The fiscal fourth-quarter report that came out of Warner Music Group
However, even digital salvation is a beast of burden these days, as growth is decelerating. High-margin downloads were supposed to beef up the bottom line, but Warner squeezed out a mere profit of $0.04 a share from continuing operations, and a loss for all of fiscal 2008.
"WMG had a strong year, outperforming the industry," CEO Edgar Bronfman Jr. noted in the release -- with a straight face, even. I guess what he should have said is, "If you think this is bad, check out the other major labels."
It's certainly not going to get any easier for Warner. The company expects near-term weakness, as a result of global economic weakness and a release calendar that favors the latter part of fiscal 2009.
With CD sales in a seemingly perpetual free-fall and MP3 sales not picking up the slack, one has to wonder if the labels will ever bounce back into favor.
The first thing we need to do is finger the culprit. The labels would love to point at widespread piracy. Surely the labels would never point to their own talent or model. Peer-to-peer file swapping has always been the easy scapegoat, but why is it that digital music growth is decelerating as legal downloading sites like Apple
To get this autopsy right, we need to dig deeper.
Is it the platform? If so, where do you pin the blame? CDs were a winner at first, as audiophiles updated their vinyl collections, but it's an easy format to duplicate. I'll make an educated guess and bet that CD sales began to fade once computers adopted the CD-ROM as the storage media of choice. It made it all too easy to rip and burn a CD, and pass it along. It's not as complicated as turning vinyl or cassette tapes into MP3 files or even mix tapes.
However, pointing the finger right back at the labels, isn't it true that our consumption habits have changed?
- The popularity of genre-specific programming on Sirius XM Radio
(NASDAQ:SIRI)and Internet radio opened aural appetites for more obscure artists.
- Even on the pop scene, where the labels cornered Top 40, many of today's hottest acts are being introduced to the masses on American Idol or the Disney Channel.
- Established artists are also going it alone. Between locking in deals like the one Madonna signed with concert promoter Live Nation
(NYSE:LYV), finding forward-thinking indie hubs like The Orchard (NASDAQ:ORCD), or connecting directly with fans through social networking sites like MySpace and Facebook, the "getting signed to a major" goal is no longer the universal dream.
So investors in the languishing publicly traded major-label companies like Warner and Sony
Longtime Fool contributor Rick Munarriz once had his band signed to Sony's Columbia Records label. It didn't exactly pan out. He does own shares in Disney, but he can't stand the Jonas Brothers. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.