WMG’s Bronfman Warms To Apple, Tip-Toes Around iTunes Speculation

Edgar Bronfman Jr

Last quarter, Warner Music Group (NYSE: WMG) CEO Edgar Bronfman Jr scolded Apple for introducing variable track pricing too late and eagerly predicted a new wave of subscription digital music services “dwarving” the iTunes Store on which labels depend so much.

This quarter, he’s full of praise for Cupertino, ahead of what many anticipate will be the launch of just that kind of subscription service from Apple.

iTunes’ contribution to labels is now only growing significantly outside the U.S., but – after announcing six percent lower sales, Bronfman told analysts on WMG’s Q2 conference call: “The flight to iTunes and iPhone continues.”

Amongst the praise Bronfman heaped: “Apple (NSDQ: AAPL) has proved to be the most adept software and hardware manufacturer out there in delivering content to consumers in a seamless and very attractive consumer experience. No-one’s gotten very rich betting against Steve Jobs – and I don’t want to be the first to do it.”

WMG recently benefitted from Apple’s acquisition of subscription web service Lala, in which WMG invested. But, when investment analysts finally got around to asking Bronfman whether Apple’s closing Lala suggests an upcoming subscription iTunes, Bronfman took careful, evasive action…

“Apple is not currently a retailer involved in an access or subscription model,” he said. “I’d probably like not to speculate on what Apple’s plans are – it’s really interesting technology that it acquired in the Lala acquisition. That’s a question that Apple management should answer.

“I don’t think Apple’s really that clear to the market (on the subscription suggestion), so I wouldn’t suggest it will not have an impact, but I certainly won’t speculate what kind of impact it will have.

“We made great progress with Apple last year on variable pricing. It’s our hope that we can continue to make great progress. But I can ‘t say that there’s a specific intiaitive today with Apple.”

With a diplomatic answer like that, Bronfman could run for political office. Augmenting iTunes Store with an unlimited monthly subscription model is one of the very things labels like WMG are seeking. iTunes now contributes over a quarter of all U.S. music sales – but North American digital music income grew only 1.1 percent through 2009.

Whilst Bronfman’s words are warmer toward Apple than last quarter, he’s still excited that the subscription paradigm – practised by the likes of Spotify, We7, Rdio, Nokia (NYSE: NOK) and probably more to come – promises more competition to Apple’s dominant music retailer.

“(We expect) significant growth in bundling access to music with the device or services from various ISPs around the world,” he said. “The ability for device makers and network operators – when they pay attention to a very facile user interface – the opportunity to add value to their customers is significant. Therefore, we see significant interest from ISPs and device manufacturers in this area.”

One Apple invention he’s not yet convinced on – iPad. It will give music “a more visual experience going forward”, but: “To suggest that it will create a new and large revenue stream in the short term is probably more optimistic than I want to be today.”

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