Warner Music Group‘s Chief Financial Officer Eric Levin says the proof is in that streaming music services can hike prices without harming growth – and he’d like to see DSPs move to recurring price hikes.
During a Q&A session at JPMorgan’s Global Technology, Media and Communications Conference on Monday (May 22), Levin said the market “has proven it can bear rate increases,” and WMG is encouraging its streaming partners “to look very, very, very, very seriously” at raising rates.
“Several of the largest players in the industry – Apple, Amazon, Deezer – have taken it upon themselves to raise rates and they’ve done it successfully,” Levin told host Sebastiano Petti, a JPMorgan equity analyst.
“The price value of music is extraordinary when compared to other media products, especially other streaming media products – video, for example.”
Levin added: “There has not been rate increases historically over the past decades. So it’s long overdue.”
But for now, the global giant of subscription music streaming – Spotify – hasn’t raised its base subscription rate for US subscribers. It has remained the same since the service launched in the US in 2011, even in the face of growing concerns among music companies and artists that their incomes are falling behind.
Spotify has hiked subscription rates in a number of other markets, including Argentina, Brazil and its home market of Sweden, and has hiked rates for multi-user bundles in a number of markets, including the US and UK.
However, Spotify’s $9.99/€9.99/£9.99 rate for monthly premium individual subscriptions in the US, UK and Europe’s biggest markets remains in place.
“When our competitors are increasing their prices, that’s really good for us because, again, with our deep engagement that we have and the lowest churn of any competitor, we will likely fare better,” Ek told analysts after Spotify released its third-quarter earnings report.
In the company’s Q1 earnings call earlier this year, Ek once again hinted at a US price hike, but said only that it would happen “when the timing is right”.
“I grew up professionally at HBO, where price increases were something we did every single year and the cable industry did every single year, while growing subscribers.”
Eric Levin, Warner Music Group
But WMG’s Levin says he would like to see DSPs move to recurring price hikes.
“I grew up professionally at HBO, where price increases were something we did every single year and the cable industry did every single year, while growing subscribers,” said Levin, who was HBO’s chief financial officer from 1988 to 2002.
“I think, and I am hopeful, that now that the industry has done a round – or at least much of the industry has done a round – of rate increases successfully and continue to grow, that they [will] start to understand that the industry can bear it, [that] they start to have confidence in the ways to do it successfully, that they continue to look at the price value of music relative to what consumers pay for other products and understand that there’s more room for increases.”
Levin said he believes that further rate hikes will build “a confidence and understanding that pricing can become and should become a normal part of the industry, and certainly in our conversations with our distributors. We are doing what we can to try to encourage not just a price increase, but a recurring set of price increases as part of the industry.”
“What we haven’t done is invest in emerging markets that are still riddled with piracy, and [where] streaming is not yet ramping up. Because you can invest a lot of money in creating music that’s not going to generate a return.”
Eric Levin, Warner Music Group
As part of its strategy to grow its business, WMG is focusing on opportunities “emerging streaming,” Levin said – meaning opportunities in such areas as fitness streaming, gaming and social media.
“Generally, people are going to have one subscription to a streaming service and that gives them the product that they need. But with emerging streaming, you have potential for multiple products in a home multiple products per person,” Levin said.
“People use multiple social media products, they play games, they have fitness products, all can be within the same home. So you have the ability – as products develop and products roll out – for emerging streaming to become two, three four use cases in a home and therefore [it] has the potential to grow faster.”
To that end, WMG has launched a number of initiatives, including Rhythm City, a “music-themed social roleplay experience” on Roblox, which it developed with gaming company Gamefam, meant to introduce users to artists and music through social roleplay and offer opportunities to collect digital items sold on Roblox. Rhythm City also features virtual concerts and events featuring WMG artists.
WMG also inked a “first-of-its-kind deal” with blockchain game developer Splinterlands, which will allow WMG artists to create and develop play-to-earn (P2E) arcade-style games.
In 2022, WMG was a launch partner for exercise device maker Peloton’s new product “Lanebreak,” which combines exercise with gaming, allowing users to complete fitness challenges to WMG music.
At Monday’s Q&A session, Levin also offered some insight into WMG’s strategy for expanding into emerging markets.
He said WMG doesn’t have a one-size-fits-all strategy for expanding into emerging markets, and takes a “bespoke” approach to each market it considers.
“What we have always prioritized is financial return,” Levin said. “What we haven’t done is invest in emerging markets that are still riddled with piracy, and [where] streaming is not yet ramping up. Because you can invest a lot of money in creating music that’s not going to generate a return. We’ve been very hesitant to do that.”
He added: “When we see markets that are coming online with streaming and digital digital distribution, and we forecast we can generate a return then we take very seriously entering that market in a very serious fashion.”