Universal Music Group chairman and CEO Lucian Grainge‘s annual New Year’s memo to staff spoke about recent innovations at the music label giant to fend off mounting competitive challenges.
“In the face of so much change and opportunity, standing still is never an option,” Grainge, CEO and chairman of UMG, stated in the internal memo obtained by The Hollywood Reporter. He reiterated UMG’s embrace of artificial intelligence tools deals with YouTube and Deezer will benefit not only his company, but the entire music industry financially and creatively.
“In a sharp break with that past, we formed a historic relationship with our longtime partner, YouTube, that gives artists a seat at the table before any product goes to market, including helping to shape AI products’ development and a path to monetization,” Grainge wrote.
UMG backs pop music giants like Taylor Swift, Justin Bieber and Billie Eilish. Grainge also talked up his label’s emerging artist centric model for royalty payments as it looks to reward music product on streaming platforms that fans engage with.
“I’m proud to say that in just a matter of months, several global platforms, including the world’s largest music platform, have already adopted artist-centric principles that will transform the way artists are compensated for their work. In the coming months, I believe you will see more platforms adopting these principles,” he predicted.
Also on an apparent leading edge, Grainge pointed to possible advances in music and health, which includes a new category that he called “prescription music,” or “an evidence-based health technique built on scientific and medical research. What excites me is that it’s cost-effective, non-invasive and drives truly beneficial results.”
In 2021, UMG announced it had partnered with MedRhythms, a digital therapeutics company, to use music to treat medical patients with neurologic disease or injuries.
Grainge argued the music label was laying the foundations with other commercial applications of its music catalog and talent to ensure a future for UMG amid unprecedented change and competitive threat. “We will be building our inhouse capabilities through groundbreaking partnerships that will accelerate our artists’ ability to create experiential, commerce and content offerings for their fans. In short, we are creating the blueprint for the labels of the future.”
Lucian Grainge’s New Year’s message to employees, edited for length, follows:
Dear Colleagues,
Happy New Year! I want to express my deepest gratitude to every one of you for all of your hard work and also to take a few moments to review with you some of the highlights of 2023 and preview some of what’s to come in 2024. Once again, 2023 saw Universal Music lead the industry in all major financial and competitive performance metrics, at the same time our artists broke records and topped the charts around the world. To put it succinctly: UMG is the most successful company in the history of the music industry and every one of us should be enormously proud of what we have accomplished together, let alone what I know we will accomplish going forward.
In fact, even beyond our artists’ extraordinary achievements and our financial results, there was so much more to be proud of this year. By the beginning of 2023, it had become obvious that if the industry were to continue to thrive and the value of our artists’ work respected, a number of critically important issues would have to be confronted. As the industry leader we had a clear vision of how to address these issues. And then we went out and took bold steps to turn that vision into reality.
Last January, for example, I wrote to you about the streaming royalty model. A new model was needed, one that would properly reward the artist-fan relationship and disincentivize fraud and gaming the system. Because artists are at the center of everything we do, we called it the “Artist-Centric Model.” I’m proud to say that in just a matter of months, several global platforms, including the world’s largest music platform, have already adopted artist-centric principles that will transform the way artists are compensated for their work. In the coming months, I believe you will see more platforms adopting these principles. Why? Because it is the right thing to do both for artists and for the wider music ecosystem. As this new model becomes widespread, the impact will be profound: a healthier, more equitable and more vibrant music ecosystem that rewards all artists—be they major, indie or DIY—at all stages of their careers.
In the same way, we showed the industry the way forward when it came to confronting the challenges and opportunities of AI. Early on in 2023, many “experts” viewed AI as a looming threat. Our view? Just as we had done with so many other previous proclamations of doom, we rejected that short-sighted appraisal. On the contrary, we saw AI as presenting opportunities. And then, just as we did with streaming, we went out to turn those opportunities into reality. We launched our Responsible AI initiative this year with two goals in mind. First, to lobby for “guardrails,” that is public policies setting basic rules for AI. In the U.S., for example we are lobbying for legislation that would establish a federal right of publicity to harmonize the protections of artists’ image, likeness and voice from AI deepfakes. We were the first music company to call upon the U.S. Congress to protect artists against unethical uses of AI.
