In an age of declining CD sales and rampant online piracy, can the major labels make money from digital music?
The answer just might be yes. The Music Industry News Network is reporting the latest quarterly results for Warner Music Group, and one thing that stands out to me is that their digital revenues are increasing in real numbers, and proportionally.
* Total revenue of $989 million increased 7% from $928 million in the prior-year quarter, and grew 1% on a constant-currency basis.
* Digital revenue was $141 million, or 14% of total revenue, up 9% sequentially from $130 million in the fourth quarter of fiscal 2007 and up 41% from $100 million in the prior-year quarter.
$141M in digital revenue… 14% of total revenue… 41% growth from the prior year. That’s nothing to sneeze at, and it goes a long way in answering the basic question that has kept many from taking the digital plunge, that being “Where’s the Money?”
Sure, we don’t know the costs associated with bringing in those revenues, but I’d argue that they’re proportionally less than their CD side of the business. No waste, no worry, and my bet is more money to the bottom line.
For some of us that proclaim the eventual death of the traditional music industry (yeah, I’m in that group), these figures also highlight the real facts that 1) consumers place real monetary value on premium content, and that 2) consumers are willing to pay for something that they could obtain for free.
That’s all good news. Although we need a radical restructuring of the music industry’s business model, we don’t want the labels to tank. Like any industry that is forced into change, from horseless carriages to cars, from trains to airplanes, from landlines to mobile phones, we need the major labels to survive by better serving their music acts and servicing their customers. They should have the opportunity to thrive through technological innovation and targeted marketing that only the Internet and mobile arenas provide. They should benefit from economies of scale and efficiencies that result from making their massive catalogs available, well, to the masses.
We want them to succeed, and some–those that are willing to weather the change–will succeed.
So here’s to you, WMG. You’ve made money from digital music sales, and the indications are positive. Congrats.
There isn’t any gold in them thar hills, because the golden days are over. But don’t knock copper mining, either–there’s still plenty of money to be made.