Peter Kafka

Recent Posts by Peter Kafka

Spotify Dollars Boost Warner Music, but Not as Much as iTunes

Music sales may have bounced back last year after a very, very long slide. But we won’t really know for some time. Meantime, a short-term marker: Warner Music says revenue didn’t increase last quarter. But it didn’t decrease, either: Sales stayed flat at $780 million.

If you are looking for a more positive story here, Warner is happy to provide one. Digital revenue jumped 17 percent, and now accounts for 28 percent of the company’s sales. (As always, the label cites guy-you’re-unlikely-to-complain-about Michael Buble as one of its biggest stars. Shudder to imagine a Buble-less quarter for Warner.)

Most interesting is Warner’s take on the kind of digital revenue it is seeing, which we can assume is a rough proxy for the rest of the business.

Downloads — primarily from iTunes, but also Amazon and other players — accounted for $205 million in music revenue last quarter, while payments from streaming services like Spotify and Deezer generated $15 million. But that streaming revenue is growing at a 36 percent clip, compared to 15 percent for downloads.

If people who used to buy albums from iTunes ditch the service for a $10 monthly subscription to Spotify, Rhapsody or the like, then the industry would see substantially more revenue, as paidContent notes. But not even the optimistic music folks think we’re heading there.

A much more realistic best-case scenario: Some people who weren’t buying any music at all start shelling out a monthly fee for subscription services, turning pirates into profit centers. That still won’t be enough to replace the dollars the industry has lost since its pre-Napster party days. But it is much, much better than nothing.


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik