Warner Music remains committed to streaming services in Europe, however the outlook for Spotify’s US launch has worsened.
Reports published yesterday suggested that the record label, whose roster of artists includes the likes of Madonna and REM, was going to pull its catalogue from advertising-supported streaming sites such as We7 and Spotify. This was after Warner Music’s chief executive, Edgar Bronfman Jr said on the company’s latest earnings call: "Free streaming services are clearly not net positive for the industry and as far as Warner Music is concerned will not be licensed.
"The 'get all your music you want for free, and then maybe with a few bells and whistles we can move you to a premium price' strategy is not the kind of approach to business that we will be supporting in the future."
A Warner Music spokesman confirmed that its current deals with services in the UK and Europe, where there is an ad-funded component, such as We7 or Spotify, will remain in place in their current form until the contracts come up for renegotiation. Indeed Spotify also verified this via its Twitter feed yesterday, saying: “To be clear WMG is not pulling out of Spotify. Media is taking things out of context.”
However, the likelihood of such deals being struck in the US moving forward, looks increasingly unlikely, which will undoubtedly put strain on Spotify’s commitment to launching with an unlimited free service (supported by adverts), similar to its UK offering when it makes its stateside debut.
Last month a Spotify spokesman told The Telegraph that the service would not launch in the US without a free service, issuing the following statement: "We've always said that our music offering may be slightly different in the US, but we can confirm that a free product will absolutely be part of that offering."
Spotify was unavailable to comment on how Warner’s strategy change will affect its US launch – but one music analyst said: “Spotify may have to address how much music it offers in its free service when it launches in the US if it wants to ensure Warner Music is on board. It may have to only make a restricted amount of songs available in order to ensure more users actually convert into subscribers – and therefore guarantee the record labels a larger amount of revenue.
Rob Wells, senior vice president of Universal Music Group International, revealed last month that Spotify had yet to convert more than 10pc of the UK and Spain's respective userbases into subscribers. However, it has managed to do so in Sweden, Norway, Finland and France and Wells said it was a “very sustainable financial model - full stop.”