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No new free music from Warner says CEO

Written by Rich Fiscus (Google+) @ 11 Feb 2010 14:47 User comments (8)

No new free music from Warner says CEO Warner Music Group CEO Edgar Bronfman Jr recently told analysts the company will not be entering into any new licensing deals for ad-supported music.
"Free streaming services are clearly not net positive for the industry, and as far as Warner Music is concerned will not be licensed." said Bronfman during a conference call. He indicated that giving away music with the goal of enticing customers to pay was a losing business strategy.

Bronfman cited the growth of subscription-based services offered by mobile phone providers as the way of the future. These involve device-dependent, DRM-laden files which require a monthly subscription just so music you've already downloaded will continue to play.

The problem is an apparent lack of recognition by Bronfman of how his company grew to the size it is today. Record labels have always used free music to drive sales. The best known of these free services is terrestrial radio.

Non-traditional revenue

Meanwhile Warner Music is increasing emphasis on so-called 360 deals. These arrangements, also known as Expanded Rights deals, provide the label with additional revenue streams in the form of merchandise and concert revenues.

Last quarter these non-traditional revenue streams accounted for 10% of WMG's income.

There is some irony in the fact that they're finally starting to take advantage of these opportunities at the same time they're attempting to squeeze free music out of existence. After all they're exactly the sort of thing you need to make money from giving away music.

In fact it's fair to say that reducing the amount of free music available also limits the value of 360 deals. Merchandising and concert attendance both rely heavily on getting as much music as possible to the most ears available.

Bronfman also made reference to "the growing recognition of the value of intellectual property." That begs the question of whether he even understands what the term 'value' actually means.

Despite many content owners' fantasies to the contrary, value is what the customer is willing to pay. No matter what Warner raises the price to, the value will be decided by their customers.

In fact Bronfman himself admitted that sales dropped as a result of iTunes' recently implemented tiered pricing model. Despite sales of popular tracks slowing when the price jumped from $0.99 to $1.29, he characterized it as a "net positive" because the price increase offset lower unit sales.

What it really means is that individual iTunes downloads have a lower value than Warner (and other label) executives want to admit.

Meanwhile recent research suggests lower prices would result in more units sold and higher revenue. In other words it would mean more profit from both traditional and non-traditional services.

The bottom line is you can't expect to get paid every time someone consumers your content. That's the losing business strategy.

It's also the direction every major label continues to charge blindly, under the mistaken belief that consumers will eventually see the light and follow like lemmings off a cliff.

The reality is consumers long ago took the lead when the labels refused to. Record labels can follow and profit or ignore them and face continued decline.

Music doesn't become free because label executives are magnanimous and charitable. It becomes free because it has a higher value as a promotional tool than a commodity.

Conveniently, that mirrors the cost to labels for reproducing all that music digitally. So the real question is how can you take advantage of free music to sell other products?

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8 user comments

111.2.2010 15:42

F*** YOU! I don't even have time to vent on how utterly wrong this guy is.

211.2.2010 16:07

Originally posted by Edgewise:
F*** YOU! I don't even have time to vent on how utterly wrong this guy is.
You and me both Geez I have a lot to say on this....especially how despite this Deuche Bag claims oh we can use Warner Music in Youtube Videos sense their entire library is in youtubes system(which I doubt) THEY PULL YOUR VIDEOS NO MATTER WHAT I could go on and on but......-_- This is another reason now why people freaking "Pirate" things

311.2.2010 19:01

I understand the frustration of Warner Music, but they need to remodel their business structure, if their to survive in the 21th century.

411.2.2010 19:51

I predict a jump in piracy... especially if this causes a whole tonne of spotify content to be removed

512.2.2010 2:50

tsk what a huge step backwards.

did you all know that Warner own the rights to the "Happy Birthday to You" song for the 1800's and still demand huge royalties for any public performance?

they want to own the rights to everything so they get a slice of every pie, not bad for a company that grew to its size by ignoring copywrite & stealing peoples works.

622.2.2010 18:13

This manager is short-sighted and history repeats itself.
Xerox was into paper and gave away the GUI (graphic users
interface) nowadays in every operating system.
The money they could make if they sold it.
Fire the manager.Give him the heave-ho!
I will sell my Warner stocks to-morrow. First thing!!!

is short-sighted good English? I translated it litteraly from Dutch.
English is a very rich language but difficult.

723.2.2010 6:25

The problem with charging people for everything is they become more choosy about what they actually pay for.

823.2.2010 6:39

when given the choice of paying for garbage or taking it away for nothing what do people do?

nasty bunch of shysters this company anyway.. remember the name "time-warner" .. the people who constantly run those infomercials to con you into buying a cd, and then send you unsolicited mail every 4 weeks with the "editors choice" and bill you for it (or drag you through debt collection agencys) even though you never ordered anything and paid to return the junk you never asked for.. DO NOT BUY ANYTHING FROM TIME-WARNER... EVER!!!!

Boycott ALL mpaa/riaa cartel companies.. they are criminals.. buying from them funds criminal international arms dealing, creation of chemical and nuclear weapons of mass destruction and huge environmental damage. By funding these companys you fund international organised crime.

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