Warner Music Group CEO Robert Kyncl on AI, streaming power, and why music royalties are the safest asset on Wall Street

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The Scene Warner Music Group CEO Robert Kyncl joins Mixed Signals — with Semafor business editor Liz Hoffman filling in for Ben — to explain what a record label actually does in a world where anyone can upload a song to Spotify. Max and Liz ask Robert why Warner struck a deal with AI music company Suno while Sony and Universal are still suing it, how he thinks about the nuclear-weapons-style leverage labels hold over streaming platforms, and why he thinks Netflix is leaving a massive opportunity on the table by ignoring music. Transcript Robert Kyncl: I think it’s like nuclear weapons. You actually should never exercise it. But it’s kind of nice to have it, which is why a lot of people are seeking nuclear weapons. Max Tani: Yes, right. In the 20th century, if you were a musician, one of the hallmarks of a successful career would be signing to a major record label. It meant that you could get time in a high-quality, good studio to record your best work. It meant that the LPs and the CDs would make their way onto the shelves of major retailers, and it meant that you would get serious promotion in the form of radio airplay, essentially. But in the world of online streaming, the business of running a record label or record label business has gotten a lot murkier. Having survived the online privacy era, record labels are faced with an even more existential threat from artificial intelligence. But there are growing parts of the business too. Back catalogs are allowing people to discover music more easily through streaming, so much so that Wall Street actually thinks that music is a good business again and is now getting back into the game. Robert Kyncl is one of the major players shaping the new music landscape. He is the CEO of Warner Music Group, which is one of the three major American record labels, record companies. And he, before that, was the chief business officer at YouTube, where he built YouTube’s streaming music business. And he was an early employee at Netflix back when they would still send discs in the mail to people. And because music and music streaming and catalogs are such an attractive asset for Wall Street these days, we thought we would ditch Ben Smith this week, chuck him out onto the heap, and bring in someone who actually understands Wall Street, understands business. That is Semafor’s business editor, Liz Hoffman, who is also the co-host of the excellent podcast Compound Interest. If you’re not listening, definitely go subscribe to it. Liz, thanks for joining today. Thanks for replacing Ben. I feel like this is a good trade that we got this week. Have you been surprised by the fact that music is kind of a growing part of the media business at a time when investors are really scared of media across the board? Liz Hoffman: Well, first of all, it’s an honor. Longtime listener, first time co-host. Thrilled to be here. The interest from Wall Street is really in two places. One is that just content is still for all the hand wringing you hear out of Hollywood these days, still pretty good business, still a pretty good quintessentially American business, really good at making stuff that people really like. And it’s never been easier, as I’m sure we’ll talk about with Robert, to distribute that, to get that to places. And watching just the huge rise of Spotify and YouTube and Netflix, I mean, streaming is just the defining distribution mechanism. It has upended bajillion business models. So, that’s one. And the other is that people are basically Wall Street’s run out of stuff to buy, and they’re looking around in the corner of every business model. Max Tani: Have they thought about a company called semafor.com? Liz Hoffman: Yeah, I don’t think they can afford us, Max. Very richly valued over here. But they’re kind of rooting around in everyone’s business model, being like, “Do you have anything that fits this chunk of money we have over here?” And music royalties have become a really interesting one. It’s not brand new. The David Bowie Bonds in the late ’90s set that off. But in the last four or five years, you’ve seen just huge pools of Wall Street money chasing essentially the long royalty that Spotify pays Warner when you stream their songs. It used to be you bought a CD, and so you’d see a big spike in sales that first week, but that doesn’t really do Wall Street any good. They want long-term cash coming in the door that they can then go do other stuff with. And so, Warner has a deal with a big private equity firm called Bain, but very infamously, Taylor Swift. We recorded her masters because she didn’t like who owned them. You’re starting to see what we call in finance an asset class, and that’s what music has become. And so, we want to get into all of that with Robert. Max Tani: Yeah, we’ll ask Robert about that, obviously, which is super interesting. We