Warner Music CEO Robert Kycl has told investors that “the role of large music companies is growing exponentially relevant”, and that WMG’s “ability to aggregate large volumes of rights across recorded music and publishing provides individual artists and songwriters with more collective bargaining power when dealing with complex existing and new distributors and technologies”. This was going to be even more important “in the age of AI”, he added.
The Warner boss was talking to investors and analysts earlier today about Warner Music Group’s Q4 2023 earnings. A recurring theme throughout the call was Kyncl’s emphasis on the value of Warner’s catalogue. He said that the company is taking a “holistic approach” to both “deep and shallow” catalogue and is “priming” its entire catalogue to achieve “maximum impact on the digital service providers”.
He praised Spotify’s recent changes to its payment model as something that “better aligns economics with the quality content that drives engagement” and hinted at more changes to the model yet to come, saying “we view this as just the beginning and we’re continually engaged with our partners to drive faster growth”.
Further price increases at the DSPs also seem likely. In a direct question from a Morgan Stanley analyst he expanded further saying, “pricing overall is a very, very large opportunity for the industry. We just need to do it responsibly so that we maintain growth, together with our DSP partners”.
He later expanded in another answer saying, “none of this should be interpreted as we want to increase pricing dramatically, but then slow down growth”.
Talking in detail about how technological transformation was driving value for Warner, he gave details of an internal AI tool the company has developed to give them a competitive edge to deliver fresh thumbnails for tracks to DSPs.
“When you manage millions of copyrights, that’s a lot of metadata. That’s a lot of thumbnails, and freshness of thumbnails helps revenue, but it’s really difficult to do that manually across such a large volume of content. We developed an AI tool that helps us update and create new ones”.
He was also asked about Universal Music’s big bust up with TikTok, which has seen that major’s recordings removed from the social media app after the two companies failed to agree a new licensing deal.
He said he knew “exactly” what both Universal CEO Lucian Grainge and TikTok boss Shou Zi Chew “are feeling”, adding. “I’ve gone through all of those feelings multiple times. The thing that I can tell you is I am confident that they will at some point sign an agreement”.
He went on to say that the current dispute was about “what is the right fair value exchange” but that “they are both reasonable people that will find a compromise”.
Expanding further on the value of TikTok to the music industry, Kyncl said, “music is incredibly helpful to virality and content. That’s valuable to a platform. Conversely, TikTok, YouTube, Reels - all of those platforms are obviously helpful to making music popular. User engagement is great”.
Warner agreed a new licensing deal with TikTok last year. And on the investor call, WMG CFO Bryan Castellani highlighted the growth TikTok is driving for the company, saying ad supported revenue from the platform “grows at 10% a quarter, and the deal we executed last quarter certainly contributed to that. We like our TikTok deal and it continues to be a driver of growth”.
Universal has said that its dispute with TikTok is not just about money, also citing concerns about how the social media firm is dealing with AI generated content.
On AI, Kyncl said that the company’s priority was focused on “making sure that the rules of the road” at platforms like TikTok “respect copyright”, because whatever generative engines are being used to create AI content, it is going to end up on the big digital platforms - so focusing on those platforms is really important.
This ties into increasing the value of music, said Kyncl. “Copyright has to be respected, and training on our copyrights has to be respected. Eventually the law will reflect this,” he added, “but the platforms will run ahead of the law”.
The investor call followed the circulation of a memo to Warner Music’s employees, which was also included in the major’s latest filing with the US Securities & Exchange Commission.
In it Kyncl outlined “a plan to free up more funds to invest in music and accelerate our growth for the next decade”. This, he admitted, “includes reducing our workforce by approximately 10%, or 600 people – the majority of which will relate to our owned and operated media properties, corporate and various support functions”.
