Warner Music Group CEO participated in Goldman Sachs’ Communacopia + Technology Conference in San Francisco this week and shared thoughts on an artist-centric payment model.
At Goldman Sachs’ Communacopia + Technology Conference in San Francisco on Wednesday (September 6), Warner Music Group CEO Robert Kyncl participated in a Q&A session where he touched on WMG’s international expansion strategy, his prior experience at Netflix and YouTube and his thoughts on what a shift to an “artist-centric payment model” would realistically look like.
Kyncl made clear his stance that creating a functional alternative to the currently pro-rata payment system will require greater cooperation between music companies and streaming services.
“If you’re on the DSP side, obviously you don’t want one partner with this, another partner with that. So you want some kind of a scalable model that can function,” said Kyncl. “So I think it’s amazing that there is a push, especially amongst the major music companies, to change both revenue per user as well as the pie distribution.”
Revenue per user at the DSP level and the distribution of the money allocated to royalties are the two primary factors in determining a new payment model, says Kyncl. He notes that revenue per user among streaming services is “lagging inflation today” and that if Spotify’s monthly premium subscription fee had maintained alongside inflation since the service’s US launch in 2011, it would cost $13.25 today as opposed to the $10.99 it now charges — up from $9.99 a few months ago.
In Kyncl’s estimation, Spotify’s average monthly revenue per user is currently around $7.50, and there is a “tremendous opportunity” to raise that number. Spotify reported an ARPU of around $4.58 per user in Q2 2023 — but that number includes ad-supported users.
“Focusing on the revenue per user is a very, very important part of what the industry needs to do,” said Kyncl, who also confirmed the recent news of a joint venture between WMG and Eliot Grainge’s 10K Projects, in which WMG will take a 51% stake in the LA-based label.
“We’re bringing incredible talent both on the artist side as well as on the executive side into our pool,” said Kyncl. “Obviously, we continue to recruit and invest (in) technology talent as well as to set up the company.”
Kyncl’s call for recurring price hikes recommends the industry take a page out of Netflix’s playbook, whereby the company has systematically raised prices, especially in the US market, since 2013.
Since the streaming company rolled out its first streaming-only plan that excluded its mail-order movie service in 2011, it has incrementally increased its rates through seven different price hikes — from $7.99 to $15.49, or nearly 94% in slightly over a decade.
“The amount of work and innovation that happens around price optimization (at) Netflix is incredible,” said Kyncl. “I think we all have a lot to learn from that, and we should adopt it.”
Kyncl also touched on the issue of generative AI in the music industry — such as the fake Drake and Weeknd collaboration that went viral earlier this year.
“I think the primary responsibility sits with the consumption platforms — especially the open consumption platforms where the content will end up,” says Kyncl, referring to platforms where any user can upload content, namely YouTube and TikTok.
Kyncl compares the AI-generated content issues today to the user-generated content that grew 15-20 years ago when YouTube started gaining significant footing in the culture.
“We built a very large multiple end dollar business for our partners from fan-uploaded content of their copyrights, that was using their copyrights,” Kyncl says. “It required technology, and deal-making, and partnership and all of that, and we applied all and built it.”
Interestingly, Kyncl’s view on the development of AI violating copyright is at odds with many other rights holders, who see the developers of AI technology as carrying the brunt of the responsibility not to infringe copyright.
Several authors have launched lawsuits against OpenAI on the grounds that the company behind the cultural phenomenon ChatGPT infringed on their copyright when they used copyrighted works as part of their AI-training process.