Sometimes industry Q&As are interesting by dint of who’s being interviewed. Sometimes they’re interesting because of what gets said.
And sometimes, as was the case today (February 9), they’re extra-interesting because of who is asking the questions.
Sir Lucian Grainge, Chairman and CEO of Universal Music Group (UMG), was quizzed earlier today at Pershing Square Holdings’ annual investor conference by someone he’ll have grown to know well.
Pershing Square, need we remind you, is the investment entity run by billionaire Bill Ackman which, since summer 2021, has owned a 10% slice of UMG.
In the recent past, Ackman has forecast that Universal can score repeated 10% rises in annual revenues over the next decade, as well as repeatedly verbalizing his respect for Grainge and his senior team.
Today at the PSH conference in Knightsbridge, London, Grainge was quizzed live on stage by Ackman himself, who promised a “freewheeling discussion” that would be light on “Wall Street stuff”.
The duo delivered on that pledge.
There was little-to-no financial chatter between the two executives, and Grainge didn’t volunteer too many details when questioned by Ackman about how/whether Universal plans to squeeze more revenue out of TikTok (UMG is pre-earnings call, so Grainge was careful to not make “forward-looking statements”).
There were, though, some revelations about Grainge’s own story, ideology, and career – as well as a brief but interesting chat about the potential impact of AI on the music industry.
Ackman made his admiration for Grainge’s achievements clear from the off, telling the PSH audience that the British music exec is “maybe one of only two icons I’ve had the opportunity to work with as an investor”.
Here are three highlights from the discussion.
1) It’s all down to a hit and run
When Sir Lucian Grainge was 13 years old, growing up in North London, he was out on his bicycle and was hit by a truck driver. The truck driver sped off, but Grainge’s father – who owned a record store – was determined to track him down.
Grainge senior did just that; he hired a lawyer, and sued the individual behind the wheel. As a result, Grainge junior was awarded GBP £4,000 in compensation – a decent amount of money for any teenager in the mid-seventies.
The now-music exec gave his dad half of the cash to buy a car, but used the rest to bankroll both his own transport (a beat-up Mini), as well as his own early foray into music management
“I fell into a scene with recording engineers,” said Grainge. “Well, they weren’t really recording engineers. They were the guys who put the two-inch tape on the multitracks [in the studio]; and, really, they were the guys who would order pizzas for the musicians.”
These individuals did, however, have the keys to recording studios – meaning Grainge was able to smuggle acts in under the cover of darkness to record demos through the night “until the cleaners got there at 5am”.
“Really, they were the guys who would order the pizzas for the musicians.”
“We were sort of big players [as a result],” said Grainge, “because we had access to studio time, and in those days if you had access to studio time, you were God”.
Grainge became the manager of two Australian writers (seemingly: John Vallins and Nat Kipner) who were behind a No.1 Johnny Mathis hit (Too Much, Too Little, Too Late).
From there, Grainge built up a “miniature network”, partly developed at the Midem conference in Cannes (where a teenage Grainge, who’s never been an alcohol drinker, would sip lemon juice and water all evening at the famous Martinez to keep down his costs).
Eventually, Grainge began calling various UK record company bosses from a payphone from his father’s shop, asking for a job.
The then-Chairman of CBS Records UK, Maurice Oberstein, obliged, and gave Grainge his first salaried role in the music business – as a talent scout in CBS’s publishing company.
Grainge’s first signing, famously, was The Psychedelic Furs.
2) “I panic when I take an aspirin…”
Speaking to Ackman, Grainge skipped through his rise Universal Music Group’s ranks, including his successful stints as the head of UK label Polydor, and as both the head of Universal Music’s UK and international operations.
Grainge also discussed the aftermath of the fateful year of 2011: The year that Spotify launched in the US, and the year that Universal – under its new CEO, Grainge – launched a successful takeover bid for its rival major record company, EMI Music
But perhaps the most interesting part of Grainge’s discussion with Ackman was the British music exec’s observations on himself, and the culture he’s fostered within UMG down the years.
Ackman asked Grainge how he was able to switch between meetings with Prime Ministers and leading investors to meeting with superstar artists and songwriters, or Daniel Ek, in the same day.
These characters all have “strong perceptions of self” noted Ackman, who asked: “How do you make [each of them] feel good leaving the room?”
Grainge replied that he was “miswired and cross-brained”, which allowed an unusual relationship between his own “left-brain” and “right-brain”.
He continued: “I panic when I have to take an aspirin and I’ve never drunk alcohol, but I can have fun with talent and artists, and I can connect with [them]… I love characters, I love people that think for themselves, [and] I love backing people.”
“We have to be an organization of great characters… [but] everyone that works for me has to be able to count, and they have to be able to say no.”
On the other side of his brain, Grainge pointed out that his mother was a chartered accountant (aka business manager), and he’d inherited some of those skills: “I can say no, and I can count!”
Grainge pointed out that this mix of numerical and creative thinking was something he looks for in all of his senior executives.
“You need to be able to talk about costs and P&L, how well we’re running the business,” he said. “[But] that is of absolutely no interest to the artist community. They want to know they’re going to be backed, covered, and invested in. And ‘investment’ comes in two forms: Not only in terms of risk, but also the capital to execute, to [do] the work, to market [music], to create short-form content, to make videos [etc.].”
Grainge noted his determination to keep the global running of Universal Music Group “incredibly decentralized”.
This model was undergirded, he said, via a multi-label structure in many countries that UMG operates in. (And it operates in many: According to Grainge, UMG is active in 200 markets and is “on the ground” in over 70.)
When Ackman suggested that it may have been because of Grainge that Billie Eilish signed to Universal, Grainge replied: “I didn’t sign Billie Eilish; the people at Interscope signed Billie Eilish. But I brought those people in, and [those people] are what makes Interscope as great as it is.”
He continued: “I hope that our culture, a culture of invention, keeps entrepreneurs [like that] in the company. And that culturally they want to be with us and to continue to do what they do.
“We have to be an organization of great characters… [but] everyone that works for me has to be able to count, and they have to be able to say no.”
3) AI a threat – or an opportunity?
Early on during Grainge’s conversation with Ackman, the Universal boss pointed out: “Whenever there’s been any disruption in music or sound, or in technology, someone somewhere in the incumbency is petrified about it. And I’ve never been [that way]. I’ve never been scared of change.”
This theme circled around again later, when Ackman asked Grainge about the potential threat to the music business from generative AI.
On ChatGPT specifically, Ackman asked: “ChatGPT can write a poem; it can write lyrics. Is this a tool that artists will use to enhance the quality of their music? Or is it a disruptive threat?”
“If [AI] can help individuals improve – but not detract from quality or authenticity – then I’m open-minded about it.”
Grainge replied: “It’s a very good question. I’m very aware of [the debate around AI].”
Yet Grainge suggested his natural position was, once again, to embrace rather than to run scared.
He compared the current wave of new generative AI tools to the birth of the polyphonic synthesizer in music – “with two hands, you could play the orchestral work of 40 musicians… and there was panic”.
Summing up, Grainge said: “If [AI] can help individuals improve – but not detract from quality or authenticity – then I’m open-minded about it.”Music Business Worldwide