Warner Music Group has announced that it will stop licensing its music to streaming services – such as Last.fm and Pandora -- that provide consumers with free, instant, and legal access to millions of songs. Generally speaking, music streaming services function like radio stations – with some, like Pandora, designed to 'guess' the musical tastes of a specific consumer and tailor suggestions based on these findings. Such services, therefore, provide new artists --and even musical genres -- with exposure to new consumers. Nevertheless, while streaming services do pay royalties for each song played the royalties are significantly less than those a company such as Warner will earn through paid downloads. Moreover, while some consumers may go on to purchase digital copies of favorite songs, it's unclear what proportion are simply free-riding on these service.
Warner, therefore, has come to the conclusion that "free streaming services are clearly not positive for the industry" and decided to focus on providing digital access to music by way of paid subscription services. However, Warner’s decision to focus on paid subscription services – none of which have yet to prove popular among consumers – has been criticized as short-sighted and oblivious to the desires of consumers that have become accustomed to free and subsidized music services. In this new landscape, many believe that any service stopping short of full-on piracy should be viewed as a positive by music labels. This view appears to be held by several major industry players such as the senior VP of Universal Music Group who has gone on record as stating that such free services provide “a very sustainable financial model.”
It remains to be seen whether Warner’s move – which will cut access to popular artists such as REM and Muse – will negatively affect the future of music streaming services. However, as noted by the head of UK’s Music Manager’s Forum, what is clear is that “anything that's going backwards is denying where the world's going.”