Specialist
Former president at Warner Music Group Corp
Agenda
- Warner Music Group's (NASDAQ: WMG) operating environment – IPO and coronavirus implications
- A&R (artist and repertoire) spend trends given lack of live events
- Contract structure evolution
- Impact of distribution platforms Spotify (NYSE: SPOT), Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) on Warner Music Group
- Outlook for 2020 and beyond, including M&A activity
Questions
1.
Could you give an industry-wide overview, thinking about top-line trends and drivers, mostly from the recorded side, and Warner Music Group’s operating environment?
2.
Do you find the trend of the unhappy artist being a meaningful trend to track as it relates to a larger theme of bypassing labels and going direct? Do you think there is a dynamic of smaller, independent labels catering to that trend? Is this something that is a moot point, to a certain extent, and the labels are very necessary, as it relates to the artist’s success?
3.
What will the impact of coronavirus be on the business model?
4.
With disruption on the distribution side and the near-term coronavirus impact, what are you monitoring when we stack up Warner to Sony and Universal Music Group, for long-term success but also ability to weather through some of these near-term challenges? Is there anything different on a digital exposure, an IP [intellectual property] rights standpoint?
5.
Is there anything else to differentiate on, such as the leverage that you have over headline rates? If not, how do you think those have been trending in aggregate? How do you think end-user revenues will trend, and do you think things will fall in or against the labels’ favour?
6.
Does Spotify have the biggest leverage over what artists, or just listening types, are getting the most views? Do you think that if Warner ever got a per-listenership pricing standpoint it would be making more money? How strong do you consider the argument that Spotify is less reliant on the labels and that it is not bringing them the top listening sources because they have podcasts and those lay-back playlists that actually do garner meaningful listenership? Alternatively, do you think Warner has a good argument, in the sense that it is bringing the company top talent that everyone wants to listen to?
7.
Has consumption trended meaningfully toward front-line music and away from catalogue over the years? How long is the value tail, in your mind, for catalogue music, given that A&R is what is going to drive listenership trends above all else?
8.
Do you find that the listener trends for on- vs off-roster melt together as the younger demographic grows older, in the sense that they will continue to listen to their favourite songs at a higher clip than the older generation? How much of a margin with that has the potential to end up being longer-term?
9.
Does the changing demographic of older music have the potential to move the percentage of catalogue overall up in total consumption, or do you think front-line will still ultimately dominate?
10.
How are we thinking about where catalogue consumption sits today? Are we talking about the top 1% most popular songs are 90% of consumption? How dramatic is the 80/20 role as it relates to front-line or even condensing that further to the most popular songs?
11.
You made a few points around growth for the label business overall coming from moving into some of the local A&R [artists and repertoire] areas. Is that the main driver of market share growth? Do you think Warner will be best positioned to move into areas such as Africa and India? What are the key success factors to continuing to gain share relative to some of the larger scout peers?
12.
Is there anything you want to highlight from a high level, as it relates to the threats or opportunities that are specific to Warner? Is management strategy well-aligned with those threats and opportunities, in your opinion, or are there any slight tweaks that could have been or should be made?
13.
Given that the industry is relationship driven, is there any key-man or -woman risk on either side, in the US or internationally, that you would point towards?
14.
How much do those work force dynamics have to do with not just doubling down on the bellwether service partnerships, such as Spotify and Apple? What are you noting, trending-wise, as it relates to Tencent, TikTok, and any other nascent themes, from a distribution standpoint, that Warner would be best inclined to get in early on?
15.
You mentioned that A&R spend is driving so much of the success of the front-line aspects of the records. What are the moving parts that are driving A&R spend to continue to increase?
16.
Do these trends have a high risk of things moving more and more towards distribution-only-type front-line deal structures? Is that a very meaningful margin and partition for Warner?
17.
Are there levers elsewhere in the business model that present Warner with the opportunity to maintain margins, or is this just a long-term trend downward, based on how the industry is evolving?
18.
Is it right to assume that a more distributed kind of consumption, moving away from Ed Sheeran or Bruno Mars, has the potential to play in Warner’s favour, in the sense that those artists, intrinsically, have less leverage and you can achieve a better royalty on a TikTok artist?
19.
Where do you expect the landscape to shake out? Is there anything that you wish to highlight or expand on?
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