Sir Lucian Grainge, Chairman and CEO of Universal Music Group, has mentioned the best way music streaming companies pay labels and artists as we speak has to vary.
Writing in a New 12 months notice to employees as we speak (January 11), obtained by MBW, Grainge mentioned: “What’s turn into clear to us and to so many artists and songwriters—creating and established ones alike—is that the financial mannequin for streaming must evolve. As know-how advances and platforms evolve, it’s not shocking that there’s additionally a necessity for enterprise mannequin innovation to maintain tempo with change.
“There’s a rising disconnect between, on the one hand, the devotion to these artists whom followers worth and search to help and, on the opposite, the best way subscription charges are paid by the platforms. Below the present mannequin, the essential contributions of too many artists, in addition to the engagement of too many followers, are undervalued.”
In Grainge’s crosshairs, there: The ‘pro rata’ payout system utilized by companies corresponding to Spotify, whereby the vast majority of subscription and advert cash generated every month is pooled right into a central ‘pot’, and is then paid out to labels and artists based mostly on their share of the quantity of whole performs.
Additionally in Grainge’s crosshairs: Corporations and entrepreneurs who search to take advantage of this ‘professional rata’ system for their very own unjust achieve. (In addition to, doubtlessly, streaming companies who strike direct low-royalty offers with music manufacturing companies, after which intentionally push music followers in the direction of this music in an try to economize on total royalty prices.)
“As soon as these followers have subscribed, customers are sometimes guided by algorithms to generic music that lacks a significant inventive context, is inexpensive for the platform to license or, in some circumstances, has been commissioned immediately by the platform.”
Writes Grainge: “With the intention to entice customers to subscribe, platforms naturally exploit the music of these artists who’ve massive and passionate fan bases. However then, as soon as these followers have subscribed, customers are sometimes guided by algorithms to generic music that lacks a significant inventive context, is inexpensive for the platform to license or, in some circumstances, has been commissioned immediately by the platform.
“For instance, simply witness the 1000’s and 1000’s of 31-second monitor uploads of sound recordsdata whose sole goal is to recreation the system and divert royalties. The consequence? A much less fulfilling expertise for the buyer, diminished compensation flowing to artists which are driving the enterprise fashions of the platforms, and fewer cultural moments that followers can collectively share, all of which undermines the creativity and growth of artists and their music that the platforms had been, partially, designed to foster.”
As he has up to now, Grainge additionally raises considerations over the large quantity of the 100,000-plus tracks a day now being uploaded to sure music streaming companies, and the buyer expertise that outcomes.
“[W]ith such an enormous and unnavigable variety of tracks flooding the platforms, customers are more and more being guided by algorithms to lower-quality useful content material that in some circumstances can barely cross for ‘music’,” Grainge writes, including: “Up to now, music trade battle was usually targeted on ‘the majors versus the indies.’ At this time, nevertheless, the actual divide is between these dedicated to investing in artists and artist growth versus these dedicated to gaming the system by amount over high quality. The present setting has attracted gamers who see an financial alternative in flooding platforms with all types of irrelevant content material that deprives each artists and labels from the compensation they deserve.”
The answer? Grainge says Common Music Group is open to experimentation on that rating, however seems to recommend that beforehand proposed different streaming payout fashions – most notably the ‘user-centric’ or ‘fan-powered’ mannequin adopted by SoundCloud and others – haven’t gained UMG’s help.
“[To] appropriate [the streaming payout] imbalance, we’d like an up to date mannequin,” he writes. “Not one which pits artists of 1 style in opposition to artists of one other or main label artists in opposition to indie or DIY artists. We want a mannequin that helps all artists — DIY, indie and main. An progressive, ‘artist-centric’ mannequin that values all subscribers and rewards the music they love. A mannequin that will likely be a win for artists, followers, and labels alike, and, on the identical time, additionally enhances the worth proposition of the platforms themselves, accelerating subscriber progress, and higher monetizing fandom.”
“This yr, [UMG] will likely be engaged on the innovation that’s completely important to advertise a more healthy, extra aggressive music ecosystem.”