also want to ask him about how he’s thinking about AI, because if I’m not mistaken, Warner has taken a different direction than its larger competitors by actually doing a deal with a major AI company rather than actually fighting it. That’s right, right, Liz? Liz Hoffman: Yeah, it is. And I suspect that this is informed by his past at YouTube where they were fighting this war with, ironically, the record labels who are pissed that all their songs are being used in user-generated content. And Robert, when he was there, helped build the business of saying, look, this is going to happen anyway. You cannot fight consumer behavior. Let’s figure out a way where everyone gets a little something. And so, I think that’s why they’ve been way more front-footed in striking AI deals than Sony and Universal. They’re two big competitors. Max Tani: Well, we got a lot of stuff that we want to get to with Robert clearly, but we have to take a short break. So, we’ll be right back with more with Robert Kyncl after this. Robert, thank you so much for joining us. I think when people think about what a record label is, they picture the heyday of the ’60s or ‘70s, the big suits, and they think that record companies basically are in charge of distributing music, making sure the LPs get pressed, booking studio time, and making sure that the LPs or the CDs later ended up on the shelves of stores and on the airwaves of radio stations. Obviously, that’s not really how most people consume music these days. So, I’m really curious, what is a record label in 2026? Robert Kyncl: Sure. So, first of all, it’s great to be here. Thank you for having me. As you can see, I do not have a big suit. I have a lululemon shirt. Max Tani: Aesthetically already very different. Yes, exactly. Robert Kyncl: Very different. Max Tani: Breaking the stereotypes. Yeah. Robert Kyncl: It’s reflective of where the music industry is, which is much more flexible than the suit. Ironically, actually, you mentioned LPs. We still distribute vinyl, and it has been actually growing for the last 20 years, which is incredible. And what you’ve seen today is actually the collector market and the desire for physical products and a bit of the nostalgia that’s actually most pronounced with Gen Z, including for the times that they haven’t lived in, or songs that they haven’t been around for like, Fleetwood Mac, are really powerful today. But the reason that that is happening and that part of the business still exists and continues to grow is that the other part that wasn’t here has grown really big, which is streaming, whether it’s ad supported streaming or subscription streaming. And the global distribution of music has connected people and the unlimited shelf space, which basically allowed catalogs to gain much more prominence, including with younger audiences. That really has transformed the business. And there are a couple of ways that it has. One, which is our business, which was predominantly in selling LPs or CDs, as you said in the beginning. Now it’s predominantly streaming. And we also sell LPs. And actually CD market is also picking up, which is kind of fun. Max Tani: Why is that? I’ve heard this. What is going on there? Is that Y2K nostalgia? I understand the LP thing because there’s an audio file argument of, oh, you get really, really good sound, much better than streaming. I get that. And I also understand it’s big and you can display it and it’s fun, and then you got the big artwork, you open it up and it shows something inside that maybe you don’t get to see if you’re just looking on streaming. But the CD thing, what is happening with that? Robert Kyncl: Yeah, it’s fairly new. It’s, I would say, the last 12 to 18 months, but we don’t have it fully bottomed out yet why it’s happening. But I think there are probably some enterprising entrepreneurs who’ve seen the boom in the vinyl business and focused on. Because what you have to do is you not only have to have the CDs, but you also need to have the machines to play them. CD players. Max Tani: Right. Forgot about those. Liz Hoffman: Want that six CD changer in my 2002 Volvo. Yeah, exactly. Yeah, exactly. Robert Kyncl: So, I think the market for selling new ones is not that big. You don’t find too many of those in Best Buy or stuff like that. But there are people who refurbish it. And so, I think in the world that is increasingly digital, young people actually crave physical nostalgic experience. Whether they experience it themselves or not, it doesn’t matter. It’s just something that is more real, less digital. And it’s happening. And it’s not happening just in music, it’s happening across art more broadly. And you see it in live music being really prominent and extremely popular in the last few years because people just create the in-person experience. So, again, it’s not digital. So, we live in this interesting world where majority of our revenue is digital, but the non-digital experiences are actually growing too because the digital