In today's CMU Daily: Universal Music boss Lucian Grainge is within inches of unlocking another giant bonus, but some analysts are now suggesting that his compensation is excessive. A vote at the company’s AGM next week will reveal how far that unrest stretches

One Liners: SRG/ILS x Virgin Music; BMG promotes Sarah Mitchell; Madonna’s massive free show; Hotel singer steps in to replace Olly Murs at Take That show; Loreen tour dates; new music from Soo Joo, Half Waif

Also today: Goldman Sachs publishes its latest ‘Music In The Air’ report; Study finds nearly a quarter of French VPN users use the tool to access illegal content; Judge declines request for new trial over Miles Davis tattoo copyright infringement claim

Plus: Tendertwin is CMU Approved

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Lucian’s lunch money under threat as shareholder pressure mounts over “excessive” pay packet

Universal Music Group CEO Lucian Grainge is facing renewed pressure from investors over his “excessive” compensation package, with leading proxy research firm Glass Lewis saying that it has “severe reservations” about Grainge’s compensation which UMG shareholders will vote on - as part of an agenda item relating to executive remuneration - at the company’s AGM in just over a week, on 16 May.

However, the agenda for the AGM makes it clear that next week’s vote on the 2023 remuneration report - which sets compensation for Grainge and other senior executives - is simply an “advisory vote” rather than a binding resolution.

More than 60% of Universal’s shares are held by institutional investors. A Tencent-led consortium holds the largest institutional stake at 19.92%, while investor Vincent Bolloré has a 18.01% stake. Hedge fund investor Bill Ackman holds 10.26%, and Vivendi - UMG’s original owner before the company was spun out - 9.98%. In July 2023, Fidelity Investments - a US fund manager - passed the 3% threshold needed to add an agenda item to the AGM.

At last year’s AGM, investors representing 941.8 million shares voted for the amendment to Grainge’s pay, while 653.5 million voted against. This means almost 41% of shareholders were unhappy with the new pay deal. This came after another warning from Glass Lewis and Institutional Shareholder Services - another company that advises institutional investors - that his pay package should be rejected.

With next week’s vote only advisory, the board of UMG will not be legally required to change the way Grainge’s compensation is structured if a significant proportion of shareholders object. However, a small increase in those voting against could bring that advisory vote within sight of 50% of shareholders, which would cause significant governance and PR issues for Universal - and potentially Grainge’s wallet - leaving the company on the back foot and in need of ways to placate discontented shareholders.

Just before last year’s AGM, Grainge entered into a new pay deal that saw his base salary slashed from €16.2 million to a mere €4.6 million but also brought in a number of changes to his ‘short-term incentives’ - or STIs - and ‘long-term incentive’ - or LTI - bonus provisions. A key part of this change was to “better align” Grainge’s remuneration “with shareholders’ interests, including a change to a more performance-based and share-based remuneration package”.

Between 2020 and 2022, Grainge received a total of around €138.5 million in salary and other benefits, with his base salary coming in at €13.6 million in 2020, €13.2 million in 2021 and €15.4 million in 2022.

On top of this, according to Glass Lewis, Grainge “received three payments” totalling €258,096,561” from Vivendi in 2021 “for achieving certain milestones pre-IPO and securing strategic investors”.

According to corporate filings made at the time of Universal’s IPO, Grainge was entitled to various benefits on top of his salary, including a housing allowance of €418,200 - plus tax liability - as well as “the use of a car, with a driver, for business and reasonable private use” as well as use of a private jet for business travel “subject to requiring approval for any such usage in excess of €410,000 per annum”. Grainge was also entitled to life insurance and international health insurance “for his family”.

As part of the new compensation package - which also saw Grainge’s tenure as UMG CEO extended through to May 2028 - Universal’s board made a “one-time transition award” that is worth up to €92 million in equity in the company. Half of this award - €46 million - is linked to continued service at Universal, while the other half is based on the company clearing various share price hurdles. With those hurdles placed at €26.50, €30 and €38, Grainge has already snagged around €15.3 million in additional shares, and is just inches away from a similar grant as the share price hovers around the €29.30 mark.

