Spotify broke the $9.99 price barrier this week, paving the way for higher music streaming prices — and downstream royalty bumps for IP owners. But while UMG chairman Lucian Grainge praised the move among DSPs, he was careful to say it doesn’t go far enough.
Grainge spoke to Wall Street analysts during UMG’s earnings report, addressing the recent spate in DSP price hikes. YouTube Music has raised its price, with Apple Music, Amazon Music, Deezer, Tidal, and finally Spotify following along behind. “We obviously welcome Spotify’s announcement, as well as YouTube’s announcement,” Grainge said of the price hikes.
“Addressing average revenue per user [ARPU] is only one component. First we must ensure that real artists with real fan bases are fairly compensated,” he continued, echoing similar complaints aired earlier. Grainge has mentioned in the past that he doesn’t believe nature sounds and other cozy streaming content should generate the same revenue potential as musical artists.
“I want to stress our goal is simple, to promote an environment where real music isn’t drowned out in a sea of noise,” Grainge told investors. Warner Music CEO Robert Kyncl has stated something similar in speaking about how labels distribute their revenues. “It can’t be that [an] Ed Sheeran stream is worth exactly the same thing than a stream of rain falling on the roof,” Kyncl said during the Q2 2023 earnings call.
Kyncl also expressed that he believes the current streaming model undervalues music. One example he showcased is how YouTube TV’s subscription price has increased by 100% over five years—while YouTube Music has not shown the same growth.
“Both businesses grew very successfully and the cause of that is the structure of the agreements with [DSPs]. That structure was really good for the music industry. It has taken it from a low point to an incredible recurring revenue stream all around the world with massive amounts of people and payment instruments on file, premium experience, personalization, all of that.” But Kyncl reiterates just because the model saved the business, doesn’t mean it will continue to be the eminent model moving forward.
“That does not mean that it is the right thing for the next ten or 20 years. It has to change and it will change. One of the reasons for that is that there is not a real incentive for price increases that you see in every other industry, but the other is that every stream is valued exactly the same way. And that doesn’t seem like something that’s aligned with the way the world works.”
“Music cannot be the only industry that doesn’t assign value to high-value artists and songwriters and that it doesn’t drive ARPU growth the way every other industry does,” Kyncl concludes.