With Universal Music’s earnings call to review its full year 2023 financials coming right at the crunch point for the mega-major’s spat with TikTok, it was inevitable that questions about that dispute would dominate yesterday’s proceedings. A key nugget: TikTok brought UMG €111 million in revenue in 2023 - which is a mere €200 every minute of every hour of every day. But when you’re Universal Music that’s such a tiny amount of money that no one will even notice. €200? That’s less than a glass of Cristal.
After an ebullient start to the earnings call, replete with the usual hooting and trumpeting of Universal’s absolute dominance of the music business on earth and across the known galaxy, Grainge honed in on the driver of UMG’s success in 2023 - the artists and songwriters signed to the company - and rattled off an exhaustingly triumphant list of those achievements.
That included: nine out of the top ten most commercially successful recording artists (including all of the top eight) were UMG; six of Spotify’s global top ten artists were UMG; thirteen of the top 20 global songs on Apple Music were UMG; three of the top five songs on YouTube were UMG; four of the most streamed artists were UMG; six of the top ten albums on Billboard 200 were UMG, three of the top five Billboard Hot 100 songwriters were UMG. Are you impressed yet? No? There’s more.
Around the world it was similarly SPECK. TACK. ULAR! Universal artists dominated Japan, Germany, Atlantis, Valhalla, Zerzura and Proxima Centauri B. Even Uranus reports positively on Lucian’s triumphs in 2023.
A big part of Universal’s success was - said Grainge - “cleaning up all the noise fraud and algorithmic gaming that was contaminating fans' experience in seeking out real music”. But just be sure that any of that ‘real music’ is from UMG artists, and not one of the hundreds of thousands of independent artists demonetised by Spotify at Universal’s behest.
Universal had banked on this “cleaning up” taking “many years” but, within a blink of an eye - mere months! - “several platforms, including Deezer and Spotify announced their plans to profoundly advance” their cooperation with Universal to demonetise huge swathes of the music industry.
What’s that, Lucian? Short form video? Out came the knife, and only seven minutes in. This is what we had been waiting for.
Holding back a single tear, Grainge struggled to “adequately express how gratifying the show of leadership from many of our platform partners has been”. That leadership, he continued, provides “an environment that revives the fundamentals of artist discovery”.
What’s more, that gratifying leadership is thrown into particularly stark relief by some ungrateful wretches who don’t sing the Universal song. “We’re committed to supporting a healthier, sustainable, existing and more competitive music ecosystem”, he went on.
That ecosystem is “an environment in which great music is not drowned out by a sea of noise, where music is easily and clearly accessible for fans to discover and enjoy”. Great if you like Universal-signed artists, because they are very easy to discover given their domination of all charts, playlists and top whatever rankings on every platform ever.
A momentary pause. This ecosystem includes “most importantly, an environment in which the creators of all music - ALL music content - whether in the form of audio or short form video are fairly compensated and will therefore be able to thrive as artists and creators for decades to come”.
Uh oh. What’s that, Lucian? Short form video? Out came the knife, and only seven minutes in. This is what we had been waiting for.
“There must not be free rides for massive global platforms”, he said. Are there any specific global platforms that are getting free rides? Oh yes. “Massive global platforms such as TikTok that refuse to meaningfully address issues around AI, platform safety or pay their fair share for our artists’ and songwriters’ work”.
OK. Awkward. Let’s move on! Universal - said Grainge repeatedly - “loves a win-win!” In fact, “win-win outcomes” are “exactly at the core of who and what we are: Win! Win! Outcomes!” Those wins come hard and fast, and if you don’t duck you might get hit in the face by a fast moving win.
Replace “former deal” with “former friend” and the message is clear: we never liked you anyway, and each time we went to the pub you somehow managed to avoid paying.
The message was clear: Universal is a winner, Universal loves to win, and Universal’s wins are - of course - spectacular. But that’s not all! Oh no. Universal is also an innovator, a disruptor, a predictor of the future, and is ahead of the game. Universal is a leader - and make no mistake: Universal is calling the shots and has a seat at the table.
But - did you know? - Universal is also brave, sensitive and caring. And friendly. Very, very friendly. But he’ll get to that in a moment.
Let’s face it: you’re probably better off having Lucian Grainge as a friend. Because if he’s not your friend, then what are you? Nothing, that’s what.
Boyd Muir, UMG’s CFO, took the floor. Lots of numbers, lot’s of growth, lots of win-wins all round. But really, who was there for the numbers this time round? Apart from one: “With regard to TikTok, we’ve disclosed that our former deal generated about 1% of total UMG annual revenue. Because other platforms in the social video category achieve much greater monetisation we’re focused on accelerating our partnerships with YouTube, Meta, Snap and others, and we look forward to updating you in coming weeks”.
Replace “former deal” with “former friend” and the message is clear: we never liked you anyway, and each time we went to the pub you somehow managed to avoid paying.
