#TheWeeklyRoundUp - 02.08.24

Indies are nibbling into the majors’ streaming market share. After Believe saga, how might Warner Music Group respond? (Music Business Worldwide)

Six months ago in this column, I laid out why I believed we were odds-on to see a large-scale (likely $1bn+) acquisition in the independent distribution and services space this year.

The company I suggested was most likely to execute that acquisition: Warner Music Group, under still-relatively-new CEO, Robert Kyncl.

Subsequent to that column being published, Warner began sniffing around Believe, mulling a potential USD $1.8 billion bid for the French company before ultimately walking away. Believe was not deemed the ideal M&A target for Warner – but I still reckon we’ll see one or multiple acquisitions from WMG in this field in the months ahead.

There are a few key reasons why, beyond the fact that Kyncl has previously expressed his desire to accelerate Warner’s presence amongst “middle-class” indie artists.

Firstly, Warner will be keen to close the gap, size-wise, on its two biggest rivals. In calendar 2023, Warner Music Group generated USD $6.3 billion in revenues; according to MBW’s calculations, Sony generated $9.3 billion (from recorded music and publishing, plus related income streams), while Universal Music Group generated $12.0 billion.

Sony, in particular, has benefitted from some game-changing inorganic growth over the past ten years (via its acquisitions of AWAL, EMI Music Publishing, The Orchard, Som Livre etc.). Its biggest competitors have spent less aggressively through the same decade, following the mega-buys in 2012/2013 of EMI Music (UMG) and Parlophone Label Group (WMG).

Another key driver for Warner Music Group’s acquisitive interest in the modern indie distribution sector? The changing face of the music biz.

New stats from Luminate, published last month, tell the story. In the US in H1 2024, indie distribution companies handled:

• 62.1% of tracks that were played between 1 million and 10 million times on on-demand audio streaming services;

• 37.4% of tracks that were played between 10 million and 50 million times;

• 22.1% of tracks that were played between 50 million and 100 million times;

• and 13.6% of tracks that were played between 100 million and 500 million times.

In every one of these categories, the indie (i.e. non-major-distribution) sector grew its market share vs. the second half of 2023.

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Universal Music Group, Sony Music and Warner Music will meet with the Internet Archive for private mediation on 24 Sep 2024, to try to resolve their $400 million lawsuit over the Great 78 Project without going to trial (Complete Music Update).