Sir Lucian Grainge on streaming growth, catalog deals and the balance of power between labels vs. DSPs

Sir Lucian Grainge doesn’t do a lot of interviews, so when he’s speaking in public, it’s remarkable that the man heads the biggest music rights company in the world.

Grainge, President and CEO of Universal Music Group join a Q&A session on Monday (September 12) at Goldman Sachs Communacopia+ Technology Conference in San Francisco.

In the interview, Grainge talked about his views on the growth potential of high-end music and the company’s approach to portfolio investments.

He argued that UMG had done “very few transactions”, but the corporate transactions yes made for works with “a definite history or a culture”.

Grainge’s participation at the following Goldman conference publication at the end of July of UMG’s Q2 2022 financial results (covering the three months to the end of June).

UMG’s total corporate revenue in (across music, publishing and other activities) has increased 17.3% YoY with the currency unchanged during the quarter to 2.535 billion euros ($2.70 billion).

Universal recorded music subscribe to streaming Q2 revenue has increased 7.0% by year with constant currency to 966 million euros ($1.03 billion), while its recorded music is sponsored by advertising/not registered Q2 streaming revenue grew 15.6% YoY with constant currency to 348 million euros ($371 million).

Commenting on the growth prospects of music streaming amid economic uncertainty and the cost-of-living crisis, Grainge calls music “strong”, and looks at previous recessions in recent years. 1980s and 1990s, where music proved to be a versatile form of entertainment despite macroeconomic difficulties.

Elsewhere in today’s interview, Grainge commented on the balance of power between studios and DSPs and the growth potential of new platforms across social media, games, and fitness.

MBW listened. Here’s what we learned…

1. Sir Lucian Grainge is “optimistic” about the growth potential of streaming music.

Sir Lucian Grainge was asked about his thoughts on the music genre’s future growth prospects, and he replied that he was both “confident” and “optimistic about the opportunity”.

He also noted that in 2019, subscription usage in mature music markets was “about a fifth” while by the end of 2021 “falls to a quarter”.

Looking to the future, Grainge says that “there are many different ways we can work with DSPS,” noting that major DSPs like Apple Music, Amazon Music and Spotify “all have different business models and all have different strengths in their own markets and in the regions in which they operate.”

Grainge added: “We have to remember that music in the cloud means that music can practically go anywhere. And it is not a trading model anymore.

“The trading model I was born with is, you launch something, you have a hit, and then it’s gone. And now it’s not gone.

“We are constantly re-energizing and revisiting, remarketing, narrating so that these journeys connect new releases, new hits, and new genres that have a lasting connection to the brand. past. So yes, obviously I am confident and I am optimistic. “

2. Sir Lucian Grainge considers UMg’s role in monetizing new platforms as a “tester”

Commenting on the theme of emerging platforms across areas such as social networking, games and fitness, Sir Lucian Grainge explained that Universal sees its role as a “market leader, as a kind of company.” test director”.

He explains that when he “taken over, 11 years or so ago, 95% of our digital business was with a single customer. Now it has a lot of businesses and partners”.

Grainge added that “our ability to monetize our IP and these broad categories as well as all new hits, which are tomorrow’s categories, has really been demonstrated during this period, not only with streaming, but also with [categories] like to exercise [and with] Health.”

He added: “Who would have thought we could make money with this huge amount of IP, with millions of copyrights from fitness? We can now see a category and society in our Top 10 categories, in terms of revenue and partners. “

Pointing to Universal’s monetization on social platforms, Grainge said it was “really quite extraordinary that we were able to monetize social” and commented on Universal’s contract of transfer of the right to use with Meta – father of Facebook and Instagram. He continued: “There is no social currency in the industry and we made a breakthrough agree with Facebook; Meta”

Speaking more broadly about “any app that can use music, in games, etc.,” Grainge says he sees an “extraordinary opportunity.” He added that “there is always a balance [to be struck]in terms of ensuring “artists are rewarded” when working with new businesses and new categories.