On top of this, Grainge is eligible for an annual cash bonus - as a short term incentive - with a “target payout” of €9.2 million - and possible maximum of €13.8 million - based on a combination of revenue growth and EBIDTA growth. As part of his long term incentives he’s also entitled to as much as €18.5 million, half of which is based on the company achieving various thresholds.

Overall, including base salary, Grainge is able to make around €37 million in salary and stock-based compensation, excluding the additional €92 million “transition award”.

By comparison, Robert Kyncl, CEO of Warner Music Group, made $2 million a year in base salary in 2023, with a cash bonus of $2.3 million and stock grants of $15.3 million. Including other benefits, his total compensation for the year was $20.4 million - or about €18.9 million converted to Euros at today’s rates.

As part of their decision making process, UMG’s board “took into consideration its belief” that Grainge’s “unique position of leadership in the music industry” would be in the best interests of UMG, its shareholders, and stakeholders in the company.

Grainge’s salary was also benchmarked against CEO pay at a number of other media, entertainment and technology companies, with the board looking at compensation practices for video games companies Activision Blizzard and Electronic Arts; cable and satellite network operators Altice and DISH Network; media companies Discovery, Fox, and NewsCorp; video streaming platform Netflix, as well as Live Nation, Sirius XM and Warner Music Group.

In a report published in November 2023, US-based shareholder advocacy not-for-profit As You Sow said that the CEOs of Live Nation, Netflix, Fox and Warner Bros Discovery were among the 100 most overpaid in the US.

More tellingly, 81% of institutional shareholders - and 54% of reported shares - voted against Live Nation boss Michael Rapino’s $139 million compensation plan, while 71% of institutional shareholders and 71% of reported shares voted against the pay package of Netflix co-CEOs Reed Hasting and Ted Sarandos.

In 2021 shareholders in Activision Blizzard - now owned by Microsoft - narrowly backed CEO Bobby Kotick’s $155 million pay package by 54%, but only after pushing back the shareholder meeting in a move that the FT said “critics described as an effort to avoid an embarrassing rebuke”. Glass Lewis had also issued a report advising shareholders to vote against the company’s remuneration report.

Late last year, Universal announced a swathe of lay-offs across its business, described by Grainge to investors as a “cut to grow” strategy which would see hundreds of UMG employees lose their jobs as part of a drive to “cut overheads in order to grow elsewhere”.

That said, with UMG’s share price up considerably from the IPO “reference price” of €18.50 per share, some may argue that Grainge’s compensation is justified. Whether or not shareholders agree at the AGM on 16 May remains to be seen.

Spiritmuse Records // Label Manager (London Hybrid)

Your Culture // Campaign Management Assistant (Brighton)

Gondwana Records // Part Time Social Media, Online Marketing & Digital Content Manager (Manchester Hybrid)

Como No & La Linea // Operations & Reporting Manager (London Hybrid)

Kilimanjaro Live // Promoter Assistant (London)

Horizon is CMU's new weekly newsletter - published each Friday - that brings you a hand-picked selection of early-stage career opportunities from across the music industry.

Whether you're looking for your first job in music or you're ready to take a step up, Horizon is here to help you find your dream job faster.

👉 Click through to see the current selection.

ONE LINERS

One Liners: Madonna, Take That, Loreen + more

DEALS

Independent label and label services company SRG/ILS Group has extended its partnership with Universal Music’s Virgin Music Group. “SRG/ILS has undergone tremendous growth over the past several years, largely thanks to the strong support provided by Virgin Music Group”, says SRG/ILS CEO Claude Villani.

APPOINTMENTS

BMG has promoted Sarah Mitchell to head up the label’s rights and royalties operations in the UK and Europe. “I am delighted to have been given the opportunity to take on this new role”, she says. “Serving songwriters and artists lies at the heart of BMG’s mission and our integrated rights and royalties operation across both music publishing and recordings gives us a unique position in the market. I am excited to be able to work with our teams in the UK and across Europe as we seek to further maximise the benefits of this moving forward”.

ARTIST NEWS

Madonna played a free show on Brazil’s Copacabana beach on Saturday. It reportedly drew an audience of over 1.6 million people. Many made it onto the beach, while others watched from nearby boats, hotels and apartments.

