“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.
How about they just offer better music? Most of the music coming out recently hasn’t been that good. There’s been a few bright spots, but not many.
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.
No surprises here. Soon Warner Music will be acquired by someone.
I agree with DakRoland. “Music” today is mostly crap, I’ll stick to just replaying my “oldies”.
Time to add “beleaguered” to Warner Music Group.
Muahaha!
Would it be out of the question for Apple to buy Warner Music? They only have a $1.7B market cap.
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.
I am mistaken. Their market cap is only $1.07B.
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.
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.
“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.
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 $15 bucks a month so I can find music to buy. The subscription could even accumulate credits to purchase albums every month or so…. I guarantee you will get more money out of people that way.
I HATE buying stuff I’m not familiar with to find out it is crap. I feel used and annoyed I wasted the money. Even more so if you later decide to delete the songs you’ll never listen to again. With a subscription service, I could try it out and if I liked it I would buy it.
I know MDN says the album is an artificial artistic construct, or something, but it certainly is convenient to put all your tunes on one piece of media. I wouldn’t say that the album is nothing but a ploy for money. It made sense for an artist, and for the consumer.
Now, it is feasible to get your music more conveniently. Would keep going to the store for one single from an artist?…no way! I’d pick up their album. Now, sometimes, I’d find an EP, or a cheaper-than-full-album alternative, and yes, sometimes, I’d be “forced” to get the whole album for the 4 songs on the radio. But a whole album is interesting sometimes. And, it represents a whole set of emotions, not just the pop, upbeat, happy ones.
I rambled. anyone agree?
One of the problems is Apple has them in a death squeeze, forcing the sale of individual songs and dictating the pricing.
Apple needs to open up a little more to helping this group save their respective necks, unless Apple is going to become the place to find and market new music. In that case, they take on the role of the music companies. If Apple doesn’t have long term aspirations here, and I’m not sure they do, then helping the music co’s survive by allowing various pricing points will go a long way to keeping ahead of the comeptition, i.e. Micro$oft, Sony and Walmart who would like nothing more than to kill Apple.
MusicisMyGirlfriend:
You can preview music on iTunes before you buy! Just click and listen to the preview.
…the other way to increase profits is to cut costs….I suspect there is a whole layer within the traditional label business model that isn’t needed anymore or can be reduced significantly. they keep looking at ways to keep that model and cost structure alive, when it is shrinking before their eyes….and another area of their business is growing at a 25% rate…
time to let go of the buggy whip makers….
to Stormy:
I’m no 2-pump-chump.
I want my previews to last more than 30 seconds.
The album or LP was, in fact, an artificial construct. Some artists simply conform to it (filler tracks), some artists utilize it to define a moment in their artistic growth, some artists use it to create a unified work (not just prog rock, either).
Download stores do not preclude the last two, which are artistically driven. Download stores do diminish the ability of labels to leverage the artificial construct/filler version for profit.
Instead of bemoaning the death of the LP, artists and labels should be enjoying the freedom from the constraints of the LP.
Well, artists should be enjoying the freedom. Labels should be scrambling to finally figure out what the consumers want in order to maximize their profits (I’m talking to you, Dupri).
@John Gee. I rambled. anyone agree?
NO!
@ zox
‘I agree with DakRoland. “Music” today is mostly crap, I’ll stick to just replaying my “oldies”.’
Couldn’t disagree more. My car CD stack is full of great new bands I’ve found in the past year. Every generation bemoans that music has become crap, but it just means you’ve become too old, dude!
i am 27 and i think much of today’s music is crap, because today much of an artist’s success is related to the image created for them through advertising and MTV. for instance, how many people will be listening to brittney spears for her musical talent in 20 years? to the contrary, people are still listening to Led Zeppelin and Hendrix decades later because they actually had talent.
Apple has billions and billions in CASH.
Once the music producers slump enough, Apple will buy their catalogs and spin off a new Media Production and Promotion unit to supply artists with a very real but previously highly overvalued service.
Reality is that any artist starting off now needs about $3000 in hardware and software to master their own digital media and promote it on the Web. All the artist needs are talented people to run the software and do the promotion.
Record industry used to hold the keys to getting an album made and the word out. Now Blogs and Google make that less valuable and no longer a barrier to entry.
So if we’re not going to be buying the filler any more, maybe 99c for a single song is a little too cheap. The good songs are worth more, the not-so-good… less.
And just as Mr. Jobs paved the way for digital music revenues to be billions instead of zero, he created a program for tracks to be more than 99c — iTunes plus.
So what did the brilliant music industry that had been crying about digital music prices do? They gave DRM-free tracks to amazon for the OLD price of 99c, forcing iTunes to lower the price on iTunes plus.
Oh and they have this really brilliant idea of bundling a subscription service with the non-ipods. Right… Apple has a 70% share with products priced slightly higher (or a lot higher if you consider the Zune brown sewage blow out). But once the alternatives cost MORE, ipod is doomed.
So clueless.
When reading the interview with the head of UMG yesterday, I saw a CEO who basically said he didn’t like the job description–he just wanted to look for great acts. No wonder Steve Jobs has pwned him. (A term I’m sure he does not understand.)
And they want to turn to MS!
If MS ran the iTS, the record companies would be getting the 30c share, not the 70c share. In fact, MS would begin the discussion with the idea that the music should be free to them like it is to radio; then start their own label. If the day ever comes when Apple stumbles and MS takes over, they’ll start remembering these as the good old days.
Frigtards.
Am I the only one who thinks it’s no coincidence that CD sales started to slump just as DVD sales started to boom? Seems to me that, with CD and DVD prices not so far apart, consumers have decided DVDs offer more bang for their entertainment buck.