lucian grainge
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As Universal Music Group chairman/CEO Lucian Grainge forecast in an October earnings call, saying that the company would need to “cut to grow,” UMG is expected to begin laying off employees as soon as this quarter.
Bloomberg first reported the news Friday morning (Jan. 12) that in the next few months hundreds of jobs will be cut from the company that has around 10,000 staffers worldwide.
A spokesperson for UMG declined to confirm the number or the timetable, but in a statement said, “We continue to position UMG to accelerate its leadership in music’s most promising growth areas and drive its transformation to capitalize on them. Over the past several years, we have been investing in future growth—building our ecommerce and D2C operations, expanding geographically, and leveraging new technologies. While we maintain our industry-leading investments in A&R and artist development, we are creating efficiencies in other areas of the business so we can remain nimble and responsive to the dynamic market, while realizing the benefits of our scale.”
In his New Year’s memo to the company, Grainge hinted at changes, writing the company will “further evolve our organizational structure.”
Despite the cuts, Grainge has promised further growth. In his same memo, he noted UMG’s global growth in the past year, including the restructuring and expansion of distribution company Virgin Music Group into such areas as the Middle East, Africa, India and China.
That is a plan that Grainge said promises to continue: “We will keep growing our presence around the world by doing just what we do in more established music markets: signing and developing local artists; providing local labels and entrepreneurs with global promotion, distribution, and a full suite of artist services; and acquiring local labels, catalogs and artist services businesses.”
The news comes while the U.S. recorded music industry continues to grow, despite the potential for streaming saturation and growing challenges from artificial intelligence. U.S. music consumption grew 12.6% in 2023 to 1.1 billion units (measured as album sales plus track equivalent albums and streaming equivalent albums), according to a year-end report issued by Luminate on Wednesday. With that double-digit gain, the U.S. market had its biggest one-year gain since consumption grew 15% in 2019.
UMG remains the leader in U.S. market share, bolstered by artists like Taylor Swift, Morgan Wallen, Post Malone and Olivia Rodrigo. For 2023, its record label market share was 35.84%, up 33.57% from 2022.
Warner Music Group already experienced layoffs, cutting roughly 4% of its staff last year.
Universal Music chairman/CEO Lucian Grainge has released his annual New Year’s memo to staff today (Jan. 9), and used the moment to largely congratulate the world’s largest music company on what was, by many metrics, a huge year for the label and publishing conglomerate.
In his 2,500 word note, obtained by Billboard, Grainge went over many of the points that he raised in his New Year’s note in 2023, when he called for an “updated model” for the music industry, calling for streaming royalty reform in the face of increased fraud and a flood of non-artist music on platforms, and a forward-looking policy in confronting the challenges and opportunities brought by AI, including government protections for copyright and creators. And in this year’s letter, he touted UMG’s achievements on those fronts in the past year, citing the “several global platforms, including the world’s largest music platform, have already adopted artist-centric principles that will transform the way artists are compensated for their work,” referencing new royalty models proposed by Deezer, Spotify and others.
And on the AI front, Grainge cited UMG’s Responsible AI initiative, which lobbied the U.S. Congress on behalf of creators in protecting their works, as well as UMG’s partnership with YouTube to allow artists to develop tools to be able to utilize the advances that AI has brought. Grainge also mentioned UMG’s efforts in the spaces of health and wellness, climate change, sustainability and societal change, through its many task forces and foundations that have fought to promote and donate to coalitions that have helped feed the homeless, promote initiatives that use music to contribute to improved mental and physical health and other initiatives, including increased health care opportunities for musicians and their families.
And he also touted the massive success of UMG’s artists, publishing clients and labels, which dominated year-end charts, including Billboard’s. “To put it succinctly: UMG is the most successful company in the history of the music industry and every one of us should be enormously proud of what we have accomplished together, let alone what I know we will accomplish going forward,” Grainge wrote.
In shifting towards the future, Grainge first noted that UMG had continued its global expansion in the past year, particularly through the expansion and restructuring of distribution company Virgin Music Group, in the Middle East/Northa Africa, Thailand, India and China, to name a few. That is a plan that Grainge says promises to continue: “We will keep growing our presence around the world by doing just what we do in more established music markets: signing and developing local artists; providing local labels and entrepreneurs with global promotion, distribution, and a full suite of artist services; and acquiring local labels, catalogs and artist services businesses.”
In terms of other plans for 2024, Grainge notes that “both the pace of change and our industry leadership will increase significantly.”
In his 2023 note, Grainge wrote about the importance of addressing streaming royalty reform and making sure artists get their deserved share of the royalty pie; in 2024, he’s focused more on “grow[ing] the pie for all artists, by strengthening the artist-fan relationship through superfan experiences and products.” Grainge says that will be accomplished both through internal improvements and through partnerships with various platforms. And he promised to continue their already-underway push in protecting and promoting creators’ voices in the AI discussion.
“In short,” Grainge writes, “We are creating the blueprint for the labels of the future.”
What that blueprint may look like is still to come, however; Grainge also notes that the company will “further evolve our organizational structure,” suggesting that changes to how the overall company operates are on the horizon.
“As you know, over the past several years, we have been investing in future growth, not just expanding geographically and leveraging new technologies, but building our e-commerce and D2C operations,” Grainge writes. “In 2024, as we continue our industry-leading investments in A&R and artist development, we will further evolve our organizational structure to create efficiencies in other areas of the business, so we can remain nimble and responsive to opportunities as they arise, while also taking advantage of the benefits of our scale. In the face of so much change and opportunity, standing still is never an option.”
Read Grainge’s full New Year’s note to staff below.
Dear Colleagues,
Happy New Year! I want to express my deepest gratitude to every one of you for all of your hard work and also to take a few moments to review with you some of the highlights of 2023 and preview some of what’s to come in 2024.
Once again, 2023 saw Universal Music lead the industry in all major financial and competitive performance metrics, at the same time our artists broke records and topped the charts around the world. To put it succinctly: UMG is the most successful company in the history of the music industry and every one of us should be enormously proud of what we have accomplished together, let alone what I know we will accomplish going forward.
In fact, even beyond our artists’ extraordinary achievements and our financial results, there was so much more to be proud of this year.
By the beginning of 2023, it had become obvious that if the industry were to continue to thrive and the value of our artists’ work respected, a number of critically important issues would have to be confronted. As the industry leader we had a clear vision of how to address these issues. And then we went out and took bold steps to turn that vision into reality.
Last January, for example, I wrote to you about the streaming royalty model. A new model was needed, one that would properly reward the artist-fan relationship and disincentivize fraud and gaming the system. Because artists are at the center of everything we do, we called it the “Artist-Centric Model.”
I’m proud to say that in just a matter of months, several global platforms, including the world’s largest music platform, have already adopted artist-centric principles that will transform the way artists are compensated for their work. In the coming months, I believe you will see more platforms adopting these principles. Why? Because it is the right thing to do both for artists and for the wider music ecosystem. As this new model becomes widespread, the impact will be profound: a healthier, more equitable and more vibrant music ecosystem that rewards all artists — be they major, indie or DIY — at all stages of their careers.