When not delivering scripted bombast, Grainge can be remarkably charming.
More numbers from Muir, and - finally - the main show started as the floor opened up to questions from analysts. No better opportunity to show exactly what meaningful friendship can look like.
Swatting away a soft open (and otherwise interesting questions) about the Chord Music acquisition from Morgan Stanley’s Ed Young, Grainge leapt back on top of the elephant in the room and gave everyone what they had been waiting for: the dirt on the TikTok deal.
Guggenheim Partners’ Michael Morris gave the open that was needed. “I’d like to ask about your comments on TikTok and the dispute there”, he said. What were the prioritised “components”, and are UMG and TikTok “closer or farther apart on any of those specific issues”, he asked. The components in question - AI, platform safety, and paying a fair share - had earlier been referenced by Grainge as issues of concern.
This delivered one of several golden moments in the call. When not delivering scripted bombast, Grainge can be remarkably charming.
“It’s Lucian here!” he started, as though he’d picked up the phone and called Morris directly. “I just outlined three issues that became a big concern to us over a long period of time”, he said, referencing the “components” that had caused concern in relation to TikTok. “We have a responsible AI strategy. We’ve made win-win partnerships and protected the partnerships for the technology we’re excited about. I see no alternative other than to work with people that share that responsibility as well as vision”, he went on. TikTok, it was clear, does not fall into that category.
“I’ve spent my entire career creating win-win situations”, he said, again. “Whether or not it was negotiating with the likes of Woolworths, or CostCo, or Walmart” he continued, somehow evoking an image of he himself turning up in shops with boxes of records, haggling his way to deals. “Those win-win positions are something which I learned - we learned - and we continued within our digital deals”.
“Let me be clear: free doesn’t work for us. The monetisation is so poor that a minimal transfer into other platforms will have a better financial outcome...”
There are winners, and there are win-winners, and then there’s TikTok. “We negotiate and deal with platforms that are worth trillions. And we’ve been able within all of them - ALL of them! - to create win-win solutions which are protective of content, protective of creators, IP, copyright, fair share compensation”.
What about just being friends, Lucian? “In addition to that, with regard to all of these platforms - and I suppose specifically around TikTok - we like to be friendly. We’re friendly people”.
With friends like Universal, who needs enemies? Just check your bed for horse’s heads before you settle down for the night.
“My phone is open”, he said, opening his wallet and looking wistfully at a photo of him and TikTok boss Shou Zi Chew sitting on a park bench feeding the ducks and laughing together as they dominated the music business. “We hope that we will be able to find solutions. We’re friendly people that like win-win situations”.
By this point the term “win-win” had lost all meaning, and Michael Nash, UMG’s Chief Digital Officer, stepped in. “Let me amplify a few of the points that Lucian made”, he said, and “provide a little more specification” about how Universal was going to show how little it cared about TikTok.
“If consumption shifts from TikTok to other short video platforms like Reels or YouTube shorts” - winners both - then Universal is confident that it can “in fact, recapture some lost revenue”. No one really likes TikTok anyway, it’s a flash in the pan, a mere distraction, and everyone thinks Reels and Shorts are cooler.
“Keep in mind that over half of TikTok monthly active users already also use other short video services”, he expanded. In fact, “in some markets, that percentage is as high as 70%”, he said. Not only that, but those winning services - those good friends - “monetise that engagement at a much higher rate”, and so Universal will focus on elevating and accelerating partnerships with YouTube, Meta, Snap and others.
Never ones to shy away from a strongly triumphant listicle, Nash highlighted some of the ways that winning friends can deliver the sorts of win-wins that Universal just loves.
Meta, he said, “has rolled out dozens of campaigns”, which have featured artists like Liam Payne, The Weeknd, Noah Kahan, Selena Gomez. Taylor Swift, Olivia Rodrigo and Ice Spice have been playlisted by Snap - and Snap is delivering even more win-wins by “evaluating how they value UMG artists” and “introducing new ways to facilitate deeper connections between artists and superfans”.
And YouTube - best of friends - launched a “major shorts driven multi-format Karol G campaign” that has helped her music reach a “huge audience”.
Lisa Yang of Goldman Sachs wanted more TikTok dirt. Has there been “any impact at all” on market share on other streaming platforms, and will not having TikTok as a promotional tool not have a big impact on things?
“We’ve observed no discernible negative impact”, said Nash. The message was clear: who even is TikTok? We heard they were someone once.
Lucian jumped back in. “Let me be clear: free doesn’t work for us. The monetisation is so poor that a minimal transfer into other platforms will have a better financial outcome”.
Shou, please: pick up the damn phone. You’re making Lucian sad. And nobody wants that.
Read more from the Universal earnings call here:
Sam Taylor
UPDATE 29 Feb 2023, 5.00pm:
After publication Universal Music reached out to request we remove an instance of the word "collusion", which we were happy to do.
