“Warner Music Group Corp., the world’s third-largest record company, posted its biggest drop in New York Stock Exchange trading after reporting a wider second- quarter loss and suspending its quarterly dividend,” Don Jeffrey reports for Bloomberg.
“Warner Music plunged as much as 29 percent to $6.39. Excluding some costs, the loss of 23 cents a share missed analysts’ average 11-cent estimate,” Jeffrey reports.
“The 13 cent-a-share dividend was eliminated to build cash and make investments in artists, the company said today in a statement. Record labels have been hurt by piracy and consumer preference for buying single songs rather than full albums. Industry sales of compact discs in the U.S. fell 17 percent this year through April 13, according to Nielsen SoundScan,” Jeffrey reports.
Full article here.
[Thanks to MacDailyNews Reader “Joe” for the heads up.]
Replace “consumer preference for buying single songs rather than full albums” with “inability to force consumers to buy bundles (albums)” and you’ll have a truer sense of the issue.
If Warner Music wants to make more money, they should release better music and deign to sell those tracks DRM-free via Apple’s market-dominating iTunes Store as EMI already did long ago.
Warner, you’re not hurting anybody but yourself by trying to prop up also-rans with DRM-free tracks while denying Apple. Your tactics fail because there is a very easy and completely cost-free way for consumers to get Warner Music DRM-free. Withholding DRM-free tracks from iTunes only helps increase the piracy of your content (the same goes for NBC and their TV shows, by the way). Consumers have the power now, not you. Figure it out and get used to it while you’re still in business.
sheesh. will these guys ever die? get fired? learn?
I love it. Music labels fearful of Apple’s stranglehold refuse to give Apple DRM free music… thereby almost guaranteeing iTMS users won’t bother looking at other music players or other stores.
“I love it when a plan comes together”
Col. Hannibal Smith, A-Team
no surprise to me that album sales are dropping when it’s better to just buy the songs you like since there is almost no cd out there that has every song everyone wants to listen to. Some are just 2 hits per cd… who would want to spend $17 for 2 songs…
I think Steve is letting these guys burn and then will swoop in with a low ball offer (and $20B in cash) to buy them outright. Steve will not only own the hardware and software we use to play our media, but he own all of the content as well. Steve will rule the universe!! Bwahahahahahahahaha!!!
Haaaahaaaaw!
jtc,
If you only like 2 songs on an album, you need to start listening to better bands.
There is still a market for albums.
“Figure it out and get used to it while you’re still in business.”
Classic!
It’s not hits per CD that matter to me. It is well crafted songs vs. filler. Many albums have a lot of good songs on them, not just the “hit” or two. Perhaps you are listening to the wrong artists. I have rarely regretted buying a whole album from the artists I like. But perhaps that is just me?
Here’s a thought. Just for the sake of thinking.
Can an artist or a band make a living on one or two songs? Who knows what makes a “hit” single? If it were a science, then everyone could do it, Even the best of the writers and performers are lucky to get a “hit” every so often. I doubt if they sit down and say: “Well, that one is a good one; now to write some poo to fill up the album!”
If this is true and the world decides that it is only going to buy singles and the paradigm shifts in that direction, then the single “hit” is going to have to jump to several $ a tune, otherwise can a band survive on a buck a tune?
@Swing Geezer: Good thoughts. I suspect the revenue ratio has moved sharply to live performance for survival-sake.
Though I’ve listened to “Comfortably Numb” a hundred times, I visualize Waters, or Gilmore playing it at ASU, or the Hollywood Bowl.
That’s the heart of music: living expression.
“The 13 cent-a-share dividend was eliminated to … make investments in artists”.
Bollocks. When did Warner ever invest in new talent – rather than just paying top dollar for established ones, and happily take the 90% commission?
Cubert, macaholic: completely agree. Chart artists sell albums on the back of a single hit, to fools. Those with integrity will make most of an album worth hearing. Except maybe for those on Warner labels…
I wonder if EMI DRM-free tracks are selling better than before they switched? I’m more likely to buy them but I’m not sure most iTS shoppers pay attention.
There are some great Indie Artists with some absolutely amazing Albums our.