In the same way, we showed the industry the way forward when it came to confronting the challenges and opportunities of AI.
Early on in 2023, many “experts” viewed AI as a looming threat. Our view? Just as we had done with so many other previous proclamations of doom, we rejected that short-sighted appraisal. On the contrary, we saw AI as presenting opportunities. And then, just as we did with streaming, we went out to turn those opportunities into reality.
We launched our Responsible AI initiative this year with two goals in mind. First, to lobby for “guardrails,” that is public policies setting basic rules for AI. In the U.S., for example we are lobbying for legislation that would establish a federal right of publicity to harmonize the protections of artists’ image, likeness and voice from AI deepfakes. We were the first music company to call upon the U.S. Congress to protect artists against unethical uses of AI.
Our second goal was to forge groundbreaking private-sector partnerships with AI technology companies. In the past, new and often disruptive technology was simply released into the world, leaving the music community to develop the model by which artists would be fairly compensated and their rights protected. In a sharp break with that past, we formed a historic relationship with our longtime partner, YouTube, that gives artists a seat at the table before any product goes to market, including helping to shape AI products’ development and a path to monetization.
Because we fundamentally believe the best way to ensure responsible AI development is through partnership and market-led solutions, in addition to YouTube, we are collaborating with several platforms on numerous opportunities and approaches — always with artists at the forefront of our thinking. In addition, our artists have begun working with some of the latest AI technology to develop tools that will enhance and support the creative process and produce music experiences unlike anything that’s been heard before. And to leverage AI technology that would benefit artists, we continue to strike groundbreaking agreements with, among others, Endel and BandLab.
We also advanced our initiatives in areas from health and wellness to sustainability and the environment.
The intersection of music and health is another exciting area about which I am especially passionate. We’ve all had experiences in which music changed our mood or comforted us in times of emotional crisis, or even helped us physically. In fact, it’s one of the reasons why so many of us have chosen to spend our careers in music. I’ve long wanted the powerful relationship between music and health to be more than a handful of subjective observations and anecdotes so that it could become a key component of our strategy.
Building upon our success in creating a robust commercial category in fitness, we’re now leading the industry in music and health. In September, we produced the first-ever Music + Health Summit where we brought our artists together with health entrepreneurs and leading neuroscientists to advance this new category. This came on the heels of us entering into a series of more than 40 license agreements to amplify the possibilities in this space. For example, we are pioneering a new category that we call “prescription music,” an evidence-based health technique built on scientific and medical research. What excites me is that it’s cost-effective, non-invasive and drives truly beneficial results. While it’s a field still in its infancy, this area will become an increasingly important component of our strategy.
In the same spirit of promoting positive change in society, our employees also accomplished amazing things. Throughout 2023, our All Together Now Foundation, Task Force for Meaningful Change, Green Team, Unhoused Coalition, and Employee Matching Program contributed to more than 500 organizations around the world, and supported over 1.2 million meals for those in need.
Moreover, in the more than three years since we established a groundbreaking relationship with the non-profit Music Health Alliance (MHA), 500 UMG and UMPG recording artists, songwriters and their families in the U.S. have received life-changing medical care. With this year’s dramatic jump in the need for mental health care within the artist and songwriter community, the MHA partnership significantly increased its support in that area.
Our efforts to move the industry on issues concerning sustainability and the environment led UMG and Bravado to host the first music industry sustainability summits in L.A., London, and New York. The series brought together industry leaders and innovators who made commitments to institute sustainable solutions across a range of categories including events, merchandise, touring and more. We co-founded the Music Industry Climate Collective, the new music industry alliance to address global climate change. And we became the first standalone major music company to win the approval of its greenhouse gas emission reduction targets by the Science Based Targets initiative, the gold standard for establishing corporate climate goals.
All of these initiatives are of course ultimately powered by the success of our artists and songwriters and the support that our employees around the world provide them. So let’s turn to the achievements of our artists and songwriters which were nothing short of astounding in 2023. Here are just a few examples.
Globally in 2023, UMG had:
On Spotify: Six of the Top 10 global artists: Taylor Swift (at No. 1), The Weeknd, Drake, Feid, Karol G and Lana Del Rey.
On Apple Music: 13 of the Top 20 most-streamed songs globally, with Morgan Wallen’s “Last Night” at No. 1.
On Deezer: The three most-streamed artists worldwide with The Weeknd, Taylor Swift and Imagine Dragons.
On YouTube: Three of the Top 5 songs, with Toosii’s “Favorite Song” at No. 1.
On Vevo: Karol G was the ‘Most Watched Artist’ for the third consecutive year.
On Amazon: The top two artists (Taylor Swift and Morgan Wallen), three of the Top 5 songs and albums, and the world’s most requested artist on Alexa (Taylor Swift).
And to break it down by region:
On Spotify: The four most-streamed artists in the U.S.: Taylor Swift, Drake, Morgan Wallen and The Weeknd.
On Apple Music: Five of the top seven songs in the U.S., with Morgan Wallen’s “Last Night” (at No.1), and “You Proof”; Drake & 21 Savage, “Rich Flex” and “Spin Bout U”; and Lil Baby “Freestyle”.
On the Billboard 200: Six of the Top 10 albums—Morgan Wallen’s One thing At A Time (No. 1), Taylor Swift’s Midnights (No. 2), Drake, 21 Savage’s Her Loss, Metro Boomin’s Heroes & Villains, Morgan Wallen’s Dangerous: The Double Album and Taylor Swift’a Lover;
Republic Records was named Billboard’s top label for the third consecutive year.
In the UK, according to the Official Charts Company, UMG had seven of the Top 10 artists, including Taylor Swift at No. 1, Drake and The Weeknd in the top five.
Also in the UK, UMG had all of the three nominees for the prestigious 2024 BRITs Rising Star award, with Island’s The Last Dinner Party taking the award, marking the third consecutive year a UMG artist has won.
In Germany, after having ALL of the Top 10 albums for a week in mid-November, a feat never before accomplished by any company; UMG finished the year with six of the Top 10 albums.
In Japan, UMG had five of the Top 10 albums according to Billboard Japan, including King & Prince at No. 1, while Ado’s single “Show” held the top spot on the weekly streaming chart for 14 consecutive weeks to finish the year.
In France, UMG had five of the Top 10 tracks overall, and three of the Top 5 tracks on Apple Music.
In Australia, UMG had the No. 1 album for 34 weeks this year, with albums from Taylor Swift, Sam Smith, Morgan Wallen, Lana Del Rey, Metallica, Peach PRC, Lewis Capaldi, Niall Horan, G Flip, Powderfinger, Olivia Rodrigo, Drake, Troye Sivan and The Rolling Stones.
In Canada, UMG had eight of the Top 10 albums, including albums from Morgan Wallen at No. 1, Taylor Swift, Metro Boomin, and The Weeknd, and held the No. 1 album for 33 weeks this year.
