From Sir Lucian Grainge on music’s streaming payout model to Kakao Entertainment’s $966m investment… it’s MBW’s Weekly Round-Up

Welcome to Music Business Worldwide’s weekly round-up – where we make sure you caught the five biggest stories to hit our headlines over the past seven days. MBW’s round-up is supported by Centtrip, which helps over 500 of the world’s best-selling artists maximise their income and reduce their touring costs.

This week, writing in a New Year note to staff, Universal Music Group Chairman and CEO Sir Lucian Grainge said the way music streaming services pay labels and artists today has to change.

In the note, obtained by MBW, Grainge said: “What’s become clear to us and to so many artists and songwriters—developing and established ones alike—is that the economic model for streaming needs to evolve”.

He added: “As technology advances and platforms evolve, it’s not surprising that there’s also a need for business model innovation to keep pace with change.”

Also this week, US market monitor Luminate published its Year-End report for 2022 revealing that on-demand audio song streams in the United States grew 12.1% last year, to reach 1.1 trillion.

MBW’s analysis of Luminate’s latest figures revealed, however, that the Top 10 biggest hits in the US each year are becoming less popular.

Elsewhere, South Korea-based Kakao Entertainment, a subsidiary of Kakao Corp, secured 1.2 trillion South Korea Won (approx $966m) investment from sovereign wealth funds.

The company’s music division operates streaming platform Melon, which Kakao claims has a “dominant market share in music distribution rights in the country”.  Kakao also operates what it calls “a multi-label management system for globally loved K-pop artists” including IVE, Monsta X and others.

Plus, Dr. Dre is reportedly close to selling some of his music assets in two separate deals worth $200m, while Sony Music filed a copyright infringement lawsuit against Trefuego, a rapper behind a TikTok hit called 90mh.

Here’s what happened this week…

1) SIR LUCIAN GRAINGE: MUSIC NEEDS A NEW STREAMING PAYOUT MODEL… AND WE’RE WORKING ON IT.

Sir Lucian Grainge, Chairman and CEO of Universal Music Group, has said the way music streaming services pay labels and artists today has to change.

Writing in a New Year note to staff on Wednesday (January 11), obtained by MBW, Grainge said: “What’s become clear to us and to so many artists and songwriters—developing and established ones alike—is that the economic model for streaming needs to evolve. As technology advances and platforms evolve, it’s not surprising that there’s also a need for business model innovation to keep pace with change.

“There is a growing disconnect between, on the one hand, the devotion to those artists whom fans value and seek to support and, on the other, the way subscription fees are paid by the platforms. Under the current model, the critical contributions of too many artists, as well as the engagement of too many fans, are undervalued…”

In Grainge’s crosshairs, there: The ‘pro rata’ payout system utilized by services such as Spotify, whereby the majority of subscription and ad money generated each month is pooled into a central ‘pot’, and is then paid out to labels and artists based on their share of the volume of total plays.

Also in Grainge’s crosshairs: Companies and entrepreneurs who seek to exploit this ‘pro rata’ system for their own unjust gain. (As well as, potentially, streaming services who strike direct low-royalty deals with music production firms, and then deliberately push music fans towards this music in an attempt to save money on overall royalty costs.)

2) THE TOP 10 HITS IN THE US LAST YEAR ACCOUNTED FOR FEWER THAN 1 IN EVERY 200 STREAMS

As MBW reported yesterday, the total number of on-demand audio streams in the US last year grew handsomely – up 12.1% to 1.1 trillion.

According to figures revealed in Luminate’s end-of-year report, this volume of streams also saw a year-on-year acceleration in growth from 2021 (total streams were up by 121.8bn YoY in 2022, bigger than the 111.0bn rise we saw in 2021).

Digging further into Luminate’s numbers, though, confirms that a long-running trend in the modern music business became even more pronounced in 2022: The Top 10 biggest hits in the US each year are becoming less popular…

3) K-POP AND MEDIA GIANT KAKAO ENTERTAINMENT SECURES $966M INVESTMENT FROM SOVEREIGN WEALTH FUNDS

South Korea-based Kakao Entertainment, a subsidiary of Kakao Corp, just secured 1.2 trillion South Korea Won (approx $966m) investment from what it says are “leading sovereign wealth funds”.

It plans to use the proceeds to accelerate its global growth across its three business divisions. Those divisions include ‘Story’, which comprises webtoons and web novels, and then Media, as well as Music.

Kakao hasn’t revealed the names of the funds backing the company, but TechCrunch reports that the investment has come from Saudi Arabia’s Public Investment Fund (PIF) and Singapore-based PWARP Investment.

The Korea Herald reports that the ‘cash injection is the largest amount ever received by a content company’ in South Korea.

4) DR. DRE SELLING MUSIC ASSETS TO SHAMROCK AND UNIVERSAL IN $200M+ DEAL (REPORT)

Dr. Dre is reportedly close to selling some of his music assets in two separate deals, with Shamrock Holdings and Universal Music Group, for upwards of $200 million.

The assets include a bundle of music income streams and some other catalog assets that generate almost $10 million in annual income, according to a report from Billboard on Wednesday (January 11).

Citing sources, Billboard reports that Dr. Dre is selling his artist royalties from two of his solo albums and his artist royalties from hip hop group N.W.A., which he formed with Ice Cube, Arabian Prince and Eazy-E in 1987.

He is also selling his producer royalties, his writer’s share of his song catalog that he doesn’t own publishing rights to, such as his share of songs on his The Chronic (1992) album, published by Sony Music Publishing, Billboard added…

5) THE STORY OF TREFUEGO’S TIKTOK HIT 90MH – AND SONY’S BID TO SCRUB IT FROM THE INTERNET

“Does anyone know why this song is banned on Spotify?”

“wHY ISNT 90MH ON SPOTIFY NA:'(((((“

“whyd 90mh get removed from spotify”

All comments posted on Twitter and YouTube at various points in late 2022 by fans of a viral TikTok hit.

Said hit, originally released in September 2019, is 90mh by independent Arizona-based rapper, Trefuego.

Each of these three comments beckons the same explanation: Because Sony Music issued a strict copyright takedown notice on 90mh to Spotify and other key platforms on August 9, 2022.

That occurrence is revealed in a lawsuit, obtained by MBW, filed by Sony Music Entertainment and Sony Music Publishing against Trefuego in the District of Arizona in December…

MBW’s Weekly Round-Up is supported by Centtrip, which helps over 500 of the world’s best-selling artists maximise their income and reduce their touring costs.Music Business Worldwide