In what is likely his final interview before leaving Warner Music, Bronfman defended Spotify’s ability to drive more value for artists and labels. “Everywhere we look, Spotify is incrementally positive,” Bronfman said. Later in the discussion he noted that the streaming music startup is “a real and growing revenue stream.”

That said, Bronfman noted that part of the success comes from a deal that Warner Music helped to negotiate that passed on more value to labels and artists. “They have Warner Music to thank for a much better economic deal. We insisted on a much stronger deal and refused to sign unless we got that deal,” he said.

In addition to adding additional incremental revenue to the music industry, Bronfman said that Spotify’s model also provides longer-lasting value than some of the other offerings on the market, because consumers access music for longer periods of time than during the usual sales cycle.

“It’s important to note that [Spotify] has a much longer shelf life than downloads,” he said. “In Spotify, a song can live in the streaming world for a long time.”

Bronfman was not as keen on other platforms for distributing music. For instance, unlike all the other major labels, Warner Music doesn’t participate in streaming video service Vevo. “We have a fundamentally different strategy,” Bronfman said. “Vevo aggregates artist content and accrues that value to something called Vevo… We aggregate our content and accrue that value to our artists.”

As for Google Music, which Warner Music also doesn’t participate in, Bronfman said, “Google has to decide if it wants to have a content platform and if it wants to have a platform that’s competitive with other content platforms.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Forecast: the future of the digital music industry
• Connected world: the consumer technology revolution
• The evolution of consumer-media cloud storage

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Connected world: the consumer technology revolution
• Monetizing music in the post-scarcity age
• Who and what to watch in the new era of the living room

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Who and what to watch in the new era of the living room
• 12 tech leaders’ resolutions for 2012
• The future of mobile: a segment analysis by GigaOM Pro

The deal wasn’t even worth much in cash terms — Citigroup simply called in the debt EMI owed it, wrote it down by $3.5 billion and took control.

EMI’s sad story shows that it’s suffering the same problems as the wider music business: It went into the networked era as a huge and well-known brand with a roster of big name artists and ownership of incredible catalogue of recordings. It was home to acts like the Beatles and Coldplay, and was the owner of iconic brands like Parlophone and Virgin. Yet despite its natural advantages it had built up over the years, it fell to pieces in the face of changing consumer behavior and aggressive new distribution models enabled by the Internet. Outpaced, outgunned and outmaneuvered, it has now handed its success over to the likes of Apple and its future to a bank that’s trying to hawk it to the highest bidder.

It was all supposed to be very different when private equity group Terra Firma bought the company for $6.8 billion in 2007. Boss Guy Hands, a successful London banker who had already overseen a succession of huge property, pubs and transport deals, hoped he could turn things around through canny business moves.

He made some progress by slashing overgrown budgets and cutting expenses — chopping the London office’s insane £700,000 annual taxi bill and, more notoriously, getting rid of the vast “fruit and flowers” budget, which most insiders understood as a byword for some altogether more rock and roll substances.

But while he was good at cutting back on excess, all his work really did was prove that the problems for the music industry aren’t fixed through frugality.

His impersonal approach meant that lucrative relationships went on the slide; major names such as the Rolling Stones and Radiohead quit the label in protest. Change was something to be endured, not encouraged. And by the time EMI did try to be progressive— the first major label to drop DRM, and one of the few that still uses artist-friendly deals — it had already handed the keys over to technology companies that didn’t really care about its business model or long-term future.

So instead of building a 21st century record label, Hands turned his investment into a huge loss: On top of the debt Citigroup has chosen to ignore, Terra Firma also lost the $2.7 billion it invested.

Perhaps most likely is a tie-up with rival Warner Music Group, which has been sniffing around a merger for years (interestingly Dick Parsons, who pushed for a similar deal while chairman of Time Warner, is now Citigroup’s chairman).

That might shore up the balance sheet temporarily and cut a few more costs, but it doesn’t seem like it would be much of an avenue to progress. After all, it would put EMI in the hands of former booze magnate Edgar Bronfman, who has pulled Warner out of deals with popular music services like Spotify while watching the losses mount year on year.

If that merger goes ahead, it will prove that the music industry is as clueless as it ever was. Traditional business heads suggest consolidation is good because it can eliminate waste and share costs. But in reality, that doesn’t work when the problem is not financial but structural – as it is in music.

The truth is that recorded music is unlikely to ever be the business it once was. The world is different now, and EMI is among those who shoulder some of the blame for letting it overtake them.