UMG Sweden’s Loreen won the Eurovision Song Contest with her single “Tattoo” and UMG Sweden had five of the Top 10 artists on Spotify.
At the Latin Grammys, Karol G swept three major awards, including Album of the Year, and Juanes won Best Pop/Rock Album, marking his 25th Latin Grammy award.
Feid continued his massive rise in 2023, as the third most-streamed Latin artist on Spotify, while Sebastián Yatra was recognized as “Artist of the Year” at the 2023 RIAA Honors.
In China, Wu Qingfeng’s Mallarme’s Tuesday won “Album of the Year” at the Golden Melody Awards.
In Indonesia, “Tak Segampang Itu” by Anggi Marito was the top song of the year on Spotify.
Juan Karlos became the first artist from the Philippines to enter the Top 100 Global Spotify Charts with his song “Ere,” which was No. 1 in the Philippines for 10 weeks.
Our Universal Music Publishing Group songwriters also performed spectacularly:
On Spotify’s 2023 most-streamed artists globally, we had four out of the Top 5 (Taylor Swift, Bad Bunny, The Weeknd and Drake) and seven out of the Top 10.
On Spotify’s most-streamed albums globally, we had four of the Top 5 (Bad Bunny, Taylor Swift, SZA, The Weeknd) and seven of the Top 10.
On Apple Music: UMPG had an interest in seven of the Top 10 most-streamed songs in the U.S.
On Billboard’s Hot 100 Songwriters in the U.S., UMPG had three of the Top 5 with Taylor Swift, Jack Antonoff and SZA.
In total, a spectacular performance. We should all be so proud of our artists and songwriters and the work we do to bring their music to the world.
In 2023, we also continued our strategy to expand our presence in high growth markets around the world — both through the strength of our companies in those regions as well as the expansion of Virgin Music Group.
We acquired Chabaka Music, a leading MENA-based company, as well as a majority stake in RS Group in Thailand.
In India we strengthened our position domestically with an exclusive partnership with Represent, a leading management company.
In China we signed new long-term agreements with superstar Eason Chan and with 2022’s No. 1 IFPI global album seller Jay Chou, that includes his JVR Music label.
Looking to 2024, both the pace of change and our industry leadership will increase significantly. We’ll be moving quickly and meaningfully on many different fronts.
Our pioneering artist-centric strategy will extend its reach. We first focused on a fairer way to allocate the streaming pie among real artists by addressing fraud and other aspects that deprive artists of their just compensation. The next focus of our strategy will be to grow the pie for all artists, by strengthening the artist-fan relationship through superfan experiences and products. We are already in advanced discussions with our platform partners regarding this phase and will have more to announce in the coming months. In addition, we will be building our in-house capabilities through groundbreaking partnerships that will accelerate our artists’ ability to create experiential, commerce and content offerings for their fans. In short, we are creating the blueprint for the labels of the future.
As for AI, we will continue building opportunity for our artists, while also leading the fight to protect them from unethical uses of this technology. And all around the world, we will continue to prioritize and fight for policies in the service of artistry — not at the expense of it. We also expect to announce more real-world commercial applications for artist-driven, ethical AI.
We will keep growing our presence around the world by doing just what we do in more established music markets: signing and developing local artists; providing local labels and entrepreneurs with global promotion, distribution, and a full suite of artist services; and acquiring local labels, catalogs and artist services businesses.
As you know, over the past several years, we have been investing in future growth, not just expanding geographically and leveraging new technologies, but building our e-commerce and D2C operations. In 2024, as we continue our industry-leading investments in A&R and artist development, we will further evolve our organizational structure to create efficiencies in other areas of the business, so we can remain nimble and responsive to opportunities as they arise, while also taking advantage of the benefits of our scale.
In the face of so much change and opportunity, standing still is never an option.
We must continue to fight for our artists and songwriters and stand up for the creative and commercial value of music.
Our vision of the future is filled with possibilities, and acting on our strategy will make those possibilities real — for our artists, our employees, our shareholders and the entire music ecosystem.
I promise 2024 will be an extremely exciting and transformative year for our company.
Lucian
Did You Get the Memo? Read Last Year’s Note From Lucian Grainge
For some music companies, 2022 was the payoff for weathering the darkest days of the COVID-19 pandemic. When business returned that year — sometimes in record-setting fashion — these companies rewarded their executives handsomely, according to Billboard’s 2022 Executive Money Makers breakdown of stock ownership and compensation. But shareholders, as well as two investment advisory groups, contend the compensation for top executives at Live Nation and Universal Music Group (UMG) is excessive.
Live Nation, the world’s largest concert promotion and ticketing company, rebounded from revenue of $1.9 billion and $6.3 billion in 2020 and 2021, respectively, to a record $16.7 billion in 2022. That performance helped make its top two executives, president/CEO Michael Rapino and president/CFO Joe Berchtold, the best paid music executives of 2022. In total, Rapino received a pay package worth $139 million, while Berchtold earned $52.4 million. Rapino’s new employment contract includes an award of performance shares targeted at 1.1 million shares and roughly 334,000 shares of restricted stock that will fully pay off if the company hits aggressive growth targets and the stock price doubles in five years.
Live Nation explained in its 2023 proxy statement that its compensation program took into account management’s “strong leadership decisions” in 2020 and 2021 that put the company on a path to record revenue in 2022. Compared with 2019 — the last full year unaffected by the COVID-19 pandemic — concert attendance was up 24%, ticketing revenue grew 45%, sponsorships and advertising revenue improved 64%, and ancillary per-fan spending was up at least 20% across all major venue types. Importantly, Live Nation reached 127% of its target adjusted operating income, to which executives’ cash bonuses were tied.
The bulk of Rapino’s and Berchtold’s compensation came from stock awards — $116.7 million for Rapino and $37.1 million for Berchtold — on top of relatively modest base salaries. Both received a $6 million signing bonus for reupping their employment contracts in 2022. (Story continues after charts.)
Lucian Grainge, the top-paid music executive in 2021, came in third in 2022 with total compensation of 47.3 million euros ($49.7 million). Unlike the other executives on this year’s list, he wasn’t given large stock awards or stock options. Instead, Grainge, who has been CEO of UMG since 2010, was given a performance bonus of 28.8 million euros ($30.3 million) in addition to a salary of 15.4 million euros ($16.2 million) — by far the largest of any music executive.
This year, shareholders have shown little appetite for some entertainment executives’ pay packages — most notably Netflix — and Live Nation’s compensation raised flags at two influential shareholder advisory groups, Institutional Shareholder Services and Glass Lewis, which both recommended that Live Nation shareholders vote “no” in an advisory “say on pay” vote during the company’s annual meeting on June 9. Shareholders did just that, voting against executives’ pay packages by a 53-to-47 margin.
Failed “say on pay” votes are rare amongst United States corporations. Through Aug. 17, just 2.1% of Russell 3000 companies and 2.3% of S&P 500 companies have received less than 50% votes on executive compensation, according to executive compensation consultancy Semler Brossy. (Live Nation is in both indexes.) About 93% of companies received at least 70% shareholder approval.