Grainge added: “We also had to give those businesses a head start. “We cannot strangle them in the early days so that absolutely nothing happens to them. So it’s a balance. We love it when they start and as they grow.”

3. Music “always a relatively low cost but very high quality entertainment genre”…

With talks about the cost of living crisis and recession looming, Sir Lucian Grainge was asked for his views on the resilience of music in the face of economic hardships such as so.

He noted that he has seen “multiple recessions” throughout his career “both in macroeconomic terms” as well as in terms of “crisis with piracy and file sharing”.

He also argues that “as a management team, we have been very adept at this stage in managing difficulties” and further notes that “music is incredibly powerful.”

He added: “[Music] strong during the recession of 1981. In the early 1990s. It has always been a genre of entertainment with relatively low cost but very high quality.

“Anything thrown at us, we will cut the fabric accordingly. And we will invest accordingly in the hope of what will continue to grow. It seems one of the indicators is that the subscription is still resilient.”

When asked if he’s worried about the weakness of the ad market, Grainge said “there could be some difficulties,” but “I don’t think we’re seeing that much at the moment.” .”

He continued: “We can see some wobbles. We could see wobble from month to month and then there will be a rebound. I don’t see everything month by month. I see what the opportunity is and how we’ve sorted out all the complications with everything we’ve got over a three, four or five year period.

“So if we had bad months, a bad quarter, I went through so much change, to be honest, we just went through it. Because we know the quality of what we have.”

4. Universal is “not a financial player” and when it comes to portfolio investing, “Control is very important”…

Commenting on Universal’s capital allocation, Sir Lucian Grainge argued that UMG “is not a financial company, we are not an instrument”. He added: “We leave streams of income; royalties to others. Control is very important. “

He further argued that UMG has done “very few transactions”, but that the transactions that UMG has done are “the best of the best, where something has defined history or a platform.” culture”.

Some of UMG’s recent acquisitions include publishing rights to Bob Dylan’s Catalog in December 2020, is one of the largest acquisitions in UMG’s history.

In February, Neil Diamond sold his complete song catalog and all major recordings for Universal. Sting also sold his track catalog to UMG in February, in a deal an industry source told MBW. worthy north of 300 million dollars.

Stressing the importance of control when it comes to portfolio transactions, Grainge notes that control means “no approval”.

He cited Bob Dylan as a test case for this, adding: “When you look at the time when we bought the Bob Dylan catalog, he was already managing his business in the United States and I think he was. He has four or five administrators, and the usual answer is “no”.

“We’ve built on our point, and with our network and people, that we can do anything with the Bob Dylan portfolio, where we don’t have to ask anyone other than ourselves, is that relevant and is it profitable?

“And he gave us the right to do that. It’s not just about checks. It’s really about trusting the right people. It was assumed that we would own these assets as long as the company existed. “

Commenting on balancing front-line music and portfolio investments, Grainge explains that “they are two sides of the same coin.” He added: “New investment, new artist [are] portfolio of the future. We have to stay present and we have to continue to sit at the big table. “

5. Labels and DSPs are “extremely important to each other…”

Referring to Universal’s relationship with music streaming services, Grainge explained that it’s “definitely very constructive.”

Looking to the past, when streaming was becoming a mass-market proposition, Grainge noted that “we brought Spotify to the global market.”

He added: “It is an idea that is being worked on in Sweden. At the time, it was an anti-piracy, file-sharing ad wrapper, and here we are. They already have 185 million Premium subscribers.

Commenting specifically on the balance of power, he said: “I don’t see this as a zero-sum game or a balance of power. We are doing business together. We are extremely important to each other.

He added: “We know that we have at least 80% to 85% of the acquisition traction of all DSPs. We have 80 to 85% of their retention rate.

“Consumers, me, you, us, don’t want a subscription that gives you white noise or something to go to sleep with or an app you’ve never heard of.

“That’s why we see the impact and importance of the category and how it fits into new music. So I enjoy working with [DSPs]. There are always skirmishes. We have fights with everyone. That’s a part of life “.

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