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In a message to staff, the executive took aim at the royalty model that streaming giants use.
By J. Clara Chan
Universal Music Group CEO Lucian Grainge said the business models for music streaming need to “evolve” to better reward artists — whether or not they are signed to a major label — and listeners.
In a message to staff sent Wednesday, the executive took aim at the royalty model of streaming services like Apple Music and Spotify; these services, broadly speaking, determine their payments to rights holders based on a pool of money coming from subscriptions and ads, divided by contributions to the total number of streams.
Though Grainge name-checked Spotify and UMG’s collaborations with the company as part of the industry’s shift toward streaming, the CEO said it was time to develop a new model “to keep pace with change.”
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“There is a growing disconnect between, on the one hand, the devotion to those artists whom fans value and seek to support and, on the other, the way subscription fees are paid by the platforms. Under the current model, the critical contributions of too many artists, as well as the engagement of too many fans, are undervalued,” Grainge said.
Without sharing specifics, Grainge said the ideal updated model would not pit artists against one another but would instead support “DIY, indie and major” artists that would similarly reward subscribers and offer an enhanced “value proposition of the platforms themselves, accelerating subscriber growth, and better monetizing fandom.” He noted that UMG would be working toward that model this year and emphasized fair compensation for creators of “all music content, whether in the form of audio or short-form video.”
Grainge’s comments come roughly four months after major streaming services and music publishers, including Universal, came to an agreement on royalty rates for song owners through 2027. Under the agreement, owners are set to receive a royalty rate upward of 15.35 percent, raised incrementally through 2027 beginning this year.
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