Hotel singer Daniel Rooney found himself performing to 14,000 Take That fans at Glasgow’s Hydro arena on Friday night. He was spotted playing at the city’s Radisson Red hotel and drafted in as a last minute replacement for Olly Murs, who was due to support but failed to make it to Glasgow due to transport issues. "I usually play to around 40 people”, he told the BBC. "It's madness”.

GIGS & FESTIVALS

Last year’s Eurovision winner Loreen has announced UK and Ireland tour dates in March 2025. Tickets go on general sale on Friday.

RELEASES

Supermodel Soo Joo has signed to LuckyMe and released a new single, ‘Running Water’, in collaboration with Hudson Mohawke. “The main concept of ‘Running Water’ was inspired from John Keats’ epitaph that said, ‘Here lies one whose name was writ in water’”, she says. “I don’t know why, but I felt the impermanence of life with that one sentence. Writing in the sand for the wind to sweep away, or trying to leave a mark on running water…it’s about the ephemera of proclamations of feelings, the emotions, and beauty. And where does that trace of moment go after? Sometimes it all feels a bit here now, maybe gone forever”.

Half Waif has released new single ‘Big Dipper’. It’s the first track to be taken from new EP ‘Ephemeral Being’, which is out on 31 May.

Goldman Sachs analysts upbeat about music industry after a “turning point” year

Analysts at Goldman Sachs have dubbed 2023 “a turning point for the music industry”, highlighting the first major round of price increases at the streaming services, changes to the way streaming revenues are allocated to tracks and catalogues, and the evolution of generative AI.

Not all of those things are necessarily super positive in the short term. Changes to track allocation disproportionately favours one part of the music community, although the big rightsholders that clients of Goldman Sachs are likely to invest in are definitely winners. And the evolution of generative AI remains a threat as well as an opportunity. However, when that opportunity starts to be fully realised it is, once again, the big rightsholders that will likely benefit the most.

Either way, in their new 'Music In The Air' report, the Goldman Sachs analysts are mainly upbeat, predicting more streaming price increases, AI licensing deals and new revenues from superfan services. Alongside all that and “a stronger outlook for the live music and music publishing segments”, the analysts have increased their predicted compound annual growth rate for the wider music sector through to 2030 to 7.6% - up from 7.3% in last year’s report.

When it comes to digital music, it is the ad-funded services - the “free tiers” of Spotify and other streaming services, as well as music used on social media and particularly short form video platforms - that have been under-performing of late. “Following a volatile year marked by a broader cyclical slowdown in global advertising demand, we expect ad-supported streaming revenues to improve gradually through 2024”, the report says.

However, “we have reduced our 2024-30 ad-supported growth forecasts to +11.6% from +14.6% previously, mainly reflecting a slower-than-expected recovery during 2023, as well as a less bullish view on the revenue opportunity from emerging platforms, and particularly from TikTok”. That calculation was made before Universal Music got its new seemingly better deal with TikTok across the line, but there remains a general feeling at record companies and music publishers that free streaming services should still be paying more into the sector.

“Given the rising subscription streaming prices, we see an increasing value gap between the freemium and the premium offerings”, the report goes on, saying that “the audio ad-supported streaming model may also need to evolve through improved monetisation”.

That might mean more ads and higher advertising rates - assuming that services can sell more ads and get more money for them - or perhaps a mid-level service - as has been adopted by video streaming platforms including Netflix and Amazon - that still requires a paid subscription, but comes in at a lower price supported by advertising.

The continuing increase in subscription prices might also make the ad-funded free tiers more attractive, the report adds. “Although we are yet to see evidence”, it states, “we see potential risks over time from existing freemium users choosing to stay on the ad-supported tier for longer; new users opting for the ad-supported rather than paid subscription tier; and paid subscribers churning down to the free ad-supported tier”.

As well as making more money from the ad-funded services, the industry's long-standing strategy of trying to convert free users to premium subscriptions will continue. Especially in emerging markets which, although a key driver of growth for some time now, usually have significantly more users on the free tiers.

The report says, “The large base of existing ad-supported users in emerging markets constitutes an attractive pool of new subscriber acquisition over time, given paying ratios tend to improve over time as the music markets mature, user engagement increases and more importantly as major streaming services increase the level of differentiation between the premium and freemium offerings”.

