Blog Post

@ Convergence 2.0: Keynote: Edgar Bronfman, CEO, Warner Music Group

If there’s one point that Edgar Bronfman, chairman and CEO of Warner Music Group (NYSE: WMG), tried to hit home, it’s that rumors of the music industry’s demise have been greatly exaggerated, contrary to what Leo Hindery said this morning. He kicked off his speech reading from a 1980 Washington Post (NYSE: WPO) editorial warning of the industry’s death at the hands of piracy and falling album sales. So yes, none of these fears are particularly new. And yet, today’s challenges are unique. CD sales are declining rapidly, and there’s no obvious replacement.

As Bronfman sees it, the key is to move beyond the “recording industry” as it is conceived of today. Instead, the industry must focus on non-recording opportunities: fan clubs, music management, concert tickets. This is particularly true in Asia, where piracy makes record sales even more difficult. There the company has really focused on non-album sales, as well as mobile, which Warner sees as a huge opportunity. Just today, Warner is announcing a a 70 percent stake in Japanese artist management firm Taisuke.

On DRM: DRM is mistakenly assumed to be about stopping piracy. Instead, it should be seen as a business model enabler, whether it’s subscription models or fan club album sales. Although Bronfman defended his pro-DRM stance, he left the door open to the possibility that it may not always be best for all business models. Insisted that fans, for the most part, aren’t just looking for free music.

Text of speech (.pdf)

2 Responses to “@ Convergence 2.0: Keynote: Edgar Bronfman, CEO, Warner Music Group”

  1. Andrew Rogers

    I just wanted to applaud the above commentator – Petr Svacina. You're comment is right on. I work for a media production company and we are trying (and succeeding) in changing how we distribute. It is just a lot of hard work.

  2. Petr Svacina

    I represent a small Brazilian software firm specialized in video and TV over the Internet. We originally intended to create an Internet video rental system, as the US film industry is responsible for over 90% of the film market, we contacted them to obtain the necessary authorization for such a service. As you may be hinting, we obtained nothing.

    DRM and the threat of piracy has always been the issue but I am convinced that other issues are behind this matter and they to be equated before the Internet sales issue can be addressed. The major problem, as I see it, is the distribution process paradigm. With the new technology, the majority of the existing sales structures are condemned to die. Why go to a store if you can find what you want over the Internet. Why go to a cinema if you can watch the movie at excellent quality of video and sound at home, streamed over the internet.

    The problem is that the existing distribution structure: distributors, stores, rental stores, video selling bookstores, are all sentenced to death. The irrational facing of this fact is what is nurturing piracy. The industry is creating artificial commercialization problems because they are, in fact, trying to find a magic solution for this insolvable problem. While they sit and wait for a magic solution, the pirate market flourishes. It's similar to the problems created by the impact of television in the 50's. At that time, the film industry invented the CinemaScope and good quality color to make it appealing for the public to go to the cinemas. Even so, they lost almost halve of the market that existed before television. But now, with high definition TVs and stupendous sound available to almost any home, no new tricks seem to guarantee the existing distribution structure.

    The incredible paranoia related to the possibility that the market "will pirate everithing" has come down to earth with the advent of the iTunes. People purchase music by the millions, just give them the availability and a fair price. People, with few but noisy exceptions, are not pirates and will not put up with criminal behavior. The problem here is a fundamental one: people will buy what is freely offered in a busy corner if they can't buy it in a store or download it easily. They don't feel guilty of this. Piracy at the existing level, as we can see, is involuntarily promoted by those who are mostly affected by them, the entertainment industry. Give people the chance to be legal and they will be! Just give them what they want.