How do you think the music industry will change in the next 5 years and how can Warner

Music ensure that it continues to be successful and relevant in this changing landscape?

- Increased reliance on music streaming services like Spotify and Apple Music, where
users pay a flat fee monthly subscription for as much music as they want to listen to,
instead of buying individual tracks or albums to download and own or buying CDs. If
you stop paying subscription you lose access to all the music.
- Increased reliance on revenue generated from live performances and tours. As
artists make less money from selling music, they are increasingly dependant on
income from live shows and things like merchandise.
- Increased brand tie ups for well known artists. As artists look for new revenue
streams they increasingly work with commercial brands in sponsorships and
advertising. Eg the big John Lewis adverts every Christmas which use music to sell
the product, and boost sales for the artist involved.
- New talent is emerging through digital channels, speaking directly to their audiences
via YouTube, Instagram, Facebook etc, so its now possible for young artists to build
up huge followings without even signing a record deal or a publishing deal so music
companies need to find new ways of working with artists – can have huge YouTube
views and a fanbase before they get signed
- Vinyl record sales are rising fast which is strange – vinyl albums earned more than
digital streams or downloads for the first time 2 months ago (Christmas presents)

- Streaming services like Apple Music are stepping in to oversee traditional label
responsibilities themselves, giving artists more direct access to their distribution and
data (à la Frank Ocean). In addition, an entirely new collection of marketing tools and
investment schemes (crowdfunding, investor-agency partnerships, accelerators like
Zoo Labs and Techstars Music) has entered the business, making the future of artist
development even more cryptic.
- Emerging record labels are recognizing these new players and capitalizing on their
strengths: giving fans more say in the recording process, building friendlier artist
contracts through strategic partnerships, aligning artist incentives with those of
startups and diversifying revenue beyond recorded music. By thinking and acting
more entrepreneurially, they are paving a more sustainable and relevant future for
themselves.

They are price-flexible.

Most record labels now receive as much as 80% of their revenues from streaming. Warner
Music Group was the first major label to officially announce streaming as its primary
revenue source; revenues from Universal Music Group's streaming business skyrocketed by
62.4 percent year-over-year as of August 2016, more than offseting the decline in digital
download and physical sales; Sony Music saw a 38.4% year-over-year increase in streaming
revenue in the quarter ending June 30. All in all, the three majors are cumulatively turning
over just under $10m every 24 hours from streaming platforms, and streaming accounted
for roughly half of the entire industry's revenues last year.

Most streaming users, however, are listening to music for free (e.g. at least 60 million of
Spotify's 100+ million users are only on the free tier, and fewer than 5% of Pandora users
pay for its ad-free services). While it seems that an inflexible dichotomy still persists
between people who are and aren't willing to pay for music, the real issue is that there
simply aren't enough options. One can either buy an album for $9.99, subscribe to Spotify
for $9.99 per month to listen to the album, or pirate the album for free—with nearly no
alternative prices in between.

"I happen to believe in my heart of hearts that there is an entire host of transactions
between $0 and $10," Ethan Rudin, Chief Financial Officer and Global Head of Label
Relations and Business Development at Napster, told Reuters. Many streaming services are
already incorporating price flexibility into their business models, from Pandora's $5-a-month
Pandora Plus to iHeartRadio's two upcoming differentiated services, iHeartRadio All Access
and iHeartRadio Plus.

The music industry should not just limit this price flexibility to streaming services, but also to
physical and digital recorded music sales at large. "Making your music available for free with
an option to buy or donate is the most rational thing to do," Gramatik told Mic. "You'd be
surprised how many people appreciate this approach and donate money to it whenever
they can, not only to pay for an album, but to show appreciation for the philosophy itself."

They diversify into events and culture.

As labels seek to build their company-level brand and connect more directly with their
audiences, events will inevitably become a more important part of their business models.
Live event revenues are already compensating for the decline in recorded revenues in the
wider music industry, a trend that will likely be replicated on the individual label level.

"Party labels will be bigger in the coming years," predicts Bamby, whose label will be hosting
a Halloween party later this month. "They could even expand to become their own event
marketing agency. In the future, everything will be linked together." Major labels and artists
are already launching their own alcohol brands that cater more to concert-going crowds,
and could take a step further into hands-on event planning and promotion.

The relationship can develop the other way around, too: organizations centered around live
performances can experiment with releasing their own recordings as a label. For instance,
the Smalls Jazz Club in New York runs its own live-streaming and audio/video archive project
called SmallsLIVE, which is essentially a digital record label that treats every performance in
the club as a record—and that gives artists full ownership of the copyright.

"The SmallsLIVE revenue share project seeks to be the most-fair revenue sharing model
available by making the artist a 50/50 partner," claims the website, suggesting that future
record labels' business models will be more diverse, more rooted in the live experience, and
fairer to artists.

5 – They can give you credibility

Even though the internet and modern technology has given anyone with a laptop the ability
to make and release music to the general public quite easily, this doesn’t mean their music
will necessarily be any good. Record labels can help here. Possibly the most important
aspect of a label is its hard-won and long-honed identity. If an artist is signed to a label,
listeners can know that a team of experts with their reputation at stake has decided to
throw their weight behind this music. This stamp of approval can be the deciding factor for
the listener spoilt for choice with thousands of songs at the tip of their fingers.

TOURS
The typical marketing strategy for a tour includes a combination of PR, print, radio and
digital marketing. Increasingly, email marketing has proven to be one of the most effective,
efficient and highest converting channels to drive concert attendance. The average tour
scales at 30 sequential concert dates in different cities and countries worldwide.
Traditionally, the operational challenges around direct marketing concert tours has been so
complex that most tours across the industry are marketed with one-time batch and blast
messages that display a plain text list of all tour dates. In addition, data shows that almost
50% of all tickets worldwide go unsold with the most common reason being, “I didn’t
know.” Understanding these challenges and staying committed to helping drive the entire
lifecycle of fan engagement, Warner Music Group’s CRM team started exploring a robust,
scalable and cost-efficient system to manage concert tour marketing.