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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
Madrid is hosting the first UMusic Hotel, a venture that aims to become an entertainment hub in the heart of the capital of Spain. Co-created by Universal Music Group and Dakia Entertainment Hospitality Group, the hotel is located inside the historic Albéniz Theater building, just a few steps from downtown tourist sites such as Puerta del Sol and Plaza Mayor.
The hotel opened on Nov. 14, 2022 at a 60% capacity and is now fully operating, with Antonio Banderas‘ take on the musical Company showing at the theater until Feb. 14. Next, Spanish singer-songwriter David Bisbal will take the stage for 20 days between March and April as part of the celebrations of his 20th music career anniversary.
The Albéniz Theater was inaugurated in 1945 and was in operation for more than 60 years until it closed its doors in 2009, when its owners wanted to demolish it and build a luxury residential building in its place. A group of citizens came together to create the Albéniz Theater Aid Platform and asked for it to be declared an Asset of Cultural Interest to prevent its demolition, which was finally granted in 2016. This allowed the 898-seat venue to be rehabilitated, and negotiations began for what is now the UMusic Hotel Madrid.
UMusic Hotels is a new international brand that offers first-class accommodations and entertainment. The goal is to create a unique experience for both guests and artists staying at their hotels, and to offer a wide range of music-related services and activities.
Music is in every corner of UMusic Hotel Madrid. Details such as the “Pasillo de la Música” (Hall of Music) — which connects the two buildings that make up the venue, and where you can see works of musicians such as Freddie Mercury, Lady Gaga, Alejandro Sanz and Katy Perry created by the Mexican artist and athlete Hubertus de Hohenlohe — is magical. Upon entering the access foyer located on Carretas Street, visitors are greeted by a neon sign that says, “Vente Pa’ Madrid” (Come to Madrid,) like the famous Ketama song, a cheerful welcoming. On one wall is a verse from Bob Dylan’s classic “Mr. Tambourine Man.”
The hotel has 130 rooms divided into four categories: classic, deluxe, premium and ultimate, all equipped with Nespresso coffee machines and Marshall speakers. There’s also the Artist’s Suite, an exclusive two-floor room with a private solarium terrace, living room and guest bathroom.
Guests can enjoy a vinyl library, gym, bar, amphitheater, outdoor pool, three meeting rooms, a two-level solarium, events spaces, a gastronomic experience at El Albéniz restaurant, 24-hour room service, and the Nota Alta (High Note) bar, located on the rooftop with a lovely city view.
Universal Music Spain has said it will keep working with the hotel to continue attracting top international stars to Madrid. UMusic Hotel confirmed that it is already working on the development of a second hotel, this time in South America, in Barranquilla, Colombia.
Universal Music Group is suing Triller over allegations that the video-sharing app has failed to make payments for months under its music licensing agreements, echoing accusations made by Sony Music Entertainment in a similar lawsuit last year.
In a complaint filed Thursday (Jan. 6) in Los Angeles court, the music giant’s publishing arm claimed that Triller stopped making payments in April 2022 under two different licensing deals and had missed several required payments since.
Universal says it filed a notice of default in November and terminated the deal earlier this week, but that Triller has still not paid the money it owes — despite allegedly spending plenty of cash elsewhere.
“During the same period that Triller was defaulting on its payment and reporting obligations, it was reported that Triller was spending substantial amounts of money acquiring companies … and throwing lavish events catering to members of the media and entertainment industry,” the company wrote.
Universal says Triller has also breached provisions that require the company to report how the music has been used on the platform. Combined with the lack of payment, Universal cited the breaches as cause to terminate the licensing contract, effective Jan. 3.
In a statement to Billboard, Triller downplayed the seriousness of the case, saying it dealt with only “a very small percentage of the catalogue, and is the ordinary course of business for the music industry and over a small amount of money.”
“This will be decided upon in a proper venue in a few years, and we clearly believe we are in the right and that a court will find in our favor,” Triller wrote in the statement. “It’s a plain vanilla case that virtually every social network has faced in one form or another. It’s not the first and won’t be the last but similar to the past disputes of these nature they tend to settle quietly and end up being a lot to do about nothing .”
The lawsuit is the latest recent legal trouble for Triller. Sony filed a similar case in August, saying it had terminated its licensing deal with the company after months of non-payment. That case, filed in federal court, claimed that Triller had continued to use Sony music without a license — meaning it had also infringed Sony’s copyrights. The case remains pending.
Before that, Triller got into a messy fight with Swizz Beatz and Timbaland, who sued in August over allegations that they were still owed $28 million from the sale of their Verzuz livestream series to Triller. The company was sued again later that month by a smartphone app consulting firm, which claimed the company had failed to pay more than $100,000 in fees. Both cases were quickly settled on confidential terms.
It’s also not the first sign of problems between Triller and Universal. In early 2021, the music giant abruptly pulled its catalog from the platform, claiming Triller had “shamefully withheld” artist payments. Three months later, the two companies announced a new worldwide licensing agreement, spanning recorded music and publishing and restoring the UMG catalog to the app. But in December, UMG was one of several major music companies to again be pulled down from the platform.
A prominent ’90s hip-hop duo is suing Universal Music Group for withholding royalties tied to what they’re alleging is a “sweetheart” deal the label reached with Spotify in the late 2000s.
