Not surprisingly, TikTok was a key topic of discussion during Universal Music Group’s first-quarter earnings call on Thursday (May 2).
Just hours before Universal Music Group (UMG) announced a revenue increase 7.9% Year-on-year Calculated at fixed exchange rate $2.8 billion in season 1, The two companies have ended a three-month licensing dispute with a shiny new deal.
This agreement means generic Catalog of songs and recordings will return to TikTok within the next two weeks, UMG Chairman/CEO, Sir Lucian Grange In an internal memo to Universal employees, it was confirmed that TikTok will provide “increased compensation” to UMG artists and songwriters through the new agreement.
In his opening remarks during a conference call with analysts on Thursday, Grainge explained that TikTok “agreed to make significant changes in several key areas that are very important to us, including addressing our concerns about generating artificial intelligence on its platform.” concerns, and the value of better aligning with other similar partnerships”.
“As a result, we have resumed licensing our music to them,” he added.
As you’ll read below, UMG’s leadership team, including Grainge, Michael Nash (executive vice president and chief digital officer), and Boyd Muir (UMG executive vice president and chief financial officer) are optimistic about the company’s new deal, but That’s all.
They also revealed Universal Music Group’s financial performance in the first quarter, cooperation strategies with emerging music companies, super fan monetization plans, etc.
Here are some things that stand out…
1.UMG hopes to monetize super fans, saying that one in five paid music subscribers is willing to pay for the super premium subscription tier.
Monetizing superfans remains a top priority for the music industry.
This is especially true for UMG, whose chairman and CEO explained in a New Year’s note to company employees in January that UMG’s strategy this year will focus on “strengthening artist-fan relationships,” particularly through “superfans.” experience and products.”
What are these, MBW asked in February’s widely circulated “MBW Reacts” article? Super fan experience Might look like that.
We got our first glimpse into what UMG’s plans might mean when it invested in HYBE’s “superfan” platform Weverse in March.
But traditional DSPs like Spotify also have a potentially lucrative role to play in the superfan category.
As we asked in February, whether “superfans” (like Taylor Swift or Billie Eilish) could subscribe to a “limited tier” of artist content via the platform (think: bonus tracks, commentary, artist Q&A, etc.) Spotify Add a few dollars (or more) to their monthly bill?
“We know we can better monetize high-value customers, and research shows that one in five paying music subscribers is willing to pay a premium fee. It’s tempting.
Sir Lucian Grange
“We’re encouraged,” Michael Nash said Thursday in response to a question from Wells Fargo’s Omar J. Mejias about monetizing super fans. [the] We are reacting aggressively around the prospect [a] Higher-priced ultra-high-end products will provide customers with more advanced value propositions.”
Nash also said that UMG’s “research shows [it] may be within range 10% arrive 20% Subscriber base [that] Potentially a target market for higher value, higher priced subscription tiers.
Commenting further on the Super Fan opportunity, Sir Lucien Grange added: “The DNA of the company is product, product, product. Artists, talent rights. That’s what we’re investing in rights and product, which will accelerate our relationship with DSP as research partner.
“We know we can better monetize high-value customers, and research shows that one in five paying music subscribers is willing to pay a premium fee. It’s tempting.
Goldman Sachs, in its latest Music on the Air Report released just last week, highlighted the role that so-called “super premium” programs will play in monetizing super fans in 2024 and beyond.
The report states: “We expect the entire industry (labels, artist managers, DSPs) to seize this opportunity to experiment and launch new superfan apps or new streaming services on top of existing streaming services over the next 12-24 months. “Super high-end level”.
Goldman Sachs predicts that ultra-premium plans will likely be rolled out in “future rounds of price increases,” adding that “that could take the form of an overall price increase across all plans, or more granular product- or feature-led price increases (such as for audio Reading fees) or Hi-Fi audio, or launching a new super premium plan catering to super fans)”.
2. UMG continues to view the entire social media category as a “work in progress.”
As we noted in the introduction to this article, Universal Music Group’s leadership team is very positive about the company’s new deal with TikTok.
However, a key question among analysts is, how good is this deal? Financially Universal Music Group?
Bank of America’s Adrien de Saint Hilaire wanted to know about the financial “advantages” of the new protocol over the old one, and UMG executive vice president and chief digital officer Michael Nash Michael Nash confirmed: “Specifically, in terms of compensation, this new agreement does mark an improvement over our last agreement.”