Grainge provides: “This yr, [UMG] will likely be engaged on the innovation that’s completely important to advertise a more healthy, extra aggressive music ecosystem, one wherein nice music, regardless of the place it’s from, is definitely and clearly accessible for followers to find and revel in. An setting the place nice music is just not drowned in an ocean of noise. And one the place the creators of all music content material, whether or not within the type of audio or short-form video are pretty compensated.
“Attaining such a profound change will current challenges in addition to alternatives. I’m assured, nevertheless, that our lengthy and deep involvement with music and artists will allow us to securely and profitably navigate our means ahead by the trade’s subsequent massive shift.”
You’ll be able to learn Sir Lucian Grainge’s New 12 months memo, which was emailed to international Common employees, in full under.
Expensive Colleagues,
Comfortable New 12 months! I wished to put in writing to you to welcome you again and as promised, provide you with my ideas in regards to the yr forward. It’s laborious to consider that just a bit greater than a yr in the past, UMG turned a freestanding public firm. It was a watershed second in our historical past. And but, in some methods, in the case of what we do day by day, we simply saved doing what we’ve all the time executed: carry nice artists and their music to the world; break efficiency information of all types in every single place; and drive the trade ahead although creativity, strategic investments, and innovation.
And that’s precisely what we plan to do that yr.
Now, with 2022 within the rearview mirror, I’d prefer to share with you a couple of ideas about what was a unprecedented yr for UMG and likewise categorical my gratitude to all of you for making the yr so outstanding. I’ll have one thing to say as nicely in regards to the very actual challenges and alternatives that lie forward for us in 2023, however first let’s take a quick victory lap to mirror on what we achieved final yr.
Starting with some accomplishments I’m significantly pleased with, listed here are only a few examples of how, as soon as once more, you and our artists confirmed up massive time to make our communities stronger and assist these in want:
- Serving greater than 20,000 meals world wide;
- Constructing neighborhood gardens all through the US, Europe and Australasia;
- Engaged on important training campaigns with organizations corresponding to Psychological Well being Coalition; and
- Extending our applications to learn our artists previous and current together with helping a whole lot of artists in saving tens of millions of {dollars} in healthcare prices by our partnership with Music Well being Alliance within the US.
And our firm’s Activity Power for Significant Change continued its groundbreaking work in a wide range of methods: funding applications to mentor the following technology of Black artists and Black music trade executives; preventing for felony justice reforms; investing in neighborhood violence intervention applications and coverage organizations; partnering with HBCU medical faculties to widen the Black practitioner pipeline; and serving to end up the vote within the US elections by offering greater than 13,000 rides to and from the polls. Between the TFMC, our All Collectively Now Basis, and our Worker Matching Program, now we have contributed to greater than 500 organizations in 2022 alone.
On the charts, the efficiency of our artists and songwriters remained stellar. So many artists from world wide 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; Think about Dragons; Rammstein; Helene Fischer; ABBA; Ado; Elton John; Eminem; Justin Bieber; King & Prince; Lil Child; Billie Eilish; amongst many many others. Listed below are some examples:
- On Spotify: UMG had 4 of the Prime 5 Artists globally; 4 of the Prime 5 within the US; 7 of the Prime 10 in Germany and Italy, together with No 1s in each nations; and the highest feminine artist in France;
- On Apple Music: Common Music Publishing Group had writer-interests in 9 of the Prime 10 most-streamed songs globally;
- On YouTube: UMG had 7 of the Prime 10 Songs within the US;
- On Billboard: We had the No. 1 Music on the Sizzling 100 year-end chart and seven of the Prime 10 Albums;
- On Deezer: UMG had the Prime 2 Artists globally, and 5 of the Prime 10;
- In Germany: The Prime 4 Albums and the Prime 3 Singles;
- Within the UK: 6 of the Prime 10 artists together with No. 1;
- In Japan: The No. 1 Artist on Billboard’s 12 months-end Chart;
- On Vevo: The No. 1 International Artist
- And at last, in China: Eason Chan’s “Gu Yong Zhe” (“The Lone Warrior”), turned the most-streamed music in UMG China’s historical past after topping the charts on all main streaming platforms.