Filed Wednesday (Jan. 4) in U.S. district court in New York by attorneys representing Andres Titus (Dres) and William McLean (Mista Lawnge), members of the hip-hop duo Black Sheep, the lawsuit claims UMG owes its artists approximately $750 million in royalties deriving from the company’s stock in Spotify. Under a licensing deal they claim UMG and the streaming giant reached in 2008, the label agreed to receive lower royalty payments in exchange for equity in the then-nascent streaming company. But Titus and McLean say the label breached their contract with Black Sheep and other artists by withholding what they argue is the artists’ rightful 50% share of UMG’s now-lucrative Spotify stock — and otherwise failing to compensate them for the lower royalty payments they received as a result of the alleged deal.
“Rather than distribute to artists their 50% of Spotify stock or pay artists their true and accurate royalty payments, for years Universal shortchanged artists and deprived Plaintiffs and Class Members of the full royalty payments they were owed under Universal’s contract,” the complaint reads. Titus and McLean further claim that Universal deliberately omitted from royalty statements both the company’s ownership of Spotify stock and the lower streaming royalty payments that resulted from its alleged deal with the streaming service.
“Over time, the value of the Spotify stock that Universal improperly withheld from artists has ballooned to hundreds of millions of dollars,” the complaint continues. “These and the other wrongful conduct detailed herein resulted in the Company’s breaching its contracts with artists, violating the covenant of good faith and fair dealing that is implicit in those contracts, and unjust enrichment at the expense of its artists.”
In a statement sent to Billboard, a UMG spokesperson denied Titus and McLean’s claims: “Universal Music Group’s innovative leadership has led to the renewed growth of the music ecosystem to the benefit of recording artists, songwriters and creators around the world. UMG has a well-established track record of fighting for artist compensation and the claim that it would take equity at the expense of artist compensation is patently false and absurd. Given that this is pending litigation, we cannot comment on all aspects of the complaint.”
According to the lawsuit, Titus and McLean signed a record contract with Polygram in July 1990 (later amended and revised in July 1991) as Black Sheep — the duo best known for the hit rap single “The Choice Is Yours (Revisited)” from their RIAA Gold-selling 1991 album A Wolf in Sheep’s Clothing. Black Sheep’s record contract was then assumed by UMG after the company merged with Polygram in 1998.
UMG acquired just over 5% of Spotify shares “in or around the summer of 2008” in a licensing agreement in exchange for lower royalty payments, the complaint adds, citing a 2018 Music Business Worldwide report. It claims that Universal acquired additional Spotify shares through its 2011 purchase of EMI, which had acquired shares in the streaming company around the same time, the suit alleges. It then cites UMG’s own prospectus, released in September 2021, revealing that the label held roughly 6.49 million, or roughly 3.35%, of Spotify shares as of June 30, 2021, valued at 1.475 billion euros ($1.79 billion).
It’s worth noting that UMG’s stake in Spotify has become significantly less lucrative since June 30, 2021, however. As of Wednesday’s closing price, UMG’s stake in Spotify is now worth just $560 million — the result of Spotify shares falling 70.5% over the past 18 months. Notably, Spotify isn’t the only streaming service UMG has equity in; according to the same prospectus, it also owns 0.73% of Tencent Music Entertainment shares, a stake that’s currently worth $112.5 million.
Included as an exhibit in the complaint is Black Sheep’s amended July 1991 contract with Polygram, which states that royalties paid to Titus and McLean “‘shall be a sum equal to fifty percent (50%) of [Universal’s] net receipts with respect to’ the ‘exploitation’ for any ‘use or exploitation’ of ‘Master Recordings’ created by Plaintiffs.” The plaintiffs claim they and other UMG artists are thereby entitled to 50% of the labels’ Spotify stock but that UMG has failed to pay it. This demand stems from a couple of broad assumptions: that all artists in the class signed similar contracts and that they were similarly not compensated with a portion of UMG’s stock holdings in Spotify.
The plaintiffs are asking for compensatory damages, punitive damages and an injunction “or other appropriate equitable relief” requiring UMG “to refrain from engaging in deceptive practices” as outlined in the lawsuit.
UMG isn’t alone among the major labels in acquiring Spotify stock — both Sony and Warner Music, as well as indie Merlin, also have or had stakes in the company. In May 2018, Sony sold half of its 5.707% stake in Spotify for an estimated $761 million, while that same month Merlin announced it sold its entire stake for an unknown amount and had shared the proceeds with its members. Warner followed suit in August 2018 when it sold its entire 2% stake in the streamer for $504 million, with the company announcing that around $126 million of the proceeds would be paid out to the company’s artists.
UMG has yet to sell any of its stock in the streaming giant.
-Additional reporting by Glenn Peoples
You can read the full lawsuit below.
The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
This was a year without splashy public offerings, like Universal Music Group’s last year and Warner Music Group’s the year before. Some of the biggest rights acquisitions of all time — for Bob Dylan’s and Bruce Springsteen’s recordings and publishing, and David Bowie’s publishing took place in those years, too. And the time when the biggest companies in the business could acquire their rivals may be over for the time being as well.
Rising interest rates put a chill on the catalog acquisition market and brought down valuations, but there was no shortage of investors for a seemingly never-ending supply of creators willing to take advantage of the streaming boom to part with their catalogs. The list of deals that didn’t even make this list includes various rights for the music of The Ramones, Justin Timberlake, Keith Urban, Louis Prima, Swedish House Mafia, Future and Blake Shelton.
Only two of the last year’s top 10 deals — ranked by dollar amount — didn’t involve a catalog changing hands. One was a reverse merger that made French streaming company Deezer a publicly traded company, while he other was Spotify’s latest acquisition to further its goal of becoming a one-stop destination for audio.
