There may be plenty of doom and gloom around the future of the CD from certain quarters – but one of the biggest companies in the record business saw a rise in sales of the format over Christmas.
In the three months to December 30 last year, Warner Music’s physical music sales rose $20 million year-on-year, up 7% to US $293m.
That’s not only a significant rise on the major’s physical music haul during the same period of 2013 ($273m), but also close to matching its performance two years prior: in the same quarter of 2012, its income from CD, vinyl and DVD stood at $300m
The majority of Warner’s physical sales growth at Christmas 2014 came from outside the US, where CD sales (plus DVD and vinyl) grew by $12m, thanks to the success of albums from the likes of Pink Floyd and Johnny Hallyday.
Physical sales grew by $8m during the period in the US, which Warner pinned on the likes of Idina Menzel and Bette Midler ‘who traditionally sell predominantly more physical than digital’.
As a result, physical was the dominant format for Warner over Christmas 2014. The company’s digital music sales grew, from $256m to $272m, incorporating streaming revenue growth of $26 million and a decline in digital download income of $7 million.
Stephen Cooper, Warner Music Group CEO, later told investors: “If you put aside the specifics of a release schedule, I think the expectation is that physical will continue to decline just generally as people move to other forms of enjoying music in particular streaming.
“while we see a very rapid growth in streaming, we don’t forget that physical and downloads remain a very, very important component of music sales”
Stephen Cooper, Warner Music
“That being said, there is a very bright spot in physical, which is vinyl; year-over-year that’s up more than 50% and what we see is because of the quality of the vinyl, the interest in collecting vinyl.
“We expect that to continue. We would expect also kind of niche bright spots with CDs which are the Collector’s Edition and the high-res CDs notwithstanding we expect the CD market to continue to contract. That being said, the demise has been predicted for years and we believe that while contracting it will have a very long tail.”
Warner’s full-year digital sales overtook physical for the first time in its FY 2014 – the 12 months to the end of September 30, 2014. Digital sales grew 15% to $1.1bn in the year, while physical music income fell 7% to $822m.
Added Cooper: “When you look at the [sales] composition in music globally, roughly 60% on a global basis is still physical and downloads, so that while we see a very rapid growth in streaming we don’t forget – and hopefully you guys don’t forget – that physical and downloads remain for the foreseeable future still a very, very, very, very important component of music globally.
“There are a number of markets – by way of example Japan, which is the world’s number two market and Germany, which is the world’s number three market – that are still highly physical and while the digital transformation streaming is beginning to take hold in those markets, we expect them to be physically oriented for the foreseeable future.
“We had in the first quarter releases where any number of our artists have historically been physically oriented and that was in large part attributable to our fiscal sales in the first quarter, while we could see that in future quarters, we continue to believe that the overall trends will be a decline in physical, both in the US and globally but with a different contracting curves around the world.”
Cooper also told investors that he expected Warner’s catalogue sales would continue to contribute 35% or 40% of its annual recorded music sales.
As previously reported, Warner Music Group’s total Q1 revenue increased by $14 million, or 2%, to $829 million for the three months ended December 31, 2014. Its net losses grew to $41m in the period.Music Business Worldwide
