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Warner to back away from free streaming services

updated 12:25 pm EST, Wed February 10, 2010

Warner CEO rejects streaming without pay

Warner Music Group chief Edgar Bronfman has cautioned that his label is likely to avoid free streaming music services. He expects to only offer music through paid services and says that free streaming services are "not net positive." He stopped short of saying Warner would quit existing services like Spotify or of flatly rejecting future free deals.

The move casts doubt on the fate of very popular free services like Last.fm, Pandora and Spotify, all of whom stream songs for free in return either for ads or content deals. While Spotify in particular has been successful and for now has the support of all four major international labels, it generates less income than either paid streams like Spotify Premium, per-track purchasing like iTunes, or download subscription services like Microsoft's Zune Pass.

Bronfman is also convinced that subscriptions will potentially be much more popular than pay-per-track and imagines attracting "hundreds of millions if not billions of people" who either buy music only occasionally or don't buy it at all. Subscriptions often cost as much or less than a full album, at $10 to $15 per month, but as 'guaranteed' revenue earns more for the label than occasional permanent copies.

"The number of potential subscribers dwarfs the number of people who are actually purchasing music on iTunes," he claims.

Paid subscriptions have previously been considered failures relative to permanent downloads and create an uphill struggle for Warner. Despite Spotify's popularity, only about 250,000 users or 5 percent of the entire base is actually willing to pay for content. Nokia's Comes With Music had just over 107,000 users in its first year of service, and RealNetworks had had such little success with its nine years old Rhapsody service that it has split Rhapsody off to cut its losses.

Some of the troubles stem from copy protection that prevents the subscription from transferring to more popular devices like the iPod as well as a lack of permanent downloads that won't disappear when the subscription ends.



By Electronista Staff
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Comments

  1. boris_cleto

    Fresh-Faced Recruit

    Joined: Sep 2002

    +3

    What a joke

    Bronfman has such a great track record for predicting what consumers want.

  1. slapppy

    Fresh-Faced Recruit

    Joined: Mar 2008

    +4

    Paid subscription

    It has failed time and time again, yet this guy still dreams of making billions with that model? Yeah okay, if you say so.

  1. tobor68

    Fresh-Faced Recruit

    Joined: Oct 2007

    +3

    Eyes bigger than his stomach

    '"The number of potential subscribers dwarfs the number of people who are actually purchasing music on iTunes," he claims.'

    and people downloading for free dwarfs both put together.

    if i was a warner share holder, i'd be screaming to have these boneheads removed from the board and get someone who thinks about the future not the past.

    geezers.

  1. JTh

    Fresh-Faced Recruit

    Joined: Sep 2007

    0

    Paid subscriptions

    Unfortunately, there's no subscription service that is serious about advertising their product. It boggles my mind that Netflix (a subscription service) can be so successful with "rental", yet people can't get their head around the same general idea when it comes to music.

    I've got Rhapsody, the subscription model works extremely well for me. The iPhone app just made it more valuable. I haven't bought music from iTunes in at least a year, and I haven't felt compelled to. Sure, if there's something that I'm dying to have in the event Rhapsody goes under, I'll buy it - but more than likely I'll look for another subscription service first.

    Oh, and I should point out that the subscription price for Rhapsody has been constant for years now.

  1. Flying Meat

    Dedicated MacNNer

    Joined: Jan 2007

    +3

    "Not net positive"

    Code for "we don't make any money off it. It's not net profit positive."

    But it is net positive, as far as the net (internet) is concerned.

  1. JulesLt

    Fresh-Faced Recruit

    Joined: Jul 2005

    +1

    s

    I sympathise with him on one angle – if these streaming-media-subsidised-by-advertising sites can’t work out how to generate enough money to pay for their content, why bother with them.

    They are, after all, businesses – if I tell our suppliers they’re too expensive, they might give a discount, but at a certain point they decide it’s not worth doing business with me. Ditto selling on the other side – some customers aren’t worth bothering with.

    As for subscription – I’m a happy emusic customer, but I’m the kind of person who buys a lot of music anyway – it represents good value for me. I don’t think there are millions of people out there who want to sign up for a music subscription though.

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