did when radio came along?”

Actually, back then the music industry lined up to pay money to the radio stations to get their music to the masses. It was called payola.”

Well actually they did do the first thing in the UK initially. In the UK public performance of records was not allowed by copyright law. Radio stations (all BBC back then) had only limited “needle time”. Radio Luxembourg (run by the record companies used to play “teaser excerpts”.
The along came “Pirate Radio” (sound familiar) which actually deserved that name because they broadcast from ships. After a while the record companies and the governement had to back down. The pirates were shut down but more BBC channels and commercial stations were set up (and they employed all the old “pirate DJs”) and ever since then the radio has been full of music just like the US.

PaulTsays:

Re: It's time for a classic...

Part of me really, really wants to see them fail, and fail badly. The problem is that they won’t ever see that it’s their own actions that caused them to fail. It’s likely that they’ll continue the myth that it was “pirates” that caused them to fail, and get laws changed to damage everyone but themselves.

Maybe this will happen too late to save this specific corporate entity, but you can bet that others in the music and other content industries will be scrambling for those changes, using WMG’s collapse (or EMI’s, whichever comes first) as an excuse to pass such laws.

I hope I’m wrong, but I don’t see an “oh, we really messed up didn’t we, everybody else had better learn from our mistakes” response to their failures.

Marcus Carabsays:

Re:

That ignores all the new players though. By the time these labels begin to seriously collapse, there will be plenty of new companies monetizing music in far more successful ways and raking in the same millions. By the time they admit they have messed up, plenty of people (who have already learned from their mistakes) will have surpassed them.

PaulTsays:

Re: Re:

Yeah, you say that, but the main thing that all of those new players need to succeed is content. The majors hold all the cards in that sense, and they constantly make the wrong moves on licensing. Until they collapse completely, the majors aren’t going to give up the content, making it hard for a new player to make a real splash ahead of the existing players.

zellamayzaosays:

Re:

Man there are quite a few indie record labels on there I really respect and have lots of good bands that are under the umbrella of WMG far reaching and self destructive cover of capital. Hopefully the heads of those indie labels have a bit more smarts and can quickly react to the changing market and stay up to date with what their fans want and how they want it available to them

Henry Emrichsays:

Re: Re:

“Man there are quite a few indie record labels on there I really respect and have lots of good bands that are under the umbrella of WMG far reaching and self destructive cover of capital.”

Then you can’t really call them “indie” (independent), can you?

Or are you using “indie” as a genre label? Pretty sad if we’ve gotten to the level where even major-label “cultural product” that actually manages not to sound like formulaic, cookie-cutter bullshit gets called “indie”.

http://www.boycott-riaa.com/article/35487

“I’m kind of conflicted about the audience right now, anyway. Not necessarily my audience, but the overall million or so adults in the United States that listen to music. THE audience, as it were. They think that music is Indie because it sounds similar to the Arctic Monkeys or White Stripes or something. I’m really not sure. I think the record labels are also trying to brand some of their new bands as “Indie Rock,” despite the obvious hypocrisy.”

Just sayin’.
Any musician/band who is still stupid enough to want to get raped (oops, I mean “signed”) by the multinational corporate megaliths….well, they’re guaranteed to have ONE fan — TAM ­čÖé

Marcus Carabsays:

Re: Re: Re:

To be fair, I think “indie” really has become more of a genre designation than a comment on the business status now. That can indeed be confusing, but sometimes it happens – just like how one could confuse “Modern Art” (period from 1860s to 1970s) and “modern art” (art made today – really should be “contemporary”, but the term is semantically correct)

It is definitely good to note that a lot of bands and labels perceived as “indie” are not actually independent in business terms – and I’m not sure how the previous commenter meant it – but I wouldn’t invalidate the use of “indie” as a genre designation. Language is a bitch, sometimes.

MACsays:

Streaming and Warner...

