Grainge, the Chairman and Chief Govt Officer of publication on the finish of July of UMG’s Q2 2022 fiscal outcomes (masking the three months to finish of June).
UMG’s whole firm revenues at (throughout recorded music, publishing, and different actions) had been up by 17.3% YoY at fixed forex within the quarter to EUR €2.535 billion (USD $2.70bn).
Common’s recorded music subscription streaming Q2 income was up by 7.0% YoY at fixed forex to €966 million ($1.03bn), whereas its recorded music ad-funded/non-subscription Q2 streaming income was up 15.6% YoY at fixed forex to €348 million ($371m).
Commenting on music streaming’s development prospects within the face of the financial uncertainty and the price of dwelling disaster, Grainge argued that music is “strong”, and seemed to earlier downturns within the eighties and nineties the place music was proven to be a resilient leisure format despite macroeconomic headwinds.
Elsewhere in immediately’s interview, Grainge commented on the stability of energy between the labels and DSPs, and the expansion potential of latest platforms throughout social, gaming and health.
MBW listened in. Right here’s what we realized…
1. Sir Lucian Grainge is “bullish” about music streaming’s development potential.
Sir Lucian Grainge was requested about his ideas on music streaming’s future development prospects, to which he responded that he’s each “assured” and “bullish in regards to the alternative”.
He additionally famous that in 2019, subscription penetration within the mature music markets was “about one in 5” whereas on the finish of 2021 “it was all the way down to about one in 4”.
Seeking to the longer term, Grainge says that “there are numerous methods by which we are able to work with the DSPS”, noting that the most important DSPs like licensing settlement with Meta – mother or father of deal with Fb; Meta”
Talking extra broadly about “any utility the place music can be utilized, in video games, and many others,” Grainge stated that he sees a “phenomenal alternative”. He added that “there’s all the time a stability [to be struck], when it comes to guaranteeing “artists are rewarded appropriately” when working with new companies and new classes.
“We’ve additionally bought to present these companies a begin as properly,” added Grainge. “We are able to’t strangle them within the early days in order that there’s completely no upside for them. So it’s a stability. We prefer it once they begin and once they develop.”
3. Music has “all the time been a comparatively low price, but very prime quality leisure class”…
With talks of a price of dwelling disaster and a looming recession, Sir Lucian Grainge was requested about his views on music streaming’s resilience within the face of such financial headwinds.
He famous that he has seen “many downturns” over the course of his profession “each when it comes to macroeconomic” in addition to when it comes to “the disaster with piracy and file sharing”.
He additionally argued that “as a administration group, we’ve been very adept over this era when it comes to managing headwinds” and famous additional that “music is extremely strong”.
He added: “[Music] was strong within the recessions of 1981. Within the early Nineteen Nineties. It’s all the time been a comparatively low-cost, but very high-quality leisure class.
“No matter is thrown at us, we’ll lower our material accordingly. And we are going to make investments accordingly in hopefully what’s going to proceed to be development. It looks as if one of many indicators present that subscription remains to be resilient.”
Requested if he’s anxious about weak point within the promoting market, Grainge stated there “may very well be some headwinds”, however that “I don’t suppose we’re seeing that a lot for the time being.”
He continued: “We might even see a number of wobbles. We might even see a wobble from one month to a different after which there’s a rebound. I don’t see issues when it comes to month-to-month. I see what the alternatives are, and the way we orchestrate all of the complexities with the whole lot that we now have over a 3, 4 or five-year interval.
“So if we now have unhealthy months, a foul quarter, I’ve been by way of a lot change, frankly, we simply we plough by way of it. As a result of we all know the standard of what we now have.”
4. Common is “not a monetary participant” and in terms of investing in catalogs, “Management is crucial”…
Commenting on Common’s capital allocation, Sir Lucian Grainge argued that UMG “shouldn’t be a monetary participant, we’re not an instrument”. He added: “We go away earnings streams; royalty streams to others. Management is crucial.”
He argued additional that UMG has carried out “only a few offers,” however that the offers UMG has carried out are the “better of the perfect, the place one thing has outlined historical past or a tradition”.
A few of UMG’s current acquisitions embody the publishing rights to Bob Dylan’s songwriting catalog in December 2020, which was one of many largest acquisitions in UMG’s historical past.
In February, Neil Diamond bought his full tune catalog and all grasp recordings to Common. Sting additionally bought his tune catalog to UMG in February, in a deal one knowledgeable trade supply advised MBW was value north of $300 million.
Stressing the significance of management when doing catalog offers, Grainge famous that management means “no approvals”.
He cited Bob Dylan as a check case for this, including: “Once you checked out after we purchased the Bob Dylan catalog, he’d managed his enterprise in america, and I feel he had 4 or 5 directors, and the reply was usually, “no”.
“We constructed into our view and with our networks and our folks, that we may do issues with the Bob Dylan catalog, the place we didn’t should ask anyone apart from ourselves, was it acceptable and was it worthwhile?
“And he gave us that proper to try this. That’s not simply in regards to the test. It’s truly about trusting the suitable folks. It’s assumed that we’ll personal these property so long as the corporate exists.”
Commenting on balancing investments in catalog and frontline music, Grainge defined that “they’re two sides of the identical coin”. He added: “New investments, new artists [are] the catalog of the longer term. We now have to maintain present and we now have to maintain sitting on the large desk.”
5. Labels and DSPs are “critically necessary to one another…”
Bearing on Common’s relationship with the music streaming providers, Grainge defined that it’s “inevitably very constructive”.
Seeking to the previous, when streaming was changing into a mass market proposition, Grainge famous that, “we introduced Spotify to a world market.”
He added: “It was an concept that was working in Sweden. On the time it was an anti-filesharing, anti-piracy promoting wrapper and right here we. They’ve bought 185 million Premium subscribers.
Commenting on the stability of energy particularly, he stated: “I don’t see this as a factor of a zero-sum recreation or stability of energy. We’re in enterprise with one another. We’re critically necessary to one another.
He added: “We all know that we’re not less than 80% to 85% of the acquisition pull of all of the DSPs. We’re 80 to 85% of their retention.
“Shoppers, me, you, us, don’t need a subscription which provides you both white noise or one thing to fall asleep to, or an app that you just’ve by no means heard of.
“Which is why we’re seeing the affect and the significance of catalog and the way it matches alongside new music. So I get pleasure from working with [DSPs]. There’s all the time skirmishes. We now have skirmishes with everybody. It’s a part of life.”
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