Warner Music boss warns against ‘burning freemium at the stake’

The debate around freemium vs. premium music services is the biz’s biggest talking point of the year. But to suggest all major labels have the knives out would be wrong…

Speaking to investors following Warner Music Group’s Q2 results this week, CEO Stephen Cooper (pictured, right) encouraged the industry to exercise caution when it comes to dismissing the value of ad-funded music services.

David Herbert of Wells Fargo asked Cooper: “There’s been a lot of debate about the freemium versus premium models, especially with Apple’s pending launch of a premium product.

“Do you feel like the industry is in more of a position to proactively move away from the ad-supported model? Spotify and others have said if that’s the case, there would be a resurgence in piracy.”

Cooper responded: “Let me start withour particular point of view, as opposed to an industry point of view. You’d have to cast a much wider net to get the industry point of view.

“First of all, there are a lot of models out there, and all of those models — ad-based, subscription-based, or with both — are better than piracy.

“You know to be crystal clear, piracy is zero revenue, it’s the theft of intellectual property, and it’s not good for anyone. So all of these models are better than piracy, that’s number one.

“Number two, the freemium models, if they encourage the adoption of subscribers… form ad-based [paths] to subscription-based models over time. We at Warner believe that’s good news.

“We are working with our digital partners to see if there are ways in which the adoption rate from ad-based to subscription streaming can be turbo-charged.”

Stephen Cooper, Warner Music Group

“We are working with a number of our digital partners to see if there are ways in which that adoption — that is the adoption from ad-based models to subscription — can be turbo-charged though modifications in service offerings, of more sophisticated approaches in the consumer market. So we don’t believe that there is just one size that fits all.”

He added: “With respect to going to a strictly subscription world, I think that you can find evidence that when music is not generally available, that people will seek out sites on the internet that in fact will offer up that music for no charges, and in many instances, with no economic model, where income flows to the content owners, the artists, or the writers.

“Before people conclude that freemium should be burnt at the stake, we should think very carefully about the consequences.”

This isn’t the first time that Cooper has distanced himself from the idea that free, on-demand streaming has to be vanquished or limited for the music industry to thrive – a point of view espoused by his rivals Sony and Universal Music Group leader Lucian Grainge.

In Warner’s Q4 earnings call last year, Cooper said: “We continue to believe that the long-term sustainability of the ‘freemium’ model is predicated on high levels of conversion from ad-supported ‘free’ to paid subscription. We look forward to continuing to work closely with our partners to turbo-charge the adoption rate for subscription streaming.”

Interestingly this is in stark contrast to the opinions of Cooper’s predecessor.

Former Warner CEO and Chairman Edgar Bronfman Jr, (pictured, left) who sold Warner Music Group to Len Blavatnik’s Access Industries, said in 2010:

“Free streaming services are clearly not net positive for the industry – and as far as Warner Music’s concerned will not be licensed.

“This sort of ‘get all the music you want for free and then we maybe we can – with a few bells and whistles -move you to a premium price’ strategy is not the kind of approach to business that we will be supporting in the future.”Music Business Worldwide

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