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The Lefsetz Letter: Warner Music Revenue Soars

The future's so bright you've gotta wear shades.

Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself.

His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to music business honchos like Michael Rapino, Randy Phillips, Don Ienner, Cliff Burnstein, Irving Azoff and Tom Freston.

Never boring, always entertaining, Mr. Lefsetz's insights are fueled by his stint as an entertainment business attorney, majordomo of Sanctuary Music's American division and consultancies to major labels.

Bob has been a weekly contributor to CelebrityAccess and Encore since 2001, and we plan many more years of partnership with him. While we here at CelebrityAccess and Encore do not necessarily agree with all of Bob's opinions, we are proud to help share them with you.

Aren't we supposed to be bitching?

No, the future's so bright you've gotta wear shades.

It's hard to change the mantra. How the internet ruined the music business, how streaming is the devil, but you can't argue with the numbers.

Revenue was up 13.3% year over year. Recorded music was up 13.2% to $770 million.

Downloads fell by 27.3%, to $88 million from $121 million. So all you people counting on the iTunes Store to save you, you're headed in the wrong direction. Files are passe. As for those saying they want to own their music, what if streaming services crater, I must tell you that as the future ensues, you will lose the ability to play your files, just try opening a Word 1.5 document from '86 today, it's loaded with gibberish. As for the vaunted cassette revival, what a bunch of PR hogwash, does anybody even have a cassette player in an era where new cars don't even come with CD players?

Meanwhile, streaming grew 58.6%, up to $360 million from $227 million.

And who says Spotify doesn't pay.

And streaming was 46.8% of revenue, with downloads 11.4% and physical, which dropped 8.4%, 21.2%.

So it's over folks. Streaming has won.

As for vinyl, it's already peaked. Just read the WSJ story: WSJ

So, Time Warner never should have sold the record company. It was offloaded at a bargain basement price, by a corporation with no vision of the future. Richard Parsons is long gone, with his millions in pay intact, and the company is a shadow of its former self.

But maybe music should stand alone, after all, Universal is the driver of Vivendi.

So what this means is…

1. You've got to stop your complaining.

2. Rights holders make tons on streaming. Either go it alone or make the best deal you can with a label.

3. Convince your audience to stream. The sooner they sign up, the sooner you get paid and your scene burgeons. By feeding false facts to your fans, you're only hurting yourself. And your genre. Oldster music especially. Imagine if all the fans of Jason Isbell streamed instead of purchased, just maybe his music would hit the top lists and not only would Isbell get paid, but more people would find out about him and the whole Americana scene, of which he's the poster boy, would lift. But too many AAA acolytes and rockers would rather live in their niche and bitch.

4. Consumption rules. It's about listening as opposed to selling. You've got to make music people want to listen to.

5. Album tracks oftentimes do poorly on streaming services, people play the hit and… So make a few great tracks instead of a couple of good ones and a bunch of mediocre ones.

6. Free listening converts to paying customers. When will Apple bite the bullet and join the fun? Amazon has a free tier for Prime members and Spotify is growing at a faster pace than Apple.

7. Online is a winner take all marketplace, one company ends up with approximately 70% of the market. We already know Apple is stumbling, it looks like an Amazon/Spotify competition, although it's still early, the final chapter has yet to be written.

Yes, songwriter compensation should go up. As for writers complaining that they're not making money on album cuts, give up, close your flip-phone and join the present.

Just think of the future revenue. Most people don't have a streaming subscription.

But more will.

Because of the convenience. Because of the business proposition. The history of recorded music for one low price, it's a NO-BRAINER!

I know it's been a war, ever since the turn of the century, but it's time to put down your guns and enjoy the peacetime bump.

Spotify was first. Then came the consumers. The artists have been last.

But the early artists, the hip-hop and pop acts who followed their customers to streaming, have been reaping the rewards so far.

Time for you holdouts to get in on the action.