ones are growing so much. So, it’s a really interesting place. But to go back to your question about what does record label and a publisher mean today versus, let’s say, 30 years ago, we live in a world of democratized distribution. Anyone can publish. You can upload a song to YouTube, you can find a way to upload it to Spotify, Apple Music, et cetera, whether it’s directly or through a distributor. So, it’s been largely democratized, which gave rise to a lot more people creating music and uploading music. And it’s not just a phenomenon in music, by the way. It’s across all media. It’s with creators on YouTube, and TikTok, and Instagram. So, it’s across all media podcasts suddenly. Max Tani: Yes, it’s democratized the new business as well. Robert Kyncl: Yeah, I hear that. Max Tani: We discovered that. Yeah, it’s a minor thing as well. Robert Kyncl: Yeah. So, it’s happening across the board. And you guys probably will. Oh, actually, I’ll be interested to see what you think. But in the world where anyone can publish, no one can be heard, or it’s very, very hard to be heard. It’s hard to break through the clutter and connect with audiences. So, I think the value proposition for companies like ours has decreased. It’s still there on the distribution, but it has decreased and has increased in breaking through the clutter, meaning understanding audiences, doing so on a global basis, which is very difficult to do. Having global infrastructure to promote songs or to promote artists and develop them is a very difficult thing to do in a noisy world. And so, I think our companies have sort of morphed into that. And what that means is that you have to start investing into technology that captures information and allows you to leverage it to break artists and break songs. So, today the companies are much different from what they used to be 30 years ago because they have to use music companies because they have to use technology, which they didn’t previously that much, and have to operate in much more seamless way, a global operation to break artists and songwriters. And now obviously we’re also contending with the advent of AI and how that impacts the industry. Liz Hoffman: I mean, just for our audience, can you break down how you make money? Where most of it comes from, what your big expenses are, how that’s changed over time, just so we really poke at the business model a little bit. Robert Kyncl: Yeah. So, think about majority of the money coming from streaming services, whether it’s YouTube music, Spotify, Apple, Tencent. A lot of what do we call DSPs, digital service providers who have subscription services. And some of them have a free funnel where they serve advertising, YouTube, Spotify, some don’t. Like Apple doesn’t have a free funnel. And so, we make money from subscription streaming and from advertising. That’s how we make mainly money from the internet. And then we make money from LPs, which have been growing significantly. Max Tani: How significantly? Because I though that I’d seen on, or maybe you had said this somewhere, that streaming was 70% of the revenue for the company today. Robert Kyncl: Yeah, that’s correct. Across both recorded music and publishing. Publishing is for where we represent songwriters, people who have created the music and the lyrics, the melody on lyrics. And then recorded music is for artists who sing it. And so, across both, roughly 70% is coming from digital, from streaming, and then as I put it. So, the rest really comes from licensing our music to television programs, movies, et cetera. Where I always say that music makes all video better, whether it’s the shortest of TikToks or the longest of James Cameron movies and everything in between. Everybody has a music there somehow attached, other than if it’s a podcast, obviously, because of overspoken word. Liz Hoffman: We’ll be bumping you in and out with a jaunty tune. We’ve got a good jingle going over here. Max Tani: So, you can make money, I think. Liz Hoffman: I don’t think it’s in a Warner catalog. Robert Kyncl: Yeah, exactly. As long as it’s Warner Artists, I’m okay with that. So, that’s really our revenue. By the way, when you think about it, when we used to sell vinyl and CDs, the business was the business of selling. And now it’s a business of rental with subscription. People are paying for access. They’re not buying those songs. So, majority of the business is business of rental. And what that means for the business is that when you’re investing money into an artist or a catalog, in the previous model, the money came back faster because when you sell upfront for a high price, et cetera. So, it comes a little bit faster, but then it dies down. In the subscription model, the money is more spread out, but it keeps going forever. So, it fundamentally changes how the money flows, the dating of cash flowing through your system, but also the longevity of it. Max Tani: Is it more predictable business, right? Robert Kyncl: Yes, it’s more predictable