Bronfman Revisits 'Variable Pricing' On Q4 Call
December 2, 2008 at 5:18 AM (PT)
In the WARNER MUSIC GROUP 4th quarter conference call, Chairman/CEO EDGAR BRONFMAN JR. once again touched upon the company's desire for APPLE's iTUNES to sell WMG product at "premium prices."
DEUTSCHE BANK's DOUG MITCHELSON asked, "Any update you can give us about the premium product pricings with iTUNES and your pricing strategy. Is there still sort of a hope that you could move at some point to a variable pricing strategy with iTUNES?"
To which BRONFMAN replied, "Well, I have said repeated probably three or four years now that I think variable pricing is appropriate for all kinds of content, including music content. I don’t believe that every song is worth exactly the same thing, and it’s worth the same thing to different consumers. Or perhaps not even worth that money at one particular time versus a later time. And I think artists and record companies should have the right to experiment with pricing, and consumers will tell us we’re underpricing more pricing, whether we get it right or we get it wrong. The consumers should have that right. So long term I do hope that that will be an opportunity to have variable pricing in the industry, and no question about it."
MITCHELSON asked, "Okay, so on top of the premium pricing that’ll be of incremental value. You have been a big believer in wireless and the impact that could have on music. Is the growth that you are seeing in smart phones here in the U.S. notably impacting music revenue yet or can you talk a little bit more about sort of how you see wirelessly evolving?"
BRONFMAN said, "Well, as I mentioned in my prepared comments, the growth of improved handset devices and networks are definitely going to alter and increase content consumption. Whether it is in sales on a per download basis or through other models like Nokia, 'Comes with Music.' I do think it is clearly going to increase. If you look at the amount of content consumption and, frankly, sales on the iPhone versus other handsets, it is multiples greater, in some cases 10 or 20 times greater than it is on a regular phone. So that augurs well and as phones get smarter and networks get better and as business models get more diverse.
"The business model of owning essentially for nothing the content with the price of the device is a very attractive consumer offer which should also be attractive [to] device manufacturers. So, I do think that we will see an acceleration in mobile over time. It is difficult to predict the timing. It is difficult to know how quickly smart phone distribution network enhancements will roll out, but as they do that is no question that content will be positively affected."