ISS was concerned that the stock grants given to Rapino and Berchtold were “multiple times larger” than total CEO pay in peer group companies and were not adequately linked to achieving sustained higher stock prices. Additionally, ISS thought Live Nation did not adequately explain the rationale behind the grants.
To determine what Rapino, Berchtold and other executives should earn, Live Nation’s compensation committee referenced high-earning executives from Netflix, Universal Music Group, SiriusXM, Spotify, Endeavor Group Holdings, Fox Corporation, Warner Bros. Discovery, Inc. and Paramount Global. Netflix co-CEOs Reed Hastings and Ted Sarandos were paid $51.1 million and $50.3 million, respectively, in 2022. Warner Bros. Discovery CEO David Zaslov made $39.3 million in 2022 — including a $21.8 million cash bonus — a year after his pay totaled $246.6 million, including $202.9 million in stock option awards that will vest over his six-year employment contract. Endeavor CEO Ari Emanuel and executive chairman Patrick Whitesell received pay packages worth $308.2 million and $123.1 million, respectively, in 2021 thanks to equity awards tied to the company’s IPO that year (the received more modest pay of $19 million and $12.2 million in 2022).
Some companies in the peer group didn’t fare well in “say on pay” votes in 2023, though. Netflix, got only 29% shareholder approval in this year’s say-on-pay advisory vote after Hastings’ and Sarandos’ compensations both increased from higher stock option awards while the company’s stock price, riding high as COVID-19 lockdowns drove investors to streaming stocks, fell 51% in 2022. Warner Bros. Discovery’s 2022 compensation squeaked by with 51% shareholder approval.
Minutes from UMG’s 2023 annual general meeting in May suggest many of its shareholders also didn’t approve of Grainge’s compensation. UMG’s 2022 compensation was approved by just 59% of shareholders, and the company’s four largest shareholders own 58.1% of outstanding shares, meaning virtually no minority shareholders voted in favor.
UMG shareholders’ votes could be meaningfully different next year. Anna Jones, chairman of the music company’s remuneration committee, said during the annual meeting that in 2024, shareholders will vote on a pay package related to Grainge’s new employment agreement that takes minority shareholders’ concerns from the 2022 annual meeting into consideration. Grainge’s contract lowers his cash compensation, and more than half of his total compensation will come from stock and performance-based stock options.
Other companies in Live Nation’s peer group received near unanimous shareholder approval. SiriusXM’s 2022 executive compensation received 98.5% approval at the company’s annual meeting. Paramount Global’s executive compensation was approved by 96.4% of its shareholders. Endeavor didn’t have a “say on pay” vote in 2023, but a year ago, it’s sizable 2021 compensation packages were approved by 99% of voting shareholders.
As the radio industry came back from pandemic-era doldrums, two iHeartMedia executives — Bob Pittman, CEO, and Richard Bressler, president, CFO and COO — were among the top 10 best-paid executives in the music industry. It was new employment contracts, not iHeartMedia’s financial performance, that put them into the top 10, however. Both executives received performance stock awards — $6.5 million for Pittman and $6 million for Bressler — for signing new four-year employment contracts in 2022. Those shares will be earned over a five-year period based on the performance of the stock’s shareholder return. Neither Pittman nor Bressler received a payout from the annual incentive plan, however: iHeartMedia missed the financial targets that would have paid them millions of dollars apiece. Still, with salaries and other stock awards, Pittman and Bressler received pay packages valued at $16.3 million and $15.5 million, respectively.
Spotify co-founders Daniel Ek and Martin Lorentzon once again topped the list of largest stockholdings in public music companies. Ek’s 15.9% stake is worth nearly $4.8 billion while Lorentzon’s 11.2% stake has a market value of nearly $3.4 billion. Both Ek and Lorentzon have benefitted from Spotify’s share price more than doubling so far in 2023. In September 2022, the inaugural Money Makers list had Ek’s stake at $3.6 billion and Lorentzon’s shares at $2.3 billion.
The billionaire club also includes No. 3 HYBE chairman Bang Si-hyuk, whose 31.8% of outstanding shares are worth $2.54 billion, and No. 4 CTS Eventim CEO Klaus-Peter Schulenberg, whose 38.8% stake — held indirectly through his KPS Foundation non-profit — is worth $2.25 billion. They, too, have benefitted from higher share prices in 2023. Last year, Bang’s stake was worth $1.7 billion and Schulenberg’s shares were valued at $2.1 billion.
These top four shareholders and three others in the top 10 have one important thing in common — they are company founders. At No. 5, Park Jin-young, founder of K-pop company JYP Entertainment, owns a $559 million stake in the label and agency he launched in 1997. Another K-pop mogul, No. 8 Hyunsuk Yang, chairman of YG Entertainment, owns shares worth $199 million in the company he founded in 1996. And No. 9 Denis Ladegaillerie, CEO of 18-year-old French music company Believe, has a 12.5% stake worth $112.7 million.
Live Nation’s Rapino again landed in the top 10 for amassing a stockholding over a lengthy career, during which he has helped significantly increase his company’s value. Rapino, the only CEO Live Nation has ever known, took the helm in 2005 just months before the company was spun off from Clear Channel Entertainment with a market capitalization of $692 million. Since then, Live Nation’s market capitalization has grown at over 20% compound annual growth rate to $19.1 billion. Rapino’s 3.46 million shares represent a 1.5% stake worth $291 million.
Selling a company that one founded is another way onto the list. Scooter Braun, CEO of HYBE America, has a 0.9% stake in HYBE worth $69.8 million. That’s good for No. 10 on the list of executive stock ownership. Braun, HYBE’s second-largest individual shareholder behind chairman Bang, sold his company, Ithaca Holdings — including SB Projects and Big Machine Label Group — to HYBE in 2021 for $1.1 billion.
These rankings are based on publicly available financial statements and filings — such as proxy statements, annual reports and Form 4 filings that reveal employees’ recent stock transactions — that publicly traded companies are required by law to file for transparency to investors. So, the list includes executives from Live Nation but not its largest competitor, the privately held AEG Live.
Some major music companies are excluded because they are not standalone entities. Conglomerates that break out the financial performance of their music companies — e.g., Sony Corp. (owner of Sony Music Entertainment) and Bertelsmann (owner of BMG) — don’t disclose compensation details for heads of record labels and music publishers. Important digital platforms such as Apple Music and Amazon Music are relatively small parts of much larger corporations.
The Money Makers executive compensation table includes only the named executive officers: the CEO, the CFO and the next most highly paid executives. While securities laws vary by country, they generally require public companies to named executive officers’ salary, bonuses, stock awards and stock option grants and the value of benefits such as private airplane access and security.
And while Billboard tracked the compensation of every named executive for publicly traded music companies, the top 10 reflects two facts: The largest companies tend to have the largest pay packages and companies within the United States tend to pay better than companies in other countries.