business, but it’s also more durable business because of the subscription. So, we love it. Liz Hoffman: You’re describing a business of predictable cash flows that Wall Street loves. And I think it’s really changed how you finance the business too. And I was hoping you talk a little bit about that and how this has actually really become an asset class. And obviously going all the way back to the Bowie Bonds in the ’90s, but we’ve just seen a bunch of these. You have a deal with Bain Capital to do some catalog financing. What’s going on there? Robert Kyncl: Well, yeah, I think you described it quite well. It’s an asset class, and it’s actually one that is completely disconnected from what’s happening in the world. I can tell you is that people are listening to music on both sides of the Strait of Hormuz, irrespective of what’s happening there, including the sailors on the ships listening to it. They may be listening to different music. Max Tani: Is that a national security risk? I mean, this was on how people knew where the boats were because someone was on Strava running around and logging their stuff on the aircraft carriers. Is this a concern for the Department of Defense/War that they’re streaming Warner stuff on the boats? Robert Kyncl: It’s interesting actually that you mentioned it. Now I’m thinking about that. It’s like you could probably do some prediction about what kind of music people are listening to when they’re getting ready to attack. Max Tani: Oh my God. Oh, no. We’re going to create a new class of Polymarket or Kalshi bettors based on your streams. Robert Kyncl: No, but the point I’m trying to make is that people love music. I always say that music is more distributed than electricity because even Caveman had music. They were singing around the campfire, but there was no electricity. And so, wherever there’s electricity, there’s music, but even when there’s not one, there’s still music. So, it’s the most distributed thing in the universe maybe other than oxygen. And because of that and the ability to personalize your experience through all the different streaming services or just singing and participating in that, it’s just broadly appealing to people and also represents their sort of a memory lane. Everybody has a soundtrack to their life. So, they basically like songs from their past, really listen to them a lot, which gives power and rise to a catalog. And because of that, it’s simply disconnected from what is happening in the economy. What is happening in terms of wars around the world is just disconnected from that. And therefore, it makes it a very safe asset class. Max Tani: So, I want to ask a very kind of a basic question, which is how much of the business of running one of the big three record companies in the world, how much of that still comes down to signing the best talent basically? Robert Kyncl: There’s some element of truth theory, but I wouldn’t take it as far. I think it’s a really interesting blend of both the technology and culture, which is what makes it a really interesting place to work. And by the way, my counterparts who run the other big music companies and I talk about it, the job has changed from what it used to be. It’s a lot harder. There are a lot more things that you have to do because not only you have to continue to find great new artists because that still matters. And we have great new artists which we’ve broken recently, Stella Lefty and Bella Kay. We continue to do that. And our company has a tremendous success in finding artists from Bruno Mars, Ed Sheeran, Dua Lipa, Cardi B, et cetera. There’s so many- Max Tani: Heard a few of those guests. Yeah. Robert Kyncl: Yeah, a few of those and Somber and Teddy Swims and Zach Bryan. So, as a company, we’re doing really great with that. But what you also have to do is because of the democratized distribution, we also have to play the volume game and we have to make sure that we provide distribution to many independent artists that would like to use our infrastructure and our agreements with the digital service providers to distribute their music. So, what we do is we have a supply chain that part of our job is to basically ingest the songs from the artists, move it through our supply chain, and then distribute to the digital service providers, and then obviously make sure that all the money flows correctly in reverse order. What we do is we externalize our supply chain and we effectively lease it to independent labels and artists so that they can hop on our infrastructure and on our deals to distribute. So, there’s additional thing that really in a big way didn’t exist. It was there a little bit in a physical world, but now every major music company has that kind of a division. But then at the same time, the business of distribution became much more complex because it used to be that we would distribute through Walmart and Best Buy and big retailers. And they were large companies, but largely they were worth tens of billions of dollars, maybe