Welcome to the New Record Business: Warner Music Group Now Generates Over $ 270 Million From TikTok, Peloton, Facebook and Other “Alternative” Platforms Every Year
MBW’s Stat Of The Week is a series in which we highlight a data point that deserves the attention of the global music industry. Stat Of the Week is backed by Five Music Group, a technology-driven label, distribution and rights management company.
It’s been a week for the majors.
Universal Music Group debuted on the Amsterdam Stock Exchange with a market cap of $ 54 billion on Tuesday, September 21. Warner Music Group saw its share price rise nearly 10% on the same day. And Sony Corp, parent company of Sony Music Group, has seen its stock price climb 6.8% since the market closed on Monday so far.
Much of the investor buzz around the majors has obviously been quite focused on on-demand music streaming and the growth potential offered by Spotify and YouTube over the next decade, particularly in so-called markets. emerging.
Yet there has also been a lot of investor talk about other fast-growing non-traditional music revenue streams – usually secured by licensing agreements – from platforms such as TikTok, Facebook, and Peloton, as well as on music’s flourishing business relationship with games (including Roblox).
Today (September 23), Warner Music Group boss Steve Cooper revealed an astonishing statistic on this second less talked about area of the business – a statistic which, according to MBW’s calculations, suggests it This is a sector that is already worth a billion dollars a year. revenues for the global music rights industry.
Speaking in an interview at Goldman Sachs’ Communacopia event this afternoon, Cooper confirmed that Warner Music Group’s recorded music operation has current revenue of $ 235 million per year. from “alternative offerings that create new use cases for music”.
Cooper also confirmed that the same revenue streams provide liquidity at a “proportional rate” to WMG’s music publishing business.
“We believe that this intersection between play, fitness, [and] social / digital, will generate substantial income in the future, ”said Cooper.
What are these “alternative offers”?
Cooper notably called out Facebook (which has “started using music in new and interesting ways over the past two years”) as well as TikTok, Peloton and Roblox for their material contributions to the $ 235 million figure, as well as ‘other platforms and innovations that are providing “new use cases” for music.
“You have to keep in mind that in all of these areas – metavers and games, live streaming, use of avatars, NFTs – are all in their infancy. [in terms of their relationship with, and payment to, music rightsholders]Cooper said. “But many of them have the potential to become the next global platform. And in fact, many of them are already moving in this direction.
Analyzing the numbers on what Cooper revealed today says a lot about how powerful these new revenue streams are set to become for rights holders big and small in the years to come:
- First: The music publishing division of Warner (Warner Chappell) was 16.4% the size of its recorded music division, in terms of revenue, in the company’s last fiscal quarter (until end of June 2021). So when Steve Cooper says that the “alternative offers” are currently making money for Warner Chappell at a “proportional rate” to WMG’s record business – and that this $ 235 million a year from them – we can safely assume that the WMG edit operation generates somewhere around $ 38 million on an annual run rate from the same platforms.
- Combined, through editing and recording, this means that Warner currently has to generate around $ 273 million from Facebook, TikTok, Peloton etc. on an annualized basis.
- According to Music & Copyright, Warner Music Group claimed a 15.9% market share of global recording industry revenue in 2020. If this is correct, it would suggest that the current revenue opportunity through the all the record industry of “alternative offers” is somewhere in the region of $ 1.48 billion per year (that is, if Warner’s $ 235 million figure represents only 15.9% of industry-wide business, $ 1.48 billion would be the “cake” total).
Warner, of course, could have achieved a market share of well over 15.9% of the total money now going into the music business from Facebook / TikTok / Peloton etc.
Indeed, Steve Cooper claimed today that his company had been unusually ‘early in this game’ in terms of Warner ‘taking advantage of these [alternative] platforms with strategic partnerships and investments ”.
So for the sake of the argument let’s say Warner is currently eating a full 25% annual money from “alternative” platforms to the recorded music publishing industries and ($ 273 million, in Warner’s case).
This would still mean that Facebook / TikTok / Peloton et al are already a billion dollars annual revenue generator for the broader global music rights industry today.
Cooper added in his interview with Communacopia: “We intend to continue investing well beyond traditional streaming. And we see it over time, [these platforms] is expected to provide a tremendous additional income opportunity for the music industry.
In a broad discussion in Communacopia with Stephen Laszczyk of Goldman Sachs, Cooper was also asked about Universal’s IPO earlier this week (at that nice opening market cap of $ 54 billion).
He replied: “Just to state the obvious, before [Warner] became public [last year] and UMG was from Vivendi, we had successfully competed in the music business [against] Universal and Sony for decades. Due to our “One Warner” approach, our global reach and in particular our artist-friendly agility, I think we are actually better positioned than our competitors to take advantage of the dynamic changes that have had and will continue to grow. take place in the musical landscape over the next two years.
“As far as Universal is concerned, I think their spin-out is good news for the music industry… I think it’s especially good that Universal agrees with our vision for the future. “
Steve Cooper, Warner Music Group
Cooper added, “As far as Universal is concerned, I think their spinoff is good news for the music industry. The market reaction validated the favorable global trends around music.
“Having another pure music company in the public eye will improve investor education on the value actually provided by large music companies. And I think it’s especially good that Universal agrees with our vision for the future.
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