And this is not exceptional. The problems endured by EMI are the same ones seen across nearly all creative industries. The businesses built to profit from the work of artists have been laid to waste by technology companies who have no legacies to worry about and systems that drive costs down to almost nothing. Faced with the choice between taking charge of the future and trying to hold onto the past, record labels, TV companies, news organizations and book publishers have all been pushed in directions they don’t want to go and scrabbling to keep themselves alive.

When they do finally realize that they can not only embrace change but create it, the effort always looks too late: you only have to look to Rupert Murdoch’s Daily for an example of that.

In the end, it means that big companies are left with two options: more consolidation (which merely puts off decline for a few more years) or radical transformation (into fewer, smaller, nimbler businesses).

Will the next owners of EMI understand that it’s better to move forward than stand still?

Related GigaOM Pro Content (sub req’d):

• Can Social Media Save the Music Business?
• How Media Companies Can Compete Online
• As Always, Mobile Music Faces Uncertain Future

HBO Subscribers Dwindling; HBO had 28.6 million subscribers in the second quarter, its lowest total in four years and the second of its first back-to-back quarterly declines in at least six years. (The Hollywood Reporter)

How Is Warner Music Group’s Video Strategy Working Out?; according to a new online video usage report, the number of music videos streamed from artist or label websites dropped 40% in the second quarter. (Billboard)

Charter Starts Itemizing Retrans Bucks In Taxes/Fees Portion Of Cable Bills; on its Web site, Charter explains to customers that they will start seeing a “Broadcast TV Surcharge” in the “taxes and fees” section of their cable bills. (Multichannel News)

Meet YouTube’s Most In-Demand Brand Stars; big-time brands like Lancome, McDonald’s, Ford and Kellogg’s are trusting YouTube celebs with their money and reputations. (AdAge)

Cable, Internet Drive Ad Comeback; big gains in cable TV and the Internet will drive overall ad growth over the next decade, according to SNL Kagan. (Multichannel News)

Justin.tv Claims “Staggering” Upload Rate of 32 Hours of Video Per Minute; the San Francisco-based live streaming site has an average of 32 hours of live video streamed and uploaded every minute. (Beet.TV)

TiVo and Samsung to Collaborate on Advanced PVR Solution; Samsung has licensed TiVo software to build a platform to dramatically accelerate deployment for operators licensing the TiVo solution. (press release)

WMG Taps MTV for Content Partnership and Video Ad Sales; the record label has given MTV exclusive rights to sell ad inventory around its music video content in the U.S. across MTV Music Group digital properties and mobile services, as well as on WMG’s artist sites and third-party affiliate sites. (TechCrunch)

Watching Netflix on Android is Only a Matter of Time; according to a job listing, Netflix is looking for “a great engineer to help [it] build Instant Streaming client implementations on Android devices.” (WebProNews)

TiVo Wants Cable to Throw More Money at CableCards; TiVo and the Consumer Electronics Association are lobbying the FCC to make the cable industry adopt an IP backchannel for switched digital video communications to replace the SDV “tuning adapters” that MSOs have been giving TiVo users to use free of charge. (Multichannel News)

Cox Reports Heavy Interactive TV Usage; even though just 10 percent of Cox’s subscribers have access to the MSO’s full suite of interactive TV applications, it is seeing heavy usage from that group. (Light Reading Cable)

TV Proves Itself into Our New Decade; BIA/Kelsey raises its estimates for over-the-air revenue to $17.5 billion, a 10.9 percent increase compared with last year’s $15.8 billion. (BIA/Kelsey Local Media Watch)

Even the government is using the cloud to process data. The National Oceanic and Atmospheric Association is using Amazon’s Web Services for its Ocean Observatories Initiative, a study surveying ocean temperatures to detect and predict climate change. And as James Watters, senior manager of cloud solutions development with VMware, notes, the coming trend will be moving your data to the cloud, rather than keeping it stored on hard drives or DVDs that are then uploaded to a supercomputer someplace, which makes the cloud a necessary tools for supporting future economies built around information.

Analyzing huge data sets with access to seemingly unlimited compute power isn’t just a benefit for climate researchers or those seeking to decode the latest H1N1 virus. The huge amount of digital information generated by financial monitoring companies, our interactions with people and products on the web, and government data (to name a few examples) is something that analysts, app developers and average citizens can all benefit from. The challenge is making that data intelligible and accessible, and that’s what Infochimps, Microsoft, and an emerging class of data marketplaces are aiming to do.

Edgar Bronfman Jr.

Warner Music Group president Edgar Bronfman this week articulated what we’ve known for quite some time: that major record labels have lost confidence in the free streaming model for music consumption — and, by extension, the freemium model. A BBC story this morning, and other reports since that time, amplified Bronfman’s conference call statement to imply that WMG plans to pull its songs from existing streaming music services, naming several candidates.