Jen Bye
and
Gatja
I could go on but but I’d need a lot more room and time & MDN would allow more links.
Here some more Great Indie Artist:
Great Girls Blouse
and Oppera and Amanda Sena and Demon Bros. and Vox Tempus
Gotta tell you I totally disagree with MDN’s constant take that albums are a product of the record company cartels etc.
As a few responses have said there are plenty of artists that put out consistently interesting albums…not just singles. You have to find bands that are good t hat’s all.
The real problem in the music industry is their continuance to sign mediocre bands and want the quick return instead of giving an artist a chance to grow. If a new band doesn’t sell gold or platinum on their first release they’re dropped. So of course they want the big hit single, the most commercial sounding thing because it’s their one shot.
To paraphrase Steve Jobs, the music industry, much like Microsoft, is run by the sales guys not the creatives. That’s the real problem.
This is essentiallz the same fundamental issue. In the 60’s and 70’s, there were singles. Labels had built their business model around promoting their artists using singles, delivering hits, then luring consumers into buying albums. When CD arrived, the labels took advantage of the switch to completely eliminate the concept of a single; it wasn’t worth it anymore, with MTV, VH1 and other channels available for cheap promotion. Artists were forced into writing/recording/producing complete albums. Some great ones rose to the task, took the format as an inspiration and wrote some great works in the album format (Pink Floyd comes to mind). Most artists never really delivered anything above a mediocre set of filler with a hit or two.
We are now witnessing the return of the ‘Single’ format, however, without its promotional quality. The single tracks are not being sold in order to promote albums; they are sold because consumers like to buy singles. Labels aren’t part of the decision. And obviously, these singles aren’t really promoting album sales anymore. If you can buy an album piece-meal, you can scrutinise each part of it and not get the parts you don’t want. The true quality (or lack thereof) of those one-hit-per-year artists shines through…
Warner (as well as other labels) will continue to see decline in revenue, not because of piracy or declining CD sales. Online sales will continue to grow; however, since the bundling era is coming to a close, Warner will have to struggle to offer quality product across the board. Right now, average is about 15% (one song out of every seven) of their content is worthy of my money. The rest is filling.
Warner could at least solve one problem, and that is its market share, by offering DRM-free iTunes tracks. While no label is producing better content (on average) than the other, their share of the digital pie will only depend on their level of involvement with Apple.
In response to Peter J, I have to say, MDN is right. Album is in fact an artificial construct, devised by bean counters, in order to get more profits for the similar investment. An arbitrary length of 44 minutes was definitely not a result of artists’ needs to express themselves. Neither was the extension of that length to 74 minutes.
Truly original and creative musicians were able to build amazing works within this artificial frame. This, however, does NOT make it any more organic, or less artificial.
ITunes sells albums. It doesn’t only offer them for sale, it actually sells a lot of music as albums. Some of those sales are the result of consumers’ inertia and habit from decades of buying albums. Many, though, are because the albums they are buying are integral work. Again, those are clearly the minority. Once liberated from the construct of the album, consumers are making choices. This proves the artificiality of the format.
The Music Labels don’t want artists and they don’t want to develop artists. Music Labels want celebrities and to develop celebrities. It’s not about does the artist make good music it’s all about will the artist make and fit into the celebrity image that the labels want to make for the image they build around a performer.
Recording Labels support and develop Music Artists is an oxymoron.
Recording Labels support and develop Celebrity Performers.
Yeh, this is just a return to the way it used to be. Tons of people bought 45s back in the day and didn’t buy whole albums. With the rise of the cassette and CD the record industry chose to follow the path of over-priced singles of only the most popular — they purposely constrained supply. I quit buying singles in the late 80’s because generally you could only get sucky pop singles and the price was too high.
The virtual demise of the single coincided with the radio cartels killing decent radio. AOR (album oriented rock) was screwed into the ground and replaced by Classic Rock (old hit singles). Thus, the number one outlet of promoting full albums was kaput. So the music industry promoted a limited number of singles/hits while pushing albums. They did it to themselves. Just about anyone could see the wide open opportunity for the iTunes business model laying there waiting to happen for the last 15-20 years.