Concord sells asset-backed securities ($1.8 billion)
This month, Concord priced the biggest music-related asset-backed securitization in history: $1.8 billion of senior notes backed by a diversified catalog of music publishing and recorded music rights valued at $4.1 billion. Apollo’s Capital Solutions business structured the transaction and formed an investor syndicate led by Apollo-managed funds. JP Morgan was the co-structuring agent. Music-backed securitization was made famous in 1997 with $55 million of asset-backed securities, commonly referred to as Bowie Bonds, supported by royalties from Bowie’s recorded music catalog. Concord’s offering was significantly larger and diverse than Bowie’s: The catalog behind Concord’s bonds includes compositions and recordings by Phil Collins, Creedence Clearwater Revival, Daft Punk, Miles Davis, Imagine Dragons, Pink Floyd, Cyndi Lauper, Little Richard and James Taylor.
Brookfield Asset Management Invests in Primary Wave ($1.7 billion)
The biggest music industry deal of the year by dollar amount was something of a surprise. The 100-year-old Canadian asset manager Brookfield’s decision to put $1.7 billion into Primary Wave, an active buyer of music rights for nearly 17 years, came during a lull in the market. Rising interest rates were making music rights a less attractive investment, headline-grabbing acquisitions had slowed since the Fed began hiking rates in March and possible changes to tax treatment of catalog sales in 2022 culminated a busy 2021. Brookfield wasn’t discouraged by market forces, though. The two companies spent six months hashing out a deal, Brookfield managing partner Angelo Rufino told Billboard. Brookfield was attracted to Primary Wave’s model of employing marketing and branding experts to build the value of its acquisitions. He called Primary Wave CEO Larry Mestel “the best I’ve ever seen at leveraging brand extensions to supercharge the growth of these assets.”
Kobalt sells majority interest to Francisco Partners ($750 million)
Kobalt has been selling off assets left and right in recent years. It sold its two investment funds that owned music assets — one went to Hipgnosis Song Management for $323 million in 2020, the other to KKR and Dundee Partners for $1.1 billion in 2021 (which resulted in the Chord Music Partners bond offering this year, see below) — and Sony Music purchased Kobalt’s independent distributor and label services provider, AWAL, as well as its neighboring rights business. These moves allowed Kobalt to pay off its debt and finish 2021 with $315 million in cash. This year, Kobalt sold a piece of itself when tech-focused investment firm Francisco Partners, along with Dundee Partners and Matt Pincus’ MUSIC, bought a majority stake in the company for $750 million.
KKR sells asset-backed security ($732.5 million)
The technical sounding Hi-Fi Music IP Issuer II L.P., Series 2022-1, was a bond offering by Chord Music Partners in February, backed by a music catalog valued at $1.13 billion. What the bond lacked in curb appeal it made up for in sheer dollar volume after raising $732.5 million for Chord Music Partners, a venture of KKR Credit Advisors and Dundee Partners. The music publishing catalog behind Hi-Fi Music offering — about 62,000 titles in all — was purchased from Kobalt three months earlier. The According to a report by ratings agency KBRA, the Hi-Fi offering is backed by over 65,000 compositions and master recordings and related assets and includes artists and songwriters such as The Weeknd, Maroon 5, Childish Gambino, Dua Lipa, Mumford & Sons and Stevie Nicks.
Concord acquires Genesis, Phil Collins and Mike + The Mechanics rights ($335 million to $375 million)
Phil Collins’ and Genesis’s The Last Domino tour, which concluded at London’s O2 Arena in March, was a reminder of how beloved the 71-year-old Collins remains 47 years after he took over vocal duties when original Genesis singer Peter Gabriel departed in 1975. In that warm afterglow, Concord acquired the recording catalogs and music publishing rights of Collins, as well as Tony Banks and Mike Rutherford for the years they were in Genesis and Mike + The Mechanics, for something in the range of $335 million to $375 million. (Former Genesis members Peter Gabriel and Steve Hackett did not participate in the deal.) Collins’ solo material, focused on a string of four multi-platinum albums from 1981 to 1989, has 403 million streams in the U.S. this year (through Dec. 8), according to Luminate. In addition, Collins’ catalog has nearly 311,000 airplay spins this year. The acquisition includes Collins’ signature solo hit “In The Air Tonight,” from the 1981 album Face Value, that counts for more than a quarter of his year-to-date on-demand streams, and “That’s All,” a No.6 hit on the Hot 100 from the 1983 album Genesis. “Everyone at Concord feels the weight of the cultural significance of this remarkable collection of works,” Concord president Bob Valentine said when the deal was announced.
Sting sells entire publishing catalog to Universal Music Group ($360 million)
Universal Music Group isn’t the most active buyer of music catalogs, but it makes a splash when it decides to pull the trigger. In 2020, it purchased Bob Dylan’s publishing catalog for an estimated $400 million. In February, UMG acquired Sting’s entire publishing catalog, including his compositions with The Police (Sting was the sole songwriter of the group’s most popular songs, such as “Roxanne,” “Every Breath You Take,” “Message in a Bottle,” “Every Little Thing She Does is Magic”) as well as his solo material (“Fields of Gold,” “Englishman in New York,” “Shape of My Heart,” “If You Love Somebody Set Them Free”). Because UMG already has the master recordings to both the Police and Sting’s solo releases, buying the publishing catalog brings both rights under one roof. That should facilitate licensing and enhance UMG’s ability to generate income from the catalog. Billboard believes Sting’s representatives were shopping the catalog with a $360 million price tag, making the deal the largest for a single artist in 2022. Across both the Police and Sting’s solo releases, the catalog generated 469 million on-demand streams in the U.S. in 2022 (through Dec. 8), according to Luminate.
