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Lucian Grainge, Chairman and CEO of Universal Music Group, To Amazon

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by Bob Lefstez, reposted from his Newletter

 

That’s right, starting July 14th Lucian Grainge will be working at Amazon.

 

Screw the French, Lucian’s sick of carrying the company, growing Universal’s market share yet still having little to show for it. He wants to make the big bucks, he wants some real power, so he’s moving to Seattle.

 

Well, not really, he’ll still be based in L.A., relationships are king, and Jeff Bezos is counting on Lucian to make Amazon Music a powerhouse.

 

That’s right, you’ll get everything Spotify offers for free. Well, not really, it’s just that it will FEEL free, which has been the goal since Napster. It’ll be baked into Amazon Prime, which gives you short shipping and video and so many perks. Furthermore, Amazon is on the cutting edge with its Echo, you can call up a song right now, they just need someone with music business expertise to show them the path forward.

 

Lucian never bought the canard that there would be competitors on the retail side, Lucian knows that online one player ends up with 70% market share. And during this run-up to subscription, now that Spotify’s got 30 million paying, and Apple 11, it’s time to double-down and go for the big money.

 

There will be a sunset on free. Even YouTube is going that way, did you notice that Peter Chernin’s Fullscreen is gonna charge $5 a month for ad-free content? That’s the future, you’re gonna pay, you just don’t know it yet. It’s just a matter of when. And rather than be hampered by the shortsighted artists and the small margins and low cash reserves of Universal, Lucian believes he can have a larger impact and get it right with Amazon.

 

Amazon is not buying Tidal. And certainly not Pandora. Tidal was bought to be sold, but just like Pandora, no one wants it. That’s why Tim Westergren is back in power, they couldn’t sell the damn company, which operates in few territories providing a product that the industry hates to passive consumers. A recipe for death. Just like Rdio, the company they bought. Lucian’s a pro, unlike Tim, he’s got experience and gravitas, he’s who the artists will rally around.

 

Unlike Jimmy Iovine, who’s got a reputation for winning for himself. Sure, Jimmy can be fun, but you’ve got to sleep with one eye open, and if you can find a studio employing Beats headphones you probably have never heard of Sennheiser, Sony or AKG. Jimmy’s lost credibility, Lucian still has his.

 

The rumor that Amazon will buy Spotify is untrue. It’s not Bezos’s style, he likes to grow products in-house, and after the failure of the Fire phone not only has quality control improved, but Jeff is now hands-on, sure, he cares about rockets and the “Washington Post,” but not as much as his baby. Amazon Web Services drives the bottom line, but on the consumer side, it’s free shipping and entertainment that bring people in. Bezos, unlike so many techies, understands the power of music. After all, he single-handedly tried to bring Layne Staley back from the brink.

 

You didn’t know that, but that’s how Bezos operates. One day you’re clueless, the next day you’re addicted to whatever Jeff is selling you.

 

So Lucian went for the power and the stock. He who has cash is king, he has leverage. And although Apple has deep pockets, Tim Cook is so busy with financial shenanigans Steve Jobs abhorred, selling bonds and granting dividends, that insiders joke that Apple is toast, there’s no cutting edge there, just endless variations on previous products.

 

And the abomination known as Apple Music. Which is so counterintuitive as to be nearly unusable. Amazon’s got 1-Click, Steve Jobs licensed it for the Apple Store, Bezos knows that usability is king, he won’t make Apple’s mistake. Furthermore, it appears that voice control will drive listening in the future and Echo is on the bleeding edge, it’s the market leader, it made Sonos blink, Lucian got a demo two years back and has been secretly meeting with Bezos ever since. Stunning what you can do when your boss is in France.

 

So, there’s the usual package, salary and not only bonuses, but stock options, which make Hollywood pay look laughable. And don’t forget, Lucian started Universal’s tech incubator, he may have worked in the trenches, started out on the streets finding bands, but unlike so many of the old acts on his labels he’s not married to the past, he knows that change happens.

