He gambled everything for EMI and now looks set to win bigger than previously imagined
If anyone in the music business still has any doubt about the wisdom of Lucian Grainge’s career-defining decision to risk his stellar reputation by bidding for EMI in 2012, consider this: Just 10 months after the deal closed, Universal Music Group (UMG) parent Vivendi received a whopping bid of $8.5 billion to buy the music behemoth and was able to turn it down. Media assets are typically valued at around six to seven times operating profits. By that valuation metric the bid was about $2 billion higher than would typically be expected.
But that was the bet Grainge was making all along. Like anyone else in this business he is acutely aware of the struggles the industry has faced for the last decade in a state of seemingly permanent decline—perhaps more so, as you would be if you were responsible for the livelihoods of 7,500 employees and more than 3,000 artists. But as a true music man to his core, he has never stopped believing in the return to growth for the industry, and others are starting to believe.
“Every morning when I wake up I realize the consumer has total choice,” Grainge says. “We don’t have the divine right to expect consumers to buy our product. Yet after all is said and done, I believe the industry will return to the level of growth that we’ve hoped for and have been fighting for for the last 10 years.”
Grainge isn’t interested in specifying what that level of growth is—his point is that the last 10 years have been the opposite of growth. And for him, there are many reasons for optimism.
As music business revenue opportunities continue to diversify away from a reliance on retail to areas more beloved by investors—subscription services, digital platforms with access to youth and high-margin brand partnerships—the value of music assets will at worst hold steady, but more than likely appreciate.
Grainge has almost guaranteed that UMG, as an all-dominant market leader, will benefit disproportionately from the rebound. It’s a key reason why the July bid from Japan’s Softbank was so high. It’s also the reason why even some of those who publicly objected to the bid at the time now privately admit Grainge made the right move.
When thinking about Grainge’s vision—and the determination and power it took to realize it—it’s important to remember just how controversial UMG’s offer for EMI was. It drew strong objections from several quarters of the business, which balked at a company that already possessed more than 30% market share being allowed to take another 10%. Grainge had to make his case before a congressional committee in a testy performance that some felt might derail the deal. It was such a risky bid that Grainge was under intense pressure that spilled over into his press encounters even after the deal was approved. But talking to Grainge a year later is revealing. Success seems to have humbled him as he marvels at how well his team has integrated the main EMI assets (Capitol and Virgin) that they retained in such a short period of time.