COVID-19 has created new channels for labels and artists to exploit.
The future looks so bright, Warner Music Group might have to wear shades. That’s the takeaway from the 70-minute earnings call on Tuesday during which CEO Stephen Cooper and CFO Eric Levin said the word “opportunity” no fewer than 11 times.
But how should one interpret the word during a discussion of 2020’s second quarter earnings, the first full reporting period of the COVID-19 pandemic?
Opportunity can be a euphemism for easy-to-grab potential following weak performance. Or, it can mean untapped and developing markets and technologies in the early stage of their life cycles that will take time and investment. In Warner’s case, during COVID-19, both uses are correct. Some aspects of Warner’s second quarter were poor — physical, digital sales, merchandise — due to uncontrollable, outside forces. But, as Cooper and Levin laid out, COVID-19 has created new channels for labels and artists to exploit.
Cooper noted the social isolation most are facing during the pandemic brought “changes in habits [and] changes in behavior,” including watching live streams and virtual concerts in increasing numbers, with both short-term and long-term potential. “There’s this old saying that nature abhors a vacuum,” he said midway through the earnings call. “I think [COVID-19] has created a situation where we’ll do all that we can to fill it.”
In some cases, Warner is happy to let digital services capitalize on market changes. “We’re very happy that Spotify is investing in podcasting,” Cooper said. “It gives them an opportunity to create another vertical they can create not only an ad-free service around but presumably over time a premium service. I believe personally that there will be people that come to Spotify for a podcast and stay for music, and that there will be people that come to Spotify for music and stay for a podcast.”
Despite Warner’s optimism about the second half of 2020, the pandemic had bred enough uncertainty that the company extended its credit facility by $120 million and got lenders to relax some debt covenants in case earnings tumble below the prescribed threshold. The third quarter looks promising in theory, but countries — especially, and notably, the U.S. — are not out of the woods.
With the coronavirus stubbornly spreading through the Americas and again in Europe, a question mark hangs over the rest of the year. If cities or regions go under lockdowns again, physical product purchases will undoubtedly suffer. Specifically, labels will lose valuable Christmas album sales, if stores are closed between Thanksgiving and Christmas. And a second wave could cause brands to pull back on spending again, hurting synch royalties and ad-supported businesses.
Although COVID-19 didn’t dent the music subscription market in Q2, ad-supported streaming “clearly was affected,” Levin said, declining to give a specific number. Unfortunately, Warner and other labels will continue to feel the decline in advertising into the third quarter, since royalties are paid on a delay. Labels received royalties from streams in April, the hardest-hit month for brand spending, in May. Advertising partially recovered in May and June, so labels’ royalties from ad-supported services will hit labels’ books in July and August.
From the first to second quarters, Spotify’s subscription revenue rose 2% and advertising revenue dropped 11.5%, Pandora’s advertising revenue fell 17%, and YouTube’s revenue dropped about 6%. Given the rising number of YouTube subscriptions and a “continued decline in brand advertising,” Google CFO Ruth Porat said during the company’s July 31 earnings call, music-related revenue probably declined more than 6%. YouTube has an ad-free video and music services as well as YouTube TV, a streaming TV service that costs $65 a month and has 2 million subscribers in the U.S.
The second quarter of 2020 brings to mind a scene from the movie The Big Short. “Do you smell that?” asks investment banker Jared Bennet (played by Ryan Gosling) when pitching an exotic financial instrument based on housing mortgages to a New York hedge fund. “Opportunity,” says his assistant. “No,” Bennet shoots back. “Money.” Yes, the music business has upside — a rebound from a poor second quarter and return to strong revenue growth, greater consumer interest in online concerts and new products from podcasts to social apps like TikTok and Instagram Reels, Facebook’s new TikTok competitor. First comes the potential. The money will come later.
Here are six other questions answered in the WMG earnings report and call:
Warner’s Q2 net loss was $519 million. Why such a huge number?
Because of its IPO in June, Warner had to recognize a non-cash stock-based compensation expense of $426 million. Warner didn’t pay this amount to employees. Warner also recognized $86 million of one-time costs related to the IPO. Accounting principles require companies to recognize these costs as operating expenses; companies like to back out these expenses with metrics such as adjusted operating income before depreciation and amortization (OIBDA, Warner’s preferred earnings metric) or adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
What livestreams has Warner produced?
Warner mentioned two livestreams: David Guetta’s United at Home benefit, which had 12 million viewers, and a ticketed concert by rock band Trivium that “also led to a spike in merch sales,” Cooper said. (The band is now buying an airplane hanger, from which it plans to host more livestreams.) He added Warner also had livestreams in Finland, France and Spain.
What does Warner expect from new licensing deals?
Cooper said “alternative distribution paths” such as Snap, Facebook, TikTok and Peloton that use music but don’t focus on streaming entire songs the way Spotify does “over time will become significant revenue contributors to Warner Music.”
Is Warner affected by Spotify’s podcasting growth?
No, not directly. What Spotify does with podcasting does not affect the royalties it is required to pay under licensing agreements with labels. Indirectly, music will benefit if podcasting attracts and retains listeners; when Spotify adds subscribers and free listeners, labels’ share of revenue grows.