On the live music side, the report is very bullish, obviously reflecting the upper end of the live sector and ignoring the challenges for artists, venues and promoters staging smaller capacity shows. “The live music industry continued its strong rebound in 2023”, the report says “with estimated revenues of $33.1 billion in 2023 (versus $26.5 billion in 2022) based on the trends reported by various industry players such as Live Nation and CTS Eventim”.

“In 2023, we estimate that the [live] industry grew 25% year on year, well ahead of our prior 6% forecast, and reaching 118% of 2019 levels”, it goes on. “This is driven in our view by a strong schedule that featured many artists who had not toured since pre-COVID, in particular Taylor Swift and Beyonce, driving both attendance (owing to larger venues) and pricing power (due to perceived scarcity of these artists in the short term)”.

Last year’s ‘Music In The Air’ very much talked up the under-tapped superfan opportunity, providing some useful stats for those at the major record companies who have been getting very excited about the potential of super-serving superfans over the last year.

On that opportunity, the new report says, “We estimate the superfan addressable market opportunity at $4.5 billion ($4.2 billion prior) ... based on the assumption that 20% of paid streaming subscribers can be defined as superfans of at least one artist and that such superfans would be spending 2x more on music than an average individual”.

It's thought that the streaming services have a role to play in capitalising on this opportunity. Although, the report adds, “While we would expect a strong appetite from superfans for the opportunity to gain further access to their favourite artists through their streaming platform, we believe that not all superfans would be monetised immediately given it may take some time/iterations for the new product and offering to be fully optimised, and such offering may vary depending on the service”.

It concludes, “We would expect the industry (record labels, artist managers, streaming services) to work on this opportunity, experiment and roll out either new superfan apps or new super premium tiers on existing streaming services over the next 12-24 months”.

Approved: Tendertwin

Tendertwin has released new single ‘Asking’, the first track to be taken from her upcoming debut EP ‘Ship Argo’, which is out this summer.

Beginning as a gentle folk song, ‘Asking’ shifts its dynamics about a minute in, taking on a loose, groove heavy rock form. Then, in a surprise third act, it leans into dense harmonies. Each sharp about-turn serves the song perfectly, drawing out and fully exposing its emotional heft.

“This is one of the dark times when I would wake up every day, wondering what would happen if I didn’t - on that thin line where nothing in life feels right”, she says of the time in her life that inspired the song.

“When you want to reach your arms up above, to whoever might be there, or to the side, or towards a body of water, and go, ‘Am I asking for too much?’ You’re not”, she continues. “And if you had to perform this dangerous dance at any point, and pulled through in resilience, I’m glad you’re here now. And I’m glad I’m here to remind you of this”.

‘Ship Argo’ is out on 5 Jul, and you can catch Tendertwin at The Great Escape on 18 May.

🎧 Watch the video for ‘Asking’ here

Quarter of French VPN users use the tool to access illegal content, says new study

The French broadcast and internet regulator Arcom - which also incorporates the old anti-piracy agency Hadopi - has published a new study on the use of VPNs and DNS modification to circumvent the web-blocks put in place against copyright infringing websites.

Based on a survey of over 3000 French internet users, Arcom reckons that “29% of French people have used a VPN personally in the last twelve months and 20% have already changed their DNS settings on one of their devices”. Of those using a VPN, “24% say they use it to illegally access content”. However, most respondents insist that accessing illegal content is not the primary factor motivating the use of a VPN.

Web-blocking has become an anti-piracy tactic of choice for the music and movie industries in those countries where copyright law provides such a thing. Under this system, copyright owners go to a court or government agency and secure injunctions ordering internet service providers to block access to websites that primarily exist to facilitate copyright infringement.

In France, the launch of Arcom at the start of 2022 made the web-blocking process quicker and, in 2022 alone, 800 sites were blocked. Web-blocking is also prolific in the UK. Meanwhile, in the US - where web-blocking is not currently available - the movie industry is having another go at trying to get it introduced.

That said, even the most web-block happy copyright owners recognise that web-blocking is no panacea. There are various ways for people to circumvent web-blocks, including by using a VPN - or Virtual Private Network - or employing DNS modification - such as using a third party DNS resolver. As a result, in more recent years we've seen copyright owners try to persuade or force the operators of VPNs and DNS resolvers to also instigate web-blocks, with mixed success.