HarbourView Equity Partners acquires SoundHouse ($325 million)
HarborView Equity Partners burst onto the music business scene in 2021, led by founder and CEO Sherrese Clark Soares, an alum of Morgan Stanley and Providence Equity Partners-backed Tempo Music, and $1 billion backing by Apollo Global Management. Among its initial deals were the publishing catalog of Latin star Luis Fonsi that includes a share of the global hit “Despascito,” the master recording income of country star Brad Paisley, the publishing catalog of country group Lady A and the publishing catalog of Dre & Vidal, the songwriting and production duo who has worked with Alicia Keys, Justin Bieber and Mary J. Blige. HarborView’s biggest-single acquisition is an unknown name with considerable star-power: SoundHouse, the owner of about 20 master recording catalogs and the assets of indie contemporary Christian label InPop. That gave HarborView the rights to some master recordings by the likes of Tech N9ne, Trey Songz, George Jones, Whiskey Myers and Tenth Avenue North. Billboard estimates the deal was worth about $325 million. SoundHouse’s 2021 income was said to be about $24 million.
Sony Music acquired Som Livre ($255 million)
Brazil’s largest domestic record label hit the market as its parent company, Grupo Globo, went through organization restructuring. Announced in 2021, Sony Music’s acquisition Som Livre was finalized in Feb. 2022 after Brazilian regulators said there would be “low market concentration and low barriers to entry” from the merger, despite Sony already having the top record label market share in Brazil and Som Livre being third behind Universal Music Brasil. Som Livre is home to more than 80 artists, including sertanejo act Jorge & Mateus, forró star Wesley Safadão and rising stars like Israel & Rodolffo. Domestic music accounts for 70% of total music consumption in Brazil, the world’s 11th largest recorded music market in 2021, according to the IFPI.
Sony Music acquired Bob Dylan’s recorded music catalog ($200 million)
Thirteen months after Universal Music Group acquired Bob Dylan’s songwriting catalog, Sony Music picked up the bard’s recorded music catalog. Sony has not disclosed the terms of the transaction, but Billboard estimates the catalog generates roughly $16 million per year globally and is worth $200 million or more. The catalog covers all of Dylan’s recordings — 39 studio albums and 16 compilations in the Bootleg series — as well as unreleased material that could be released on future collections. (Separately, Primary Wave acquired Dylan’s share of the master and neighboring rights royalties from the Traveling Wilburys supergroup.) It makes sense that Dylan’s recordings ended up with Sony. The artist spent almost his entire career at Columbia Records, save two albums, Planet Waves and Before the Flood, both released by David Geffen’s Asylum Records in 1974 but distributed by Sony for decades. Dylan’s catalog amassed 313.5 million on-demand streams in 2022 (through Dec. 8), according to Luminate, and provides Sony with ample opportunities for licensing for film, television and advertisements (Airbnb used his track “Shelter From The Storm” from 1975’s Blood on the Tracks in a television ad this year). He used his return to Columbia in 1974 to gain ownership of his recordings, according to Dylan: A Biography by Bob Spitz.
Universal Music Group acquires Neil Diamond Catalog ($145 million)
In February, Universal Music Group announced a deal to acquire Neil Diamond’s song and master recording catalogs, reuniting Diamond’s non-UMG work with music released through UMG’s MCA Records during the artist’s successful 1968 to 1972 streak. Diamond’s catalog includes “Sweet Caroline,” “Cracklin Rosie” and “Forever iIn Blue Jeans.” His songwriting catalog includes compositions for other artists that reached No. 1 on the Billboard Hot 100 chart: “I’m a Believer” by The Monkees (1966); “You Don’t Bring Me Flowers” by Barbra Streisand (1978, co-written with Alan and Marilyn Bergman); and “Red, Red Wine” by UB40 (1988). Additionally, the recording of “Girl, You’ll Be a Woman Soon” by Urge Overkill has an indelible place in pop culture for its use in Quentin Tarantino’s 1994 movie Pulp Fiction. The trove of material included 110 unreleased tracks, an unreleased album and archival video. The deal also includes the rights to release any future music by Diamond should he return to the studio. Billboard estimates the deal was worth about $145 million.
Deezer’s reverse merger with SPAC I2PO ($143 million)
Deezer was one of two music companies to go public in 2022 through a reverse merger with a special purpose acquisition company (SPAC) in April before the SPAC craze fizzled in the second half of the year. (The other was Anghami, an Abu Dhabi-based streaming service. A third, wholesale distribution giant Alliance Entertainment, plans to complete a reverse merger with Adara Acquisition Corp.) The reverse merger with French company I2PO, which traded on the Euronext Paris exchange, provided Deezer with 135 million euros and valued Deezer at 1.08 billion euros ($1.17 billion at the time). The money came through a PIPE (private investment in public equity) subscribed by most of Deezer’s existing shareholders, including Access Industries, Universal Music Group, Warner Music Group, French telecom company Orange, Kingdom Holdings, Eurazeo and Xavier Niel. After investors poured money into blank check companies in 2020 and 2021 in pursuit of companies to take public, SPAC deals are increasingly rare these days. Among the many SPACs to end their search and return funds to shareholders are Music Acquisition Corp, which raised $230 million in Feb. 2021, and Liberty Media’s $575 million Liberty Media Acquisition Corporation.
