Warner Music Group Proceeds with IPO, Reflecting a Re-Stabilization of the Music Industry: Business Casual
At one time, the compact disc (CD) was so popular, so profitable that the music industry couldn’t imagine life without it…until it had to. A disruption nobody had foreseen, advances in technology are to blame for the death of the music industry’s biggest money-spinner. Spawned by file-sharing via Napster and Limewire and the launch of the mp3 at the turn of the millennium, CD sales nearly halved between 2000 and 2007, which is when smartphones and the first music streaming services surfaced to put the final nail in the compact disc’s round coffin. Unfortunately, with the downfall of the CD came a breakdown in the music industry, shifting the balance of power in favor of consumers and platform owners, resulting in a commensurate fall in revenues for the music sector.
However, after an 11- year slump, the music industry is on the rise once again, notching double digit annual growth since 2016, with 2018 revenues up 13% year on year. The reason: music streaming platforms—a medium that barely registered as a source of income a decade ago! Now, accounting for nearly 80% of retail sales revenues in the U.S., streaming has been a boon for the industry, resulting in $20.2 billion in revenue in 2019, up from $14 billion in 2014. With that said, Warner Music Group’s plan to go public, with an initial public offering valuing the company at $13.3 billion, reflects a revitalized industry. And on this snippet of Business Casual, hosts Daniel Litwin and Tyler Kern break down Warner’s business strategy, consumer listening habits, digital streaming platforms, and the overall economics of the music industry.
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