“Downloading music electronically...[is] going to be an enormous revenue stream within two or three years, when we really get traction.”


Winner Talks to Loser, As Music Biz Giant Stoops to Speak with Roy Trakin

They’re called Universal for a reason. Universal Music Group’s Q4 release schedule is nothing short of history-making in breadth and depth. And amid the group’s many upcoming platinum-artist releases is something for everyone: rock from Bon Jovi, U2 (greatest hits), Nirvana (retrospective with previously unreleased "You Know You're Right"), Three Doors Down and Sum 41; hip-hop from Eminem (8 Mile), Jay-Z, Ja Rule and DMX; R&B from Dru Hill, Ashanti (remixes) and the Isley Brothers; country from crossover queen Shania Twain and pop from Mariah Carey and Now 11.

And those are just a few highlights. Before the end of the year, the world’s largest music group—currently sporting record marketshare of 30.6%—will release nearly three dozen albums from established artists who have previously sold 300k or better. And that’s not counting developing artists and soundtracks. UMG also has four of the top five 2002 albums to date, which so far have been good for more than 14.5 million OTC sales among them: Eminem’s The Eminem Show, Nelly’s Nellyville, Ashanti’s Ashanti and the O Brother ST.

“The labels have done a fantastic job not only coordinating schedules but setting these records up,” UMVD chief Jim Urie enthuses. “We’re also benefiting from the artist development work we’ve done all year. Puddle of Mudd, New Found Glory, Jimmy Eat World and Hoobastank are carrying over from the first three quarters and are now paying off. It’s all coming together at the right time.”

And now, a few words from the man who, since Seagram's acquisition of PolyGram, has presided over the creation and increasing success of the largest music enterprise on the planet. Here's HITS' own lunchroom market (and sandwich) analyst Roy "Vey" Trakin with the pitch:

UMG remains red-hot, with 30% marketshare and a record-shattering $1 billion EBITDA. To what do you attribute that success?
I attribute our success to the executives who run our various divisions. Because of their talent, we have the greatest fourth quarter we’ve had coming up—I actually think we’re going to increase our marketshare.

Is it good for the business to have a single music group dominating the landscape like UMG? Consolidation hasn’t exactly been the best thing to happen to the radio industry.
The difference is we built this company gradually, over eight years—we didn’t just buy it. Actually, when we first acquired PolyGram, our marketshare was around 20%

You’ve repeatedly given credit to your executive team for the company’s success.
There’s a certain vibe that runs through our company; it’s about being thoughtful, reasonable and treating people well. This is a place where the artist comes first. What we’ve done is put incredible entrepreneurial people in charge of helping artists’ careers and given them the autonomy to do so.

Much like Steve Ross’ WEA, where you spent many years.
WEA in the late ’70s and ’80s had some amazing record people who ran their own show, had great taste and built an incredible record company. I spent a lifetime there, and I certainly took all the good elements and tried to expand them. The difficult part was getting the counterparts to Ahmet Ertegun, David Geffen and Mo Ostin; those kinds of executives are hard to find. Take a look at any one of these labels. When Chris Blackwell left Island, there was a period of decline. Same at A&M, when Herb and Jerry left, and at Geffen when David left. It takes a while to build it back up. You need the people to put the gas in the car. You have to bring in talented people, pay them correctly, make sure they get credit for their accomplishments. We have a creative atmosphere here, one of reason and thoughtfulness. At least you have a fighting chance with that.

Can the record industry overcome the various threats to its health?
Of course. It’s in the artists’ interests and our interests to align. Most of the journalists and commentators miss the big picture. We already have thousands of people buying and downloading music electronically on legal sites. Un­questionably, we’re seeing the genesis of a revolution. It’s going to be an enormous revenue stream within two or three years, when we really get traction, as the music becomes simpler to download, as we facilitate the ease with which the consumer can get the music. We’re no longer solely a packaged-goods business.

Can the traditional retail sector coexist with the Internet?
Definitely. The same way TV, movies and videos coexist.

Universal is firmly behind the current PSA campaign to fight Internet piracy. Are you worried about a possible public backlash?
A lot of people won’t like it, and why should they? They’re getting something for free. For us, it’s important to be on the right side of the issue. In the end, the side that’s legal will defeat what’s illegal. It may take a while, and it’s inevitable that people will have differing opinions along the way.

Are you bullish on the future of the music business?
Absolutely. There’s just a great deal of misunderstanding about what it costs to create music, what the profitability is. If people took the time to look closely, they’d realize we’re not operating on very large margins. People should be more thoughtful about what they write, think and say. Things are different from what they appear on the surface. We have to communicate our point of view, which we haven’t been articulate about. We want to do the best we can to represent that. It’s inevitable that we’ll sell music electronically and through brick-and-mortar. The illegal systems will close down, and at that point, the record business will experience an explosion.

How have parent company Vivendi’s various problems affected UMG?
Not at all. Jean-Rene Fourtou is a very direct, straightforward person. He has been clear with us that we have done a good job. They’re very pleased with us and excited about the direction we’re going in.

Do you expect any more consolidation at UMG and in the record industry overall?
It depends on how business is. If things continue to slide, I’m sure there’ll be fewer people working at all these companies. We have tightened things up, and we don’t foresee any layoffs. This is a stable company. We’re just looking forward to the fourth quarter.