Warner Music profits fall as their sales of digital music rise 25-percent

Apple iTunes“Warner Music Group, the world’s third-largest music company, on Thursday posted a fall in quarterly profit, hurt by an industry-wide slump in sales as more fans choose to buy songs online rather than physical albums,” Yinka Adegoke reports for Reuters.

“Warner’s net profit fell to $5 million, or 3 cents a share in its fiscal fourth quarter, from $12 million, or 8 cents a share, a year ago,” Adegoke reports.

“Sales of digital music at Warner were up 25 percent at $130 million during the quarter but this could not make up for the short-fall in CD sales,” Adegoke reports.

MacDailyNews Take: Because, thanks to Apple, music fans now get to choose the songs they want to buy and are no longer stuck buying them bundled with filler on an overpriced plastic disc. Welcome to the brave new world of consumer choice, Middlebronfman. The days (decades, actually) of artificially-inflated profits are over. You’ll actually have to do some work now. Imagine that.

Adegoke continues, “U.S. album sales are down 14 percent year on year, according to data from Nielsen SoundScan, as more fans choose to buy music as individual songs through online stores such as Apple Inc’s iTunes, or resort to using free file-sharing services to get music.”

MacDailyNews Take: And the more the music cartels withhold their music (or higher-quality, DRM-free music) from iTunes in misguided (and, quite possibly, illegal) attempts to break Apple’s dominance, more people will resort to using free file-sharing services, as opposed to — sorry to dash the hopes and dreams of coke-addled cartel dinosaurs the world over — signing up for unending music subscription services.

Adegoke continues, “Warner Music stock is down nearly 70 percent since the start of the year as evidence of a faster-than-expected deterioration in music sales has become more clear to investors.”

MacDailyNews Take: Gee, that’s too bad, huh? Offer your music in higher quality, DRM-free form via Apple’s iTunes Store, Warner et al., and you’ll sell more music. Here comes the ground guys, pull up before it’s too late.

43 Comments

  1. Articles keep on forgetting to mention that the music industry, for more than a decade, rode high on a wave of people re-buying on CD the same music they had on vinyl discs. Only so many people were going to re-buy remastered CDs they had already bought, as well.

    With that wave fallen, the music industry has nothing to fall back on anymore.

    … and this time around, people are just ripping the CDs to iPods and hard drives… the music they already re-bought once.

    P2P is the scapegoat the music industry is using for their own failure to produce good NEW music and to sell CDs at a reasonable cost.

  2. Time for Warner Music board of directors to fire the Middlebronfman and the senior management. Too much emphasis on hip-hop/gangsta “music.” Look at iTunes top songs. Absolutely nothing of interest on most of that list.

  3. Seems to me they could have Avoided this years ago by moving to the Dell Supply chain management model. On demand CD burning machines in record stores could have been instituted. This would not necessarily have been a cheaper alternative but it might have held the profit picture up at a lower pitch point for a longer term rather than preprinting a bunch of junk that you end up dumping i the Wal-Mart sale bin for $2.00 a pop. The music industry needs a lesson in basic price elasticity. By piling on irrelevant costs (such as make them pay for a non wearing media) they killed the golden goose too early in the game.

  4. MacSmiley:

    I totally agree they no longer have a multi-pronged business model, but they also lack the foresight to build on the ones right in front of them.

    There are plenty of good bands here in the UK, but we hear of them first via word of mouth, P2P and social networking sites, not via the label-controlled radio stations. Concerts here are real sellouts costing a fortune, plus they make a heap on merchandising. With record stores becoming rarer due to Walmart and our changing buying habits, the labels better move into the concerts, merchandising and promotion business soon or be left outside the stage door.

    Warner and NBC need to embrace, not fight, the Apple glow since it may not last forever, but it has helped many companies in the past few years (ATT, O2, Orange, Creative). Sure, sell to other, but keep the complaining in the boardroom as you could the profits.

  5. “the music industry, for more than a decade, rode high on a wave of people re-buying on CD the same music they had on vinyl discs”
    So true! But here, too, the industry screws the consumer. Many of the “Best Of” albums are compilations of second rate life gigs, not the original recordings. Sadly, that is true for many iTMS offerings, too.

    There is a way out, though. Using my Griffin iMic and Final Vinyl, I have preserved a great number of my old treasures for the digital age. The gentle scratching sounds from the turntable strangely fit the old music. Ole Blues Eyes or Satchmo without the noise just doesn’t sound right.

  6. MDNs view of subscription services is narrow and shortsighted. Everyone thinks of the buy vs subscription models as mutally exclusive. But Apple is clever enough to make it succeed by offering it as an enhancement to iTunes.

    For example: Let me rent unlimited for $15 bucks a month so I can find music to buy. The subscription could even accumulate credits to purchase albums every month or so…. I guarantee you will get more money out of people that way.

    I HATE buying stuff I’m not familiar with to find out it is crap. I feel used and annoyed I wasted the money. Even more so if you later decide to delete the songs you’ll never listen to again. With a subscription service, I could try it out and if I liked it I would buy it.

  7. I know MDN says the album is an artificial artistic construct, or something, but it certainly is convenient to put all your tunes on one piece of media. I wouldn’t say that the album is nothing but a ploy for money. It made sense for an artist, and for the consumer.

    Now, it is feasible to get your music more conveniently. Would keep going to the store for one single from an artist?…no way! I’d pick up their album. Now, sometimes, I’d find an EP, or a cheaper-than-full-album alternative, and yes, sometimes, I’d be “forced” to get the whole album for the 4 songs on the radio. But a whole album is interesting sometimes. And, it represents a whole set of emotions, not just the pop, upbeat, happy ones.

    I rambled. anyone agree?

  8. One of the problems is Apple has them in a death squeeze, forcing the sale of individual songs and dictating the pricing.

    Apple needs to open up a little more to helping this group save their respective necks, unless Apple is going to become the place to find and market new music. In that case, they take on the role of the music companies. If Apple doesn’t have long term aspirations here, and I’m not sure they do, then helping the music co’s survive by allowing various pricing points will go a long way to keeping ahead of the comeptition, i.e. Micro$oft, Sony and Walmart who would like nothing more than to kill Apple.

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