Universal Music is looking far from Vivendi for the melody of happiness

However, the arrival of artificial intelligence is causing panic at the headquarters in Santa Monica, California. On October 18, the group sued the startup Anthropic. UMG accuses her of looting their catalog to train their algorithms and of being disrespectful “his copyrighted works”. Universal is demanding 150 million in damages “illegal copying and distribution” his works, including song lyrics. But the complaint is part of a wider fight: one led by UMG’s chief executive, Sir Lucian Grainge, for better pay for workers. “professional artists” and fight with “garbage sellers” who flood streaming platforms with noise, rain sounds or playlists with no musical value.

The British boss has good reason to be angry. Universal’s revenue is closely tied to licensing agreements between UMG and streaming platforms such as Spotify, Deezer, YouTube and Apple. For each song, Universal gets a few cents, a percentage of which it pays to its artists. This model allowed it to survive the collapse of CD sales and regain double-digit margins under its former owner and current minority shareholder with a 9.9% stake, Vivendi. When the latest results were presented, its revenue for the first nine months of the year reached $7.9 billion, driven by streaming revenue.

The arrival of AI-generated music threatens this delicate economic balance. “Lucian Grainge has been very aggressive in his speeches for a year. notes a professional in the field. They try to pass themselves off as protectors of artists, but they are defending their own business. » Almost 100,000 new titles arrive on the Deezer and Spotify platforms every day. Therefore, Major is not interested in content produced by bots that siphon off its market share and destroy value in the music industry.

Agreement with platforms

Even if they represent only a small part of the listening on the platforms, Universal teams have started negotiations with the entire industry. The goal: to reduce the reward for this artificially generated content. The first deal was signed with Deezer last September. Major used the weight of his catalog and managed to twist Tom Paleček’s arm in the sector by negotiating a bonus for “professional artists” – those with more than 1,000 listens per month and high engagement with their fans. Other platforms like Spotify could follow in the coming months, according to our sources.

Victory for Lucian Grainge who won the deciding round. “The house needs to bring back artists, explains a former Universal label executive who left to start his own label. The majors are panicking at the thought that they will no longer be useful, he continues. Because artists no longer need a label behind them to distribute their records. » Many of them now prefer to sign with distributors like Believe to promote the titles they produced themselves and get better fees: up to 80% of the rights in the distribution contracts. Competition that forces UMG to reassess its margins as it hires new talent. “A universal sign of few artists, but good ones”, summarizes the Parisian producer.

Anthem for artists

Unlike the French company Believe, the major does not have a volume strategy; instead, it focuses on artists with high commercial value. Big American stars like Lady Gaga are pampered by Universal, which indulges them at every whim: the record company finds itself managing “brands” instead of artists. The reigning champion is blonde and her name is Taylor Swift: from soaps with fragrances inspired by her albums made in North Carolina to fan cruises organized in the Bahamas, the singer owns around a hundred registered trademarks in EUnited States. A legacy she manages as a shrewd businesswoman alongside her musical endeavors overseen by Universal.

Older business

Social networks, as well as data professions, have taken an important place in this activity. In technology, UMG bought Ingrooves in 2019 to distribute its talent and discover future stars, particularly in Virgin Music, its label for independent artists. For several years now, the major has also been knocking on TikTok’s door to request licenses on the Chinese social network. Today, this tool is increasingly being used by young people to discover – or rediscover – artists. But the main one benefits from a huge advantage in terms of data: its back catalog that spans decades, which gives it detailed knowledge of the market… Eighteen months after its release, the title is still generating money with every listen – an advantage that the CD did not have.

This heritage has become the income of these brands, which make the most of the vein. His name is: “legacy business”. Last year, teams paid $250 million to acquire the rights to the singer Sting. The big three — Universal, Sony and Warner — are competing for a catalog of late-career artists whose popularity has exploded in recent years. “Old artists sell better than contemporary music”, American music historian Ted Gioia underlines in his article Atlantic. And the stakes are rising: according to CNN, UMG is still in talks to acquire Queen’s complete discography for nearly a billion dollars.

To the chorus of cost cutting

The record label, which employs nearly 10,000 people worldwide, will have to cut staff. On October 27, UMG CFO Boyd Muir announced that a “Cost-cutting program (will) begin in 2024”. The asset review was carried out by the group, which has so far been spared social plans, unlike its rivals Warner and Bertelsmann Music Group (BMG), in EUnited States. Enough to bring back bad memories: Universal laid off nearly 3,000 workers in the midst of a record-breaking 2002-03 recession. The situation is different, but the cuts initiated during the health crisis by Vivendi are already being felt by artists as well. “On the tour we were asked to justify the purchase of pizza”a former executive of Universal France testifies.

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