The list of stock ownership is also taken from public disclosures. The amounts include common stock owned directly or indirectly by the executive. The list does not include former executives — such as former Warner Music Group CEO Stephen Cooper — who are no longer employed at the company and no longer required to disclose stock transactions.
Universal Music Group announced on Monday (Aug. 21) a partnership with YouTube to create a set of principles and best practices around the use of artificial intelligence within the music community, as well as a Music AI Incubator bringing together several UMG artists and producers to help study the effect of the technology, including Anitta, Juanes, Yo Gotti, Louis Bell, ABBA’s Björn Ulvaeus, Ryan Tedder and the estate of Frank Sinatra, among others.
In announcing the new incubator and the three principles — which boil down to embracing the new technological possibilities while protecting creators and establishing content and safety policies — UMG chairman/CEO Lucian Grainge penned an op-ed for YouTube’s blog, in which he acknowledged both the possibilities and the potential dangers of AI.
“Given this tension, our challenge and opportunity as an industry is to establish effective tools, incentives and rewards – as well as rules of the road – that enable us to limit AI’s potential downside while promoting its promising upside,” Grainge writes. “If we strike the right balance, I believe AI will amplify human imagination and enrich musical creativity in extraordinary new ways.”
In reference to the collaboration with YouTube, Grainge points to the video streamer’s development of its ContentID system, which helps screen user-generated content uploaded to the service for copyrighted works, and helps get creators (and copyright owners, such as UMG) paid for their use on the platform. That type of collaboration between DSP and music companies is foundational to the work YouTube and UMG are beginning with respect to AI, Grainge says.
“The truth is, great entertainment doesn’t just reach audiences on its own,” he writes. “It also requires the global infrastructure, new business models, scaled distribution, innovative partnerships and effective safeguards that enable talented artists to create with freedom and receive fair compensation. … Today, our partnership is building on that foundation with a shared commitment to lead responsibly, as outlined in YouTube’s AI principles, where Artificial Intelligence is built to empower human creativity, and not the other way around. AI will never replace human creativity because it will always lack the essential spark that drives the most talented artists to do their best work, which is intention. From Mozart to The Beatles to Taylor Swift, genius is never random.”
Read his full op-ed here.
Universal Music Group shareholders approved on Thursday (May 11) the 2022 compensation packages for CEO Lucian Grainge and his deputy, Vincent Vallejo, plus a special $100 million stock option awarded to Grainge to stay on the job for five more years.
The company did not immediately disclose the percentage of votes cast in support of the advisory vote on the pay packages or other voting items at its annual general meeting held in the Amsterdam, and the meeting was live-streamed only to registered shareholders.
Since the global financial crisis, these kinds of annual meetings become a stage for shareholders to express their gripes about a company’s policies or performance. The vote of support for the world’s largest music company’s pay practices comes despite criticism raised by influential shareholder advisory groups, Institutional Shareholder Services and Glass Lewis, who had advised investors to reject Grainge’s pay packages.
Shareholders approved Grainge’s 2022 pay, which totaled more than 47 million euros (roughly $50 million), and re-appointed him as executive director, along with Sherry Lansing and Luc van Os as non-executive directors. Entertainment mogul Haim Saban was also appointed as non-executive director.
Shareholders declined to reappoint Anna Jones as a non-executive director, and her current term will run until the company’s next annual meeting in 2024.
Shareholders also approved a final 2022 dividend payout of 0.27 euros per share, which investors will receive in June. The vote brings UMG’s full year 2022 dividend to 0.51 euros per share.
In an April report, ISS recommended shareholders vote against UMG’s 2022 remuneration policy, saying the pay packages were out of step with industry standards in part due to “excessive” base salaries. That Grainge’s total pay was 12.4 times higher than the median of peers “raises substantial concerns,” ISS wrote.
Grainge’s 2022 pay package included a base salary of about 15.4 million euros and short-term incentives totaling 28.77 million euros, including a portion equivalent to 1% of UMG’s consolidated earnings before interest, taxes and amortization (EBITA) that was part of an agreement reached prior to UMG going public.
In its annual report, the company says that full-time UMG employees receive an average of 142,039 euros annually,up from 131,961 euros in 2021.
The board explained its reasoning for the remuneration for its executive directors saying that Grainge was a one-of-a-kind executive, and that certain incentive payments were due to legacy arrangements agreed to before the company went public.
In the proposed future pay agreement, which was part of an extension of Grainge’s contract through May 2028, the board said it did away with the incentive that paid Grainge 1% of UMG’s consolidated EBITA. In addition, the new agreement transitions Grainge from an all-cash compensation package to a combination cash and equity package “with a broad set of performance-based objectives aligned with shareholders’ interest and corresponding to the company’s long-term growth strategy.”
UMG ended the European trading day up 0.43% at 18.79 euros ($20.52).
Universal Music Group chairman/CEO Lucian Grainge took aim at artificial intelligence again on Wednesday (April 26), this time blaming AI for the “oversupply” of “bad” content on streaming platforms and pointing to user-centric payment models as the answer.
AI tools have exploded in popularity in recent months, and Grainge has been an outspoken critic of generative AI being used to mimic copyrighted works, as with the song “Heart on My Sleeve,” which used AI to generate vocals from UMG artists Drake and The Weeknd.
In fervent comments Grainge made during a call discussing UMG’s earnings Wednesday, the executive said AI significantly contributes to a glut of “poor-quality” content on streaming platforms, muddies search experiences for fans looking for their favorite artists and generally has “virtually no consumer appeal.”
“Any way you look at it, this oversupply, whether or not AI-created is, simply, bad. Bad for artists. Bad for fans. And bad for the platforms themselves,” Grainge said.
The head of the world’s largest music company specifically called out the role of generative AI platforms, which are “trained” to produce new creations after being fed vast quantities of existing works known as “inputs.” In the case of AI music platforms, that process involves huge numbers of songs, which many across the music industry argue infringes on artists’ and labels’ copyrights.
Grainge argued that “the flood of unwanted content” generated by AI could be reduced by adopting new payment models from streaming platforms. UMG is currently exploring “artist-centric” models with Tidal and Deezer, while SoundCloud and Warner Music Group also announced a partnership on so-called user-centric royalties last year.
“With the right incentive structures in place, platforms can focus on rewarding and enhancing the artist-fan relationship and, at the same time, elevate the user experience on their platforms, by reducing the sea of ‘noise’ … eliminating unauthorized, unwanted, and infringing content entirely,” Grainge said on Wednesday.
While UMG continues exploring alternative streaming payment models with partners Tidal, Deezer and others on what form alternative streaming payment models should take, an analyst on Wednesday’s call asked Grainge if, in the meantime, the company would ever consider licensing songs to an AI platform.
“We are open to licensing … but we have to respect our artist and the integrity of their work,” Grainge said. “We should be the hostess with the mostest. We’re open for business with businesses that are legitimate and (interested in) partnership for growth.”
The board of directors at Universal Music Group (UMG) has extended the contract of chairman and CEO Sir Lucian Grainge until May 1, 2028, the company announced Thursday (March 30).