Our second goal was to forge groundbreaking private-sector partnerships with AI technology companies. In the past, new and often disruptive technology was simply released into the world, leaving the music community to develop the model by which artists would be fairly compensated and their rights protected. In a sharp break with that past, we formed a historic relationship with our longtime partner, YouTube, that gives artists a seat at the table before any product goes to market, including helping to shape AI products’ development and a path to monetization. Because we fundamentally believe the best way to ensure responsible AI development is through partnership and market-led solutions, in addition to YouTube, we are collaborating with several platforms on numerous opportunities and approaches—always with artists at the forefront of our thinking. In addition, our artists have begun working with some of the latest AI technology to develop tools that will enhance and support the creative process and produce music experiences unlike anything that’s been heard before. And to leverage AI technology that would benefit artists, we continue to strike groundbreaking agreements with, among others, Endel and BandLab.
We also advanced our initiatives in areas from health and wellness to sustainability and the environment. The intersection of music and health is another exciting area about which I am especially passionate. We’ve all had experiences in which music changed our mood or comforted us in times of emotional crisis, or even helped us physically. In fact, it’s one of the reasons why so many of us have chosen to spend our careers in music. I’ve long wanted the powerful relationship between music and health to be more than a handful of subjective observations and anecdotes so that it could become a key component of our strategy. Building upon our success in creating a robust commercial category in fitness, we’re now leading the industry in music and health. In September, we produced the first-ever Music + Health Summit where we brought our artists together with health entrepreneurs and leading neuroscientists to advance this new category. This came on the heels of us entering into a series of more than 40 license agreements to amplify the possibilities in this space. For example, we are pioneering a new category that we call “prescription music,” an evidence-based health technique built on scientific and medical research. What excites me is that it’s cost-effective, non-invasive and drives truly beneficial results. While it’s a field still in its infancy, this area will become an increasingly important component of our strategy.
In the same spirit of promoting positive change in society, our employees also accomplished amazing things. Throughout 2023, our All Together Now Foundation, Task Force for Meaningful Change, Green Team, Unhoused Coalition, and Employee Matching Program contributed to more than 500 organizations around the world, and supported over 1.2 million meals for those in need. Moreover, in the more than three years since we established a groundbreaking relationship with the non-profit Music Health Alliance (MHA), 500 UMG and UMPG recording artists, songwriters and their families in the U.S. have received life-changing medical care. With this year’s dramatic jump in the need for mental health care within the artist and songwriter community, the MHA partnership significantly increased its support in that area. Our efforts to move the industry on issues concerning sustainability and the environment led UMG and Bravado to host the first music industry sustainability summits in L.A., London, and New York. The series brought together industry leaders and innovators who made commitments to institute sustainable solutions across a range of categories including events, merchandise, touring and more. We co-founded the Music Industry Climate Collective, the new music industry alliance to address global climate change. And we became the first standalone major music company to win the approval of its greenhouse gas emission reduction targets by the Science Based Targets initiative, the gold standard for establishing corporate climate goals.
Looking to 2024, both the pace of change and our industry leadership will increase significantly. We’ll be moving quickly and meaningfully on many different fronts. Our pioneering artist-centric strategy will extend its reach. We first focused on a fairer way to allocate the streaming pie among real artists by addressing fraud and other aspects that deprive artists of their just compensation. The next focus of our strategy will be to grow the pie for all artists, by strengthening the artist-fan relationship through superfan experiences and products. We are already in advanced discussions with our platform partners regarding this phase and will have more to announce in the coming months. In addition, we will be building our inhouse capabilities through groundbreaking partnerships that will accelerate our artists’ ability to create experiential, commerce and content offerings for their fans. In short, we are creating the blueprint for the labels of the future.
As for AI, we will continue building opportunity for our artists, while also leading the fight to protect them from unethical uses of this technology. And all around the world, we will continue to prioritize and fight for policies in the service of artistry—not at the expense of it. We also expect to announce more real-world commercial applications for artist-driven, ethical AI. We will keep growing our presence around the world by doing just what we do in more established music markets: signing and developing local artists; providing local labels and entrepreneurs with global promotion, distribution, and a full suite of artist services; and acquiring local labels, catalogs, and artist services businesses. As you know, over the past several years, we have been investing in future growth, not just expanding geographically and leveraging new technologies, but building our e-commerce and D2C operations. In 2024, as we continue our industry-leading investments in A&R and artist development, we will further evolve our organizational structure to create efficiencies in other areas of the business, so we can remain nimble and responsive to opportunities as they arise, while also taking advantage of the benefits of our scale.
In the face of so much change and opportunity, standing still is never an option. We must continue to fight for our artists and songwriters and stand up for the creative and commercial value of music. Our vision of the future is filled with possibilities, and acting on our strategy will make those possibilities real—for our artists, our employees, our shareholders and the entire music ecosystem. I promise 2024 will be an extremely exciting and transformative year for our company.
Lucian