Can this man save the music business? – Los Angeles Times
He is putting songs on smartphones in Africa, reviving moribund American record labels and making Lorde into a Grammy-winning global sensation. Above all, he wants to forge new partnerships with his industry’s erstwhile adversaries — the technology firms that have upended the way people get their music.
Skeptics question whether anyone can reverse the decline of an industry that has seen global sales plummet from $28 billion in 1999 to $16.5 billion in 2012. But if anyone can save the music business, it might be Grainge. As chairman of Universal Music Group, the biggest of the three remaining major record companies, few rival his influence in determining how people will listen to music, and how they will pay for it.
“He’s the great hope for the music business,” said Irving Azoff, manager of the Eagles, Christina Aguilera and other acts. “He started as a song plugger and a publishing guy. He understands the entire worldwide record business. And he gets technology. He understands that’s the future of the business.”
Many have counted out the business as a casualty of the digital age. Grainge, 54, contends that the music industry has turned a corner. Globally, annual sales rose 0.2% in 2012 — a modest number, but the first growth since 1999. Universal itself booked a profit of $706 million last year.
The nascent recovery can be traced to the growing popularity of digital music services. Pandora, Spotify and other streaming enterprises are now the fastest-growing source of revenue for the industry, aided by the spread of smartphones. This has helped create new markets and allowed Universal and other companies to collect monthly fees that provide a steady source of revenue.
Satellite radio is starting to generate serious cash as well. Seven out of 10 new cars sold in the U.S. come equipped with satellite radios, and 25.6 million people pay to tune in. Royalties paid by Sirius XM are the largest chunk of the $590 million that labels and artists pocketed last year, according to SoundExchange, which collects and distributes music royalties.
At the same time, Grainge says the industry has only just begun to reinvent itself — Universal included. Four years ago, he moved the headquarters from New York to California to be closer to the tech companies — such as Google’s YouTube division and Apple Inc. — that have replaced radio stations and record stores as the key gateways through which a new generation hears music.
The challenges facing even a successful company such as Universal were on display in a conference room at Universal’s offices in Santa Monica.
Rob Wells, the global digital business chief, kicked off a presentation by noting that people in some markets spend less than $1.50 a month on music, or less than a cup of coffee at Starbucks.
“Better turn the lights off,” Grainge said with a smile. “We need to save some electricity.”
Wells then went on to present what might be considered a radical new plan: a service that would permit unlimited song downloads for about $20 a month.
The hook is that consumers would get to keep all the tracks they download, even after the subscription lapses. The risk is that consumers would gorge on music for a month or two, downloading thousands of songs, and then let the subscription lapse.
Grainge found the potential upside to be worth the risk, and urged his team to test the concept in a European market ravaged by piracy.
Such new approaches to distribution serve Grainge’s larger goal of boosting sales by focusing on emerging markets, where revenues are expected to double over the next five years. In Africa, Universal partnered with Samsung last spring to launch the Kleek, a music service that offers a mix of the company’s international catalog as well as local artists such as Power Boyz and DJ Vetkuk.
In countries including Kenya, Uganda and Nigeria, Samsung provides the service free as an incentive to buy its smartphones.
“We’re bundling music into markets where we’ve never been able to monetize anything,” Grainge said.