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Metaverse means more revenue, says Warner Music CEO

In WMG’s earnings call on Monday, one word came up repeatedly as analysts searched for information on the opportunities that lie ahead: the metaverse. Thank Mark Zuckerberg for that. The term has gained attention since Facebook announced its name change to Meta on October 28 and detailed its plan to create a metaverse, a combination of augmented and virtual reality, where people interact with the avatars of other users. in simulated worlds. Other tech titans share Facebook’s vision. Microsoft is also working on a metaverse for its Office products and its Xbox gaming platform. Apple is said to be working on augmented reality glasses and “mixed reality,” a combination of AR and VR.

WMG already has a metaverse game thanks to an investment in January in Roblox, a platform that hosts user-generated games. WMG artist Twenty One Pilots showed Roblox’s potential in September by launching a full-fledged tour with a virtual concert that allowed viewers to choose songs in real time. Other labels and artists are also on the move: Sony Music Entertainment entered into a strategic partnership with Roblox in July that will put its artists in front of Roblox’s more than 42 million active daily users. Fortnite – arguably a social media platform rather than a metaverse – is best known in the music world for its groundbreaking performances by Marshmello and Travis Scott that drew 10 million and 12 million viewers, respectively.

The metaverse picks up where the streaming left off. CEO of WMG Stephen cooper described the difference between traditional streaming and metaverse in terms of interactivity. With traditional streaming, labels and digital service providers are pushing the music to listeners, and listeners are pulling the music they want to hear. It’s a big change in the way streaming was framed just a few years ago. For almost 20 years, music streaming has been referred to as “interactive” because music on demand was a fundamental shift from one-time purchases of vinyl albums, CDs or downloads. In fact, there is a legal distinction here: interactive means the listener has an on-demand “growing” experience with unlimited song selection. Non-interactive services allow listeners to “relax” by limiting the degree of control they have over the music being played. For the moment. this nomenclature works, but it quickly becomes obsolete.

The metaverse is the interactive experience that has “the interconnectivity between content, between people, between people and content, between communities. [and] the interaction between adjacent communities, ”said Cooper. “It brings music and our artists into these environments, to build and enhance not only the interconnectivity of music with people, but our artists with people.” [and] our artists at [other] artists. And this creates so many possibilities for the convergence of content, artists, fandom and distribution, that I think music and the capacity of music will have to be truly the one, true global language, to a whole different. level.

At least that’s the plan. Today, the metaverse is a promising promotional opportunity with no significant revenue. In five years, it could approach the revenues of a current growing segment. Revenues from games, social activities and fitness, for example, are growing in importance, although their contribution to WMG’s income statement has remained unchanged from the previous profit call of $ 235 million on an annualized basis. . Still, WMG believes that these platforms cannot meet the needs of users without licensed music. “I see no reason why these models – whether social, gaming, fitness or other fields – will not continue to emerge,” said CEO Stephen Cooper. “Personally, I couldn’t imagine Peloton without music, or a TikTok without music.”

Not that streaming revenue can be taken for granted, especially when ad revenue growth requires brand spending to remain stable as COVID-19 rises globally again. And a healthy streaming market demands that labels release music that listeners are passionate about. Streaming services also need to do their part to draw consumers to their platforms and turn new releases into major events (as seen with Adele’s latest release). Additionally, the amount of revenue that streaming services share with rights holders is constantly changing.

But for the most part, the music streaming business model is set for the foreseeable future. Innovation and investment in audio streaming now comes from podcasts, as evidenced by the hundreds of millions of dollars spent by Spotify, Apple Music, Amazon, SiriusXM, and other big companies on original content and licensing of music. ‘popular shows. Audiobooks are also gaining in importance – Spotify on November 11 announced plans to acquire Findaway, a platform for established publishers and self-service authors, to better compete with from Amazon. In China, Tencent Music Entertainment acquired Lazy Audio, an audiobook and podcast producer, in January for $ 417 million.

Where else is Warner looking to grow? Good old acquisitions. Cooper continued his continued message on WMG’s approach to catalogs in the face of increasing multiples amid a growing number of competitors. “We are certainly not going to be one of the lemmings who cross a cliff spending recklessly and thinking that without the organization and the expertise [that] these assets will grow through a mystical and magical formulation, ”said Cooper.

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