Robert Kyncl Say Music Streaming Is Way Too Cheap — And the Music Industry’s ‘Wallet Share’ Way Too Low

Photo Credit: Robert Kyncl by Barry J Holmes for Warner Music Group

Robert Kyncl publishes a letter to Warner Music Group shareholders talking up the value of AI and renegotiated deals with digital service providers.

Warner Music Group (WMG) CEO Robert Kyncl has released a letter to shareholders that pushes the potential of AI to drive WMG’s value ever upward in the financial market. The timing is significant, as both WMG and Universal Music Group shares have recently been trading below their previous highs amid increasing concerns about threats from AI-generated content.

Notably, the letter also indicates that recently renegotiated deals with digital service providers (DSPs) will lead to price increases to better compete with the film and TV industry.

“While Hollywood consolidates and frets over its future, music is emerging as a refuge in the storm rocking the broader media landscape,” Kyncl writes. “The average American spent $14 a month on recorded music between streaming subscriptions and purchases last year, according to Goldman Sachs research, a sliver of the $69 per month they spend on on-demand video streaming subscriptions. There’s clearly more share of the wallet left for music.”

That further indicates that WMG is demanding a certain amount of revenue from streaming platforms, regardless of where the exact subscription price currently falls. More wholesale pressure on DSPs would lead to more pressure to hike prices to keep those margins agreeable.

“We’re making significant progress as our recently renegotiated DSP deals are shifting the music industry from volume-driven growth to volume and price-driven growth,” Kyncl continues. “Since streaming’s introduction 18 years ago, the music industry has predominantly grown through rapid subscriber growth, as both passionate and casual fans flocked to music’s incredible value proposition.”

“As subscriber growth moderates in developed markets, DSPs have started to drive growth through subscription price increases. Given this evolution, we have reached new wholesale terms with our partners that better reflect the ever-increasing value of music, while providing us with greater economic uncertainty and untethering us from where our partners choose to set subscription prices.”

“We’ve transformed as an industry and as a company,” he concludes. “Now, we’re ready to revolutionize our superpower—the music—and drive its value to new heights for our artists, songwriters, and shareholders.”