Universal Music pumped €1 billion into acquisitions and investments last year, and plans to maintain “similar investment levels in the next few years”, according to COO and CFO Boyd Muir, speaking during the major’s latest earnings call yesterday.
Those investments come as the major implements its much-vaunted “Streaming 2.0” plan through newly secured agreements with Amazon Music and Spotify - even as independent music trade groups warn of devastating consequences for many artists and the wider music ecosystem.
Those digital service provider deals mark the first concrete steps in UMG’s vision for reshaping the economics of streaming - putting in place a model that the major claims will better reward artists while enhancing digital platform offerings.
However, indie label groups are reporting that Amazon’s new payment policies, which Universal has hailed as a breakthrough in its “artist-centric” crusade, have resulted in some independent labels seeing as much as “70% of their repertoire being demonetised overnight”.
UMG’s aggressive acquisition strategy reveals a clear pattern of extending control beyond the traditional label model, with the acquisition of Downtown Music Holdings, announced at the tail end of 2024, representing perhaps the most significant move in this direction - if it overcomes the regulatory hurdles and industry backlash surrounding the deal.
“In December, Virgin Music” - UMG’s label services business - “entered into an agreement to acquire Downtown Music Holdings, which will enhance our capabilities in serving the independent music community”, CEO Lucian Grainge noted during yesterday’s earnings call, again deploying the Virgin brand as a more palatable face for what critics have termed “another step in UMG’s relentless path to dominance”.
Grainge expanded on this theme during the call, describing how “by investing in businesses like Downtown that can and do support today’s leading music entrepreneurs, we can also help to advocate for advanced policies and practice that will further protect and grow the entire music system”.
Muir further emphasised this strategy, explaining that “the independent services space is highly competitive and a growing part of the industry. The reason so many independent music entrepreneurs actively seek to partner with UMG, when they have more alternatives than ever before, is that we provide what they’re seeking, the most innovative creatives and the finest resources to advance their artists’ careers”.
Of course, this somewhat disingenuous positioning of Universal as a benefactor to independents ignores the fact that - particularly with the Downtown deal - many independents are finding themselves without much choice, as Universal’s aggressive programme of acquisitions reduces the number of truly independent offerings on the table, and present a significant contraction of routes and access to market.
When the Downtown deal was announced, Beggars Group founder Martin Mills dismissed UMG’s use of the Virgin brand in all the official announcements of the acquisition as “cynical”, given some still associate the brand with the indie sector because of the original Virgin Records label. He then warned “there’s a wolf under that cape”, criticism that stands in stark contrast to Universal’s carefully cultivated narrative about supporting the independent ecosystem.
The Downtown acquisition - and other recent moves by the mega-major - have drawn fierce criticism from independent sector trade groups, with IMPALA demanding regulators block what it sees as a “naked land grab” and submitting “detailed submissions to key competition authorities”, urging intervention.
The potential control over Downtown’s combined infrastructure, which includes FUGA, CD Baby and the Downtown label services business - and which reportedly touches as many as one in three tracks going into Spotify - raises serious competition concerns that go far beyond simple market share calculations.
Making matters worse, Universal has announced yet another acquisition, of Dutch indie label 8Ball Music, after already absorbing [PIAS] last year, prompting IMPALA CEO Helen Smith to declare “there comes a point where big is simply too big, and the scale can impact outcomes for a whole market. It’s time to put a stop to Universal’s juggernaut strategy”.
Beyond acquisitions, as Universals’ deals with streaming platforms translate into actual policy changes, the independent sector is witnessing first hand the consequences of what Grainge proudly terms “artist-centric principles”, but which AIM CEO Gee Davy describes as having “a disproportionate impact on [independent] artists and revenue”.
Muir, during the earnings call, touted the “significant progress” that UMG is making on its ‘Streaming 2.0’ agenda, noting that “in December, UMG and Amazon Music announced an expanded global relationship, one that will enable further innovation, secure implementation of artist-centric initiatives, advanced AI and fraud protections, and promote revenue growth”.
