Confidence in Free Streaming Models Is Fading — Fast

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.

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