AN AUDIENCE
WITH L.G.

If the measure of a CEO’s performance is his company’s profitability and marketshare, Lucian Grainge’s first four years at the helm of UMG have been a resounding success. Since July of 2011, when he was appointed Chairman/CEO, Grainge has increased UMG’s profitability from $519m in 2011 to $622m in 2014, while acquiring EMI Recorded Music and expanding Universal’s global footprint. Grainge has engineered similar gains in terms of revenues, which rose from $4.6 billion in 2011 to $5 billion last year. The signs point to an even bigger 2015 for Universal. Q1 revenues were $1.21 billion, the highest in the last nine years.

In terms of marketshare, UMG boasts a stunning 43% in frontline year-to-date and 39% in TEA. The simultaneous release of two of the year’s biggest debuts in Luke Bryan and Dr. Dre is expected to drive those winning numbers higher still. Given this degree of dominance, it isn’t surprising that Universal labels have notched eight of the Top 10 albums year-to-date.

Concurrently, under Grainge’s oversight, Universal’s percentage of Vivendi’s overall revenue has increased from 14.5% to 45.1% as the French parent company has sold off assets in transforming itself into a dedicated media and content entity. Film and TV studio/distributor Canal+ accounted for 54% of Vivendi revenue in 2014.

He accomplished this steady growth during his first term in office. The second term symbolically began earlier this month, following the announcement of his new five-year deal with Vivendi. While the EMI pickup has clearly been the centerpiece of Grainge’s reign, the application of his business philosophy has been UMG’s driving force during that time.

Grainge took the reins of Universal following a successful run as the Chairman of the U.K. company, achieving and maintaining dominance in that market. He brought his global view of the music business, formulated during his six years heading UMG International, to his new job and has applied it with surgical precision. More recently, Grainge has led an industrywide crusade for premium streaming across every viable platform, once again staying ahead of the curve.

By prioritizing A&R—optimizing existing talent while developing new career artists—Grainge has kept the focus on any music company’s most important asset. This emphasis on maximizing talent extends to his key executives, whom he’s empowered and organized according to their particular skillsets. In September of 2013, he brought in experienced top exec Michele Anthony as EVP of the company, and she quickly made her presence felt. In pairing Monte Lipman’s Republic with David Massey’s Island, he brought together the master of promotion with one of UMG’s top A&R executives, and this complementary partnership has paid dividends since it was formed in April of 2014. At the same time, Grainge charged Steve Bartels with the job of revitalizing Def Jam as a standalone label, and chose renowned publishing exec Jody Gerson to lead UMPG, while tapping John Janick to succeed Jimmy Iovine at Interscope, which remains Universal’s most important label brand. UMG Nashville’s Mike Dungan and BMLG’s Scott Borchetta have consistently delivered as well.

But the shining example of Grainge’s approach has been the revitalization of the former EMI Recorded Music as the Capitol Music Group under the handpicked leadership of Steve Barnett, who has cannily combined the strongest aspects of British and American operational principals, transforming what had been a battered and mismanaged operation into a highly competitive, state-of-the-art modern music company. This metamorphosis would not have been possible had Grainge not swooped in to snag EMI in the first place, and then quickly and decisively installed the right executive as its architect of change.

Grainge’s highly skilled, well-coached team has expertly executed his business philosophy, and it would be foolhardy to bet against them moving forward.

We asked the UMG ruler some questions about his plans for the company going forward, and to our surprise and delight, he actually answered them.

As you consider the next phase, what are your top priorities for UMG?
First and foremost, we’ll continue to invest in A&R—which as you know is my passion—and we’ll be laser-focused on breaking new artists. I’m incredibly proud of our track record in this respect, and I’d like us to be producing more global breakthrough artists this year and in the years to come.

Of course we’ll continue our efforts to improve the monetization of our artists’ music, particularly on streaming platforms. We will keep doing everything we can to create an environment that benefits artists, labels, consumers and the platforms alike. We’ll broaden our revenue streams; you’ll see this in our work with brands and sponsors, as well as in our development of audio-visual content and our increasing presence in emerging markets. [Vivendi Chairman] Vincent Bolloré has brought a renewed sense of innovation and entrepreneurship, which positions UMG to play a broader role in the new Vivendi.

With streaming gaining so much momentum just as the global release date kicks in, how is the process for setting up and marketing releases changing?
Having run the international division of the company for many years, I understand the importance of an executive team that knows how to think and act globally. I see this as a unique strength of UMG’s. And now, with the global release date, it’s more important than ever to evaluate and adapt to the individual needs and conditions of each market, but at the same time have the ability to mobilize the entire organization on behalf of an artist on a global basis. What this means is that our ability to break artists faster and internationally will only improve. At the same time, we must not underestimate the importance of local-language repertoire and the incredible creativity we’re seeing in countries around the world. Our efforts to support local music and local artists play an important role in everything that we do.

What’s your sense of the streaming landscape right now?
When you cut through all the noise, the potential is enormous, and obviously I remain incredibly optimistic. A lot of the press coverage and industry chatter has been dominated by the “freemium” debate, which has degraded the conversation to the point where you’re cast as either “for” or “against” ad-supported on-demand music consumption. Clearly, it’s not that simplistic. As I’ve said before, while ad-supported on-demand music definitely has a place, whether that’s as part of discovery or trials of new products and offerings, freemium alone is inadequate to support our critical ecosystem of artists, labels and the platforms themselves. What that means is that we must seek the proper balance between ad-supported and paid subscription. It’s not one or the other. With the two approaches in proper relationship, we can continue the level of investment we make in artists who then, in turn, can be fairly compensated for their work. If we get that right, everyone wins. That’s what we’re working towards.

Can you say a bit about UMG’s plans to develop other media, including video and film? What about media for new technology?
This is a key part of our strategy. These projects can open a whole new world of opportunities for our artists, and underscore their massive appeal beyond recorded music.

Last year, we acquired Eagle Rock Entertainment, which has a big library of concert films and documentaries, and they are producing more and more video content for us. Of course the success of Amy is but one example of our strategy. David Joseph did a remarkable job executive-producing that film. There are other examples, including Kurt Cobain: Montage of Heck, and we’re involved in a Ron Howard-directed Beatles documentary with our sister company Studio Canal that’s due out in 2016. And there’s a lot more to come, particularly as it relates to working with Canal+ and Studio Canal.

I’m watching a couple areas in new technology that could have implications for music. One area where my team has done some interesting work is with virtual reality. We’ve produced concert films and music videos that show the potential of VR and how artists can connect with their fans in an entirely new way. •