Warner Music Group‘s Chief Monetary Officer Eric Levin says the proof is in that streaming music companies can hike costs with out harming development – and he’d wish to see DSPs transfer to recurring worth hikes.
Throughout a Q&A session at JPMorgan’s World Expertise, Media and Communications Convention on Monday (Might 22), Levin stated the market “has confirmed it will probably bear fee will increase,” and WMG is encouraging its streaming companions “to look very, very, very, very significantly” at elevating charges.
“A number of of the biggest gamers within the trade – Apple, Amazon, Deezer – have taken it upon themselves to lift charges they usually’ve accomplished it efficiently,” Levin advised host Sebastiano Petti, a JPMorgan fairness analyst.
“The value worth of music is extraordinary when in comparison with different media merchandise, particularly different streaming media merchandise – video, for instance.”
Levin added: “There has not been fee will increase traditionally over the previous many years. So it’s lengthy overdue.”
Final yr, amid excessive inflation throughout quite a few markets, a variety of streaming companies raised costs, together with Apple Music and Apple TV+, in addition to YouTube Premium.
However for now, the worldwide big of subscription music streaming – Spotify – hasn’t raised its base subscription fee for US subscribers. It has remained the identical because the service launched within the US in 2011, even within the face of rising issues amongst music corporations and artists that their incomes are falling behind.
Spotify has hiked subscription charges in a variety of different markets, together with Argentina, Brazil and its residence market of Sweden, and has hiked charges for multi-user bundles in a variety of markets, together with the US and UK.
Nonetheless, Spotify’s $9.99/€9.99/£9.99 fee for month-to-month premium particular person subscriptions within the US, UK and Europe’s largest markets stays in place.
Spotify CEO Daniel Ek hinted at a worth hike throughout an earnings name final October, following worth hikes at Apple Music and Apple TV+, in addition to at YouTube Premium.
“When our rivals are rising their costs, that’s actually good for us as a result of, once more, with our deep engagement that now we have and the bottom churn of any competitor, we are going to possible fare higher,” Ek advised analysts after Spotify launched its third-quarter earnings report.
Within the firm’s Q1 earnings name earlier this yr, Ek as soon as once more hinted at a US worth hike, however stated solely that it will occur “when the timing is correct”.
“I grew up professionally at HBO, the place worth will increase had been one thing we did each single yr and the cable trade did each single yr, whereas rising subscribers.”
Eric Levin, Warner Music Group
However WMG’s Levin says he want to see DSPs transfer to recurring worth hikes.
“I grew up professionally at HBO, the place worth will increase had been one thing we did each single yr and the cable trade did each single yr, whereas rising subscribers,” stated Levin, who was HBO’s chief monetary officer from 1988 to 2002.
“I believe, and I’m hopeful, that now that the trade has accomplished a spherical – or not less than a lot of the trade has accomplished a spherical – of fee will increase efficiently and proceed to develop, that they [will] begin to perceive that the trade can bear it, [that] they begin to have faith within the methods to do it efficiently, that they proceed to take a look at the worth worth of music relative to what customers pay for different merchandise and perceive that there’s extra room for will increase.”
Levin stated he believes that additional fee hikes will construct “a confidence and understanding that pricing can turn out to be and may turn out to be a standard a part of the trade, and definitely in our conversations with our distributors. We’re doing what we are able to to attempt to encourage not only a worth improve, however a recurring set of worth will increase as a part of the trade.”
“What we haven’t accomplished is put money into rising markets which might be nonetheless riddled with piracy, and [where] streaming shouldn’t be but ramping up. As a result of you’ll be able to make investments some huge cash in creating music that’s not going to generate a return.”
Eric Levin, Warner Music Group
As a part of its technique to develop its enterprise, WMG is specializing in alternatives “rising streaming,” Levin stated – that means alternatives in such areas as health streaming, gaming and social media.
“Usually, individuals are going to have one subscription to a streaming service and that offers them the product that they want. However with rising streaming, you’ve potential for a number of merchandise in a house a number of merchandise per individual,” Levin stated.
“Individuals use a number of social media merchandise, they play video games, they’ve health merchandise, all could be inside the identical residence. So you’ve the flexibility – as merchandise develop and merchandise roll out – for rising streaming to turn out to be two, three 4 use instances in a house and due to this fact [it] has the potential to develop quicker.”
To that finish, WMG has launched a variety of initiatives, together with Rhythm Metropolis, a “music-themed social roleplay expertise” on Roblox, which it developed with gaming firm Gamefam, meant to introduce customers to artists and music via social roleplay and provide alternatives to gather digital gadgets bought on Roblox. Rhythm Metropolis additionally options digital concert events and occasions that includes WMG artists.
WMG additionally inked a “first-of-its-kind deal” with blockchain sport developer Splinterlands, which can permit WMG artists to create and develop play-to-earn (P2E) arcade-style video games.
In 2022, WMG was a launch companion for train gadget maker Peloton’s new product “Lanebreak,” which mixes train with gaming, permitting customers to finish health challenges to WMG music.
At Monday’s Q&A session, Levin additionally provided some perception into WMG’s technique for increasing into rising markets.
He stated WMG doesn’t have a one-size-fits-all technique for increasing into rising markets, and takes a “bespoke” method to every promote it considers.
“What now we have at all times prioritized is monetary return,” Levin stated. “What we haven’t accomplished is put money into rising markets which might be nonetheless riddled with piracy, and [where] streaming shouldn’t be but ramping up. As a result of you’ll be able to make investments some huge cash in creating music that’s not going to generate a return. We’ve been very hesitant to try this.”
He added: “Once we see markets which might be coming on-line with streaming and digital digital distribution, and we forecast we are able to generate a return then we take very significantly coming into that market in a really critical style.”
Levin introduced earlier this yr that he plans to retire, and will likely be leaving WMG later this yr. He’ll stick with WMG to assist CEO Robert Kyncl discover a new CFO.Music Enterprise Worldwide