The updated agreement transitions Grainge from an all-cash compensation package to one that combines cash and equity; the latter of these includes performance-based objectives that align with the interest of shareholders and correlate with the company’s long-term growth strategy. The majority of the compensation package’s value will be paid in UMG equity and performance-based stock options. As a result, Grainge’s annual salary will be reduced by more than two-thirds from his current salary, down to $5 million. He will be eligible for an annual bonus with a target of $10 million. The EBITA bonus from his previous contract has been eliminated, and he will only be entitled to the contingent bonus under his prior agreement on a pro rata basis until Friday (March 31).
The equity components of the compensation program include annual grants of $20 million, comprised of as much as 50% performance share units (PSUs), with annual PSU goals set by the board of directors; the remainder will be comprised of restricted share units (RSUs). Grainge will also receive a one-time transition equity award of $100 million, comprised of 50% RSUs and 50% performance stock options (PSOs). The PSOs will be paid out only if the company surpasses stock price hurdles — 1/3rd at 26.50 euros ($28.90), another 1/3rd at 30.00 euros ($32.71) and 1/3rd at 38.00 euros ($41.44) — within the term of the agreement.
UMG went public in September 2021 with a listing on the Euronext Amsterdam Stock Exchange.
“UMG is the world´s most successful music company and there are incredible opportunities ahead for a company with the right leadership and vision,” said UMG chairman of the board Sherry Lansing in a statement. “The UMG Board is resolutely committed to converting those opportunities and maximizing shareholder value for the long term. Only the right kind of chief executive can help achieve that goal and Lucian is just the one to do it. Through his clear vision and strong execution in building UMG into the industry leader, Lucian has also essentially created a new category of music company. This agreement is designed to drive both the sustainable success of UMG and long-term shareholder value.”
To align Grainge’s term as executive director and chairman/CEO with the term of the extended contract, the board will put forth a proposal to reappoint him as executive director for a term ending on May 1, 2028, at UMG’s 2023 general meeting on May 11; it will also seek approval for a supplement to UMG’s existing executive directors remuneration policy with respect to his new compensation.
Grainge got his start in the music publishing business in 1979 at age 18. He joined Universal Music in 1986 when he launched PolyGram Music Publishing in the U.K. and steadily climbed the ladder from there, rising to chairman/CEO of UMG’s international division in 2005 and chairman/CEO of UMG in 2011, succeeding Doug Morris. He placed atop this year’s Billboard‘s Power 100, marking his seventh appearance at No. 1 on the list; in 2020, he was named Billboard‘s executive of the decade.
In 2022, UMG’s overall revenues increased 21.6% to 10.34 billion euros ($10.96 billion), boosted by solid returns from recorded music subscriptions and streaming. It remains far and away the largest recorded music company by market share.
Universal Music Group CEO Lucian Grainge announced that the company had entered into a new partnership with Deezer during an earnings call on Thursday (Mar. 2nd). The goal? To help develop a “new model” that “ensure[s] continued growth of streaming” while also valuing “the contribution of both artists and fans alike.” UMG previously touted a similar partnership with TIDAL in January.
The need for a “new model” — also highlighted in Grainge’s letter to staff from January — was a recurring theme of Thursday’s call. “Streaming has evolved in a way that undervalues the critical contributions of many an artist as well as the engagement of many fans,” Grainge said. This unfortunately flouts “the basic unarguable truth that is: The artists are the center of everything in the music ecosystem,” he added.
UMG executives offered scant details about what this new model would look like, even when asked directly about the topic, saying it was too early to tell. One key element for Grainge appears to be that “artists are rewarded for the fans they bring in [to subscribe to streaming services] and the engagement they drive [on those platforms].” In addition, he hoped that fans would be “offered more ways to engage.”
These sentiments were echoed by Michael Nash, UMG’s executive vp and chief digital officer. Streaming platforms can do “a better job of monetizing these high integrity, high intense artist-fan relationships,” he said. “That will come with superfan monetization. We’ve been speaking with platforms…about the enhancement of offers to the consumer that reflect the engagement with artists that are really driving the economic models of the platform.”
UMG executives also praised the streaming services that have raised their prices recently, mentioning Apple and Amazon by name (twice). “Fans recognize the enormous value offered by music subscriptions, still a relatively low cost, high-value form of entertainment, which in turn has supported decisions made by a number of our DSP partners to raise prices recently,” Grainge said.
But not all streaming services have gone this route. Grainge added, pointedly, that “ensuring the artists’ work is properly valued should be a critical goal for everyone who wants to keep the industry growing.”
In addition to discussing the future of streaming, UMG executives spent a notable portion of the conference call explaining to analysts, in defensive tones, their place in a highly competitive catalog acquisition landscape and the strategy they use to evaluate potential purchases. Grainge said UMG sees “almost everything” in the music rights investment space that goes up for sale and passes on “most of it” because it does not meet the company’s standards for returns.
He also asserted that many competitors in the catalog acquisition space are “passive participants who do nothing and therefore cannot exploit the full potential” of the rights they own. “There are many who claim they actively manage rights, but they do not,” Grainge said. “Why? Their lack of infrastructure, their lack of experience and expertise and even more critical, in many cases, their inability to acquire all of the rights necessary to actively manage anything.”
Acquisitions “are an important, although relatively small proportion of our total business today,” UMG’s CFO Boyd Muir added during his remarks. “But we will continue to be opportunistic, to add to a roster of iconic artists, in a financially disciplined way.”
Universal Music Group chairman and CEO Sir Lucian Grainge is calling on music industry executives to come together to get artists paid. Last night (Feb. 1), Grainge addressed an audience of Billboard Power 100 honorees in Los Angeles with the hope that the most powerful business figures in the industry can come together on the side of creatives.
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“Our industry is entering a new chapter where we’re going to have to pick sides, all of us are going to have to pick sides,” Grainge said from the stage in Hollywood. “Are we on the side of FinTech [Financial Technology] and functional music, functional content? Or are we on the side of artistry, and artists?”
Grainge was the first executive to take the stage after Billboard editorial director Hannah Karp opened the ceremony and introduced Grainge who, once again, landed the top spot on the Billboard Power 100 list this year. Grainge takes the top spot as the leader of UMG which reported third-quarter earnings of 2.66 billion euros (approximately $2.9 billion), up 13.3% year over year in constant currency, a fifth-straight quarter of growth since the company spun off from Vivendi in fall 2021.
His call to action was based on the idea of disrupting the music industry, but from those who care most about it. “I’ve always seen opportunity in disruption. And for those of us that have been in the business, made our living out of music, boy have we seen an enormous amount of disruption,” said Grainge. “But the problem is that all too often we’ve let others disrupt our industry. But if we work together across the music community, we can disrupt the status quo instead. And that offers enormous opportunity for real music, real artists. Now, that’s what I call powerful.”
The executive was also quick to thank his colleagues at UMG and provided a shout out to its label Republic Records, which landed the No. 1 label of the year based on current market share. But Grainge’s short and poignant speech focused on his love of music and those who work on behalf of artists.
