| Over the past two years, whether they liked it or not, most everyone in the music industry became subject to Lucian Grainge's agenda. And this week, the company he runs, Universal Music Group, issued new marching orders. During its capital markets day on Tuesday, the company unveiled a new slogan, dubbed "Streaming 2.0." Michael Nash, chief digital officer at UMG, explained that the idea is to focus less on scale in streaming and, instead, to maximize customer value through various subscription tiers and by selling additional merchandise or branding opportunities to fans. "While streaming has delivered robust growth to UMG for over a decade, streaming 2.0 will represent a new age of innovation, consumer segmentation, geographic expansion, and greater value through both subscriber and ARPU growth," Grainge said. Much of the strategy's potential upside will rely on streaming services continuing to increase their prices while also launching compelling, pricier premium tiers that give listeners a reason to upgrade their plans. At the moment, this feels like a surefire bet. Spotify Technology SA has been working for many months on its so-called "Supremium" offering and plans to launch it later this year. How many people will upgrade, and how Spotify will entice them to do so, remain open questions. So far, the tier's primary perk appears to be high fidelity audio, a product Spotify publicly announced in 2021 and that is already standard on Amazon Music and Apple Music. Ultimately, it will be up to the streamers to determine how high they're willing to push their prices. But this isn't the first time in recent years that Grainge and his team have pushed for significant updates to the way in which the streaming platforms operate. In 2023, UMG began pushing a new streaming idea called the "artist-centric model." The strategy boiled down to the idea that a greater share of the revenue generated by streaming platforms should go to those who make music professionally, rather than to one-off hobbyists or white-noise creators. The model also prioritized doing a better job of cracking down on the fraud that was siphoning revenue away from rightsholders. Simultaneously, UMG also initiated an aggressive push against certain generative artificial intelligence companies and use cases. It helped to launch an organization, the Human Artistry Campaign, to rally artists and organizations of all types around various principles that protect copyright. Over the summer, UMG and the other major labels sued the makers of two popular generative AI platforms, alleging that the services were unlawfully training their AI models on copyrighted music. Finally, in an effort to get TikTok to pay higher royalty rates, UMG removed all its artists and songwriters' music from the ascendant short-form video service. Despite a lot of noisy saber-rattling at the outset of the disagreement, the protracted battle eventually ended in a whimper after Taylor Swift, a UMG artist, put her music on the service prior to any sort of public, UMG-wide deal. In spite of the TikTok setback, UMG has been able to claim a couple of victories elsewhere. Spotify and Deezer SA have implemented several "artist-centric" changes in the way that they calculate streaming payouts. To date, however, it remains largely unclear how exactly such wins are impacting UMG's overall sales — or, how effectively the artist-centric model is moving money from hobbyist and noise creators to professional shops. At this week's presentation, Nash said the company has generally seen "significant progress" towards Deezer's "publicly stated goal of shifting 10% of the royalty pool from irrelevant long-tail volume to qualified artists." In terms of Spotify, Nash said it was still early in the platform's "implementation process," but "we're encouraged about their efforts to deliver on their publicly stated objective to see $1 billion in incremental revenue generated for the music industry's artists over the next five years." Still, some aspects of this artist-centric approach depend, in large part, on the cooperation of various other industry players, ranging from distributors, to labels, to law enforcement agencies. Two weeks ago, the Southern District of New York unsealed a court case in which a man allegedly used artificial intelligence to generate songs, which he then streamed with bots. The prosecution claims his scheme netted him $10 million. We don't know yet which streaming services paid out the majority of those royalties — though Spotify told me last week that it paid out only a $60,000 chunk. The fact that any money was paid out at all is a good reminder that two years into UMG's artist-centric campaign, there's plenty more work that needs to be done to safeguard the overall streaming ecosystem for artists. When it comes to AI and copyright issues, UMG and other rightsholders will remain beholden, in the months and years to come, to the US courts and government to ensure protections. As of yet, there still hasn't been a definitive ruling on how AI systems can train their models on copyrighted material and who owns the resulting output of those models. How anyone in music will significantly monetize these advances in AI also remains hazy. Currently, UMG is rallying constituents to try and push through legislation. Yesterday, the Human Artistry Campaign ran a print and digital ad in Politico demonstrating the support from various artists for the No Fakes Act, which would federally protect people's voices and likenesses from being used without their consent. UMG said this week that under "Streaming 2.0" it expects annual sales growth of 7% on average for the next five years thanks to improved subscriptions and monetization of superfans. While the slogan suggests the dawn of a new era in streaming, for now, the multi-variable challenges facing UMG and the rest of the music industry remain stubbornly unchanged. | 
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