To talk well and eloquently is a very great art, wrote Mozart, but an equally great one is to know when to stop. Unfortunately, knowing when not to talk up expectations remains an uncommon trait in the music industry. Its recent self-satisfied musings on the growth of digital music are understandable after six straight years of shrinking global recorded music sales. But it also sets the stage for disappointments.
Take Warner Music Group, which delivered forecast-beating earnings on Tuesday, thanks to lucrative digital sales. Before too long, it should also receive a boost from gift cards for music downloads. But, with hopes running high that revenues might finally start growing again, weakness in the top line, mainly because of a recent subsidiary sale and exchange rates, sounded like a bit of a setback.
In growth terms, the basic problem of the industry is that, unlike in the past, recent innovations do not force listeners to buy the same album twice. Music companies need new hits, even assuming that piracy can be contained and that competition among download services allows them to capture a larger share of the pie.
Fortunately, a bit of creativity can go a long way in music. At Warner Music, for example, about half of digital sales come from ring-tones. That illustrates the potential of legacy libraries, even as audiences are increasingly willing and able to pick and choose. Sadly, the recent record of music companies when it comes to creativity remains uninspiring.
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