Spotify acquired audiobook distributor Findaway ($122 million)
Findaway was neither Spotify’s priciest acquisition — it paid more for podcast companies The Ringer and Gimlet and tech platforms Anchor and Megaphone — nor was it the splashiest deal the music streaming giant has made in its roughly 15-year history. But buying the Ohio-based audiobook distributor was a pivotal moment in the company’s years-long transition from a music platform to a broader audio platform. With its share price down 68.1% year to date and investors anxious for profits, Spotify is betting that being a single destination for all things audio is a better strategy than focusing solely on music. The more ways Spotify can keep people listening, the idea goes, the longer consumers will engage with the platform , which in turn will funnels more people from the free version to the subscription service. Plus, audiobook margins are about double what Spotify gets for licensing music. Audiobooks also fit neatly with Spotify’s ongoing battle with Apple over the latter’s 30% share of in-app purchases and subscription revenue. Spotify CEO Daniel Ek’s PR push in recent months has been aided — and overshadowed — by new Twitter CEO Elon Musk’s public takedown of Apple over the same in-app fees.
Music companies’ quarterly results in October and November were a bright spot amid a mostly bleak earnings season. High inflation, rising interest rates and the chance of a recession presented a triple-whammy to most sectors — particularly tech and retail — but in the music industry, those macroeconomic threats weren’t enough to dampen consumer demand and investors’ confidence.
“While the broader economy is facing challenges, the music industry as a whole remains healthy,” says Golnar Khosrowshahi, founder and CEO of Reservoir Media, which raised its full-fiscal-year forecast by 11% for both revenue and adjusted earnings before interest, tax, depreciation and amortization (EBITDA).
So what worked in music companies’ favor? In short, more people are going to concerts and buying streaming subscriptions, and revenues from those sectors helped bolster quarterly results for nearly every publicly listed music company.
Diversifiction = Fortification
The major labels, which have a piece of the market in nearly every segment of the music industry, all reported quarterly revenue gains over the third quarter last year, ranging from 16% at Warner Music Group to 6% at Sony Music Entertainment. On Universal Music Group’s third-quarter call, chairman/CEO Lucian Grainge attributed the company’s 13.3% third-quarter revenue gains to UMG’s diversification strategy. While ad-supported streaming revenue slowed significantly, only growing 5.2% (from last year’s 15.6% growth), licensing and other revenues rose by 30% due to an $84.2 million increase in touring revenue from Latin American, European and Asian markets where UMG is in that business. Merchandising and other revenue related to those tours grew by over 100% to almost $199 million. “We are better positioned to navigate the inevitable ebbs and flows of revenue of any particular business, as well as to weather any macroeconomic headwinds,” said Grainge.
Live’s Alive Again
Live Nation Entertainment had its biggest summer concert season ever, reporting that more than 44 million fans attended 11,000 events in the third quarter, as attendance for stadium shows tripled to nearly 9 million. Companywide, Live Nation reported $6.2 billion in quarterly revenue, up nearly 67% from the last-comparable quarter, which for it was the third quarter of 2019.
Streaming’s Still Strong
On a call with investors, an analyst asked Sony deputy president/CFO Hiroki Totoki what risks Sony Music Entertainment faces. His reply: “Streaming is very successful, and we don’t really have that much of a concern.” Spotify’s third-quarter results confirm that. Revenue rose 12% to roughly $3.2 billion at a constant currency, on a 13% uptick in subscription revenue from more than 195 million subscribers — 1 million more than the company targeted.
French streaming company Deezer also reported double-digit revenue growth, although it attributed the increase in part to a one-euro price hike the company instituted in France earlier this year. Deezer’s revenues rose nearly 14% to $112.5 million at the Sept. 30, 2022, exchange rate.
Price hikes, coming at a time consumers’ costs are rising across the spectrum, are the final thing working for music industry companies. After Apple said it would raise its standard individual streaming plan price by $1 to $10.99 in the U.S. and Spotify signaled it was also considering a price increase, major labels and other streaming company executives all said they expect trickle-down benefits.
It’s also worth noting that although Totoki said on the call that Sony is “taking steps to prepare for further deterioration… in each of our businesses,” the company raised its revenue and operating income targets for the full fiscal year by $9.8 billion and $1.9 billion, respectively (at Sony’s assumed exchange rate for the second half of the fiscal year).
Universal Music Group (UMG) will expand its early career development program, Bonus Tracks, to Atlanta’s Frederick Douglass High School and through Motown Museum’s Hitsville NEXT in Detroit in the coming spring semester, the company tells Billboard. Last spring, UMG completed its first year in New York at Brooklyn’s Pathways in Technology Early College High School (P-TECH).
Bonus Tracks is dedicated to discovering and developing a diverse set of future executive talent by giving students in grades 11 and 12 the opportunity to learn about the music industry through immersive programming while being provided with transferrable skills. During the multi-week program, participants attend weekly meetings at a UMG label with executives from all areas of the company, including creative, marketing, commercial partnerships and promotion.
UMG has also created the Bonus Tracks Scholarship Award, a college scholarship that will be given to one Bonus Tracks student in each city who are recognized for their community leadership, commitment to academic excellence and completion of the program, including the presentation of their capstone project.
The Bonus Tracks program was launched in 2019 in partnership with Capitol Music Group (CMG) and the Compton Unified School District at Dominguez High School in Los Angeles. It later expanded to Nashville through Capitol Christian Music Group and Pearl-Cohn Entertainment Magnet High School. It was founded by Brian Nolan, executive vp and executive vp of marketing at Motown; Patrick Stephens, manager of brand partnerships at CMG; and Micah Ali, president emeritus of the Compton School District.