In the Arcon study, 81% said they had heard of VPNs, while 49% said they understood what a VPN did. 49% had heard of changing DNS settings, and 23% understood how that worked. In total, 35% of those surveyed were either using a VPN or modifying DNS or both.

There are various reasons why a user might employ a VPN or modify DNS, of course. Of the VPN users surveyed, 49% said that a key motivating factor was that VPN use provided more anonymity and privacy on the internet. 23% said VPNs were good for accessing geo-blocked content on legit streaming platforms. Only 17% cited accessing blocked streaming sites as a motivating factor, with 12% citing accessing blocked download sites.

For the movie industry, the use of VPNs to circumvent geo-blocked content - for example, to access movies and TV programmes available on Netflix in one country which are not available on that platform in the user’s home country - is also a concern, given geo-blocking is much more common with that kind of content.

However, for the music industry, the main concern is when VPNs are used to access unlicensed streaming or download services, or stream-ripping platforms.

Of the people surveyed, 24% admitted to accessing at least one item of content from a piracy service in the last year. Of that group, more users - 37% - cited web-block circumvention as a motivating factor for using a VPN. Circumventing web-blocks was also a higher motivating factor for those who have started using VPNs in the last three years. However, protecting anonymity and privacy is still more important to those VPN users.

Despite all that, web-blocking copyright owners seem likely to continue to consider how they can put more pressure on VPNs and DNS resolvers to try to extend the reach of the web-blocks now routinely instigated by ISPs.

Setlist Podcast: Calls for urgent new AI laws in UK and US

In this week's Setlist Podcast, Chris Cooke and Andy Malt discuss the calls on both sides of the Atlantic for new AI laws to protect creators, the big love-in between Universal and TikTok as they finally resolve their differences, and more.

Click here to listen - or search for 'Setlist Podcast'

Judge declines to order new trial in Miles Davis tattoo copyright case

The judge who oversaw the copyright dispute that centred on a tattoo of Miles Davis has declined to order a new trial. The photographer whose photo was copied in the creation of the tattoo failed to convince judge Dale S Fischer that there were grounds to overturn the jury’s decision on similarity and fair use.

“The standard for overturning a jury verdict is ‘very high’”, Fischer writes in her new judgement, adding that photographer Jeffrey B Sedlik needed to demonstrate that there was “no legally sufficient basis for a reasonable jury” to reach the conclusion reached in the original trial. And he failed to do that.

Sedlik sued celebrity tattooist Kat Von D for copyright infringement after she based a Mile Davis tattoo on a photo he took of the musician back in 1989. A jury ruled against Sedlik in January.

He took issue with various aspects of the original trial and judgement, including the jury’s decision that Von D’s tattoo - although based on his photo - was not substantially similar to it. He also objected to the conclusion that social media images showing Von D inking the Miles Davies tattoo, in which Sedlik’s photo could be seen, were covered by the fair use defence.

As to whether Von D's tattoo was substantially similar to the original photo, Sedlik honed in on what is known as the ‘intrinsic test’. Citing precedent in her new judgement, Fischer explains that that test involves considering the “similarity of expression from the standpoint of the ordinary reasonable observer”, and whether an original work and copied work are “substantially similar in ‘total concept and feel’”.

Sedlik argued that Von D had failed to present any evidence that her tattoo had a “different total concept and feel” to his photo. However, Fischer writes, “the entire point of the intrinsic test is that it is from the perspective of the ordinary person without expert assistance. The only evidence that a jury needs in order to apply the intrinsic test is the original work and the alleged infringement”.

Declining to overturn the jury’s decision on similarity, Fisher continues, “the court must draw the reasonable inference that, considering the works, the jury concluded that they had a different total concept and feel from the portrait”.

With the social media images that included Sedlik’s photo in the background, the photographer argued that “the jury’s finding of fair use is contrary to the clear weight of the evidence because the social media uses were not transformative, were commercial, and harmed the market for Sedlik’s photograph”.

He's wrong, Fisher concludes. “While the court cannot read the jurors’ minds, it is not persuaded that the clear weight of the evidence (and law) favours any of Sedlik’s positions”. As a result, “the clear weight of the evidence does not allow the court to disturb the jury’s verdict and grant a new trial”.