Will Warner work with podcasters who aren’t artists on one of its labels?
Some Warner artists already have podcasts. “That being said,” said Cooper, “the economics of podcasting remain pretty opaque and while we are prowling around that space, we haven’t really found anything yet … that has really caught our eye.”
Is Warner in the market for master or publishing rights?
Yes and no. Warner considers current valuations to be “somewhere between crazy and really, really crazy” and is constrained by “a real cost of capital” that requires financial discipline, said Cooper with both humor and seriousness. “We are not allowing COVID to screw up our brains and make us lose…financial discipline.”
Country Outlaw Songwriter Billy Joe Shaver Dies at 81
He became a reliable storyteller, logging songs with Kris Kristofferson (“Good Christian Soldier”), Tom T. Hall (“Willie the Wandering Gypsy and Me”), the Allman Brothers (“Sweet Mama”) and Elvis (“You Asked Me To”). When Jennings invited Shaver to Nashville to work on what became his 1973 outlaw country landmark album Honky Tonk Heroes, Shaver burst into national…
He became a reliable storyteller, logging songs with Kris Kristofferson (“Good Christian Soldier”), Tom T. Hall (“Willie the Wandering Gypsy and Me”), the Allman Brothers (“Sweet Mama”) and Elvis (“You Asked Me To”). When Jennings invited Shaver to Nashville to work on what became his 1973 outlaw country landmark album Honky Tonk Heroes, Shaver burst into national prominence. He landed credits on 10 out of 11 tracks on the album that is often tagged as the first, and some say best, “outlaw” LP from a back-to-basics 1970s movement that included Willie Nelson, Kristofferson, Merle Haggard, Johnny Cash and a number of others.In 1973, he also released his Kristofferson-produced solo debut, Old Five and Dimers Like Me, which included his beloved songs “Willie the Wandering Gypsy and Me” and “Georgia on a Fast Train.” Cash covered his song “I’m Just an Old Chunk of Coal (But I’m Gonna Be a Diamond Some Day),” which he wrote after giving up drugs and alcohol. In all, Shaver released nearly 2 dozen albums on a variety of labels (MGM, Capricorn, Columbia, new West, Sugar Hill), earning a Grammy nomination for Best Southern/Country/Bluegrass Album for his 2007 effort Everybody’s Brother. His most recent release, 2014’s Long in the Tooth, was his first to chart on Billboard’s Top Country Albums tally and it featured a duet with Nelson on “Hard to Be an Outlaw.”Shaver received the first-ever Lifetime Achievement Award in Songwriting from the Americana Music Association in 2002 and was inducted into the Nashville Songwriters Hall of Fame in 2004 and the Texas Country Music Hall of Fame in 2006. His highest praise, however, came from the men who towered in the genre and whom he called friends. Cash once referred to Shaver as “my favorite songwriter,” and good pal Nelson said he was “definitely the best writer in Texas… Everything he writes is just poetry.”His rough-and-tumble songs often emerged from a life that had its share of tragedies and heartache, from his son Eddy’s 2000 death from a heroin overdose to the nearly fatal heart attack he suffered onstage in 2001 and a notorious incident in 2007 when a bar fight ended with Shaver shooting another man in the face; he was acquitted of the charges and turned the scuffle into the song “Wacko From Waco.”Shaver also acted in a number of films, including Secondhand Lions, The Wendell Baker Story and Bait Shop, and his song “Live Forever” was performed by his friend Robert Duvall in the Oscar-winning film Crazy Heart; Duvall cast Shaver in his 1996 movie The Apostle and produced the 2004 documentary A Portrait of Billy Joe.Check out some of Shaver’s songs below.
Janelle Monáe Leads The Revolution In Stirring ‘Turntables’ Video
YouTube “We are in the middle of a revolution right? What’s a revolution without a song and a song without a revolution.” That’s the question the Grammy-winning artist Janelle Monáe posed to Entertainment Weekly when describing her latest single, “Turntables.” The song was released on and flips between cleverly rapped lines about “liberation, elevation, education” and a harmonic…
“We are in the middle of a revolution right? What’s a revolution without a song and a song without a revolution.”
That’s the question the Grammy-winning artist Janelle Monáe posed to Entertainment Weekly when describing her latest single, “Turntables.” The song was released on and flips between cleverly rapped lines about “liberation, elevation, education” and a harmonic refrain with clear gospel influences. It’s Monáe’s take on a contemporary protest song, a call for a political sea change, in the vein of, say, Billie Holiday’s “Strange Fruit” or Public Enemy’s “Fight the Power.”
Courtesy of Atlantic RecordsAnd on Tuesday (September), Monáe released a moving music video — or, as she calls it, an emotion picture — that solidified that message. The visual opens and closes with the singer walking along the beach in a beige trench coat and military cap. At times, she can be seen singing into a retro microphone before an American flag; in others, she moves through staged breakfast scenes, with a family reading through newspaper headlines as they mouth her lyrics. The visual flashes through archival and contemporary footage depicting inspirational figures past and present: Where one scene shows the model and activist Jillian Mercado at a photo shoot, another depicts a conversation with lifelong activist Angela Davis.