“We’re excited to see Bonus Tracks continue to expand and look forward to bringing the program to students in Detroit and Atlanta,” said Nolan. “We knew Bonus Tracks could thrive and scale in the most meaningful ways in order to reach the next generation of music industry leaders. I am grateful to Micah Ali for his partnership in this incredible journey and to UMG for fully embracing and supporting the vision of the program: inspiration, education, and pathway.”
“Bonus Tracks has always been about giving students the opportunity to learn about career pathways in a way that meets their passion for music and curiosity about the industry,” added Ali. “As this program moves into its fifth year, I’m incredibly honored to continue to expand this program to reach students across the country.”
“Motown Museum’s Hitsville NEXT is devoted to supporting creativity in today’s young artists, entrepreneurs and changemakers,” said Robin Terry, chairwoman and CEO of the Motown Museum. “Partnering with Bonus Tracks is a perfect reflection of our mission. We can’t wait to work with the entire Detroit Public School system and grow this great program in our community.”
“With Atlanta being the music capital of the south, Frederick Douglass High School has produced some of the most famous music industry icons such as T.I., Lil Jon, and Killer Mike, to name a few, said Erika Y. Mitchell, a school board member of Atlanta Public Schools. “Bonus Tracks will create pathways for our students to learn about the music industry’s business, provide mentorships with music executives, and allow our students post-graduation to have access to internships at Universal Music Group or receive a scholarship toward college.”
Mitchell added that she’s “looking forward to expanding” the Bonus Tracks program to Atlanta’s Benjamin E. Mays High School “in the near future.”
“It is critically important for UMG to provide early career opportunities as an investment in the future of this industry, both from a business and fan perspective,” said Natoya Brown, senior vp of people inclusion and culture at UMG. “Bonus Tracks is a way to begin discovering and cultivating the next generation of music industry leaders.”
The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
After a miserable year for music stocks — and stocks in general — 2022 could end on a string of positive notes.
As rising interest rates have hammered stocks and erased big gains made during the pandemic, the Billboard Global Music Index, a float-adjusted group of 20 publicly traded music companies, is down 36.1% in 2022, and shares of vital companies such as Spotify and Warner Music Group are down 65.7% and 20.5%, respectively.
But in recent weeks, the momentum has reversed dramatically. The Billboard Global Music Index is up 12.6% over the last two weeks and 14.6% in the five weeks since Oct. 28.
Since Oct. 28, the week when music companies began to release third-quarter financial results, the stocks of major labels rose an average of 23.1%. Indie music companies — Reservoir Media, Believe, Hipgnosis Songs Fund and Round Hill Music Royal Fund — rose an average of 8.2% over that time period. K-pop companies from South Korea averaged a 16.1% improvement.
Part of music stocks’ rebound can be attributed to overall market sentiment. Stocks have improved in recent weeks — the New York Stock Exchange composite index is up 6.6% in the last five weeks and the S&P 500 is up 4.4% over that time. This week, stocks surged on Wednesday (Nov. 30) after Federal Reserve chairman Jerome Powell said upcoming interest rate hikes will be smaller following “promising developments” in the Fed’s efforts to slow inflation. Stocks gave back some of those gains on Friday, however, after a solid U.S. jobs report showed a combination of strong hourly earnings and lower labor force participation. Higher wages erode corporations’ profits and persistent inflation could mean more rate hikes by the Federal Reserve.
But music companies have outperformed the broader stock markets thanks to solid third-quarter earnings results that met and occasionally exceeded expectations. In addition, many companies increased their fourth-quarter guidance when they announced third-quarter results. That tends to increase share prices as investors adjust upward their expectations for future performance.
Among the best performers of late has been Warner Music Group, whose shares improved 31.1% in the last five weeks. Last week, Warner beat analysts’ expectations for both revenue and earnings per share in the fiscal fourth quarter ended Sept. 30 and announced on Nov. 22. It posted revenue of $1.5 billion, up 16% year-over-year at constant currency (+9% as reported). Adjusted earnings before interest, taxes, amortization and depreciation grew by 16% to $276 million.
Shares of Universal Music Group have risen 16.1% since Oct. 28. The day prior, UMG’s third-quarter earnings showed a 13.3% jump in revenue at constant currency. Sony Corp., the parent company of Sony Music Group, climbed 23.7% over the same period. Sony Music’s quarterly earnings, released on Nov. 1, showed 5.9% year-over-year revenue growth. Sony’s music division accounts for just 11.4% of the company’s consolidated revenue and 16.7% of its operating income while UMG and WMG are pure-play music companies.
Smaller labels and publishing companies have improved, too. Reservoir Media shares have climbed 14.9% over the five weeks, while shares of Believe rose 19.1% over five weeks but stumbled 7.8% in the last two weeks. Both companies raised guidance for their fourth quarter results. Korean music companies have also fared well: the shares of four K-pop-focused companies — HYBE, SM Entertainment, YG Entertainment and JYP Entertainment — rose an average of 16.1% in the last five weeks.
Labels’ and publishers’ financial results were augmented by positive news that suggests even stronger streaming revenue in 2023. According to WMG CEO Stephen Cooper during the company’s Nov. 22 earnings call, announcements of price increases by Apple Music [on Oct. 24] and Deezer “in the current economic environment shows that music subscription services offer amazing value to consumers. Music remains undervalued, but we’re optimistic that there will be other increases to come.”