It seems to me that this enormously selfish generation does not understand that the labels compensate the artists that pour their hearts and souls into a production.
Apparently, they believe that EVERYTHING should be free.
It does’nt work that way. You pay for what you get.
Would any of you fools out there work for free? Of course not and neither should the Artists that produce the music that all of us so enjoy.
Oh, and advertising revenu? Do you really think that sooner or later the advertisers are going to catch on a realize that we mostly ignor internet ads, completely.
When was the last time you saw a side bar ad and said ‘Great! I’m just gonna run right out and buy it!’
Probably never.

Paulsays:

Re: Streaming and Warner...

This generation isn’t any different than any other generation. Nobody is saying that everything should be free.

You claim that “you pay for what you get”…

Now days I pay to access the Internet, and I pay to download a song onto a computer that I bought and store the song on a hard drive I paid for. In the past, Labels pressed a round chunk of vinyl, put it into a cover with cover art, shipped it across the country, where a guy was paid to show it off to me, and I bought it.

Now the Labels want ME to pay for all of that, and pay them the same money I did in the past!

And at the same time, story after story comes out about labels NOT paying artists what they are owed.

So get off your high horse. Labels aren’t any more interested in paying artists than I am interested in paying Labels. I happily pay artists directly for their work. And if a label is involved, I do without.

Richardsays:

Re: Streaming and Warner...

“Oh, and advertising revenu? Do you really think that sooner or later the advertisers are going to catch on a realize that we mostly ignor internet ads, completely.
When was the last time you saw a side bar ad and said ‘Great! I’m just gonna run right out and buy it!’
Probably never.”

OK so how did Google make so much money so quickly?

Chuck Norris' Enemy (deceased)says:

Re: Streaming and Warner...

Would any of you fools out there work for free? Of course not and neither should the Artists that produce the music that all of us so enjoy.

Some can make money off of a hobby…most people don’t. They get jobs/careers that support themselves and then do their hobby on the side. If you’re good enough at your hobby then maybe you can make money if other people find it valuable enough to pay for. What the entertainment industry hasn’t figured out is that a lot of people don’t think that the value of copies (distribution cost of essentially zero) of their ‘art’ is the same price the industry demands.

Re: Streaming and Warner...

“It seems to me that this enormously selfish generation does not understand that the labels compensate the artists that pour their hearts and souls into a production.”

It seems to me that you’re an old timer who believes the BS the recording industry has spoon fed you. They don’t compensate the artists. The artists get an advance, and the rest of the recording sales goes to paying off that advance. The record companies make sure their accounting makes it so that the advance is never paid off and the artists never make royalties off of the recordings. It’s the CEOs of the record companies that get compensated for the artists’ hearts & souls.

Artists that make money making music make the lion’s share of their money off of touring and merchandising. This has been the case for decades and isn’t changing any time soon (in fact, one could easily argue that touring & live performances have been the only way most musicians have ever made a sustainable living in all of human existence … this recorded music thing is a fad of the latter half of the 20th century). The only people who are hurt by “this enormously selfish generation” are the enormously selfish CEOs who feel they are entitled to money from everyone for no reason what-so-ever than because they are.

Anonymoussays:

Re: Streaming and Warner...

MAC:

In your perfect world, everyone would understand that, love one another, and pay exhorbitant prices to the record companies who then toss their leftover pennies to the artists.

Really, they don’t get much at all compared to the giant companies – they really make their money off of touring and merch.

Now it’s my turn to say – it doesn’t work your way. There’s no concievable way to deal with file-sharing and the internet. Ethics aside, the technology is there and people will use it, develop it, and share it. That’s the way things are. You have to adapt and stay ahead or the trends, or you’ll be left by the wayside.

Apparrently Warner’s going to be in that second camp.

Kelledinsays:

Re: Streaming and Warner...

It seems to me that this enormously selfish generation does not understand that the labels compensate the artists that pour their hearts and souls into a production.
Apparently, they believe that EVERYTHING should be free.

