SIR LUCIAN'S MESSAGE
TO THE TROOPS

Fresh off announcing deals with Facebook and YouTube, UMG chieftain Sir Lucian Grainge sent out this company-wide letter summing up an extraordinary year.

Dear Colleagues:

With the holidays fast approaching, I want to take a moment to share with you a few highlights of what we achieved this year as well as outline what we hope to achieve in 2018.

First off, our success was no accident. For years now, in a wide variety of ways, we've been at the forefront of fostering the development of streaming. In 2017, our efforts really began to pay off. The dramatic worldwide increase in streaming has been the single most important catalyst in returning UMG—and the music industry at large—to growth.

In part, that’s why we posted our best financial performance in 15 years by many metrics. How did we do it? We started, of course, with great music. That’s where it all begins. On top of that, UMG’s artists accomplished something never done before, something unimaginable only a year ago: they logged nearly a quarter of a trillion streams in 2017. As a result, streaming and subscription revenue represented 46%—almost half—of our Recorded Music revenue for the first nine months. And that figure is exactly double what it was just two years ago.

But financial results are just one measure of the many successes our artists racked up this year. There were way too many to highlight, so I’ll mention only a few:

• On Spotify: UMG had three of the top four artists globally (Drake, The Weeknd, Kendrick Lamar); four of the top five albums (Drake’s More Life, Kendrick Lamar’s DAMN., The Weeknd’s Starboy and Post Malone’s Stoney); as well as two of the top three songs (two versions of Luis Fonsi’s “Despacito”).
  
  
• On Apple Music: globally, we had the top three albums (More Life, DAMN., and Taylor Swift’s Reputation); and three of the top five songs (“Despacito,” Kendrick Lamar’s “HUMBLE.” and Sam Hunt’s “Body Like a Back Road”).
  
  
• According to Nielsen: in the U.S. year-to-date, UMG had the No. 1 album (DAMN.); the No. 1 track (“Despacito,”); three of the top four albums (DAMN., More Life and Reputation); and three of the top four tracks (“Despacito,” “HUMBLE.” and Post Malone’s “Congratulations”).
  
  
• And when it comes to video: “Despacito” was 2017’s most streamed video. In fact, it was the most-streamed video of all time.

As incomparably talented as our artists are, they don’t do it alone. Peel back the curtain and what’s revealed is... you—our roughly 7,000 employees in 60 countries. Day in and day out, your coordinated efforts—leveraging your relationships, expertise, passion and creativity on behalf of our recording artists and songwriters—are what's made UMG the undisputed leader of an industry that is, once again, growing.

For growth to be sustainable, however, we must remain focused, bold and daring, and in 2017, we had no shortage of examples:

• In May, through our agreement with Tencent, we significantly expanded the Chinese music market, opening vast opportunities for our artists in China. And, with the creation of Abbey Road Studios China, we will be accelerating the development of Chinese recording artists and local repertoire.
  
  
• This year, yet again, UMG was at the forefront of the industry in re-setting our relationships with Spotify and YouTube—creating new paradigms for artists and fans. And just yesterday, we struck a deal with Facebook, a deal which, for the first time, brought the world’s largest social platform into the music industry as a true commercial partner. When you consider our pioneering deal with Amazon and our continuing partnership with Apple, you can see emerging an increasingly competitive and dynamic market for music among the biggest tech platforms on earth.
  
  
• At the same time, we can’t let our future rest in the hands of a few giant distributors. Nearly a decade ago, when streaming was a welcome but small source of revenue, we embraced new entrants like Spotify. Going forward we will maintain the same approach. That’s why, in October, we launched our Accelerator Engagement Network, a first-of-its-kind program that will support the next generation of entrepreneurs and promote the development of their innovative music startups.

Impressive commercial results and remarkable chart positions are not the only things that drive us. Being the global market leader comes with responsibility. We take that role seriously. Day in and day out, we fight for public policies supporting fair treatment of recording artists, songwriters and all music creators.

And this year, in the face of heartbreaking disasters—both natural and man-made—time and time again we saw the good our employees and artists could do—in Texas and Florida and Las Vegas. And around the globe as well. Just one powerful example among many: we were proud to stand with Ariana Grande and our many other artists in support of the victims and families affected by the horrific attack last May in Manchester. Between direct donations and funds generated through initiatives by Bravado, Republic and Universal Music U.K., we raised more than two million dollars for the victims.

As a company built on shared values, we launched two important initiatives this Fall. All Together Now is our philanthropic initiative that supports employees’ good works and engagement in important causes focusing on key areas of need across education, health and well-being, with a special tie to music and the arts.

The reality is this: when the business was experiencing double-digit declines, we didn’t dig a hole and hide; we invested—in new artists, in emerging markets, in new business models, new technologies, and in local music from around the world. We didn’t lose faith.

We also became the first music company to partner with USC Annenberg on the launch of its Annenberg Inclusion Initiative. The goal is simple but profound: to increase representation of women and underrepresented and underserved racial and ethnic groups in the music and entertainment industries. Our USC partnership is but one aspect of our commitment to a workplace that attracts and promotes people from all backgrounds—a workplace that matches and supports the incredible diversity of our artist roster.

I’m enormously proud of these recent steps. More like them will be coming. They help us fulfill our social responsibility, yes, but more than that, I truly believe that in a world that is constantly spinning in new and surprising directions, they will be absolutely critical to our future success.

Looking toward the new year, we’ll strengthen the relationships we’ve put in place and build new ones with new partners. And we won't let up in continuing to redefine what it means to be a 21st-century music company—growing our presence in film and television, short-form video, brand partnerships, live events and direct-to-consumer, among other areas.

Most importantly, we'll continue to demonstrate why we are the best home for artists. The reality is this: when the business was experiencing double-digit declines, we didn’t dig a hole and hide; we invested—in new artists, in emerging markets, in new business models, new technologies, and in local music from around the world. We didn’t lose faith. We just kept doing what we came here to do—work tirelessly on behalf of our artists.

All of us know that people who choose to spend their lives in the music business are special, they're unique, and they might be a little bit crazy. Because for us, this isn't simply a job, it's a mission—a mission motivated by our love of music. And that’s precisely what makes me so proud to work alongside each and every one of you.

I wish you and your loved ones a happy, restful and safe holiday and I look forward to seeing you in 2018.

Lucian