Cooper was also encouraged by subscriber growth reported by streaming companies. Spotify exceeded expectations in the third quarter by adding seven million subscribers — 1 million more than its guidance. YouTube announced on Nov. 11 it had reached 80 million subscribers of YouTube Music and Premium just 14 months after surpassing the 50-million mark. “Developed markets continue to grow in the double digits while emerging markets are growing at higher percentages,” said Cooper. “With global smartphone penetration expected to increase meaningfully in the coming years, our conviction in streaming growth remains strong.”
While labels and publishers have surged, streaming companies have been mixed. On average, streaming companies’ stocks rose 24.4% over the last five weeks. The biggest gains came from much smaller Tencent Music Group and Cloud Music, up 101.6% and 28.4%, respectively — but both have relatively small floats and remain majority owned by Tencent and NetEase, respectively. Even smaller yet are Anghami (-3.1%) and Deezer (-1.5%). Spotify, one of the largest companies in the index, declined 3.7%.
Companies in the live and ticketing space haven’t fared as well as others, however. Live Nation shares are down 7.7% in the last five weeks, due mainly to a 7.5% drop following its third-quarter earnings release and a 10.3% decline on Nov. 18 following reports that the company was being investigated by the Department of Justice after its controversial presale for Taylor Swift’s upcoming tour. The latter was a short-lived dip, however, and Live Nation shares have reclaimed that lost ground and more by rising 11.6% in the last two weeks. Over five weeks, MSG Entertainment shares rose just 2% and Vivid Seats shares are off 1.2%. On the other hand, shares of German concert promoter CTS Eventim rose 27.7% over five weeks after posting strong third-quarter results and sounding more confident about full-year results than comments it made in its second-quarter earnings release.
Four radio companies — iHeartMedia, Cumulus Media, Audacy and Townsquare Media — have fared the worst, falling an average of 6.8% since Oct. 28. IHeartMedia, the largest radio company and a member of the Billboard Global Stock Index, fell 9% over that time.
When Motown Records chairwoman and CEO Ethiopia Habtemariam announced on Tuesday she would be stepping down to “pursue new endeavors,” the news was met with surprise, concern and the one inevitable question: What’s next for the storied label founded by Berry Gordy?
“Nobody saw this coming,” says one veteran label executive of the stunning announcement, stemming from the fact that Habtemariam was promoted to the chairwoman/CEO post in March 2021, only 20 months ago. Her groundbreaking appointment as the third woman — and only the second one of color — ever to hold that title at a major label was concurrent with other major news: Motown was being re-established as a standalone label after first being under the Island Def Jam umbrella and most recently under the Capitol Music Group banner.
During Habtemariam’s tenure — which also includes six years as president — she has rebuilt Motown into the strongest position it’s held in years. After overseeing the label’s relocation from New York to Los Angeles in 2014, Habtemariam announced her first major signing in 2015: a joint venture with Atlanta-based Quality Control. The alliance yielded such now-marquee names as Lil Baby, Lil Yachty, Migos and City Girls for the label’s roster. Other entrepreneurial ventures ensued, including Blacksmith Recordings (Vince Staples) and Since the 1980s (Asiahn, Njomza), alongside roster mates Erykah Badu, Kem, Tiana Major9 and Nigerian star Tiwa Savage. This fall, Motown signed Youngboy Never Broke Again after inking a global joint venture with his Never Broke Again collective last year. Also new to the roster are Brandy and Sean “Diddy” Combs with a one-album deal for the first release from his R&B-focused label Love Records.
At the time of Habtemariam’s promotion to chairman in 2021, Motown’s overall U.S. market share was 0.85%, having grown from 0.4% in 2017 to 0.59% in 2020, and she’s since grown it further, to 0.95% to date in 2022. While catalog had primarily driven Motown’s performance in the past, its market share growth in 2020 and 2021 was largely due to its frontline commercial releases, thanks primarily to the QC roster, Staples and veteran R&B chart-topper Kem. In April 2021, its current market share — essentially the performance of music released in the 18 months prior to the measurement period — was just shy of 1%. That’s after averaging 0.14% from 2015 to 2019 and more than doubling that number to 0.32%, according to Luminate data. In 2022 so far, Motown’s current market share has risen to 1.30%.
Habtemariam has also wielded influence at the corporate level, too, having co-founded and served as co-chair of Universal’s Task Force for Meaningful Change, dedicated to supporting initiatives designed to support marginalized communities battling injustice, inequality and inclusion issues. Having spent 20 years at UMG in various roles, Habtemariam was well-respected internally, several sources note.
Habtemariam’s pending departure will leave only two people of color running major labels as chairmen/CEOs: Epic Records’ Sylvia Rhone, now in her eighth year at the label and third as chairman/CEO, and Def Jam Recordings’ Tunji Balogun, who will celebrate his first anniversary at the label in January. As to who will succeed Habtemariam, inside sources say nothing has been decided yet. And in talking to several other industry executives, no one had any contenders they wanted to suggest. Given past precedent, however, UMG could opt to have a senior executive oversee the label for an interim period, as happened in 2020 when Paul Rosenberg exited as Def Jam CEO and Universal tapped Jeffrey Harleston, its general counsel and executive vp of business & legal affairs, to temporarily oversee label operations while it conducted a search, which lasted almost two years and ultimately resulted in the appointment of Balogun. Universal Music Group had no comment when contacted.
Just as important as diversity and inclusion in the search for Motown’s next chief is what happens now with the label itself. Will it remain a standalone or be folded back into the Capitol Music Group or another sister label?