Major corps like WMG are in this business for their own enrichment, not for the sake of the artists. In fact, they routinely end up screwing the artists they’re supposed to be supporting. Artists just about sign away their souls to major record labels, then historically end up getting a piddling fraction of a dollar every time a consumer spends $10-20 on one of “their” CDs. Considering how the labels treat the artists that depend on them, claiming this play is all about “compensating the artist” is nothing more than a sad, hollow joke.

The labels are whining because they spent a decade riding the wave of of vinyl-to-CD conversion, using a few good tracks to sell bundles of garbage, and growing fat off the profits. They got left with an entitlement complex even after the bubble burst. Now they feel like they automatically deserve some minimum profit margins that are neither justifiable (given the quality of their product) nor practically sustainable (given the easy availability of pirated music).

Oh, and advertising revenu? Do you really think that sooner or later the advertisers are going to catch on a realize that we mostly ignor internet ads, completely.

Funny…how many billions has Google raked in, solely in ad revenue? And how many years have they kept that up?

Paulsays:

From the article, “New media has to give the consumer what they want and the consumer is in a world where they want things right here, right now – and if you don’t give it to them, they’ll steal it.”

What a stupid way to put it. More accurately, there isn’t much of a barrier between what a consumer demands and what a consumer can have. Far and away, most people will pay a reasonable fee for the option to simply have access to content, be it music, movies, books, news, whatever.

Increasingly, we as consumers know we can easily access all of these content sources on a host of platforms. Like mobile phones, game consoles, laptops, touch pads (assuming that the iPad actually sells, and gets some competition), etc. We hardly have to do anything to get the features we want. We can rip DVDs to get content into our iPods; we can record streamed music to put it into our MP3 players; We can print online books into PDF files. We can OCR scanned books to make them searchable.

If I can’t get content in the form or mode that I want, I can legally buy the content, legally buy the computer, legally download the software, and (it seems) “steal” it from its legal form into the illegal form I want.

Time Warner is betting that they can put up a thread between the legal sources of their content, and nobody is going to walk walk through that thread to get that same content in the from they wanted in the first place.

We are not far from having Terabytes of storage in our mobile phones. Streaming is really only a solution that will attract customers as content providers are willing to make it better and easier than forcing customers into putting music themselves onto their mobile device. But train the market in that direction, and they will get good at it.

I am 98% converted to podcasts. Content is available and easy and legal without labels. Others I know are in gray areas, moving legal content perhaps against contracts of service to devices where they want it. And I am sure there are plenty of people that simply download content as they see fit.

This is the world as it is.

ChrisBsays:

“The ‘get all your music you want for free, and then maybe with a few bells and whistles we can move you to a premium price’ strategy is not the kind of approach to business that we will be supporting in the future.”

WTF does he think Radio is? I don’t pay for squat for the music I listen to over the radio and yet i can listen to it ALL day long.

Is WMG going to pull all their content from radio as well?

Philsays:

It's a smart move!

Each person listening to a WMG artist for free on a stream will now become a paying customer. In fact they’ll be buying the same song MULTIPLE TIMES just like they hear the same song multiple times on any streaming service. Can’t you people see that EVERY stream listener and EVERY stream play equals one sale?!?!?!

DARN! I almost got through that with a straight face;-) Oh, well, sarcasm mode OFF.

Anonymoussays:

I don’t steal my music, and it really pisses me off when some industry spokeshole paints a broad accusatory brush on all music fans. Many of my impulse (read: wasted money) music purchases come from hearing a stupid song on the radio or satellite music service, hitting the button on my Google phone that tells me the name of the song and the artist, and then buying the song as soon as I’m back at my desktop computer. I’ve also bought music after hearing songs on mobile streaming websites. Go ahead, Warner Music. Cut off the spigot.

At this moment, I have 26 days worth of music and audio books stored on my hard drive, all of it paid for MP3s, ripped from CDs I own, or downloaded free from Amazon or Itunes during free music promotions. I don’t need to buy any more music, and every time some industry nuthead makes another dumb statement about music thieves, they lose more paying customers. Your arrogance is disgusting.

