Every senior exec at Universal Music Group was reminded last night that, no matter how successful their professional record, no matter how imperial they feel they deserve to be, they are still an employee. And employees can always be cast aside.
To a sizable degree, Pascal Nègre wasn’t just the boss of Universal Music France. He was Universal Music France.
In 1998, at the age of 33, Nègre was promoted to CEO of the music division of Barclay’s parent company PolyGram.
Following the acquisition of PolyGram by Universal Music four years later, he became the boss of UMG in Paris – a position he relished for 16 years.
A mini-celebrity in his own right, the bald, be-scarfed image of Nègre is recognisable to generations in France, aided by his role as a judge on the French TV talent show Star Academy for several seasons.
This time last month, he was regarded as one of UMG’s favourite and most loyal sons – not to mention one of its most decorated: so much did the Vivendi setup once think of him, Nègre was not only Universal France boss, but also UMG’s President of Italy, Middle East and Africa.
And now, just like that, he’s gone.
Literally scrubbed from Universal’s much-mentioned ‘family’ in a heartbeat.
Less than 24 hours after the announcement of his exit, Negre’s profile has even been purged from the UMG corporate website.
‘Page not found’. Quite.
Nègre’s weighty reputation and arm-aching contacts book will no doubt be of much intrigue to Universal’s rivals in France.
Whether or not he technically walked or was shoved from UMG, you can bet your bottom Euro that Sony will be having a word in his ear this week.
So what gives?
How could the best-known music executive in Paris, the man who ran the biggest record company in the country for nearly two decades, just be jettisoned out of the operation – a business he’d steered since Justin Bieber was still in Pampers?
Welcome to the leaner, meaner UMG of 2016.
A revenue-hungry machine rapidly, rampantly marching towards a streaming-reliant future.
A company ferociously run by a man on a mission.
There were strong whispers in the market that when Lucian Grainge signed his new five-year deal at Vivendi last summer, he’d committed to some kind of ‘slash and burn’ of any outdated departments within UMG.
Universal will tell you that recent job losses across the likes of Capitol Music Group and Universal Music Group International (UMGI) are a little less sensational – that this is simply a root and branch review of how a tanker of a music company can better position itself for worldwide growth in the age of Spotify.
The truth, as ever, all depends on your perspective.
It’s certainly the case that UMG hasn’t only been pruning its work-force, but hiring too – and that this clearly isn’t all about saving cash.
The evidence: (i) Vivendi has €6.4bn in the bank at its disposal ready to spend; (ii) UMG’s made recent big-money appointments, including respected Sony A&R veteran Ashley Newton, plus David Blackman and Scott Landis, two prominent entertainment producers now leading Universal’s production of film, television and theatre projects.
If you thought Grainge was calling the shots on every element of this restructuring, you’re probably mistaken.
He wasn’t the ‘man on a mission’ I was referring to.
For if Grainge is undisputed king of UMG, he now stands side-by-side with a powerful emperor.
In a roundabout way, this guy was the music business’s biggest investor last year.
Bar none.
Vincent Bolloré (pictured) spent a mind-boggling €2.84bn ($3.15bn) of his own money acquiring a 14.5% stakeholding in Vivendi in Spring 2015.
He literally spent all of that cash in six weeks. Like Supermarket Sweep on the stock exchange.
This outrageous amount of wodge wasn’t frittered for fun: the Vivendi board was becoming increasingly rattled by rogue shareholders pushing against its strategy – including a call for Universal Music to be spun out into an independent entity – when Bolloré decided to take control.
Restless investor mutiny now thwarted, it’s up to Bolloré to make sense of Vivendi’s future strategy.
He appears committed to two fool-proof opportunities for his French media empire:
- Premium content creation, through the likes of UMG and Canal +, as well as Ubisoft and Gameloft – two Paris-based video games firms which Bolloré aggressively bought into last year. (Vivendi is now reportedly making moves for a hostile takeover of Gameloft);
- Online content distribution, through digital channels such as Dailymotion, Radionomy and Watchever.
Vivendi is currently in something of an acquisition mode, so this is ever-changing, but just look how important UMG was to the French company (and Bolloré’s cash) in 2015:
In recorded music and music publishing alone (not including its film production efforts with the likes of AMY), UMG contributed 48% of Vivendi’s revenue in 2015.
It did so while posting huge revenues of its own, boosted by a weak Euro, of over €5 billion.
Insiders tell MBW that Bolloré is a big fan of Grainge and that Grainge, in turn, appreciates having a ‘leader’ to turn to within Vivendi.
“It’s lonely at the top, especially when the village of the music industry is always pointing your way, but Lucian knows Vincent is right behind him,” said one source.
“There was no better reply to stupid rumour-mongering that Lucian was losing his job last year than the announcement of his new deal.
“Lucian knows exactly what he has to do, and who’s willing him on.”
A big part of that ‘to do’ list is gaining a better balance of UMG’s global revenue sources overseas.
Grainge has been particularly tasked with improving UMG’s income in China, Africa and India.
Vivendi made a point to investors this week of highlighting just how concentrated UMG’s commercial market is right now, with 75% of the major’s income coming from just five countries (US, UK, Germany, France and Japan), and only 3% coming from the BRICS territories (Brazil, Russia, India, China and South Africa).
Drilling down deeper, 42% of UMG’s 2015 income was derived from North America alone, with 38% from Europe, 11% from Asia and just 9% from the rest of the world.
This is an alien concept to Vivendi, which did 66% of its own total business (UMG included) in Europe last year.
42% of its income was derived just from France.
Which brings us back to Pascal Nègre.
Since the departure of Universal Music Group International boss Max Hole in October last year, Nègre – like all UMG country heads – has been reporting directly into Lucian Grainge.
Intriguingly, Nègre was definitely (and publicly) appointed to the new-look UMG Executive Management Board following Hole’s exit.
Was there a subsequent clash of characters?
Was Grainge unhappy with his French music biz legend – or was his French music biz legend unhappy with his boss’s to-the-point style?
Did Paris-based Vincent Bolloré – and his gladiatorial influence on UMG – play a key role in Negre’s shock departure?
The news all seems a bit too immediate to suggest the Universal ‘family’ has remained completely harmonious.
What is does prove is that there will be no executive too big, no track record too robust, to prevent Grainge and Bolloré making drastic changes if they see fit.
Said Vivendi in its summing up to investors yesterday: “We continue to see positive momentum in UMG’s business, driven by ongoing growth in streaming and subscription… leading to a reasonable increase in results this year – and enhanced results from 2017 and onwards.”
Clearly, Grainge has in mind a preferred management team to ensure such ‘enhanced results’ are achieved – whatever the cost.