All that—and a lot extra—didn’t simply “occur.” To realize such astonishing success for each creating and established artists, and to take action yr after yr, in each conceivable style, usually in areas past their house nations, isn’t any accident. UMG’s distinctive artist-centric tradition accounts for that repeated success and is on the coronary heart of our firm’s two-fold mission.
Our first, easiest, and but most troublesome crucial is to find and break new artists after which maintain their careers over the long term. Not like so many different gamers within the music world, particularly the newer ones, UMG can by no means be thought to be merely a “checkbook and distribution” firm. Nor are we some convoluted monetary instrument that seeks to take advantage of the current progress in our trade. No, we’re totally different. Very totally different. As a result of for all of us at UMG, music and the artists who create that music comprise our very raison d’être. It’s what will get us up within the morning.
The second a part of our mission is to advertise a wholesome, sustainable and thrilling music ecosystem wherein our artists can thrive for years and many years to return. We fulfill that objective by utilizing our ingenuity to drive the music trade ahead as know-how and the world round us maintain altering. That’s the reason, at the same time as we diligently work, day-in and day-out, to interrupt our artists and songwriters, we’re additionally pursuing unexplored avenues of artistic and business potentialities and, every time acceptable, taking the required steps to show these potentialities into actuality.
One highly effective instance of a type of potentialities turning into actuality: immersive or ‘spatial’ audio. Seven years in the past, we launched into a journey to evolve the music listening expertise. We approached Dolby with a proposal: if our two firms labored collectively, we might develop a brand new format that envelops the listener right into a 360-degree immersive setting that gives artists with a broader artistic palette on which to precise themselves. We believed that this might be some of the vital developments within the recorded music listening expertise in many years.
An advance as vital as immersive audio was no straightforward feat. It required years of funding and innovation. Way more. We constructed state-of-the-art recording suites inside our community of iconic studios—Capitol Studios in LA and Abbey Highway Studios in London, to call simply two. We educated a number of the world’s high engineers in the best way to make one of the best use of the format. And we carried out an intensive marketing campaign to teach artists and artist estates in regards to the limitless artistic alternatives that immersive audio supplies.
We’re already seeing the outcomes. Practically half of UMG’s streaming consumption and 80% of our top-50 streaming artists’ music can be found in immersive (or Atmos) variations.
Who advantages from this landmark innovation? For starters, artists, in fact. And by “artists,” I imply all artists, not simply UMG’s. Because of our efforts, your complete trade has been releasing an increasing number of music in immersive audio. And plenty of platforms—together with Apple Music, Tidal and Amazon Music—are providing this far superior expertise to the opposite beneficiaries of immersive audio: music followers. Tens of millions and tens of millions of them world wide. And so they merely can’t get sufficient.
This yr followers will get much more. I’m assured that we are going to see vital international progress within the availability of immersive audio as an increasing number of car and machine producers introduce new merchandise designed to ship this enormously enhanced musical expertise.
Wanting past the enlargement of immersive audio, our dedication to drive change will solely speed up this yr. Simply as we’ve executed so efficiently up to now, we’re setting up the methods and sources to guide by each vital technological advance on the horizon. And every such advance—from web3 and the metaverse, to new functions for well being and wellness and medical music supply—will allow us to attach on to customers in ways in which had been unimaginable only a few years in the past and ship vital long-term worth to these followers, in addition to to our artists, our staff and our shareholders.
That’s precisely the pioneering method we took on the creation of streaming. Early on, we noticed the potential inherent in streaming and subscription and jumped proper in. Although it looks as if solely yesterday that we had been working with Spotify to allow their US launch, that “yesterday” was means again in 2011. Whereas different firms had been attempting to carry their floor at the same time as that floor was shifting beneath their toes, UMG leaned into what was probably the most profound enterprise mannequin shift the trade had ever seen, redesigning our international group, turning into the primary to adapt to after which thrive within the streaming period.