So you could kinda say that the music market is actually “righting” itself to the way it used to be. Apple is providing single songs in a format people want to buy at a price they like. It’s like the “DUH Who didn’t see that coming?” of success stories.
You’re right, Predrag!
I’m a jazz fan and when Bob James, Earl Klugh, Harvey Mason, Grover Washington, Jr., etc., recorded for the CTI label, I’d buy albums based on the label. All I needed to hear was one cut. I still like and listen to Jazz, but there are only a few artists from whom I’d buy the entire album. I get to pick and choose with iTunes.
Back in the day, Motown albums were good through and through.
Who’s running the labels? The sales guys–classic!
The conference call transcript was interesting reading:
http://seekingalpha.com/article/76333-warner-music-group-f2q08-qtr-end-3-31-08-earnings-call-transcript?page=-1
In it you’ll see that 34% of Warner music sales in the US were digital, and more than 70% of that was iTunes. Bronfman tries to avoid mentioning iTunes, but in answering one analyst, he admits, “Remember that today our digital revenues really are a function of iTunes, principally, and ringtones.”
And for those people still wondering, Warner Music Group is now worth only $1.3B.
The problem with albums IS that the ratio of song to album price is wrong, and yes they need to renegotiate this with SJ. The song you most want on the album is NOT worth the same as the other songs.
What they don’t understand and don’t have the leap of faith to do is… $4.99 or $5.99 albums. And sell them without DRM and with awesome quality. Instead of trying to protect your death-spiral CD business, attack the digital market with gusto, like you actually want to maximize sales.
In the vinyl days there were singles and albums… and most people actually bought the ALBUM. But the album isn’t worth 10X the song you need for your mix.
Price right and parents will bribe their kids into not pirating. Sell a high quality product and most adults won’t bother either. The best antidote to piracy is to making legal alternatives compelling enough so piracy isn’t worth the bother.
But the labels have to take the leap toward MAXIMIZING their digital REVENUES (which is not the same as price persong)… not protecting the dying physical format.
They are not going to scheme and litigate their way out of this. They need to think like salespeople (maybe they should hire Balmer? jk). How do we sell the most? (Answer: what do people want to buy? And how can we make the value so compelling they can’t resist?)
There is an adage in technology “if you don’t eat your children somebody else will.” It’s why whether iphone cannibalizes ipod is a stupid question–it doesn’t matter. What matters is that Apple does the cannibalization before somebody else does.
The simple simple simple lesson being ignored is that digital distribution has been cannibalizing CDs for a decade. And the record labels are still FOLLOWERS not leaders in digital distribution. They need to wake up one morning and say “Fsck the CD. How do we maximize our digitial sales?”
Storage is cheap. Bandwidth is cheap. iTunes distribution is cheap. One day, they’ll be amazed at how much music they can sell, and how much money they actually make.
Warner Music is a rotten fish, that stinks from the head down.
Perhaps if Warner spent less on lawyers it wouldn’t be doing so bad.
Also, how can Warner be losing money to piracy? They are counting sales they weren’t going to get anyway.
1-Why doesn’t Apple stick the stiletto in and just sign bands directly? I cannot for the life of me see why any established artist would need these hangers on (RIAA Cartel). Apple could easily add a button to iTunes allowing the purchase of a physical CD and contract the fab and distro out to Oasis or someone else. Sounds like a business model that will profit the artists and Apple greatly.
2-Why are live DVD concert videos not more widely available on iTunes for purchase? Instead of having to buy and rip the concert DVD it should be available for iTunes/iPod/iPhone/AppleTV. The same DVD fab/distro model would work for concert videos.
3-Note to the RIAA cartel: Just because Amazon (who I am a regular customer of) offers DRM free music does not mean it will be filling my iTunes library. If I wanted inferior MP3 audio I could go elsewhere. AAC IS THE STANDARD- get over it. Put AAC DRM-free tracks on Amazon with decent navigation and we’ll give it a try. The Amazon website is a train-wreck- it’s easier to find stuff with a Google search than with the site’s internal navigation.