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 Common Music Group participated in a Q&A session on Monday (September 12) on the Goldman Sachs Communacopia + Know-how Convention in San Francisco.
Through the interview, Grainge was grilled on his views about premium music streaming’s progress potential, and the corporate’s strategy to catalog investments.
He argued that UMG has accomplished “only a few offers,” however that the offers the corporate has accomplished 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 whole 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 appeared 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 this time’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 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 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 longer term, Grainge says that “there are numerous methods through which we will work with the DSPS”, noting that the most important DSPs like Apple Music, Amazon Music and Spotify have “all acquired completely different enterprise fashions they usually’ve all acquired completely different strengths inside their very own markets and throughout the areas through which they function”.
Added Grainge: “We should keep in mind that music within the cloud signifies that music can in actual fact 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 might have a success, after which it simply disappeared. And now it doesn’t disappear.
“We’re continually 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 function within the monetization of recent 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 function “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 an entire plethora of companies and companions”.
Grainge added that UMG’s “skill 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 actually fairly extraordinary how we’ve been capable of monetize social” and commented on Common’s licensing settlement with Meta – guardian of Fb and Instagram. He continued: “There was no social monetization within the trade and we made our groundbreaking deal with Fb; Meta”
Talking extra broadly about “any utility the place music can be utilized, in video games, and so forth,” Grainge stated that he sees a “phenomenal alternative”. He added that “there’s at all times 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 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 once they begin and once they develop.”
3. Music has “at all times been a comparatively low price, but very top quality leisure class”…
With talks of a value 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 group, 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-cost, but very high-quality leisure class.
“No matter is thrown at us, we’ll reduce our material accordingly. And we are going to make investments accordingly in hopefully what’s going to proceed to be progress. It looks like one of many indicators present that subscription remains to be resilient.”
Requested if he’s apprehensive about weak point 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 mean 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 by way of month-to-month. I see what the alternatives are, and the way we orchestrate all of the complexities with every thing 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 by a lot change, frankly, we simply we plough by it. As a result of we all know the standard of what we now have.”
4. Common is “not a monetary participant” and in terms of investing in catalogs, “Management is vital”…
Commenting on Common’s capital allocation, Sir Lucian Grainge argued that UMG “will not be 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 accomplished “only a few offers,” however that the offers UMG has accomplished are the “better of the most effective, the place one thing has outlined historical past or a tradition”.
A few of UMG’s latest acquisitions embrace 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 bought his full tune catalog and all grasp recordings to Common. Sting additionally bought his tune catalog to UMG in February, in a deal one skilled trade supply informed MBW was value 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 individuals, that we may do issues with the Bob Dylan catalog, the place we didn’t must 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 concerning the verify. It’s truly about trusting the suitable 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 longer term. We’ve got to maintain present and we now have to maintain sitting on the huge desk.”
5. Labels and DSPs are “critically essential to one another…”
Relating 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 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 recreation or stability of energy. We’re in enterprise with one another. We’re critically essential to one another.
He added: “We all know that we’re at the very least 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 desire 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 impression and the significance of catalog and the way it matches alongside new music. So I get pleasure from working with [DSPs]. There’s at all times skirmishes. We’ve got skirmishes with everybody. It’s a part of life.”
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