Streaming music rakes in revenue, not hurting digital downloads

By on August 10, 2012, 5:00 PM

Warner Music Group, a major player in the music industry who's labels include the likes of Atlantic, Elektra, Warner Bros., Reprise and East West, has released their fiscal third quarter results. The results? For the first time ever, online music streaming services accounted for one-quarter of the group's recorded music revenue.

While there's little doubt the continuing paradigmshift from physical to digital plays symphony to the ears of most music-loving digirati, it's interesting to see those digital sales take on a new form: online streaming.

Services like Pandora, Spotify and Rdio have continued to become increasingly popular amongst users, especially with the widespread adoption of mobile apps. With millions of songs available nearly anywhere at any time, it may be no surprise the subscription model is lifting itself to new heights.

As it turns out, Warner Music Group has some reasons to be excited about this trend too. Crude logic may suggest the recent explosion of streaming subscriptions would cruelly cannibalize sales of digital downloads; however, this does not appear to be the case.

According to WMG, despite the rising uptake of streaming services, digital music downloads (i.e. iTunes) appear unphased. Also a first, the gain in digital sales was greater than the loss of physical sales -- there's simply more music being purchased these days.

All in all, Warner Music Group harvested about $54 million in revenue from streaming music outfits last fiscal quarter. That represents roughly eight percent of WMG's total revenue, confirming that services like Spotify are indeed valuable to the music industry.  Interestingly, YouTube was also included as a streaming revenue source, but WMG omitted profits from digital lockers like Amazon's Cloud Drive.

User Comments: 11

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Darkshadoe Darkshadoe said:

Give the customer what they want..who would have thunk it?

Steve Steve said:

The most shocking thing about this report is that people are still using services like iTunes when Pandora and Spotify exist.

The thing I love about these streaming services is that they make pirating music a waste of time, its pointless to even bother now.

mevans336 mevans336 said:

The most shocking thing about this report is that people are still using services like iTunes when Pandora and Spotify exist.

The thing I love about these streaming services is that they make pirating music a waste of time, its pointless to even bother now.

I'm not a Pandora or Spotify fan. I don't buy enough music monthly to justify a recurring cost. When I want a song, I want that song. I don't want to hear artists that are similar.

Steve Steve said:

But Spotify allows you to hear whatever you want, you don't have to hear similar artists.If you don't listen to much and it sounds like you don't then I wouldn't even bother paying for it, the free service should be more than good enough.

PinothyJ said:

"Digital Downloads"

Another tautology, and in the title as well?

Jos Jos said:

Agreed with Steve, services like Spotify and Pandora are making piracy less and less convenient. iTunes and now iTunes Match (along with the Google and Amazon equivalents) are doing their part too. They only thing most of these services still need to work out is international availability, but that's probably because record labels make such licensing deals a pain in the ass.

TJGeezer said:

Steve and Jos nailed it. On the international access problem, though, it goes deeper I think than PITA licensing practices and maybe has more to do with U.S. distortions of copyright law, or so I've heard. Some countries simply don't care to go after their own citizens because of laws written by and for U.S. private interests, an attitude that annoys hell out of the RIAA enforcers.

Spotify has fixed that problem for me, but it's just as hard to find a legal way to watch U.S., New Zealand, Canadian or Australian TV - even PITA licensing seems blocked in noncompliant countries.

Being on a retirement pension in Mexico, I do wish on-demand streaming TV were available but to qualify, I'd also have to pay for a fast, anonymizing proxy with a region-selectable IP address to get the U.S., Australian, New Zealand, U.K. and Canadian programs I enjoy.

Even assuming I could find such a proxy service without impossible ping times, it would add cost to stream from too many countries for my monthly pension to cover. An encrypted Usenet connection in some happy non-RIAA, non-MPAA enforcer country simply makes better sense, especially if you want less parochial or nationalistic TV fare.

Guest said:

I'm sorry but no matter how competitive is Pandora and Spotify, you can't beat zero.

waterytowers said:

Remove all barriers to consuming media globally at a single price for all, then pirating will effectively end. There will always be some people not willing to or unable to afford to pay, but as an Aussie I refuse to pay for media at inflated prices. I also don't torrent movies or music, I am more of a book reader, yet another industry that costs double in Australia compared to USA pricing.

The most effective way to beat poor business practice is to not buy from the business. If people realised how much power they have over these companies by refusing to consume or buy their products the industry would come to its senses very quickly, I suspect a concerted effort would bring results within a year. Not many businesses would be able to cope with no revenue for more than a year.

Unfortunately I don't see international pricing about to change because there are too many people that are either willing to pay the higher price for media outside the USA or are willing to pay the cheaper USA price by buying from USA using the known workarounds. Either way the greedy companies still get their money.

tomkaten tomkaten said:

@PinothyJ: Haha, that's funny and sooooo true...

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