🔵 The checkmate genius of Universal's "partnering and influence" strategy

Why the company's current approach might now see it remain unchallenged for years, maybe decades, to come.

I have really enjoyed reading Eamonn Forde’s “1999: The Year the Record Industry Lost Control”. The title says it all, with the book working through how the music industry went from its most profitable phase to its most broken, with piracy eating its model and slashing profits.

One part of the book details how the indie labels realised a need for trade representation, and formed AIM as a consequence. The formation of AIM certainly rattled the BPI, which until then could claim it represented all record labels here in the UK.

Equally though, AIM enjoyed a certain level of power and influence, and amid the digital disruption going on at the time it was able to take quite a different stance to the majors, and explore that accordingly.

Many (if not most) indies were very pro-digital, leaning into licensing their catalogue to companies like eMusic. Details like this tend to get forgotten now, and I feel part of the reason for Eamonn’s book is to illustrate that this was a complex issue that history has now flattened into a more convenient “the labels just didn’t get it” viewpoint that is entirely untrue.

Reading the book however, one cannot help but reflect on that period and relate it to where the music industry is now, in 2024. One might argue there are parallels, not least in labels currently enjoying an especially profitable period thanks to streaming revenues. Unlike 1999 though, it is clear that Universal in particular has learned lessons along the way, and its strategies in 2024 speak to that.

For me, it also underlines why the company’s dominance will only continue to grow, and why that won’t change for some time yet, unless something unforeseen and drastic happens.

What Universal has realised is that it might not need to outright own companies, provided it can wield enough influence to ensure that its will is the one companies bow to.

The situation with Deezer’s remuneration is a perfect case in point. Despite criticising aspects of the new approach, the likes of Merlin have now capitulated and signed on for the new payment structure. There is no question labels might earn more from this approach, but they arguably do so at a cost of reputation, as it involves subscribing to the “reverse Robin Hood” theory that, in time, I fear might well come back to haunt everyone.

Universal is understanding that strategic partnerships and minority investment ensure that when it comes to how the music market develops, it is holding unparalleled influence. Whether it is minority stakes (49% of PIAS, 25% of NTS for example) or strategic alliances (YouTube, HYBE, Roland), Universal is working hard to ensure that its network of influence stretches far and wide through both the recorded music space and the wider music world beyond it.

I have written before about Universal’s market share and how that should be of concern. Increasingly though, I am realising that Universal is playing a much smarter game than that. Put simply, it does not need market share provided it can ensure all partners are backing whatever agenda it might have. Market share is good, but supreme influence is even better.

Again, the Deezer remuneration aspect might be the best example here. Granted, it isn’t all bad, but it most certainly ensures that Universal’s agenda is met first and foremost. The really crucial part however, is that this alternative method managed to get so far without a single other label (or trade body, I would assume) being consulted. By the time this was being pushed through, it was too late, and all everyone else could do was sign on or stay with the current approach. Any means to propose an alternative remuneration method had already vanished.

That is the genius of that deal. It is also a bellwether of what might be to come.

At points, there is no question Universal’s imperious position works for the wider music industry. The dispute with TikTok is a perfect case in point. The company’s removal of all music it has any control over (including publishing and distribution) ensures that a vast amount of works are now barred from use. The impact of that is still being measured, but it appears profound, and as Universal goes on the offensive to even remove modified songs (i.e. those that have been sped up or slowed down), the view count of removed material is well into the billions.

Awkwardly, the company’s sheer muscle is now meaning it can effectively speak for the whole music industry, or certainly work to materially affect how music is valued. Trade bodies of all kinds arguably now look redundant, in the sense that the larger agenda is now being set by Universal, not anyone else.

Disrupting Universal’s dominance will be an incredibly hard task. In that context, it makes a lot of sense that Warner - the smallest of the three remaining majors - is now looking to buy Believe. This is the strategy Seagram deployed in the ‘90s when it built Universal by acquiring other majors, all of which is detailed in Forde’s book. If Warner wants a seat at the table, it will need to be much bigger than it is now, and only Believe or BMG might deliver that kind of heft (and BMG don’t seem too keen on that approach).

The only companies likely to even dispute Universal’s position (given it is fair to assume both Sony and Warner would love to be in that same spot, and therefore cannot cry foul) are the indies, but - unlike back in 1999 when AIM rattled many a cage as the world’s first independent trade body - it now feels like the whole indie trade body space has become too diffuse, with little means to stand up and globally speak as one. Even if it could, I fear its means to really change the outcome might now be fatally compromised.

In many ways, one has to admire how Universal has manoeuvred in recent years. I think there can be little doubt as to the power and influence it wields. It is not slowing down either, with the HYBE and Roland partnerships both happening in the past week alone.

For everyone else however, it looks like Universal has checkmated the rest of the music industry. It has placed itself beyond scrutiny with a clever approach that avoids market share dominance in favour of influence. That in turn ensures its position keeps gaining momentum and its own self-serving vision dominates the agenda, every time.

You have to admire it, even if you do not like it.

Have a great evening,

D.

🚨 We are hiring again! Details at the bottom, or click here to go straight to our Jobs page on the Motive Unknown website. 🚨

🎶 listening to “Watussi” by Harmonia. I blame the video below for rekindling my passion for all things Krautrock. This is a wonderful example, and something I can lose myself in easily as a repetitive, hypnotic little space jam. Glorious.

📺 watching “The Drum Machine That Shaped Krautrock”, which shows off the little-known Elka Drummer One, recognisable to some as the drum machine featuring on works by Harmonia and Cluster. It just makes me want to get one and make loads of crazy rhythmic Cluster vibes. Wonderful stuff.