Bronfman put it this way:

“[F]ree streaming services are clearly not net positive for the industry, and as far as Warner Music is concerned will not be licensed. So 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.”

Based on the context of his original quote, Bronfman appears to be willing to experiment with paid subscription models, but is pained by free streaming services and their freemium counterparts. That said, I doubt that WMG plans to cripple existing services like Spotify or Pandora by yanking its songs – at least not in the short term. Spotify, for one, has already told its Twitter followers, “WMG is not pulling out of Spotify,” and that media outlets are overreacting. And while the BBC story and others name non-interactive streaming service Pandora in the same breath as on-demand ones, the spirit of the quote seems far more squarely aimed at the freemium model than at Internet radio providers. Pandora should be just fine.

But while WMG may not be ready to pull content from streaming sites just yet — particularly after withdrawing from YouTube for several months last year — it may be ready to stop some services from growing, especially in new markets. Bronfman’s quote didn’t name Spotify, whose entry into the U.S. has been anticipated (and delayed) for months, but it might as well have. Spotify’s free ad-supported version, which has created fanatical fans across the pond, now seems unlikely to appear in the U.S., which would mute a lot of buzz around the company. With the premium edition used by only about 3.6 percent of its installed base in Europe, there are still a lot of freeloaders for every paying customer — too many to produce satisfactory returns for content owners.

At least one record executive said recently that Spotify’s model is sustainable in some territories, but Bronfman’s quote sounds like a vote of no confidence that the same thing will happen in the States, from someone who can effectively stop a launch singlehandedly. The trouble is, while free streaming doesn’t work well enough to please record labels, it sure does work for consumers — and taking away what used to be free has never sat well with them. Back to the drawing board.

Related content from GigaOM Pro (sub req’d):

Forget Syncing, Let’s Put Music in the Cloud!

Muse on Hulu

Not too long ago, Hulu dipped its toes into the music video biz with a limited deal to bring EMI’s Norah Jones on board to promote her new album. Well, now it seems the company will be pushing further into those murky waters by striking a new relationship with Warner Music Group to bring a whole bunch of videos to the premium video site.

For an unconnected old fogie like me, the list of Warner Music artists that will appear on Hulu is a bit of a mixed bag. The first to appear on the video site is British alt-rock group Muse (whose vast success I’ve somehow managed to ignore); Warner will soon follow that up with a page for Jason Mraz (who I think is only slightly more talented than this kid) and one for Paramore (who I actually kind of enjoy). Artist sites on Hulu will reportedly have a mix of music video and live content, including exclusive concert footage, interviews and the like to appease the hoarding masses that watch that sort of thing.

But does this signify that Hulu is starting to think of itself as a possible competitor to Vevo, the joint venture between Universal Music Group, Sony Music and YouTube that launched earlier this month? Probably not. After all, having a sum total of four artists on the site is probably not going to make it much of a destination site for music lovers everywhere.

What’s more likely is that EMI and Warner Music are just looking for ways to hit as many eyeballs as possible by putting their videos in as many places as possible. EMI isn’t a stakeholder in Vevo, after all; it merely licenses its videos to the site. And Warner Music, after a lengthy spat with YouTube, now has plenty of videos and channels for its artists (including one for Muse!) on the video share site.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Connected world: the consumer technology revolution
• What the shift to the cloud means for the future EPG
• Connected consumer third-quarter 2012

While YouTube has had trouble negotiating with the music labels, they continue to provide the most popular content on the video site. Warner has missed out on hundreds of millions of views and their associated revenue since it pulled the plug. Though YouTube did not disclose terms of the deal, it said Warner would be able to sell its own advertising on its content and YouTube would take a cut.

“Warner and YouTube have a long relationship,” said Chris Maxcy, head of music partnerships at YouTube, noting that Warner was actually the first label on the site in 2006. “Our door’s always been open to Warner. It was a continual conversation.”

One interesting aspect of how this has played out is that Warner’s approach is different than that of Sony and UMG, which are taking their music videos off YouTube and creating an entirely different site, Vevo, though it’s powered by YouTube. “We see Vevo as something very separate; we do have a partnership with Vevo” said Maxcy, who declined to comment on behalf of the labels about their relationship with each other. Warner and YouTube say they want to make a “premium” experience around the label’s videos, but we don’t know what that will look like yet.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Who and what to watch in the new era of the living room
• Forecast: the future of the digital music industry
• Connected world: the consumer technology revolution