Walmart at that time, maybe a hundred, couple hundred billion. Now our distributors are trillion, multi-trillion dollar companies, and the game has completely changed. So, the level of sophistication that we have to have in order to negotiate correctly and deal with the complexity of it is completely different for what we used to have. And then you layer AI on top of it, which is a brand new force that sort of entered the industry. We’re all making it up as we go on both sides. But obviously with the right intent, which is how to serve artists and storm gutters the right way and create value. But we’re all students at the same time as we’re teachers, right? It’s truly interesting time to be doing this. Liz Hoffman: Most people who have your job or have had a job in the past are music industry folks, background in talent, A&R. You’re a product guy, actually kind of like an ad tech guy, a platform guy, a deal guy. Curious, what did you do to convince the creatives? Or what do you think that your resume brings to the job that other more creative types might not? Robert Kyncl: Well, I don’t convince the creatives because I don’t meddle in the creative part of the business. We have experts for that. Elliot who runs Atlantic and Tom and Aaron who run Warner Records and many others, a guy Carianne who run Warner Chappell. So, they know how to do that. So, for me, I’m not going to improve them creatively. That’s not going to happen. Liz Hoffman: Someone else massages the delicate egos of the talent. Robert Kyncl: Yeah. I mean that’s why they have the jobs that they have. So, they’ve earned them and they know what to do. What I think our majority shareholder, Len Blavatnik saw in making this move is that in an industry that is changing, you have to bring different perspectives to it. Because if you keep everything with the same perspectives, you will likely miss the next shift that’s going to happen and occur or you will not. Ideally, we actually cause those shifts ourselves, but for that you need a bit of a fresh perspective and a different perspective. So, what we’re doing at Warner is we’re building a company that has diverse set of talent of people who are from the music industry and people from outside of the music industry. It doesn’t mean just from technology, but also from financial services and just wide variety of experiences. And when you bring it together in a well-functioning team, then you’re onto something and then you don’t miss the next turns in the industry. And again, as I say, I actually like to cause those turns. So, you bring in people who like to do that. And that makes it fun because the path is not clear and we get to chart it. Max Tani: I was listening to another interview that you did where you said that there are people who know 90%. They’re smart people. I think you were mostly talking about people in the media such as us. I’ll try not to let my feelings get hurt by this, but you basically said that there’s people who are 90% smart and this is the conventional wisdom essentially that you read from, but that extra 10% is where the real value is and that’s where change happens and that’s where people make real money. I think this is what you’re saying when you’re talking about shifting the business, steering the business. What’s that 10%? What is the move that you’re going to make that you were just alluding to there? Robert Kyncl: Well, for us, yeah, so you’re right, actually. It’s one of my favorite sayings, which is it’s really the last 10% that completely differentiates you. The 90% is the same, which is why you never should go by conventional wisdom because all you hear is anything up to the 90%. And so, what it takes is extra curious people who seek the remaining 10. And when you do that, suddenly the path of what you should try to do emerges and then you try to make it happen. There are many examples of that from my previous jobs at Netflix and YouTube. At Warner, there are quite a few, but one is how we approach pricing with our digital service providers where we were more like passive recipients of rate increases and we’ve become active pushers of that recipients or how we think about monetization of the long tail of our catalog and optimization of it using AI because humanly it’s impossible because it’s just too many songs to manage. But with automation, you can actually achieve it. So, the conventional wisdom is focused on the top a few hundred of the titles because they represent half the revenue. But what about the other half? But that one, oh, you can’t because you don’t have enough people to manage that. It’s like, well, but now with the advent of AI and AI agents, you actually can. It’s complex. It’s very difficult to build, but it’s possible. So, we focus on that and we’re already having some great results. So, it’s things like this. So, whether it’s deal-making or technology or how we think about finding assigning artists, you want people who seek the last 10% of any wisdom and then manifest it into