In light of recent developments from Apple, Google, Spotify, and other tech companies at the forefront of the music streaming business, Universal Music Group finds itself preparing to fire CEO Lucian Grainge unless sales conditions dramatically improve, and fast, for the mega-label. UMG is the largest record label in the world, and it has a lot of influence over every aspect of the industry. This is why UMG’s parent company, the French corporation Vivendi, is leaning hard on Grainge to “fix the free problem,” which has been disrupting business as usual.
“This is all coming from Vivendi,” an anonymous source told Digital Music News. “They don’t really understand how free content works in music.” This comes only six months after UMG fired Rob Wells, the well-respected head of digital who embraced the Spotify model and proposed shifting focus towards converting ad-supported users. Top-level executives were not satisfied with the strategy.
“Wells was a sacrifice,” said another anonymous source within UMG. “Lucien fired Wells to buy six months for himself, that’s the only reason Wells was fired.” This bit of insight allows experts and commentators to understand UMG’s internal corporate struggle in a different light. Grainge’s public statements criticizing free streaming as an unsustainable business model have been made only to please his own superiors, who do not even understand the industry. His argument is itself non-sustainable, but it has been parroted by CEO’s across the board at large labels.
“Basically, I equate ‘free’ with the decline of the music business,” said Doug Morris, director of Sony Music Entertainment. “Why should anyone pay for anything if they can get it for free?” The next development in the situation was Apple’s announcement that it was going to launch its paid-only streaming service. The three-month window that Taylor Swift has recently made a big fuss about was actually designed as a direct pressure against other free streaming sites like Spotify and SoundCloud. They had three months to switch to subscription-only access, just like the corporate giants. Spotify pushed back hard, and, thankfully for plebeian music listeners like us, has received enough support from state attorneys in New York that it will most likely survive the hold-out.
Meanwhile, Soundcloud is also getting bolder. So is Youtube. “We’ll always have ad-supported. That’s our core, and we’ll never stop focusing on it,” said Robert Kyncl of Youtube. “It’s in Google’s DNA to be in the ad-supported business. Subscription is just an add-on. It’s an adjacent business that we’re building.”
The situation remains complex, but one thing is clear. The future of not just the music business but also that of intellectual content is in the balance.