“Working on behalf of artists and working to grow this industry has been my life’s passion and I’ve been very lucky,” Grainge said. “I feel very strongly that if we’re to succeed, more than ever, we need to come together as an industry, to fight for artists, and for music.”
He continued: “Let’s focus our energy on rewarding those that make great music and those that made music great. Let’s break artists, fight to get them paid, and to give fans real joy.”
Universal Music Group chairman/CEO Lucian Grainge has sent out his annual New Year’s memo to staff at UMG, within which he touted several of the wins — both artistically, but also culturally and socially — that the world’s largest music company achieved in the past year. But he also laid out several issues that he feels have arisen in the decade-plus since streaming was introduced and began to take over the music industry, and called for an “updated model” for the business that will be “an innovative, ‘artist-centric’ model that values all subscribers and rewards the music they love.”
Grainge, who just guided UMG through its first full year as a public company, touted the advances that UMG’s Task Force for Meaningful Change and other community efforts made around the world, including helping artists with health insurance through a partnership with Music Health Alliance and, through various initiatives, contributing to 500 organizations around the world. He also highlighted chart successes on all platforms, including the Billboard charts in the U.S. and in countries like Japan, China and the U.K., and UMG’s role in ushering in immersive and spatial audio, which has grown significantly in the past year.
But he also sought to position UMG as the lead innovator in the music business globally, particularly in a time of growth for the business in which “bad actors” have come in to take advantage of that growth.
“Unlike so many other players in the music world, especially the newer ones, UMG can never be regarded as merely a ‘checkbook and distribution’ company,” Grainge wrote. “Nor are we some convoluted financial instrument that seeks to exploit the recent growth in our industry. No, we are different. Very different. Because for all of us at UMG, music and the artists who create that music comprise our very raison d’être. It’s what gets us up in the morning.”
While championing the company for helping usher in the streaming era, he also attacked the ecosystem that streaming has created. “Today, some platforms are adding 100,000 tracks per day,” he added. “And with such a vast and unnavigable number of tracks flooding the platforms, consumers are increasingly being guided by algorithms to lower-quality functional content that in some cases can barely pass for ‘music.’ … For example, just witness the thousands and thousands of 31-second track uploads of sound files whose sole purpose is to game the system and divert royalties. The result? A less fulfilling experience for the consumer, diminished compensation flowing to artists that are driving the business models of the platforms, and fewer cultural moments that fans can collectively share, all of which undermines the creativity and development of artists and their music that the platforms were, in part, designed to foster.”
After pointing out those issues, Grainge then called for change — change that he didn’t specify, but that he says will be “absolutely essential to promote a healthier, more competitive music ecosystem, one in which great music, no matter where it’s from, is easily and clearly accessible for fans to discover and enjoy. An environment where great music is not drowned in an ocean of noise. And one where the creators of all music content, whether in the form of audio or short-form video are fairly compensated.”
That, he says, will be one of the main goals for UMG in this coming year.
“[W]e need an updated model,” Grainge wrote. “Not one that pits artists of one genre against artists of another or major label artists against indie or DIY artists. We need a model that supports all artists — DIY, indie and major. An innovative, ‘artist-centric’ model that values all subscribers and rewards the music they love. A model that will be a win for artists, fans, and labels alike, and, at the same time, also enhances the value proposition of the platforms themselves, accelerating subscriber growth, and better monetizing fandom.”
Read Grainge’s entire memo below:
Dear Colleagues,
Happy New Year! I wanted to write to you to welcome you back and as promised, give you my thoughts about the year ahead. It’s hard to believe that just a little more than a year ago, UMG became a freestanding public company. It was a watershed moment in our history. And yet, in some ways, when it comes to what we do every day, we just kept doing what we’ve always done: bring great artists and their music to the world; break performance records of all kinds everywhere; and drive the industry forward though creativity, strategic investments and innovation.
And that’s exactly what we plan to do this year.
Now, with 2022 in the rearview mirror, I’d like to share with you a few thoughts about what was an extraordinary year for UMG and also express my gratitude to all of you for making the year so remarkable. I’ll have something to say as well about the very real challenges and opportunities that lie ahead for us in 2023, but first let’s take a brief victory lap to reflect on what we achieved last year.
Beginning with some accomplishments I’m particularly proud of, here are just a few examples of how, once again, you and our artists showed up big time to make our communities stronger and help those in need:
— Serving more than 20,000 meals around the world;— Building community gardens throughout the US, Europe and Australasia;— Working on vital education campaigns with organizations such as Mental Health Coalition; and— Extending our programs to benefit our artists past and present including assisting hundreds of artists in saving millions of dollars in healthcare costs through our partnership with Music Health Alliance in the U.S.
And our company’s Task Force for Meaningful Change continued its groundbreaking work in a variety of ways: funding programs to mentor the next generation of Black artists and Black music industry executives; fighting for criminal justice reforms; investing in community violence intervention programs and policy organizations; partnering with HBCU medical schools to widen the Black practitioner pipeline; and helping turn out the vote in the U.S. elections by providing more than 13,000 rides to and from the polls. Between the TFMC, our All Together Now Foundation, and our Employee Matching Program, we have contributed to more than 500 organizations in 2022 alone.
On the charts, the performance of our artists and songwriters remained stellar. So many artists from around the world contributed to 2022’s success, with standout performances from: Taylor Swift; Olivia Rodrigo; The Weeknd; The Beatles, Kendrick Lamar; Drake; BTS; Karol G; Luciano; Angèle; Glass Animals; Imagine Dragons; Rammstein; Helene Fischer; ABBA; Ado; Elton John; Eminem; Justin Bieber; King & Prince; Lil Baby; Billie Eilish; among many many others. Here are some examples:
— On Spotify: UMG had four of the Top 5 Artists globally; four of the Top 5 in the U.S.; 7 of the Top 10 in Germany and Italy, including No. 1s in both countries; and the top female artist in France;— On Apple Music: Universal Music Publishing Group had writer-interests in 9 of the Top 10 most-streamed songs globally;— On YouTube: UMG had 7 of the Top 10 Songs in the U.S.;— On Billboard: We had the No. 1 Song on the Hot 100 year-end chart and 7 of the Top 10 Albums;— On Deezer: UMG had the Top 2 Artists globally, and 5 of the Top 10;— In Germany: The Top 4 Albums and the Top 3 Singles;— In the U.K.: 6 of the Top 10 artists including No. 1;— In Japan: The No. 1 Artist on Billboard’s Year-end Chart;— On Vevo: The No. 1 Global Artist— And finally, in China: Eason Chan’s “Gu Yong Zhe” (“The Lone Warrior”), became the most-streamed song in UMG China’s history after topping the charts on all major streaming platforms.
All that — and so much more — didn’t just “happen.” To achieve such astonishing success for both developing and established artists, and to do so year after year, in every conceivable genre, often in regions beyond their home countries, is no accident. UMG’s unique artist-centric culture accounts for that repeated success and is at the heart of our company’s two-fold mission.