existence. Liz Hoffman: What is the current balance of power between the labels and the distributors and the streaming platforms? There’s only three of you and there’s, I don’t know, five to eight of them around the world that you would think you would have the stronger hand on that stuff. How has that changed? Robert Kyncl: Well, it also depends on how big they are, right? So, obviously there are a few of the big ones, which is Spotify, YouTube, Apple, those are the three largest. Then Tencent in China is actually the largest by number of... well, not total number of subscribers, but out of one country. But the ARPU is a little bit lower. And then Amazon obviously is very important. So, I would say the balance of power is kind of balanced. We have this coexistence, right? Everybody wants more. We want more, they want more, and it’s a dance that we do. I think the thing that’s really important is, and I learned this from my days at YouTube, which is when you realize that if the partner is going to be with you for the next decade or two decades, then you cannot have a zero-sum relationship with them. It doesn’t work because okay, you’ll do a renewal for three years and you take a really harsh stance, very adversarial, et cetera. But then you have to deal with it again and then and again and then again. You just can’t have a scorched earth type of an approach. Now on the other hand, you don’t want to be easy, right? You’re not here to just please people. So, I think it has to be a mutually beneficial relationship that is for the long term. And I think that is the hardest thing to achieve because people generally focus on the negotiation in the moment versus actually building a real relationship that is based on trust. And I think if you have that, then you can overcome some very, very difficult situations in the negotiations. As long as you have two very senior people on both sides who trust each other, they can actually be the peacemakers in those situations. And so, I always focus on that. Max Tani: So, Robert, I am curious though, I did hear you speak in some other venue and saying the balance of power right now Spotify is bigger than you guys and one of your goals is to rebalance that power. Because at one point, you guys controlled a lot of the distribution. Now they control a lot of the distribution they pay you. I’m curious, how can you become bigger in some ways than a digital distributor like Spotify when I’m paying Spotify, Spotify is paying you? How do you regain that power? Robert Kyncl: I don’t think we become bigger. I don’t think that’s necessarily possible. I think the way... and again, it’s not just the music industry thing. This television is the same way film. When you’re negotiating, you kind of look at what is your disruptive power basically. So, it’s not like that you’re bigger, but it’s just how much you disrupt the other person’s business. And if your disruptive power is very large, then you have a lot of leverage. Now on the other hand, you’ll get a, well, what is their disruptive power to us in terms of revenue? And also when that’s large, obviously that’s not pleasant. So, it’s really about those two things, but it doesn’t mean that you have to be equal in size in order for that to matter. You just have to be large enough and to have significant disruptive power. Now, I think it’s like nuclear weapons. You actually should never exercise it. Yes. But it’s kind of nice to have it, which is why a lot of people are seeking nuclear weapons. Max Tani: Yes, right. Well, we have many, many more questions that we want to ask Robert, but we have to take a short break. So, we’ll be right back with more after this. Liz Hoffman: You’ve been pretty bullish on AI for the music industry. Artists are understandably kind of skeptical or thinking a little bit. Robert Kyncl: Sure. So, how much time do we have? Max Tani: 25 minutes. Unless you want to go longer, we can go longer. Robert Kyncl: So, one of the things that the industry has always had issue with was pricing. If you look at the pricing for music versus, let’s say, Netflix, for video, Netflix, Amazon Prime Video, et cetera, it’s lagging significantly. When you look at total consumption and the price that consumers pay, music is at 50% discount to video. If Well, as somebody who’s representing artists and selling others art, well, I don’t want there to be a discount. I want it to be the same. Makes a lot of sense. But it’s hard to achieve that, to drive it up because the digital service providers are in charge of the retail prices. We cannot tell them what those are. Liz Hoffman: This is like I pay eight bucks a month for Spotify and 15 bucks for Netflix. That’s basically the math they’re doing? Robert Kyncl: Yeah, except it’s about 12 bucks now for Spotify and it’s a little bit more for Netflix. But yes, exactly. But you also take into consideration the consumption because you consume music so much relative to video. And also in a music service, you have all music ever made