 

Launch date of the service was planned for Labor Day, to beat the new iPhones to market, but it looks like it’ll be more like Thanksgiving. Although Universal licenses are a no-brainer and Warner is already on board, Doug Morris still has a hard-on for Lucian, for being squeezed out of Universal, Doug’s dragging his feet. But there’s nothing that money can’t buy, and the advance will be so big that Sony corporate’s bottom line will be affected. There’s no truth to the rumor that Amazon will provide security for Sony, eliminating the possibility of hacking, but there is truth that Sony offered to sell its entire music unit to the Seattle behemoth. But Bezos only wants it if he can have the movie studio too and leave the electronics out and it all became too complicated so expect a straight licensing deal.

 

My sources say the introduction will feature Amy Winehouse. Don’t laugh, holograms are the next big thing, they’re going on tour, you read the internet, don’t you? Just like Jeff went on “60 Minutes” and stole the holiday season with talk of drones, the Winehouse hologram will be the talk of the holiday season.

 

As for the drones… They will be named after musical acts. Just like Richard Branson had cheeky names for his Virgin planes. Imagine getting your soap delivered by the Jefferson Airplane drone! You know Paul Kantner was always into spaceships and the future, he came up with the idea, but he’ll never get the credit, since he passed away prematurely.

 

So it comes down to Amazon, Apple and Spotify. Spotify’s the most nimble player, but it has no deep pockets, read Brad Stone’s “Everything Store” book, what Bezos does is enter your sphere, underprice you and then force you to sell. So, Spotify might end up with Amazon yet. And this could be attractive to Bezos, since it’s well-known that Daniel Ek and his company are on the cutting edge of algorithms, providing what people want to hear via machine learning. This is what Amazon specializes in, that’s how it got rid of human beings and sold more books, via algorithms. But Bezos doesn’t want to pay today’s price, he wants a more realistic valuation.

 

But watch out. Not only did Bezos squeeze Diapers.com, he squeezed Zappos too. And he neutered Best Buy. And don’t forget that Wal-Mart has been hurt by the Amazon revolution, it’s Jeff’s world and we just live in it.

 

And it’s gonna get bigger.

 

You don’t think that Lucian would jump for a music service only, do you?

 

Don’t forget, Amazon is building its own delivery system. Lucian plans to sell this to the touring industry, it’ll be Amazon that trucks your equipment and stage to its next location, the deal with Tait Towers is just waiting for ink.

 

And no one can do sponsorship and marketing like Amazon. Just imagine, your next box from the retailer will feature a picture of Lady Gaga or Justin Bieber. But not Taylor Swift, the country doyenne turned pop princess has gone deep with Apple. The truth is she’s about reached her limit with Max Martin, she’s convinced Jimmy to come out of retirement for her next LP, she wants to go for more of a rock feel, it’s being called her “Bella Donna” moment, she wants to assuage her guilt for messing up her duet with Stevie Nicks on the Grammys. But you know Taytay never uses only one producer, so Dre himself is gonna give her that inner city vibe she so desires, you know she loves hip-hop.

 

It’s all internet all the time baby. And if you’ve got status, power and relationships, even at this late date you can jump ship, you can play with the techies, if you’ve got the gift of gab and the success to back it up, which Lucian does.

 

But the deal is not exclusive! Lucian can work in the event space, which Amazon does not inhabit and has no plans to. Turns out Lucian will be the third leg in Irving Azoff and Tim Leiweke’s Oak View Group. You could never understand what that company did? That’s because they were waiting for Lucian to come on board! They’re gonna give Phil Anschutz a run for his money, the goal is to drive down the price of AEG and then steal it.

 

We’ll see.

 

We’ll also see who ends up running Universal. I hear there’s been talk of taking Craig Kallman from Atlantic, since they poached John Janick for Interscope, to replace Jimmy, but everyone believes Monty will get the gig.

 

But the power is no longer with the labels. Music is just a pawn in the techies’ game. Where transparency reigns and fairness has a toehold. Since Amazon has such deep pockets, 80% of streaming revenue will go back to rights holders, and Lucian’s squeezing the labels to pay the acts 50% of net. See, wait long enough and it all works out.

 

For Lucian anyway.

 

But for you and me too! We have to pay $120 a year to stream via Spotify, for that same dough with Amazon we not only get music, but movies/TV and fast shipping! It’s a no-brainer, Amazon wins. Don’t they always?

 

 

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