The Spotify Effect Shows Up: Streaming Music Boosts Warner’s Bottom Line

Streaming services like Spotify and Pandora have made a lot of noise. Now they’re actually generating money for the music labels, too.

Warner Music Group says streaming services contributed 25 percent of the digital revenue that its “recorded music” group saw last quarter. That works out to be about $54 million, or about 8 percent of Warner’s total revenue for the period.

What’s more encouraging for Warner — and, presumably, the rest of the big labels — is that streaming revenue is growing quickly, but doesn’t seem to be cutting into traditional digital sales from outlets like iTunes.*

Just as encouraging: Warner says that after you net out the effect of currency fluctuations, the increase in digital sales was bigger than the decrease in physical sales. That’s the goal the industry has been aiming for since the late 1990s.

*Warner defines “streaming” revenue as money it gets from subscription services like Spotify and Rhapsody, along with Web radio revenue from the likes of Pandora, Sirius and Clear Channel. It doesn’t include the new cloud/locker services from Apple and Amazon. [UPDATE: That number does include YouTube, though, which is a significant income source for some corners of the business.]