Warner Music Group 2015 Q1 Earnings: Streaming Revenue Surpases Downloads

As industry observers see the growing dominance of streaming, many have waited for the moment when it would become more important than digital downloads. Warner Music Group announced its first quarter earnings ending on March 31, and the main takeaway from their report was that streaming has at last surpassed downloads as the primary source of revenue for the smallest of the three major labels.

Propelled by increased streaming payouts, Warner saw their total revenue grow 4 percent or 13 percent on a constant-currency basis to $677 million. Though digital downloads fell once again, streaming increased by 33 percent, more than offsetting the fall in revenue from digital downloads. Digital revenue increased by $1 million dollars from this point last year.

An increase in revenue from digital sources and cost cutting measures paying off at Parlophone Music Group, which Warner acquired in 2013, are two of the primary reasons for the increase in revenue.

"Notably, in this quarter we saw continued growth in streaming revenue which surpassed download revenue for the first time in the history of our recorded music business," said Stephen Cooper, Warner Music Group's CEO. "Our commitment to being at the forefront of industry change as well as our ongoing investment in artist development is the foundation of our continued success."

The news about streaming revenue comes as services, notably Spotify approach a crossroads in their business model that utilizes the lure of free music with ads to draw fans in and then attempt to convert them to paying customers. There has been increased pressure on streaming services to ditch the "freemium" model in favor of just a paying subscriber model as labels attempt to shore up revenue from streaming.

Apple has been reportedly pressuring labels to force Spotify to change, though Warner CEO Cooper was wary of killing "freemium" due to the potential consequences of consumers turning to pirate sites in the interim, which generate no revenue. He notes in a investor's call (via Billboard) that the industry should be careful, "before freemium is burnt at the stake."

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Warner Music Group, Spotify