Sir Lucian Grainge, Chairman and CEO of Common Music Group, has mentioned the best way music streaming providers pay labels and artists at present has to alter.

Writing in a New 12 months notice to employees at present (January 11), obtained by MBW, Grainge mentioned: “What’s turn out to be clear to us and to so many artists and songwriters—growing and established ones alike—is that the financial mannequin for streaming must evolve. As expertise 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. Beneath the present mannequin, the crucial contributions of too many artists, in addition to the engagement of too many followers, are undervalued.”

In Grainge’s crosshairs, there: The ‘professional rata’ payout system utilized by providers reminiscent of 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 primarily based on their share of the amount 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 acquire. (In addition to, probably, streaming providers who strike direct low-royalty offers with music manufacturing corporations, after which intentionally push music followers in direction of this music in an try to economize on total royalty prices.)

“As soon as these followers have subscribed, shoppers are sometimes guided by algorithms to generic music that lacks a significant creative context, is cheaper for the platform to license or, in some instances, has been commissioned instantly by the platform.”

Writes Grainge: “So as to entice shoppers to subscribe, platforms naturally exploit the music of these artists who’ve giant and passionate fan bases. However then, as soon as these followers have subscribed, shoppers are sometimes guided by algorithms to generic music that lacks a significant creative context, is cheaper for the platform to license or, in some instances, has been commissioned instantly by the platform.

“For instance, simply witness the hundreds and hundreds of 31-second monitor uploads of sound information whose sole objective is to recreation the system and divert royalties. The end result? 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 improvement of artists and their music that the platforms have been, partly, designed to foster.”

As he has prior to now, Grainge additionally raises issues over the massive quantity of the 100,000-plus tracks a day now being uploaded to sure music streaming providers, and the buyer expertise that outcomes.

“[W]ith such an unlimited and unnavigable variety of tracks flooding the platforms, shoppers are more and more being guided by algorithms to lower-quality practical content material that in some instances can barely go for ‘music’,” Grainge writes, including: “Previously, music business battle was usually targeted on ‘the majors versus the indies.’ At the moment, nevertheless, the true divide is between these dedicated to investing in artists and artist improvement 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 counsel that beforehand proposed different streaming payout fashions – most notably the ‘user-centric’ or ‘fan-powered’ mannequin adopted by SoundCloud and others – haven’t received UMG’s help.

“[To] appropriate [the streaming payout] imbalance, we want an up to date mannequin,” he writes. “Not one which pits artists of 1 style towards artists of one other or main label artists towards indie or DIY artists. We’d like a mannequin that helps all artists — DIY, indie and main. An revolutionary, ‘artist-centric’ mannequin that values all subscribers and rewards the music they love. A mannequin that shall be a win for artists, followers, and labels alike, and, on the similar time, additionally enhances the worth proposition of the platforms themselves, accelerating subscriber progress, and higher monetizing fandom.”

“This 12 months, [UMG] shall be engaged on the innovation that’s completely important to advertise a more healthy, extra aggressive music ecosystem.”

Grainge provides: “This 12 months, [UMG] shall 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 well and clearly accessible for followers to find and luxuriate in. An setting the place nice music shouldn’t be 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.

“Reaching 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 business’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.

Pricey Colleagues,

Comfortable New 12 months! I needed to write down to you to welcome you again and as promised, provide you with my ideas in regards to the 12 months forward. It’s onerous to imagine that just a bit greater than a 12 months in the past, UMG grew to become a freestanding public firm. It was a watershed second in our historical past. And but, in some methods, in terms of what we do day-after-day, we simply stored doing what we’ve all the time performed: convey nice artists and their music to the world; break efficiency data of every kind in all places; and drive the business ahead although creativity, strategic investments, and innovation.

And that’s precisely what we plan to do that 12 months.

Now, with 2022 within the rearview mirror, I’d wish to share with you a couple of ideas about what was a rare 12 months for UMG and in addition specific my gratitude to all of you for making the 12 months so exceptional. 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 short victory lap to mirror on what we achieved final 12 months.

Starting with some accomplishments I’m notably happy with, listed below are just some 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 all over the world;
• Constructing group gardens all through the US, Europe and Australasia;
• Engaged on important schooling campaigns with organizations reminiscent of Psychological Well being Coalition; and
• Extending our applications to learn our artists previous and current together with aiding lots of 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 Job Drive for Significant Change continued its groundbreaking work in quite a lot of methods: funding applications to mentor the following technology of Black artists and Black music business executives; combating for legal justice reforms; investing in group violence intervention applications and coverage organizations; partnering with HBCU medical colleges to widen the Black practitioner pipeline; and serving to prove 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, we’ve got 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 all over 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; 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 High 5 Artists globally; 4 of the High 5 within the US; 7 of the High 10 in Germany and Italy, together with No 1s in each international locations; and the highest feminine artist in France;
• On Apple Music: Common Music Publishing Group had writer-interests in 9 of the High 10 most-streamed songs globally;
• On YouTube: UMG had 7 of the High 10 Songs within the US;
• On Billboard: We had the No. 1 Tune on the Scorching 100 year-end chart and seven of the High 10 Albums;
• On Deezer: UMG had the High 2 Artists globally, and 5 of the High 10;
• In Germany: The High 4 Albums and the High 3 Singles;
• Within the UK: 6 of the High 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”), grew to become the most-streamed tune 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 attain such astonishing success for each growing and established artists, and to take action 12 months after 12 months, in each conceivable style, usually in areas past their dwelling international locations, is not 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 tough crucial is to find and break new artists after which maintain their careers over the long term. In contrast to 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 business. No, we’re completely different. Very completely 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 a long time to come back. We fulfill that purpose by utilizing our ingenuity to drive the music business ahead as expertise 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 prospects and, every time acceptable, taking the required steps to show these prospects into actuality.

