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Sir Lucian Grainge doesn’t do many interviews, so when he does communicate publicly, it’s value 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 + Expertise Convention in San Francisco.
In the course of the interview, Grainge was grilled on his views about premium music streaming’s development potential, and the corporate’s method to catalog investments.
He argued that UMG has carried out “only a few offers,” however that the offers the corporate has carried out are for works which have “outlined historical past or a 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 whole firm revenues at (throughout recorded music, publishing, and different actions) had been up by 17.3% YoY at fixed forex 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 forex to €966 million ($1.03bn), whereas its recorded music ad-funded/non-subscription Q2 streaming income was up 15.6% YoY at fixed forex to €348 million ($371m).
Commenting on music streaming’s development prospects within the face of the financial uncertainty and the price of dwelling disaster, Grainge argued that music is “sturdy”, and appeared to earlier downturns within the eighties and nineties the place music was proven to be a resilient leisure format despite macroeconomic headwinds.
Elsewhere in as we speak’s interview, Grainge commented on the stability of energy between the labels and DSPs, and the expansion potential of recent platforms throughout social, gaming and health.
MBW listened in. Right here’s what we discovered…
Sir Lucian Grainge was requested about his ideas on music streaming’s future development prospects, to which he responded that he’s each “assured” and “bullish concerning 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 all the way down to about one in 4”.
Seeking to the long run, Grainge says that “there are numerous methods during which we will work with the DSPS”, noting that the key DSPs like Apple Music, Amazon Music and Spotify have “all received totally different enterprise fashions and so they’ve all received totally different strengths inside their very own markets and inside the areas during which they function”.
Added Grainge: “We should keep in mind that music within the cloud implies that music can in actual fact go in every single place. 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 gotten 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 continuing relationship with the previous. So sure, clearly I’m assured and I’m bullish.”
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 form 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 a whole plethora of companies and companions”.
Grainge added that UMG’s “means 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 large quantities of IP, with these thousands and thousands of copyrights from health? We’ve now received 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 capable of monetize social” and commented on Common’s licensing agreement with Meta – mother or father of Facebook and Instagram. He continued: “There was no social monetization within the business and we made our groundbreaking deal with Fb; Meta”
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 all the time a stability [to be struck], by way of making certain “artists are rewarded appropriately” when working with new companies and new classes.
“We’ve additionally received to offer these companies a begin as properly,” added Grainge. “We will’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 once they begin and once they develop.”
With talks of a price of dwelling 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 Nineteen Nineties. It’s all the time been a comparatively low-cost, but very high-quality leisure class.
“No matter is thrown at us, we’ll reduce our fabric accordingly. And we’ll make investments accordingly in hopefully what’s going to proceed to be development. It looks like one of many indicators present that subscription continues to be resilient.”
Requested if he’s anxious about weak spot within the promoting market, Grainge stated there “could possibly be some headwinds”, however that “I don’t suppose we’re seeing that a lot for the time being.”
He continued: “We may even see a couple of 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 we have now over a 3, 4 or five-year interval.
“So if we have now dangerous months, a foul quarter, I’ve been by way of a lot change, frankly, we simply we plough by way of it. As a result of we all know the standard of what we have now.”
Commenting on Common’s capital allocation, Sir Lucian Grainge argued that UMG “shouldn’t be a monetary participant, we’re not an instrument”. He added: “We go away earnings streams; royalty streams to others. Management is crucial.”
He argued additional that UMG has carried out “only a few offers,” however that the offers UMG has carried out are the “better of the very best, the place one thing has outlined historical past or a tradition”.
A few of UMG’s current acquisitions embrace the publishing rights to Bob Dylan’s songwriting catalog in December 2020, which was one of many largest 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 business supply informed 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: “Once you checked out once we purchased the Bob Dylan catalog, he’d managed his enterprise in the US, 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 individuals, that we may do issues with the Bob Dylan catalog, the place we didn’t should ask anyone apart from ourselves, was it applicable and was it worthwhile?
“And he gave us that proper to do this. That’s not simply concerning the verify. It’s truly about trusting the proper individuals. It’s assumed that we are going to personal these property 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 long run. Now we have to maintain present and we have now to maintain sitting on the large desk.”
Referring to Common’s relationship with the music streaming providers, Grainge defined that it’s “inevitably very constructive”.
Seeking to the previous, when streaming was changing into a mass market proposition, Grainge famous that, “we introduced Spotify to a worldwide 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 received 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 vital to one another.
He added: “We all know that we’re not less than 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 just’ve by no means heard of.
“Which is why we’re seeing the influence and the significance of catalog and the way it suits alongside new music. So I take pleasure in working with [DSPs]. There’s all the time skirmishes. Now we have skirmishes with everybody. It’s a part of life.”
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