Warner comes out against free music services

By February 11, 2010Music

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As you may have seen Edgar Bronfman Jr, CEO of Warner Music Group, yesterday came out against free streaming services, saying the following (full article on the BBC website):

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.

That is clearly bad news for companies like Spotify and We7, although in the short term I guess it won’t effect them as their current contracts with Warner obviously aren’t affected by the comments of the CEO.  What counts for all the music streaming services is Warner’s position when they come to renew their agreements, and given there has been a recent shift, their could well be another one back the other way.

Obviously if Warner did decide to withdraw their catalogue from free services it would deal them a huge blow.  Having a full(ish) range of tracks is a big deal for Spotify et al, because that is what the consumer expects.  A service which excludes a bunch of your favourite tracks leaves you needing to find an alternative solution to run alongside it – at which point you might as well switch entirely to that alternative.  E.g. if I have to put all my Warner music on my laptop directly I might as well put all my music on rather than use Spotify for some and iTunes for others (that said now that I’ve been using Spotify for a while there is a big gap in my ‘owned’ catalogue).

The big question here is whether services like Spotify can make enough money for the music industry, and whilst Bronfman thinks they can’t, Rob Wells, senior vice president of Universal Music Group International, thinks they can – in his words:

Spotify is a very sustainable financial model – full stop

The difference between Bronfman and Wells might lie in their respective views of how big the music market can be/should be/will be.  It seems to me that like newspaper classifieds and encyclopedias before them the size of the music industry is being shrunk by the internet, and maybe these two are at different stages in their acceptance of that fact.

The important thing for the long term health of the music industry is that artists make enough money.  At the moment they aren’t seeing enough out of the free music streaming sites, largely because the labels are taking all the cream via up front minimum guarantees and equity stakes, and that needs to change.  The fact that artists are making more money via concerts these days will also help.

Once artists are getting enough money to keep them producing (which for many will be less than the days of yore) the labels and music services can fight over the rest.  Failing to support the free streaming services will only serve to push people towards piracy, further shrinking the size of the pie for everyone.

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