One highly effective instance of a kind of prospects changing 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 corporations labored collectively, we may 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 could possibly be one of the vital necessary developments within the recorded music listening expertise in a long time.

An advance as important as immersive audio was no straightforward feat. It required years of funding and innovation. Rather more. We constructed state-of-the-art recording suites inside our community of iconic studios—Capitol Studios in LA and Abbey Street Studios in London, to call simply two. We educated a number of the world’s high engineers in the best way to make the most effective use of the format. And we performed an in depth 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. Almost 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, all the business has been releasing an increasing number of music in immersive audio. And lots 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. Hundreds of thousands and tens of millions of them all over the world. And so they merely can’t get sufficient.

This 12 months followers will get much more. I’m assured that we are going to see important international progress within the availability of immersive audio as an increasing number of vehicle and gadget producers introduce new merchandise designed to ship this drastically enhanced musical expertise.

Trying past the enlargement of immersive audio, our willpower to drive change will solely speed up this 12 months. Simply as we’ve performed so efficiently prior to now, we’re setting up the methods and assets to steer by each important 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 shoppers in ways in which have been unimaginable just some years in the past and ship important 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 introduction of streaming. Early on, we noticed the potential inherent in streaming and subscription and jumped proper in. Although it looks like solely yesterday that we have been working with Spotify to allow their US launch, that “yesterday” was means again in 2011. Whereas different corporations have been making an attempt to carry their floor at the same time as that floor was shifting beneath their ft, UMG leaned into what was essentially the most profound enterprise mannequin shift the business had ever seen, redesigning our international group, changing 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 improvement inevitably creates new challenges for us to confront. So, it’s no shock that after virtually a dozen years of essentially reworking the music enterprise, the way wherein music is introduced and consumed on streaming platforms has itself developed. And whereas that evolution has created monumental alternatives and advantages for artists and shoppers—mirrored in elevated listening range that originally comes with adoption of subscription—it has additionally created byproducts which are more and more complicated and unfulfilling for them as the amount of noise within the market has elevated. At the moment, some platforms are including 100,000 tracks per day. And with such an unlimited and unnavigable variety of tracks flooding the platforms, shoppers are more and more being guided by algorithms to lower-quality practical content material that in some instances can barely go for “music.”

Let me clarify. So as to entice shoppers to subscribe, platforms naturally exploit the music of these artists who’ve giant and passionate fan bases. However then, as soon as these followers have subscribed, shoppers are sometimes guided by algorithms to generic music that lacks a significant creative context, is cheaper for the platform to license or, in some instances, has been commissioned instantly by the platform. For instance, simply witness the hundreds and hundreds of 31-second monitor uploads of sound information whose sole objective is to recreation the system and divert royalties. The end result? 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 improvement of artists and their music that the platforms have been, partly, designed to foster.

Whereas this unsatisfying scenario is discouraging, it’s not shocking. Now that the business 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 business.

Previously, music business battle was usually targeted on ‘the majors versus the indies.’ At the moment, nevertheless, the true divide is between these dedicated to investing in artists and artist improvement 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 out to be clear to us and to so many artists and songwriters—growing and established ones alike—is that the financial mannequin for streaming must evolve. As expertise 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. Beneath the present mannequin, the crucial contributions of too many artists, in addition to the engagement of too many followers, are undervalued.

Due to this fact, to appropriate this imbalance, we want an up to date mannequin. Not one which pits artists of 1 style towards artists of one other or main label artists towards indie or DIY artists. We’d like a mannequin that helps all artists—DIY, indie and main. An revolutionary, “artist-centric” mannequin that values all subscribers and rewards the music they love. A mannequin that shall be a win for artists, followers, and labels alike, and, on the similar 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 12 months, we shall 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 well and clearly accessible for followers to find and luxuriate in. An setting the place nice music shouldn’t be 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.

Reaching 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 business’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 business at giant. I imagine there isn’t any higher crew anyplace than the one we’ve got proper right here at UMG.

Thanks as soon as once more for unimaginable 2022 wherein our artists and our firm achieved exceptional issues.

I’m immensely happy with all of you.

I’m excited for what shall be an eventful and affluent 2023.

LucianMusic Enterprise Worldwide