At yesterday’s Sony Corp business segment meeting for 2024, Sony Music CEO Rob Stringer talked about the success of the major’s “aggressive” mergers and acquisitions strategy, the impacts of AI, and the increasing value gap in streaming. He said that “the price gap between free and paid has gotten wider” and that ad-supported streaming needs to be “more than just a marketing funnel for paid subscription”. 

The expansion of short-form video “has been rapid, driving total audio streaming consumption growth”, something that Sony believes has “similar commercial potential” to “full track streaming” - but that “some of the leading platforms must deliver greater value”. Without referencing TikTok directly, Stringer said that it is the “premium quality artistry” of Sony content that “drives the appeal” of short-form video platforms, with music playing a key role in the content served up, with “music being central to approximately 70% of videos” created.

Short-form video content is playing a “larger and larger role in music discovery and engagement amongst young listeners”, he went on. As such, platforms like TikTok, Instagram and YouTube Shorts are becoming more and more important as “primary consumption sources” which need to be “valued accordingly”. 

As part of that increased value, Sony is “always developing relationships to further the usage of our content and the monetisation model that coexists”, he continued. However, as a percentage of revenue the monetisation of short-form video is “not where we’d like it to be”, at just five or six percent of overall streaming revenues. 

“It’s well known that we would like to see more revenue coming into the business from short-form video,” added Stringer, “particularly with the number of short-form video users. Single digits is not what we hope for and we are constantly fighting as an industry to get that number up”. 

New technology presents significant commercial potential for Sony Music, said Stringer, highlighting that the major is committed to “the research and development of cutting-edge formats to provide our artists with more creative outlets and ways to reach new fans”. 

Part of this is the opportunities that AI offers which “once it is in place” has the potential to be a “multidimensional tool for creativity, scalability and efficiency” for the music industry. However, on a more cautionary note he noted the importance that human artistry will play as AI evolves, highlighting IFPI’s recent survey that showed that “nearly 80% of music fans say human ingenuity is essential to the creation of music”. 

However, Stringer believes that AI represents a “generational inflection point” for music and content, and Sony is focused on “building transparent and fair partnerships”. Over the last year, he continued, Sony Music has “convened with more than 350 organisations” to set up those partnerships with a range of companies in what he termed the “AI stratosphere”.

“We will go where our artists want to go creatively in the AI space”, he said, “while protecting their rights at every step”. Sony is “not naive about how complex” protecting those rights - and protecting music as an artform will be, though. “We won’t tolerate the illicit training of AI models via reckless and unlicensed misuse” of music, he clarified, and said that Sony “believes strongly that permission is the only way AI models can be training with our content”. 

To that end, Sony has sent out more than 700 letters to opt-out its content from being used in AI training, under mechanisms introduced by the recent EU AI Act.

“We have prospered from disruptive market change before”, he concluded, saying that Sony is “confident that we can navigate this chapter successfully”.

In addition to the current hot topics of streaming monetisation, short-form video and AI, Stringer highlighted the success Sony’s international M&A strategy has delivered, and the role that catalogue plays in Sony’s long-term strategy.

“New investment” in M&A “will be vital in future years to ensure our powerhouse status worldwide,” he said, highlighting the “exciting new entrepreneurial partnerships” that Sony is developing in Asia, the Middle East and Africa, as well as a recent focus on the “rapidly developing” Indian market, where Sony is now “the number one major music company”. 

Similarly, Sony’s strategy in LATAM has delivered significant results, with Stringer saying that the company is “the leader in the Latin region, where so much of the music in the global streaming charts now comes from”. This is in part due to Sony’s integration with Brazilian label Som Livre as well as the major’s investment in Rimas “home of superstar Bad Bunny” and the acquisition of Spanish indie Altafonte.

“Targeted investments” in catalogue are the “base” of Sony’s strategy to “navigate a successful path” through the evolution of technology, added Stringer, saying that Sony “brings together some of the most iconic libraries from all eras of music, including the work of contemporary stars whose hits today become enticing catalogues of tomorrow”. 

Sony was “extremely strategic” in the catalogue deals it has pursued in recent years, added Stringer, saying that the company did not involve itself in the “rush and race with multiples” - referencing the increasingly buoyant valuations seen against catalogue earnings over recent years. 

“The only deals we did on that scale tended to be content deals or catalogue deals where we already had a relationship … and understood the numbers better than anybody”, he continued. “We didn’t enter the rush for catalogue acquisition, and we will continue to be very careful and strategic, bearing in mind interest rates, and bearing in mind the return on capital”.

Sony, concluded Stringer, has “inside track on how these catalogues work”, which is “better than outside investment funds”. 

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