What Muir did not mention, of course, is that these “artist-centric initiatives”, yet again - as with changes to Spotify, Deezer and Apple Music’s models - appear to involve disadvantaging or demonetising artists and tracks that fail to reach certain thresholds - a system that predictably benefits the majors and their superstar artists at the expense of independent artists and labels.
Beyond - or perhaps in step with - its controversial platform deals and acquisitions, Universal continues to push into emerging markets, with Grainge framing these investments as opportunities in regions previously written off due to rampant piracy.
“A lot of the markets and regions where we’re investing are where there was no investment because there was massive piracy and there was no protection for copyright and IP”, Grainge said, explaining the major’s emerging markets focus.
The digital transformations that made these markets viable also provides UMG with unprecedented data insights, allowing the company to “identify exactly what the audience and what the consumer actually wants in these markets”, where they were previously “operating blindfold” without visibility into consumer demand.
UMG appears to be applying the same financial and data-driven approach to these emerging markets as it has elsewhere, with Grainge noting that these regions often contain “enormous libraries and catalogues of labels that were created decades ago, which we can actually put into our M&A strategy”.
To Grainge’s mind, these are not merely markets recovering from the impacts of piracy, but entirely new opportunities. These markets offer significant opportunities for growth, continued Grainge, noting “you couldn’t even say that they just rebound: they actually now exist for the first time ever”.
This, alongside Grainge’s statement that Universal will march “hand in hand” with its DSP partners - stating that “Amazon, Apple, Spotify - where they go, we go” - suggests a potentially worrying strategy with a systematic approach to identifying acquisition targets in territories where legacy catalogues previously devalued by piracy now represent potentially undervalued assets, ripe for Universal to swoop in and gobble up.
Muir reinforced this strategy, confirming that Universal’s first M&A priority is “investment in those geographies which are evolving where we see the consumption pattern shifting towards paid subscription”, indicating that the company’s billion-euro annual investment will take on a global perspective as it targets strategic footholds in developing markets.
Of course, a big part - and possibly the most anticipated element - of Universal’s ‘Streaming 2.0’ thesis is the introduction of higher-priced ‘super-premium’ tiers by the DSPs - a concept that now appears to be moving from a years-long and fairly theoretical discussion to actual product development, with Spotify apparently “committed to launching” its “higher price point” tier that will include “enhanced features”, according to EVP Digital Strategy Michael Nash.
As previously reported, Universal has an optimistic view of the super-premium opportunity, claiming that its research suggests that as many as one in five existing premium subscribers would shift to a ‘super-premium’ offer, with platforms expected to “compete on product with differentiated super premium tier offers”.
Nash highlighted innovations like Amazon’s Alexa Plus as a real-world example of this, pointing to enhancements in “personalising the music experience, more relevant queries, being able to surface music discovery in new ways, and interoperability with the home environment”.
These innovations, says Grainge, leverage what he calls “the stickiness of our music and our libraries and our catalogue and our global reach”, suggesting that Universal sees its content as an essential foundation for driving these technical advancements - and, presumably, by extension, justifying the company’s continued market expansion.
As Universal continues that aggressive expansion - so far unhindered by regulatory obstacles - and navigates financial pressures and platform negotiations, the question remains whether its Streaming 2.0 vision represents a genuine innovation for the broader music ecosystem, or simply another mechanism for the mega-major to consolidate market power under the guise of artist advocacy.
The growing chorus of concern from the independent sector suggests the latter, with IMPALA’s Smith observing that “Universal made it very clear in press releases that its new deal with Amazon announced at the end of last year is part of its bid to impose its view of how streaming revenues should be allocated” - a view that appears to be resulting in rapid and significant harm to many independent artists and labels.
As regulators consider whether to intervene in Universal’s current and future acquisition sprees, and its growing influence over streaming platform policies - and clearly stated focus on land-grabs and domination in emerging markets - the coming months may determine whether the industry’s digital future remains diverse and open, or continues its path towards an unprecedented concentration of power in the hands of a single dominant player.