🤖 playing with AI note-taking from meetings. Getting transcripts of meetings and having AI create formal meeting notes is a total game-changer for me. I never used to take notes, but now this is providing a perfect summary every time, both for me and our clients. Wonderful time-saver and productivity improver!

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Stories from the Music Industry:

WMG gets access to Believe data as takeover battle heats up

Now WMG will be given “access to a data room including a level of information consistent with the information provided to the Consortium, subject to appropriate confidentiality undertaking”. Why is this important? It has only happened because French financial regulator the Autorité des Marchés Financiers (AMF) got involved to prevent the consortium from waiving a previously-agreed condition of its bid that (according to MBW) would have cleared the way for it to buy 72% of Believe, and thus lock WMG out. That’s been blocked, so now the major label will be able to do its due diligence and (possibly) make its bid.

👆🏻Hot take: I feel Warner needs Believe if it has any aspiration to truly competing with the likes of Sony and Universal for market share. This will be quite the battle IMO.

Universal Music invests in ‘superfan’ platform Weverse, as it strikes new 10-year agreement with HYBE

HYBE has struck what it calls an expanded long-term agreement with Universal Music Group (UMG).  The deal provides UMG with exclusive distribution rights for HYBE’s music for the next 10 years. The even bigger news? The deal will also see UMG invest in – and further collaborate with – HYBE’s global superfan platform, Weverse. (Sources tell MBW that UMG has made a minority investment in Weverse as part of the new partnership.) According to the two companies’ announcement today (March 26), the “partnership will help enhance the growth” of Weverse in North America.

👆🏻Hot take: see editorial above. It’s another savvy move, and one of many Universal have been making of late.

Spotify launches video courses on production, songwriting, how to ‘make hit records’ and more

The platform has teamed up with educational technology companies like BBC Maestro, PLAYvirtuoso, Skillshare, and Thinkific to offer courses across four main categories: making music, getting creative, learning business skills, and healthy living. BBC Maestro is a subscription-based online learning platform created in partnership with BBC Studios. It offers pre-recorded video courses taught by  experts in various creative fields. PLAYvirtuoso is another learning platform specializing in online music education through artist-led courses, mentoring, and structured curriculums

👆🏻Hot take: I can see the logic here, though I’m not sure what long-term traction there will be. In the case of music production for example, anyone I know simply uses YouTube.

Why We Need To Stop Seeing Grassroots Venues As Mere Rungs On A Ladder

With music venues in crisis, does celebrating them as places where bands appeared on the way to fame overshadow their true purpose as the places in which music is played for the sake of communal joy, asks Luke Turner

👆🏻Hot take: a terrific read here from Luke, laying down a few home truths that I think everyone needs to stop and consider.

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Notable stories from the world of tech:

New study of unicorn founders finds most are ‘underdogs,’ and female founders are rising

The study found: 70% of unicorns have “underdog founders” (immigrants, women, people of color). Unicorns used to have only male founders, but this is changing, with 17% having a female founder in 2023. 53% have degrees from the top 10 global universities. 49% of unicorn CEOs had STEM degrees (64% of female founding CEOs had STEM degrees) and 70% of founder teams have STEM degrees. Outside of SV Angel (6.4%) and YC (10%), no other VC fund got into more than 2.8% (Sequoia) of unicorns.

👆🏻Hot take: some positive news for a change! This is great to see - amid much talk of the dominance of Big Tech, it is certainly welcome to see the diversity at the startup level.

OpenAI’s app store draws investors and students seeking artificial aids

“In some ways OpenAI is following a very standard ‘how to build a platform’ template that’s so predictable that it might have used ChatGPT to write it,” said Benedict Evans, an independent technology analyst. “So, we have a developer conference, an API and an app Store. But it’s not clear to me whether this really has traction.”

👆🏻Hot take: I feel this underlines a broader view I have, namely that the excitement around AI and what it can do might actually be waning. No doubt it is great for some things, but the average consumer is not seeing masses of utility as yet.

Study claims more than half of Americans use ad blockers

More than half of Americans are using ad blocking software, and among advertising, programming, and security professionals that fraction is more like two-thirds to three-quarters. According to a survey of 2,000 Americans conducted by research firm Censuswide, on behalf of Ghostery, a maker of software to block ads and online tracking, 52 percent of Americans now use an ad blocker, up from 34 percent according to 2022 Statista data.

👆🏻Hot take: no great shock here, but I think what’s missed is the point that this underlines and enforces the dominance of platforms who deliver ads through apps, and which therefore aren’t so easily blocked - Meta being the obvious example with Facebook and Instagram.

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Looking for something else to read? Here you go:

Why you shouldn’t trust AI search engines

Here’s the problem: the technology is simply not ready to be used like this at this scale.

👆🏻Hot take: some fine reminders here as to why AI is far from perfect in the search engine space (or indeed in many other spaces too).

Six Subscriptions Actually Worth Paying for, According to Reddit

Subscriptions have a way of piling up, but here are a few to consider that are truly worth their cost.

👆🏻Hot take: sadly this one is really only for US readers, but I’d love to see something similar for those of us in the UK.

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We are hiring (again!):

Motive Unknown continues to grow, and despite hiring four people since February began, we are now hunting for another Marketing Assistant, and - for the first time - another Marketing Manager.

In the Marketing Assistant role, the successful applicant will be responsible for working with our Marketing Managers to develop and execute effective marketing campaigns for our clients, leveraging various digital channels to promote their music and engage with their fan base.

In the Marketing Manager role, the main function will be to manage our client relationships and lead in the creation and execution of marketing initiatives for Motive Unknown’s clients, primarily focused on the recorded music space (i.e. labels, management companies, artists direct etc).

Interested, or know someone who might be? Full details are on the Jobs page of our site, along with the form to apply. Please do pass this along if you can. Many thanks! 🙏

(Please note: both roles are for UK-based applicants only)

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