The Ledger: Why Warner Music’s Incoming CEO Makes Sense for a New Era
"He's got a global perspective [and] understands the concept of the long tail and its potential to be monetized."
The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
Way back in December 2008, Warner Music Group pulled its entire catalog from YouTube after the two companies reached an impasse in negotiations over what the streaming platform would pay to use WMG’s recordings and musical works.
WMG would not accept “terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for value they provide,” the company said in a statement at the time. Nine months later, YouTube announced in a blog post that WMG was returning with a new, multi-year agreement covering WMG’s full catalog including user-generated content.
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That once-controversial aspect of YouTube’s business model came into the spotlight this week after WMG announced that YouTube’s former chief business officer, Robert Kyncl, will become its next CEO. Kyncl, well-respected throughout the music industry, will take over the role next year from Stephen Cooper, who has led the company since it was acquired by Access Industries in 2011.
It’s remarkable – and rare – that an executive from a disruptive streaming platform would lead one of the world’s largest content companies. In recent decades, major music companies have usually been run by people who built their careers on the creative side of business – the path taken by Universal Music Group CEO Lucian Grainge and Sony Music Entertainment CEO Rob Stringer. At a minimum, a major label CEO had roots in content creation. Prior to becoming EMI Music’s CEO, Roger Faxon was an executive at LucasFilm and a founding partner of a film and TV production company. Cooper was an exception to the rule: a proven manager with experience leading corporations through transformative times.
During WMG’s kerfuffle with YouTube, Kyncl was vp of content acquisition at Netflix, helping the company transition from a DVD mail delivery company into a streaming service. He joined YouTube in Sept. 2010 to “secure deals with television networks” and help the fledging platform, purchased by Google four years earlier for $1.65 billion, become an online destination for content from Hollywood studios, the Los Angeles Times reported at the time.
Over the past nearly two decades, dustups between YouTube and content creators have not been unusual. YouTube is built on a user-generated model that allows people to use music and other copyright-protected content in videos they upload to the platform. The Digital Millennium Copyright Act protects online services from copyright violation claims if they meet specific requirements, and major content creators have put those guidelines to the test. In 2007, Viacom sued YouTube for copyright infringement – its users uploaded hundreds of thousands of its videos – and sought more than $1 billion in damages (the parties settled in 2014). The same year, Universal Music Group issued a takedown request for a video of a dancing toddler that utilized Prince‘s “Let’s Go Crazy,” leading the YouTube user to sue UMG for violating the Digital Millennium Copyright Act. The two sides settled in 2018.
But these lawsuits are now old history, and in 2022 Kyncl is not a surprising choice to lead WMG, arguably the most active of the major music companies in fostering in-house experience, partnerships and investments in next-generation technologies such as NFTs and the metaverse. “Warner Music is a metaverse play,” says Ivan Feinseth, an analyst at Tigress Financial Partners. He calls Kyncl “a good choice” because YouTube “is transitioning to a metaverse experience.”
Kyncl’s experience as a streaming executive is the most pertinent factor behind his hiring, however. YouTube has grown from a critical promotional platform with weak royalties to a crucial business platform that paid out $6 billion in music royalties in the year ended June 30. Crucially, 30% of YouTube’s music royalties came from user-generated content. That gives Kyncl valuable experience in an industry that is increasingly driven – promotionally, but also commercially – by UGC at such platforms as TikTok and Instagram, a music executive tells Billboard. “He’s got a global perspective [and] understands the concept of the long tail and its potential to be monetized.”
To gauge the importance Kyncl places on UGC, look no further than Streampunks: YouTube and the Rebels Remaking Media, the 2017 book he co-authored that looks at YouTube’s role in shaping, as the book describes it, “a generation of auteurs and entertainers who have built their success on the platform, inspired by the challenge to share their creativity with the world.” Kyncl’s contribution to global culture wasn’t the Hollywood fare he was originally hired to license for YouTube; it was YouTube’s ability to build an economy to support a new class of creators far from the traditional gatekeepers.
Speaking at a Goldman Sachs conference last week, outgoing CEO Cooper described a company well suited for the incoming CEO. In recent years, WMG has “reduce[d] our dependency on superstars,” said Cooper. Instead, WMG’s A&R teams find “artists at the beginning of their career” and build careers “on a set of economics that we believe are reasonable and rational, as opposed to economics that we often observe in other deals that frankly we don’t understand.” Cooper didn’t mention that artists are increasingly likely to retain ownership of their rights and partner with companies like WMG – turning a major label into a service provider. If success in the future music business requires WMG to operate within streaming’s economics while sharing a larger share of revenues with non-superstar artist-clients, Kyncl is a sensible pick to guide the company into the next era.