Warner Music Group – growth outlook & strategic initiatives

Record labels prepare for life after streaming

This fusion between online gaming and music is one that has “massive” opportunities for major record companies, a former executive at Warner Music Group told Third Bridge Forum, as labels begin to diversify revenue streams away from streaming.

The specialist said that although they were “pretty optimistic” about short-term growth in the music streaming market, record labels should be prepared for streaming to reach a saturation point. 

Early streaming markets such as those in Scandinavia are already starting to flatten, the specialist said, and streaming services have yet to provide a proven model to drive subscription prices higher. The specialist also questioned whether established streaming sites could earn significant ARPU from consumers in emerging markets despite their “vast quantity of potential streamers”. Emerging markets such as Brazil and Nigeria are already home to a number of local streaming players and the specialist warned acquisitions would therefore be needed to gain a foothold in these areas. 

Warner Music Group is therefore being “proactive” in finding alternative sources of income that “moves the needle” before streaming flattens, the specialist said. Wellness and video social network apps are potential areas for investment, but the specialist highlighted gaming environments as “a good proxy” for Warner Music because of its high-level fan engagement and the company’s experience investing in the virtual infrastructure online gaming inhabits. 

The specialist said music rights holders could use online gaming environments and the metaverse to drive marketing, promotional services and more streams for artists who publish music on these platforms. However, for more innovative players such as Warner Music, there are also “significant” commercial opportunities such as virtual concert venues, virtual DJ sets, and virtual merchandise, all of which can drive “very high margins”.

The specialist said as a family-owned business, Warner Music holds a significant advantage over the two other “big three” record labels, allowing it to plan further ahead. Much of that planning will go into how to drive more revenue from non-streaming sources, which the specialist said will make up a “a very significant percentage of revenue” in the future, as well as investing in new and upcoming partnerships that will benefit the business long term.   

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