But when historical past teaches us something, it’s this: each blazingly transformative technological growth inevitably creates new challenges for us to confront. So, it’s no shock that after nearly a dozen years of basically reworking the music enterprise, the style wherein music is offered and consumed on streaming platforms has itself advanced. And whereas that evolution has created monumental alternatives and advantages for artists and customers—mirrored in elevated listening variety that originally comes with adoption of subscription—it has additionally created byproducts which are more and more complicated and unfulfilling for them as the quantity of noise within the market has elevated. At this time, some platforms are including 100,000 tracks per day. And with such an enormous and unnavigable variety of tracks flooding the platforms, customers are more and more being guided by algorithms to lower-quality useful content material that in some circumstances can barely cross for “music.”
Let me clarify. With the intention to entice customers to subscribe, platforms naturally exploit the music of these artists who’ve massive and passionate fan bases. However then, as soon as these followers have subscribed, customers are sometimes guided by algorithms to generic music that lacks a significant inventive context, is inexpensive for the platform to license or, in some circumstances, has been commissioned immediately by the platform. For instance, simply witness the 1000’s and 1000’s of 31-second monitor uploads of sound recordsdata whose sole goal is to recreation the system and divert royalties. The consequence? A much less fulfilling expertise for the buyer, diminished compensation flowing to artists which are driving the enterprise fashions of the platforms, and fewer cultural moments that followers can collectively share, all of which undermines the creativity and growth of artists and their music that the platforms had been, partially, designed to foster.
Whereas this unsatisfying state of affairs is discouraging, it’s not shocking. Now that the trade is rising once more—largely because of UMG’s technique, investments and innovation—new gamers in addition to some unhealthy actors who don’t share our dedication to artists and artistry have been swooping into the reinvigorated trade.
Up to now, music trade battle was usually targeted on ‘the majors versus the indies.’ At this time, nevertheless, the actual divide is between these dedicated to investing in artists and artist growth versus these dedicated to gaming the system by amount over high quality. The present setting has attracted gamers who see an financial alternative in flooding platforms with all types of irrelevant content material that deprives each artists and labels from the compensation they deserve.
What’s turn into clear to us and to so many artists and songwriters—creating and established ones alike—is that the financial mannequin for streaming must evolve. As know-how advances and platforms evolve, it’s not shocking that there’s additionally a necessity for enterprise mannequin innovation to maintain tempo with change. There’s a rising disconnect between, on the one hand, the devotion to these artists whom followers worth and search to help and, on the opposite, the best way subscription charges are paid by the platforms. Below the present mannequin, the essential contributions of too many artists, in addition to the engagement of too many followers, are undervalued.
Subsequently, to appropriate this imbalance, we’d like an up to date mannequin. Not one which pits artists of 1 style in opposition to artists of one other or main label artists in opposition to indie or DIY artists. We want a mannequin that helps all artists—DIY, indie and main. An progressive, “artist-centric” mannequin that values all subscribers and rewards the music they love. A mannequin that will likely be a win for artists, followers, and labels alike, and, on the identical time, additionally enhances the worth proposition of the platforms themselves, accelerating subscriber progress, and higher monetizing fandom.
Together with many others within the music world, we share deeply held ideas in regards to the worth of artistry and the artist-fan relationship. This yr, we will likely be engaged on the innovation that’s completely important to advertise a more healthy, extra aggressive music ecosystem, one wherein nice music, regardless of the place it’s from, is definitely and clearly accessible for followers to find and revel in. An setting the place nice music is just not drowned in an ocean of noise. And one the place the creators of all music content material, whether or not within the type of audio or short-form video are pretty compensated.
Attaining such a profound change will current challenges in addition to alternatives. I’m assured, nevertheless, that our lengthy and deep involvement with music and artists will allow us to securely and profitably navigate our means ahead by the trade’s subsequent massive shift.
I’m wanting ahead to being on this journey with all of you!
Our previous is prologue to a future the place the options we discover and the steps we take to implement them will contribute to a different period of progress for UMG and the trade at massive. I consider there is no such thing as a higher crew anyplace than the one now we have proper right here at UMG.
Thanks as soon as once more for unimaginable 2022 wherein our artists and our firm achieved outstanding issues.
I’m immensely pleased with all of you.
I’m excited for what will likely be an eventful and affluent 2023.
LucianMusic Enterprise Worldwide