Alexsays:

It's their product, they can do whatever they want

You can complain about what these companies do with their property, but its their property. If they decided to sell each song for $1000 its their choice, it could work in a weird and twisted way. You just complain about their business strategy because they have a product that you want, but you aren’t willing to pay for what they are asking.

I buy all my music (4000+ song library) and refuse to illegally download any song because I know if I had a product that was in demand, I wouldn’t want people stealing it.

If you can do a better job than these companies you continue to complain about, then start your own company and do a better job, offering a new business model that could make the artists a lot of money.

Tom Landrysays:

Re: It's their product, they can do whatever they want

You just complain about their business strategy because they have a product that you want, but you aren’t willing to pay for what they are asking.

and?

Its great you have the ethics and discipline to buy all your songs. it’s unfortunate that people like yourself and record companies keep expecting people to suddenly feel guilty and start paying up at which point the industry will rise like the reborn phoenix.

It’s never going to happen and the reason the industry keeps going down is they just haven’t grasped that fact yet. The point being made is if they want to stay in business, then they’d better find a way to give people a reason to buy rather than expect everyone to play fair. Argue about “whats right” until your blue in the face. No one’s listening.

The spiritual value of music is as high as its every been. The cash value of music is near zero.

Anonymoussays:

Re: It's their product, they can do whatever they want

I buy all my music (4000+ song library) and refuse to illegally download any song because I know if I had a product that was in demand, I wouldn’t want people stealing it.

Right, that’s why I pay licensing fees every time I sing Happy Birthday. I mean, this song is so great that everyone has it memorized and no one is paying for it whatsoever.

JEDIDIAHsays:

Sorry Billy...

There are some bands that I have NEVER supported directly in any monetary fashion. This is not due to piracy but simply due to the fact that their work gets heavy rotation on radio, MTV and sites like Pandora.

“Hey Billy, I like some of your stuff but I’ve never paid a dime for any of it.”

No piracy is necessary.

OTOH, continued exposure to Billy just might result in an album sale someday.

Although the whole “suing your customers” thing pretty much stopped my rather substantial monthly music media habit cold.

“You just complain about their business strategy because they have a product that you want, but you aren’t willing to pay for what they are asking.”

Who is this addressed to?

As a general rule, the reasonable people here are simply trying to point out that these companies are doing things that are losing them money. It’s not ‘complaining’, it’s making an observation.

Dogesays:

This and that

I have another opinion to add in support of Warner. The audio quality of all the streaming services is very poor and by supporting them the labels are downgrading their product. What they need is CD quality downloads, and a new HD quality service at premium cost.

They should go talk again to Apple to see if they will put Apple Lossless files at 16bit/44.1kHz and 24bit/96kHz on iTunes. That would be a premium service worth paying for.

F Psays:

Interesting… I used to buy about 1 album/month. Once it was revealed that Sony put malware on some of their CDs, I essentially stopped…. I think I’ve bought less than one every other year, all of which were because I loved a piece from the radio.

Personally, I’d appreciate it if they’d stop treating their own customers as criminals. Then I might consider buying more frequently again.

Rich Fiscussays:

Even worse than it sounds

One thing that nearly everyone seems to have missed in all the discussion of this decision is that Warner is simultaneously trying to develop non-traditional revenue streams through 360 deals with new artists. In the same conference call Bronfman complained about free music he was talking up the fact that 10% of WMG’s revenue for the quarter came from these deals in the form of merchandising and concert promotion. Regardless of whether you accept the (completely untested) hypothesis that eliminating free music will result in higher track sales online, there’s really no question that merchandise and concert receipts are best promoted by attracting the maximum number of listeners.

How many iTunes downloads does it take to equal the profit from a single concert ticket? And which is easier, selling 1 ticket or that number of downloads?

Music Guysays:

Dare I give an alternative view?

