Sir Lucian Grainge on streaming development, catalog offers and the steadiness of energy between labels vs. DSPs

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 Govt 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.

Through the interview, Grainge was grilled on his views about premium music streaming’s development potential, and the corporate’s strategy to catalog investments.

He argued that UMG has executed “only a few offers,” however that the offers the corporate has executed 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 (overlaying the three months to finish of June).

UMG’s complete 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 residing disaster, Grainge argued that music is “strong”, and seemed to earlier downturns within the eighties and nineties the place music was proven to be a resilient leisure format regardless of macroeconomic headwinds.

Elsewhere in at the moment’s interview, Grainge commented on the steadiness 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 development potential.

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”.

Trying to the long run, Grainge says that “there are numerous methods by which we are able to work with the DSPS”, noting that the foremost DSPs like Apple Music, Amazon Music and Spotify have “all obtained totally different enterprise fashions they usually’ve all obtained totally different strengths inside their very own markets and inside the areas by which they function”.

Added Grainge: “We should do not forget that music within the cloud signifies that music can actually go all over the 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 will have a success, after which it simply disappeared. And now it doesn’t disappear.

“We’re always 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 type 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 “capacity 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 hundreds of thousands of copyrights from health? We’ve now obtained health as a class and social in our High 10 classes, when it comes to income and companions.”

Pointing to Common’s monetization of social platforms, Grainge stated that it “is de facto fairly extraordinary how we’ve been capable of 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 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 at all times a steadiness [to be struck],  when it comes to guaranteeing “artists are rewarded appropriately” when working with new companies and new classes.

“We’ve additionally obtained to provide these companies a begin as nicely,” 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 steadiness. We prefer it after they begin and after they develop.”

3. Music has “at all times been a comparatively low price, but very top 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 when it comes to macroeconomic” in addition to when it comes to “the disaster with piracy and file sharing”.

He additionally argued that “as a administration group, we’ve been very adept over this era when it comes to managing headwinds” and famous additional that “music is extremely strong”.

He added: “[Music] was strong within the recessions of 1981. Within the early Nineteen Nineties. It’s at all times been a comparatively low-cost, but very high-quality leisure class.

“No matter is thrown at us, we’ll lower our fabric accordingly. And we’ll make investments accordingly in hopefully what is going to proceed to be development. It looks like one of many indicators present that subscription remains 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 in the intervening time.”

He continued: “We might even see just a few wobbles. We might even see a wobble from one month to a different after which there’s a rebound. I don’t see issues when it comes to month-to-month. I see what the alternatives are, and the way we orchestrate all of the complexities with all the things that we now have over a 3, 4 or five-year interval.

“So if we now have unhealthy months, a nasty quarter, I’ve been via a lot change, frankly, we simply we plough via it. As a result of we all know the standard of what we now have.”

4. Common is “not a monetary participant” and with regards to investing in catalogs, “Management is vital”…

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 revenue streams; royalty streams to others. Management is vital.”

He argued additional that UMG has executed “only a few offers,” however that the offers UMG has executed 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 music catalog and all grasp recordings to Common. Sting additionally bought his music catalog to UMG in February, in a deal one skilled 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: “Whenever you checked out once 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 individuals, that we may do issues with the Bob Dylan catalog, the place we didn’t must ask anyone apart from ourselves, was it acceptable and was it worthwhile?

“And he gave us that proper to try this. That’s not simply concerning the test. It’s really about trusting the appropriate individuals. 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 long run. Now we have to maintain present and we now have to maintain sitting on the huge desk.”

5. Labels and DSPs are “critically necessary to one another,” despite the fact that “There’s at all times skirmishes…”

Pertaining to Common’s relationship with the music streaming companies, Grainge defined that it’s “inevitably very constructive”.

Trying to the previous, when streaming was changing 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 obtained 185 million Premium subscribers.

Commenting on the steadiness of energy particularly, he stated: “I don’t see this as a factor of a zero-sum sport or steadiness of energy. We’re in enterprise with one another. We’re critically necessary to one another.

He added: “We all know that we’re no less than 80% to 85% of the acquisition pull of all of the DSPs. We’re 80 to 85% of their retention.

“Customers, 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 get pleasure from working with [DSPs]. There’s at all times skirmishes. Now we have skirmishes with everybody. It’s a part of life.”

 Music Enterprise Worldwide