What rings true without is a hopeful cry for change and for equality, and a recognition of those who have been leading that fight for decades. Monáe wrote “Turntables” for the new Amazon Studios documentary, All In: The Fight for Democracy, that shines a light on voter suppression, particularly through the lens of Stacey Abrams’s failed bid for the Georgia governorship. “Right now, I am focused on turning the election in our favor,” Monáe told Entertainment Weekly, “and I hope this song can inspire those who are on the ground doing the work.”
Joe Keery’s Reinvention, Mxmtoon’s Carly Rae Jepsen Collab, And More Songs We Love
Getty Images/April Blum The search for the ever-elusive “bop” is difficult. Playlists and streaming-service recommendations can only do so much. They often leave a lingering question: Are these songs really good, or are they just new? Enter Bop Shop, a hand-picked selection of songs from the MTV News team. This weekly collection doesn’t discriminate by…
Getty Images/April Blum
The search for the ever-elusive “bop” is difficult. Playlists and streaming-service recommendations can only do so much. They often leave a lingering question: Are these songs really good, or are they just new?
Enter Bop Shop, a hand-picked selection of songs from the MTV News team. This weekly collection doesn’t discriminate by genre and can include anything — it’s a snapshot of what’s on our minds and what sounds good. We’ll keep it fresh with the latest music, but expect a few oldies (but goodies) every once in a while, too. Get ready: The Bop Shop is now open for business.
St. Vincent ft. Yoshiki: “New York”
St. Vincent, the intuitive musical goddess that she is, must have sensed our collective need for another quarantine ballad. Enter “New York [Feat. Yoshiki],” a classical arrangement of the standout single from 2017’s Masseduction. An added string section courtesy of Yoshiki, a Japanese multi-instrumentalist, beautifully complements the song’s original piano instrumentals. What more can I say? “New York isn’t New York / Without you, love” just hits different in the middle of a pandemic. —Sam Manzella
Djo: “Keep Your Head Up”
Last year, Joe Keery (of Stranger Things fame) released a glossy solo album under the moniker Djo. It was titled Twenty Twenty, and its sparkling arrangements ended up being quite far removed from the overall vibe of 2020 the year, but who could fault him for his optimism? Keery has also long been a contributing member of Chicago psych band Post Animal, but Djo is simply Joe — and latest “Keep Your Head Up” feels like several Joes ripping open a vortex in the funk-time continuum. This is a groove, peppered with buzzy synths and icy falsetto and an honest-to-god sax part. It’s akin to Todd Terje doing Tame Impala, a lightheaded cocktail rush that feels both clubby and bedroom ambitious. Positively galactic. —Patrick Hosken
Mxmtoon ft. Carly Rae Jepsen: “OK On Your Own”
When Mxmtoon’s Maia said she recorded “OK On Your Own” for the girls and the gays, she wasn’t kidding. The mellow bedroom-pop bop soundtracks a journey of self-reflection after a breakup, complete with the soft ukulele instrumentals that put the 19-year-old singer-songwriter on the map. Is it revelatory? No, but with pop icon Carly Rae Jepsen lending her sugary-sweet vocals to the second verse, it doesn’t have to be. Now I’m just waiting for “Party for Two.” —Sam Manzella
Video Age: “Aerostar”
Pleasure Line, the third album from emerging indie pop quartet Video Age, delivers perfectly escapist ’80s new wave vibes for when you need to get outta 2020 for just a moment. “Aerostar” is its punchy center, a hip-twisting, shoulder-shuffling groove that delivers quirky robot dance commands (“Slide to the left, now! Shimmy to the right!”) over hoppin’ funk synths and a kickin’ drum machine. It all harkens to a simpler time, one where dance floors were actually a real thing. Oh, the ’80s! —Terron Moore
Ruel: “As Long As You Care”
About a year ago, Australian middle-part heartthrob Ruel told MTV News that for him, “songwriting is exaggerating to an extent.” On his latest, the technicolor, soulful “As Long As You Care,” his exaggeration is so seamless, you’d be forgiven for believing the 17-year-old is actually a time traveler. The neo-soul groove he rides propels everything upward, even as the sound cheekily looks backward. “As Long As You Care” has one amazing hook, coupled with sonic candy that makes his upcoming third EP, Bright Lights, Red Eyes (out October 23) one to watch. —Patrick Hosken
Alycia Bella ft. Boogie: “Cue the Sun”
Something magical happens two-and-a-half minutes into “Cue the Sun,” the exploratory new collab between striking R&B voice Alycia Bella and rapper Boogie. After piping in the aural equivalent of stage smoke via jazzy piano and gorgeous vocalizations — “It feel like being lost in the right direction” — Bella’s song enters a more sparkly realm for Boogie’s recitations. By the end, you’re lighter, like your mind’s been cleared of all the cobwebs. Cue the sun. —Patrick Hosken
Carly Rae Jepsen