Streaming is now Warner Music's biggest source of revenue

Warner says it is the first major music company to see streaming surpass physical formats

Editor's Note: Our annual Vator Splash Spring 2016 conference is around the corner on May 12, 2016 at the historic Scottish Rite Center in Oakland. Speakers include Tom Griffiths (CPO & Co-founder, FanDuel), Andy Dunn (Founder & CEO, Bonobos), Nirav Tolia (Founder & CEO, NextDoor), Mitch Kapor (Founder, Kapor Center for Social Impact); Founders of Handy, TubeMogul, VSCO, Vinted; Investors from Khosla Ventures, Javelin Venture Partners, Kapor Capital, Greylock, DFJ, IDG, IVP and more. Join us! REGISTER HERE.

I remember the first time I used Napster. My sister had just moved into college, so she had ethernet Internet for the first time (this was 2000, and we still had dial-up in our house). I was blown away by it. Suddenly I could download anything I wanted! It was a dream come true!

The golden age of downloading didn't last long, though. It took over 100 years for physical media to be replaced, but, only 15 years later, downloaded have already been usurped by another format.

Warner Music Group unveiled its second quarter earnings on Friday, in which it revealed that it now makes more money from streaming than any other source of revenue. This is the first time this has happened for one of the three major labels, the others being Sony and Universal.

The company’s total revenue increased 10 percentThe  year-to-year, with digital revenue growing 21.2 percent to $360 million. That represents nearly half, 48.3 percent of the company's total revenue, compared to 43.9 percent in the second quarter of 2015. 

“These impressive results were driven by outstanding music from our artists and songwriters, the expansion in our global footprint, our leadership in the industry’s digital transformation and excellent execution globally,” Stephen Cooper, Warner Music Group’s CEO, said in a statement. 

“We are now the first major music company to report that streaming is the largest source of revenue in our recorded music business, surpassing our revenue from physical formats."

It was only a year ago that Warner revealed that streaming revenue had topped that of downloads, so while digital has been growing, this milestone can also be attributed to the fall in physical revenue, which dropped by $6 million year-to-year.

The rise of streaming

This isn't a surprising development, as this is what has been happening to the industry as a whole. 2015 was the first time that streaming services were the largest source of revenue for the music industry.

In all, they accounted for 34.3 percent of revenue, compared to 34 percent for digital downloads and 28.8 percent for physical purchases. Streaming accounted for 27 percent of revenue in 2014, meaning it increased by 26 percent year-to-year.

Last year, streaming exceed $2 billion for the first time ever, and revenues grew 29 percent year-to-year.

Paid subscriptions accounted for the majority of revenue, $1.2 billion of it. Revenues from paid subscriptions grew 52 percent year-to-year, and the number of paid subscriptions grew 40 percent, to an average of 10.8 million.

There were two other sources of streaming revenue: SoundExchange distributions made up $803 million and on-demand ad-supported revenue was just $385 million.

 Of course, if you add up digital downloads and physical media, it's clear that the vast majority of people still want to own their music, but its not hard to imagine a world where streaming dominates them all. 

(Image source: jornaldenegocios.pt)