One senior-level executive notes that Motown “has never been set up to run on its own.” The label shares some services through Universal and still uses Capitol’s radio promotions team, while its market share still goes through Capitol Music Group, a setup similar to those at other UMG labels like Island, whose market share goes through Republic. Another label executive who agreed to talk on background said that while it’s too soon to predict what happens with Motown, bringing the label back under CMG isn’t an unrealistic scenario. In an uncertain economic climate that’s already sparked layoffs at CNN, Twitter and other companies, such a move would reduce overhead while strengthening Capitol’s R&B/hip-hop presence.
However, given the strides made under Habtemariam’s watch, one major label executive says Motown shouldn’t be viewed as “disposable.” They continue, “I would hope that Motown stays standalone. Its legacy remains an important part of Black culture and pop music, thanks to its generational talent then — and now.”
Additional reporting by Dan Rys.
Try using some of your favorite songs on the short-form video app Triller, and you’ll be hard pressed to find what you’re looking for.
On Thursday, the music catalogs for Universal Music Group, Warner Music Group, Sony Music and Merlin — which provides digital licensing to many top independent labels and distributors — were removed from the platform.
A Triller spokesperson says the platform is “reassessing each of our label deals as they come due as our catalogue music usage is a small fraction of our overall business with creators.
“Some labels are more used than others and if we can make financial arrangements which make sense for the platform, on a label by label basis, we will. In other cases the usage does not justify the cost.”
The news follows a lawsuit filed by Sony Music Entertainment in August, claiming Triller had “historically failed to make payments in a timely manner” but that this issue got even worse in March 2022 when Triller “failed to make any monthly payments required under the Agreement, totaling millions of dollars.”
A source at one of the other major music companies says similar breach of contract and failure to make payments, including “millions and millions in past due royalties,” was behind Triller’s decision to pull these catalogs. The Triller spokesperson, however, called that claim “false and grossly inaccurate.”
Representatives for Universal, Warner, Sony and Merlin declined to comment.
In a Thursday morning email, Merlin’s senior director of business and legal affairs alerted members that Triller had “commenced the takedown of Merlin content.” He continued, writing “at this stage we do not believe that Merlin is the only licensor/content provider to have had content taken down. The term of our current agreement with Triller has now expired. We will update members as soon as we can regarding renewal discussions.”
Merlin members include Secretly Group, Mom + Pop, Monstercat, Symphonic, Ninja Tune, Beggars Group, FUGA, ONErpm, Domino, SubPop, Vydia and more. The Triller spokesperson told Billboard when asked about the Merlin email, “We are in active conversations with Merlin and expect to renew our relationship and continue our friendly and successful partnership.”
“As Triller has grown and expanded its portfolio of services for creators as an open-garden platform, we are recalibrating some of our partnerships with a focus towards showcasing talent and maximizing their monetization,” that statement continued.
A glance at Triller’s Discover Music page shows that there are now few official music options available after the takedowns, and the promoted new releases and top picks are largely artists with no label affiliation. The only traces left of some label-signed artists are available through searching “OG Sounds,” which are typically user-created soundtracks like remixes that sometimes contain copyrighted material, or if a signed artist collaborated as a feature on a song released independently.
The public rift between Triller and the music business dates back to about 2020, when chairman and CEO of the National Music Publishers’ Association (NMPA) David Israelite criticized the app in an Instagram post, saying Triller needed to fully license its members works. “It’s a simple proposition – license songs before you use them,” he wrote.
In November of that year, Wixen Music Publishing filed a 15-page lawsuit against Triller, suing the company for $50 million dollars, stating in the complaint that Wixen felt encouraged when Triller’s CEO appeared to agree with the NMPA’s criticism that summer, but then, after months with no agreement reached, Wixen opted to file the lawsuit.
In the indictment, Wixen alleged Triller had “brazenly disregarded copyright law and committed willful and ongoing copyright infringement,” of its more than 1,000 song catalog. The lawsuit was dismissed in February 2021.
Eventually, in March 2021, Triller came to an agreement with the NMPA on behalf of its members.
Also in early 2021, Universal Music abruptly pulled its catalog from Triller, saying the app “shamefully withheld” artist payments. A source familiar with the matter told Billboard at the time that the payments UMG claims Triller is withholding went back several months. Three months later, the two companies announced a new, worldwide licensing agreement, spanning recorded music and publishing and restoring the UMG catalog to the app.
This August, Timbaland and Swizz Beatz also sued Triller for failing to make payments due on the sale of their popular Verzuz livestream series the year prior. They claimed the platform still owed them $28 million from the deal 18 months later. That lawsuit was settled in September.
Outside of music, there have been other claims against Triller for allegedly failing to make owed payments. Boxing journalist Dan Rafael reported that Triller had not fully paid several fighters and crew members from a May 2022 fight. In August, the Washington Post reported that Triller “promised millions to Black creators” to use the app as part of a paid influencer program, but “nearly a year after…its payments to many creators have been erratic — and in some cases, nonexistent.” In September, it was also sued by a smartphone app consulting firm that said it was owed more than $132,000 in unpaid fees.
Over the past two years, Triller has repeatedly announced plans to go public but has so far failed to do so — initially through the formerly-popular ‘SPAC’ merger process, and then in June this year filed paperwork with the U.S. Securities and Exchange Commission indicating that it plans to take a more traditional IPO route. In late September, the company announced it had secured $310 million from Luxembourg-based private alternative investment group for a 36-month term following a public listing of Triller’s common stock and would aim for a public listing by early in the fourth fiscal quarter (October-December).