Our first, simplest, and yet most difficult imperative is to discover and break new artists and then sustain their careers over the long run. Unlike so many other players in the music world, especially the newer ones, UMG can never be regarded as merely a “checkbook and distribution” company. Nor are we some convoluted financial instrument that seeks to exploit the recent growth in our industry. No, we are different. Very different. Because for all of us at UMG, music and the artists who create that music comprise our very raison d’être. It’s what gets us up in the morning.
The second part of our mission is to promote a healthy, sustainable and exciting music ecosystem in which our artists can thrive for years and decades to come. We fulfill that goal by using our ingenuity to drive the music industry forward as technology and the world around us keep changing. That is why, even as we diligently work, day-in and day-out, to break our artists and songwriters, we’re also pursuing unexplored avenues of creative and commercial possibilities and, whenever appropriate, taking the necessary steps to turn those possibilities into reality.
One powerful example of one of those possibilities becoming reality: immersive or ‘spatial’ audio. Seven years ago, we embarked on a journey to evolve the music listening experience. We approached Dolby with a proposal: if our two companies worked together, we could develop a new format that envelops the listener into a 360-degree immersive environment that provides artists with a broader creative palette on which to express themselves. We believed that this could be one of the most important developments in the recorded music listening experience in decades.
An advance as significant as immersive audio was no easy feat. It required years of investment and innovation. Much more. We built state-of-the-art recording suites within our network of iconic studios — Capitol Studios in L.A. and Abbey Road Studios in London, to name just two. We trained some of the world’s top engineers in how to make the best use of the format. And we conducted an extensive campaign to educate artists and artist estates about the limitless creative opportunities that immersive audio provides.
We’re already seeing the results. Nearly half of UMG’s streaming consumption and 80% of our top-50 streaming artists’ music are available in immersive (or Atmos) versions.
Who benefits from this landmark innovation? For starters, artists, of course. And by “artists,” I mean all artists, not just UMG’s. Thanks to our efforts, the entire industry has been releasing more and more music in immersive audio. And many platforms — including Apple Music, Tidal and Amazon Music — are offering this far superior experience to the other beneficiaries of immersive audio: music fans. Millions and millions of them around the world. And they simply can’t get enough.
This year fans will get even more. I am confident that we will see significant global growth in the availability of immersive audio as more and more automobile and device manufacturers introduce new products designed to deliver this greatly enhanced musical experience.
Looking beyond the expansion of immersive audio, our determination to drive change will only accelerate this year. Just as we’ve done so successfully in the past, we’re putting in place the strategies and resources to lead through every significant technological advance on the horizon. And each such advance — from web3 and the metaverse, to new applications for health and wellness and medical music delivery — will enable us to connect directly to consumers in ways that were unimaginable just a few years ago and deliver significant long-term value to those fans, as well as to our artists, our employees and our shareholders.
That’s exactly the pioneering approach we took at the advent of streaming. Early on, we saw the potential inherent in streaming and subscription and jumped right in. Though it seems like only yesterday that we were working with Spotify to enable their U.S. launch, that “yesterday” was way back in 2011. While other companies were trying to hold their ground even as that ground was shifting beneath their feet, UMG leaned into what was the most profound business model shift the industry had ever seen, redesigning our global organization, becoming the first to adapt to and then thrive in the streaming era.
But if history teaches us anything, it is this: every blazingly transformative technological development inevitably creates new challenges for us to confront. So, it’s no surprise that after almost a dozen years of fundamentally transforming the music business, the manner in which music is presented and consumed on streaming platforms has itself evolved. And while that evolution has created enormous opportunities and benefits for artists and consumers — reflected in increased listening diversity that initially comes with adoption of subscription — it has also created byproducts that are increasingly confusing and unfulfilling for them as the volume of noise in the marketplace has increased. Today, some platforms are adding 100,000 tracks per day. And with such a vast and unnavigable number of tracks flooding the platforms, consumers are increasingly being guided by algorithms to lower-quality functional content that in some cases can barely pass for “music.”
Let me explain. In order to entice consumers to subscribe, platforms naturally exploit the music of those artists who have large and passionate fan bases. But then, once those fans have subscribed, consumers are often guided by algorithms to generic music that lacks a meaningful artistic context, is less expensive for the platform to license or, in some cases, has been commissioned directly by the platform. For example, just witness the thousands and thousands of 31-second track uploads of sound files whose sole purpose is to game the system and divert royalties. The result? A less fulfilling experience for the consumer, diminished compensation flowing to artists that are driving the business models of the platforms, and fewer cultural moments that fans can collectively share, all of which undermines the creativity and development of artists and their music that the platforms were, in part, designed to foster.
While this unsatisfying situation is discouraging, it’s not surprising. Now that the industry is growing again — in large part as a result of UMG’s strategy, investments and innovation — new players as well as some bad actors who do not share our commitment to artists and artistry have been swooping into the reinvigorated industry.
In the past, music industry conflict was often focused on ‘the majors versus the indies.’ Today, however, the real divide is between those committed to investing in artists and artist development versus those committed to gaming the system through quantity over quality. The current environment has attracted players who see an economic opportunity in flooding platforms with all sorts of irrelevant content that deprives both artists and labels from the compensation they deserve.
What’s become clear to us and to so many artists and songwriters — developing and established ones alike — is that the economic model for streaming needs to evolve. As technology advances and platforms evolve, it’s not surprising that there’s also a need for business model innovation to keep pace with change. There is a growing disconnect between, on the one hand, the devotion to those artists whom fans value and seek to support and, on the other, the way subscription fees are paid by the platforms. Under the current model, the critical contributions of too many artists, as well as the engagement of too many fans, are undervalued.
Therefore, to correct this imbalance, we need an updated model. Not one that pits artists of one genre against artists of another or major label artists against indie or DIY artists. We need a model that supports all artists — DIY, indie and major. An innovative, “artist-centric” model that values all subscribers and rewards the music they love. A model that will be a win for artists, fans and labels alike, and, at the same time, also enhances the value proposition of the platforms themselves, accelerating subscriber growth, and better monetizing fandom.
Along with many others in the music world, we share deeply held principles about the value of artistry and the artist-fan relationship. This year, we will be working on the innovation that is absolutely essential to promote a healthier, more competitive music ecosystem, one in which great music, no matter where it’s from, is easily and clearly accessible for fans to discover and enjoy. An environment where great music is not drowned in an ocean of noise. And one where the creators of all music content, whether in the form of audio or short-form video are fairly compensated.
Achieving such a profound change will present challenges as well as opportunities. I’m confident, however, that our long and deep involvement with music and artists will enable us to safely and profitably navigate our way forward through the industry’s next big shift.
I’m looking forward to being on this journey with all of you!
Our past is prologue to a future where the solutions we find and the steps we take to implement them will contribute to another era of growth for UMG and the industry at large. I believe there is no better team anywhere than the one we have right here at UMG.
Thank you once again for incredible 2022 in which our artists and our company achieved remarkable things.
I am immensely proud of all of you.
I’m excited for what will be an eventful and prosperous 2023.
Lucian