I work for one of the big 4 labels. I hold a senior position in finance. So I’m not a creative, I’m one of the guys in suits you self appointed music gurus hate, so I expect some abuse. But here goes anyway in trying to explain some of this.

To paraphrase Lars Ulrich, a record company’s primary role in the industry is to be a bank. The labels scout for talent and then lend money to new (and often established) artists, give them access to studios (less of an issue in the digital age) and provide the marketing, promotion and distribution. All of these expenses are then set off against the royalties earned until the advance (loan) is paid off and then we take a cut of future earnings.

You can argue that all of this can be done by small indie labels or by the band itself using some laptops and Facebook. And that’s true and good luck to them. But only the large labels have the financial muscle to bankroll a large number of potential artists in the hope of revealing a few stars who make music that people want to hear.

Like a bank who lends money to small business or mortgages, labels are supposed to have expertise in picking enough winners to offset the loses from the losers. That’s what is supposed to make them profitable. You can scream all you want about faceless suits and evil corporations screwing artists and profiteering, about it being money and not the music etc etc. But at the end of the day, profit only comes from finding artists that the public wants to hear.

Now of course the model is broken. The labels don’t make profits because no-one pays for music. The artists don’t make money because no-one pays for music. It hasn’t hit yet as the labels are still paying artists but are going bust. But you lose the Big 4 and most of the successful artists around now will be broke. This rubbish about concerts filling the gap ignores the economics of touring I’m afraid.

The industry is only surviving on catalogues. The only artists still making money are people like the Rolling Stones, Depeche Mode, The Beatles, Queen etc who were invested in and supported in the bad old days when people paid for music.

With no profit in making music, the quality of artists will fall (if it hasn’t already) and all you will get are bland, generic, safe bands and singers who pump out low risk stuff so they can at least get 500k sales and make a modest living. You will never get the geniuses and iconic music makers of the past as no-one will take a risk on anything other than established artists or those that sound like them.

Why? Because no label will be big enough to take the financial losses from the bad calls necessary to sustain them until they make a very right call. Small indy labels can never pick up this slack and will similarly have to look for safe, generic stuff or go bankrupt pretty quickly.

In 5 years time when there are only 2 or 3 big labels, look at the music available and when you see it’s all rubbish you will see I’m right, but by then it will be too late.

Right now we are getting by on the fumes of talent nurtured in the bad old days when labels made money and could invest. Those times are coming to an end as we speak.

So to all those simpletons who like automotons bash the big labels and rub their hands with glee when the Big 4 report losses and one of them looks like disappearing, thanks for helping make modern music rubbish and for dancing on the grave of the creativity you claim to worship.

I’m not saying free is bad or that any of this is not inevitable or in fact a bad outcome, but people who refuse to pay for music need to understand that there is a cost and the cost is quality, diversity and choice. If you still chose to steal music after considering that, then fair enough, it’s a free world. But only chose to do so after considering the cost because once the music industry is dead, it won’t come back.

Anonymoussays:

@Music Guy

Not all music comes from the big labels.

If they can’t adapt to the effect the Internet has on their business, then they should die. Music is already being generated by bands who do not sign to anyone, who produce their own CDs, who do all their own promotions, who connect with their fans over the net. Now that their audience is so accessible, they don’t need the big labels anymore.

Don’t think for a second that the loss of Warner Music is going to put even a dent in the amount of music being consumed. People will look elsewhere, and they’ll find other bands to listen to whose labels haven’t decided to lock away their greatest assets. If the big labels won’t give them what they want, they’ll pirate. If the labels die, they’ll listen to independents with working business models. But music will always be made, and in an age where a video can be sent around the world and seen by millions of people in a single day, it will be heard.

Personally, I’m fairly sure the big labels will fold sooner or later. The recording industry can’t survive where the Internet has made recordings close to worthless. But as Mike likes to say, the music industry is booming like never before, so y’know – no huge loss there.

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