Sir Lucian Grainge on music streaming progress, catalog offers and the stability of energy with the DSPs
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Sir Lucian Grainge doesn’t do many interviews, so when he does converse publicly, it’s price paying shut consideration to the person on the helm of the world’s largest music rights firm.
Grainge, the Chairman and Chief Government Officer of Universal Music Group participated in a Q&A session on Monday (September 12) on the Goldman Sachs Communacopia + Know-how Convention in San Francisco.
In the course of the interview, Grainge was grilled on his views about premium music streaming’s progress potential, and the corporate’s method to catalog investments.
He famous that UMG has performed “only a few offers,” however the the offers the corporate has performed are for works which have “outlined historical past or tradition”.
Grainge’s participation at Goldman’s convention follows the publication on the finish of July of UMG’s Q2 2022 fiscal outcomes (protecting the three months to finish of June).
UMG’s complete firm revenues at (throughout recorded music, publishing, and different actions) have been up by 17.3% YoY at fixed foreign money within the quarter to EUR €2.535 billion (USD $2.70bn).
Common’s recorded music subscription streaming Q2 income was up by 7.0% YoY at fixed foreign money to €966 million ($1.03bn), whereas its recorded music ad-funded/non-subscription Q2 streaming income was up 15.6% YoY at fixed foreign money to €348 million ($371m).
Commenting on music streaming’s progress prospects within the face of the financial uncertainty and the price of residing disaster, Grainge argued that music is “sturdy”, and seemed to earlier downturns within the eighties and nineties the place music was proven to be a resilient leisure format despite macroeconomic headwinds.
Elsewhere in right this moment’s interview, Grainge commented on the stability of energy between the labels and DSPs, and the expansion potential of latest platforms throughout social, gaming and health.
MBW listened in. Right here’s what we realized…
1. Sir Lucian Grainge is “bullish” about music streaming’s progress potential.
Sir Lucian Grainge was requested about his ideas on music streaming’s future progress prospects, to which he responded that he’s each “assured” and “bullish in regards to the alternative”.
He additionally famous that in 2019, subscription penetration within the mature music markets was “about one in 5” whereas on the finish of 2021 “it was right down to about one in 4”.
Seeking to the longer term, Grainge says that “there are numerous methods wherein we are able to work with the DSPS”, noting that the foremost DSPs like Apple Music, Amazon Music and Spotify have “all acquired completely different enterprise fashions and so they’ve all acquired completely different strengths inside their very own markets and inside the areas wherein they function”.
Added Grainge: “We should keep in mind that music within the cloud implies that music can actually go in all places. And it’s not a transactional mannequin any extra.
“The transactional mannequin that I used to be born into was, you launch one thing, you’ve got successful, after which it simply disappeared. And now it doesn’t disappear.
“We’re consistently re-energising, and revisiting, remarketing, re-narrating in order that these journey wires between new releases, new hits and new genres have gotten a relentless relationship with the previous. So sure, clearly I’m assured and I’m bullish.”
2. Sir Lucian Grainge sees UMg’s position within the monetization of latest platforms because the “experimenter in chief”
Commenting on the subject of rising platforms throughout classes like social media, gaming and health, Sir Lucian Grainge defined that Common sees its position “because the market chief, as a kind of experimenter in chief”.
He defined that when he “took the corporate over, 11 years or so in the past, 95% of our digital enterprise was with one buyer. Now it’s with an entire plethora of companies and companions”.
Grainge added that UMG’s “capability to monetize our IP and these huge catalogs in addition to all the brand new hits, which is the catalog of tomorrow, has actually been proved over this era, not solely with streaming, however with [categories] like health [and with] well being.”
He added: “Who would have thought that we might have made cash with these enormous quantities of IP, with these thousands and thousands of copyrights from health? We’ve now acquired health as a class and social in our Prime 10 classes, by way of income and companions.”
Pointing to Common’s monetization of social platforms, Grainge stated that it “is admittedly fairly extraordinary how we’ve been in a position to monetize social” and commented on Common’s licensing agreement with Meta – mum or dad of Facebook and Instagram. He continued: “There was no social monetization within the trade and we made our groundbreaking deal with Fb, Meta, now.”
Talking extra broadly about “any software the place music can be utilized, in video games, and so on,” Grainge stated that he sees a “phenomenal alternative”. He added that “there’s at all times a stability [to be struck], by way of guaranteeing “artists are rewarded appropriately” when working with new companies and new classes.