However, without providing specific financial details, he added: “Of course, there are other aspects, and the economic value of any deal will not necessarily be reflected in the revenue, including e-commerce, ad credits, data, marketing programs and our relationship with TikTok Other important aspects of platform relationships”.
Nash also highlighted the “strategic significance” of TikTok’s commitment to responsible artificial intelligence, which is a key part of the deal.
Commenting further on UMG’s new relationship with TikTok in the context of the broader social media category, Nash explained that UMG views “all” of its “partnerships as works in progress,” and in fact, the company still views ” The entire social media category is a work in progress.”
He explained: “[Social media] Still a relatively new monetization category”.
He noted that UMG’s 2017 deal with what was then Facebook “was the first time a social platform paid for music use.”
Nash added: “We still need to focus now on continuing to work across the industry to maximize participation by artists and songwriters in the value they create on these platforms. So that’s important moving forward. One step. This is a journey. We are thinking long term.
3. Sir Lucian Grainge says the TikTok chief executive “should be commended” for his leadership during the renegotiation of UMG’s TikTok deal…
Sir Lucian Grainge, the company’s chairman and chief executive, agreed with Nash’s comments about the benefits of the TikTok deal for UMG and the growth of the broader social category, telling analysts, “It’s in our DNA. It’s all about long-term behavior and long-term growth.”
He added: “What we have achieved on responsible artificial intelligence, where we stand and what we can agree on [TikTok] exist [attribution] I think stream operations really bring advantages to the whole social project.”
Sir Lucian Grange also singled out TikTok chief executive Shou Chew, telling analysts the executive “should be praised for his leadership” [around the negotiation of the deal] And seize this with me, with us, about the opportunities and possibilities for both companies and for all writers and artists ”.
If we look a little further, we should note that UMG and TikTok have reached a new deal against the backdrop of ongoing political scrutiny of the Bytedance app in the United States, the world’s largest country where music is recorded.
As we’ve reported in recent weeks, TikTok has come under fire from U.S. lawmakers, with President Joe Biden recently signing a bill requiring TikTok’s China-based owners to divest the app’s U.S. operations or face Ban is on the market and it matters 170 million user.
The company just sued the U.S. government today (May 7) over the law.
The head of a Los Angeles-based music giant, which accounts for 51.1% of its total music recording turnover in 2023 (€8.46 billion/$9.16 billion), has spoken out in the United States and Canada For TikTok’s CEO, this isn’t an ugly look.
4. Some of UMG’s partners “may start out as lower-margin deals,” but they have “huge potential”…
In a prepared speech at the start of the call, Sir Lucian Grange stressed the “strategic and financial importance” of Universal Music Group working with “emerging and established music companies and entrepreneurs”.
Grainge explained, “We are able to enter into these relationships because we designed and built UMG so that we can leverage our scale and global infrastructure to provide a broad range of distribution, marketing, promotional and other services to third parties.”
He further explains, “While these relationships may begin with less profitable Transactions,” which UMG believes have “huge potential.”
That’s because of the “connections” Universal Music Group has built with some of the industry’s “most exciting entrepreneurs and artists,” which “often expand into broader service offerings over time and develop into multi-faceted collaborations.” Chance” .
These partnerships “will in turn lead to greater strategic benefits and higher profits,” he said. A key example cited by Grainge is UMG’s long-standing partnership with the South Korea-based entertainment giant move.
In 2017, UMG cooperated with South Korea’s HYBE and signed a record service agreement for its flagship group BTS.
Grainge added, “Four years later in 2021, the company has found success, expanding its relationship through a global strategic agreement to collaborate on numerous artists and projects.”
Last year, as Grainge noted on a conference call last week, Universal’s Geffen Records and HYBE signed a joint venture agreement last year to launch Debut: Dream Academy “Aiming to implement HYBE’s K-Pop approach and launch a new band in the United States.”
UMG also established a new partnership with HYBE in the first season. The deal provides UMG with exclusive distribution rights to HYBE’s music for the next 10 years, and UMG will also invest in and further collaborate with HYBE’s global super fan platform Weverse. (Sources told MBW at the time that UMG made a minority investment in Weverse as part of the new partnership.)global music business
