This week Warner Music Group published its quarterly earnings for the period 1 Jul 2023 to 30 Sep 2023, rounding off its fiscal year and reporting full year revenues of $6.03 billion - the first time the smallest of the three major music companies has hit the psychologically significant $6 billion milestone.
In a detailed earnings call that seemed well-received by analysts, Kyncl also outlined his strategy for further growing revenue at Warner. And - alongside a deep dive into the company’s approach to AI, which we cover here - he focused in on a number of other topics of interest: physical music products; the evolution of royalty models and the value of music; and opportunities for international growth.
First, the high value physical music products represent in WMG’s business. In his opening remarks, he specifically pointed to this part of Warner’s operations, saying: “We brought bold inventive thinking to attracting new fans to our legendary artists and classic recordings”.
“Recent examples”, he said, “included a new deluxe edition of Talking Heads ‘Stop Making Sense’, [and special releases for] the fifteenth anniversary of Slipknot’s ‘All Hope Is Gone’ and the 20th anniversary of Linkin Park’s ‘Meteora’. With Madonna on tour, it's been a pleasure to find new ways to create cultural moments around her iconic career. These include a series of remix albums, the special Pride edition of her box set containing 50 number one tracks and the celebratory viral campaign ‘We love Madonna’”.
Secondly, Kyncl talked in detail about his continuing efforts to “realise the true value in music” - in particular around “price optimisation” and “evolution of royalty models”. Like the other majors, Warner has been increasingly pushing for higher subscription prices and new models for allocating royalties in the subscription streaming domain.
He told investors that a “more sophisticated and dynamic approach” to pricing will benefit “the entire ecosystem”, including streaming services, music companies, artists and songwriters, and that he “strongly believes there is a greater pricing opportunity in the future”. In particular, he called out the pricing disparity between family plans and individual premium subscriptions, pointing out that Chinese music services only offer the latter, with no bundle packages, and are still successfully growing premium user numbers.
As part of this conversation, Brian Castellani, WMG’s new CFO, also stated that Warner believes that “performance and targeted advertising in the streaming space” is outperforming the wider advertising market. This means there is potential for further growth in the ad-funded side of streaming as well.
On the evolution of the payment models employed by the streaming services, Kyncl stuck to the major music company party line, saying that streaming services need to “ascribe more value to what their customers value most”.
He added: “To state the obvious: premium music should be better compensated than low quality filler or functional music”. He commended Deezer’s “new approach” and teased that the industry should expect “similar developments with other partners in coming months”.
Kyncl’s third area of focus was the opportunity for growth in developing music markets, highlighting the potential for Warner in China, the Middle East, Africa and India. Warner, said Kyncl, “invests in A&R… to create a consistent flow of music from our artists and songwriters. We provide them with tailored approaches to become standout global success stories”.
India, he said, was a great example of Warner’s global strategy in action: “With a vast population of 1.4 billion people and its huge diversity of demographics, India has an endlessly evolving music scene”, he noted, which - he added - Warner has been moving to capitalise on, launching a local office in Mumbai in 2020 and growing the major’s presence through a series of strategic partnerships and acquisitions.
“The music ecosystem is healthy and has a number of exciting growth drivers”, said Kyncl. “With price increases happening across all major [streaming services], royalty models evolving to reward quality and emerging markets gaining traction,” he went on, Warner is “very confident and positive about the path ahead”.