“We’ve additionally acquired to provide these companies a begin as effectively,” added Grainge. “We are able to’t strangle them within the early days in order that there’s completely no upside for them. So it’s a stability. We prefer it after they begin and after they develop.”
3. Music has “at all times been a comparatively low value, but very prime quality leisure class”…
With talks of a price of residing disaster and a looming recession, Sir Lucian Grainge was requested about his views on music streaming’s resilience within the face of such financial headwinds.
He famous that he has seen “many downturns” over the course of his profession “each by way of macroeconomic” in addition to by way of “the disaster with piracy and file sharing”.
He additionally argued that “as a administration crew, we’ve been very adept over this era by way of managing headwinds” and famous additional that “music is extremely sturdy”.
He added: “[Music] was sturdy within the recessions of 1981. Within the early Nineties. It’s at all times been a comparatively low value, but very prime quality leisure class.
“No matter is thrown at us, we’ll lower our fabric accordingly. And we are going to make investments accordingly in hopefully what’s going to proceed to be progress. It looks as if one of many indicators present that subscription remains to be resilient.”
Requested if he’s apprehensive about weak spot within the promoting market, Grainge stated there “might be some headwinds”, however that “I don’t suppose we’re seeing that a lot in the intervening time.”
He continued: “We may even see just a few wobbles. We may even see a wobble from one month to a different after which there’s a rebound. I don’t see issues by way of month-to -month. I see what the alternatives are, and the way we orchestrate all of the complexities with all the things that now we have over a 3, 4 or five-year interval.
“So if now we have dangerous months, a nasty quarter, I’ve been by means of a lot change, frankly, we simply we plough by means of it. As a result of we all know the standard of what now we have.”
4. Common is “not a monetary participant” and relating to investing in catalogs, “Management is important”…
Commenting on Common’s capital allocation, Sir Lucian Grainge argued that UMG “is just not a monetary participant, we’re not an instrument”. He added: “We depart earnings streams; royalty streams to others. Management is important.”
He argued additional that UMG has performed “only a few offers,” however that the offers UMG has performed are the “better of the perfect, the place one thing has outlined historical past or tradition”.
A few of UMG’s current acquisitions embody the publishing rights to Bob Dylan’s songwriting catalog in December 2020, which was one of many greatest acquisitions in UMG’s historical past.
In February, Neil Diamond sold his full tune catalog and all grasp recordings to Common. Sting additionally offered his tune catalog to UMG in February, in a deal one professional trade supply advised MBW was worth north of $300 million.
Stressing the significance of management when doing catalog offers, Grainge famous that management means “no approvals”.
He cited Bob Dylan as a check case for this, including: “Whenever you checked out after we purchased the Bob Dylan catalog, he’d managed his enterprise in the USA, and I believe he had 4 or 5 directors, and the reply was usually, “no”.
“We constructed into our view and with our networks and our folks, that we may do issues with the Bob Dylan catalog, the place we didn’t need to ask anyone aside from ourselves, was it acceptable and was it worthwhile?
“And he gave us that proper to do this. That’s not simply in regards to the examine. It’s truly about trusting the appropriate folks. It’s assumed that we are going to personal these belongings, so long as the corporate exists.”
Commenting on balancing investments in catalog and frontline music, Grainge defined that “they’re two sides of the identical coin”. He added: “New investments, new artists [are] the catalog of the longer term. We’ve got to maintain present and now we have to maintain sitting on the large desk.”
5. Labels and DSPs are “critically necessary to one another,” although “There’s at all times skirmishes…”
Pertaining to Common’s relationship with the music streaming companies, Grainge defined that it’s “inevitably very constructive”.
Seeking to the previous, when streaming was turning into a mass market proposition, Grainge famous that, ‘we introduced Spotify to a world market.”
He added: “It was an concept that was working in Sweden. On the time it was an anti-filesharing, anti-piracy promoting wrapper and right here we. They’ve acquired 185 million Premium subscribers.
Commenting on the stability of energy particularly, he stated: “I don’t see this as a factor of a zero-sum sport or stability of energy. We’re in enterprise with one another. We’re critically necessary to one another.
He added: “We all know that we’re a minimum of 80% to 85% of the acquisition pull of all of the DSPs. We’re 80 to 85% of their retention.
“Shoppers, me, you, us, don’t need a subscription which supplies you both white noise or one thing to fall asleep to, or an app that you simply’ve by no means heard of. Which is why we’re seeing the impression and the significance of catalog and the way it sits alongside new music and new launch so important to them. So I take pleasure in working with them. There’s at all times skirmishes. We’ve got skirmishes with everybody. It’s a part of life.”
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