Independent music company [PIAS] and Universal Music Group (UMG) have struck a strategic global alliance.
As part of the deal, Universal has committed to providing [PIAS] with an undisclosed package of funding. In return, UMG will be able to access [PIAS]’s international distribution network through its recently rebranded distribution and services division, [Integral].
Unusually for a deal like this, Universal Music Group isn’t taking an equity stake, even a minority equity stake, in [PIAS]: The indie company remains fully controlled by [PIAS] co-founders, Kenny Gates and Michel Lambot.
Could that situation ever change in future? When MBW asked [PIAS] CEO, Kenny Gates, that question, he replied: “The future is the future. We don’t know what will happen tomorrow or the day after. But today, we are completely independent and completely in control of our destiny.”
Gates was extremely clear on one crucial point: “[PIAS] is not for sale.”
(Even if Universal and [PIAS] had agreed an equity acquisition, things would likely get complicated: As a condition of acquiring EMI Music in 2012, Universal was forced to divest a collection of assets by the European Commission. This ultimately became Parlophone Label Group (PLG), sold to Warner Music Groupin summer 2013. Also as a condition of its EMI buy, Universal committed in 2012 to not re-acquire any assets or re-sign any artists signed with any divested entities for a period of 10 years, i.e. until the end of 2022. Yet a few months before it sold PLG to Warner, in Q1 2013 – amid worries its EMI acquisition would weaken the independent sector – Universal also sold its Co-Op division to [PIAS]. Co-Op continues to partner with standout indie labels at Lambot and Gates’ company today.)
[Integral] provides support to its own, in-house labels and over 100 independent label partners around the world, including ATO, Beggars Group, Bella Union, Chrysalis, Domino, Epitaph, LSO, Mute, Ninja Tune, Partisan, Secretly Group, Transgressive and Warp.
[PIAS] currently has offices in all major territories around the world and over 300 employees.
News of the [PIAS]/Universal partnership comes three months after Universal Music Group’s launch of Virgin Music Label & Artist Services – its own global distribution and services division serving independent artists and labels.
Kenny Gates, co-founder and CEO of [PIAS], said: “Almost 40 years since Michel Lambot and I launched [PIAS] we are as eager and driven as we ever were and remain wholly committed to providing independent labels and artists with a platform to reach a global audience.
“This new, somewhat unconventional, strategic agreement with UMG will help both companies maximize the many opportunities we know are available, while not compromising our independence whatsoever.”
“At UMG, we understand that a vibrant independent sector is essential to a thriving music ecosystem.”
Sir Lucian Grainge, Chairman & CEO, Universal Music Group, said: “At UMG, we understand that a vibrant independent sector is essential to a thriving music ecosystem.
“After all, we are a company built by – and for – entrepreneurs and today serve as an accelerator for so many independent creative voices, which is why we are delighted to provide [PIAS] the support and resources to bolster their company as a fiercely independent force in music.
“I have known Kenny and Michel for more than 30 years and have deep respect for their passion for music as well their openness and authenticity. As pioneers of the label services model, they have created enormous opportunities for independent artists and labels and established [PIAS] as a beacon of excellence in the independent community.”
“This new, somewhat unconventional, strategic agreement with UMG will help both companies maximize the many opportunities we know are available, while not compromising our independence whatsoever.”
Kenny Gates, [PIAS]
Michel Lambot, co-founder of [PIAS], added: “I’m so pleased that we’ve been able to find an agreement with UMG based on trust and mutual appreciation.
“As a major and an independent, we are both leading music companies that exist to empower artists and labels.
“As a major and an independent, we are both leading music companies that exist to empower artists and labels.”
Michel Lambot co-founder of [PIAS]
“This partnership of two companies with music at the heart of their business allows us to grow in an increasingly global and competitive marketplace and to provide a world-class service to independent Artists and Labels with integrity and care”.
You can read an abridged Q&A with Michel Lambot and Kenny Gates about the new deal below:
run us through the top line points about this partnership.
Kenny Gates: We decided to look for a partner a couple of years ago. It’s been a long process. We met a lot of people. We met people from the financial community, and we met people from the music community.
In the end, despite what might be a surprise of working with Universal, we felt far more close and a much better fit with an actor from the music business rather than the financial community.
Had you ever thought about going the IPO route instead?
KG: One of the experiences we’ve been through in 1999 was that we already sold [PIAS]. There’s a whole story online about how I sold my company and bought it back. We went through that route with Edel in 1999, which went through an IPO.
[An IPO] is really not us. This is not what we do. It’s really not our culture.
Michel Lambot: The last Chairman of EMI, talking at a financial press conference, was saying, ‘Next year will be a bit harder because we had a fantastic year, we sold many millions of [copies of] the Spice Girls.’ One of the financial analysts said, ‘Are you stupid? Why are you not releasing the Spice Girls every quarter? Why are you telling me that you can’t repeat next year, the results you had last year?’
We don’t want to go to the Stock Exchange and explain that we’re not going to release the Spice Girls every three months.
We don’t speak the same language. We can talk to artists and we can talk to people. But this is a different language, making bankers happy. Making sure we’re going to get the last juice of the fruits that we have in the basket against the reputation of artists; that is not us.
What is it about Universal that made you want to work with them on this strategic partnership?
KG: Firstly, they’re the biggest [major music] company. So if there was a deal [to be done] with a major, [we] might as well make it with the biggest. But also they need us, and we need them.
We are complementary. They know that in their system, they have under-loved and under-serviced [certain] clients, artists and labels, who will be much better off through the [PIAS] system.
The deal allows for three things. It allows us to have the funding we need, and it allows us to have access to the repertoire that [PIAS] and Universal together feel will be better serviced within our system. But most and for all, it leaves us completely independent.
The board remains the same, the commercial management remains the same and there’s no upstreaming. It’s a perfect fit.
There’s no mention of equity going to Universal in the announcement. Is that something that might be looked at later further down the line?
[PIAS] is not for sale and the future is the future. We don’t know what will happen tomorrow or the day after. But today, we are completely independent and completely in control of our destiny.
What message does the partnership send to the wider independent community about the cooperation that can happen between a company like [PIAS] and Universal Music Group?
ML: We have been working with the majors for a long time. We, the independent community, when we do have problems – [for example] when we want to ensure that article 14, or 17 now, was passed – we work hand in hand with the majors. We never have the financial community alongside us when we want to have a better copyright legal ground. I think the [old notion] of majors versus indies is now more, finance versus record companies.
KG: It’s finance versus music. There was a polarization before, of independents and majors, and we’ve decided that we felt closer to [a major music] company than a venture capitalist.
Venture capitalists, when we spoke to them after 10 minutes, it wasn’t, ‘What is the plan?’ It was, ‘When and how are we going to exit?’ There’s only two ways of exiting. Either selling to a major company or some [other] company in the future, or an IPO.
There’s three types of [music] companies really. There’s the traditional companies, there’s what I call the ‘flippers’. People who want to build a company and then flip it. And there is the gold race for copyright.
The latter two are bringing so much money into the [music] business, that we really need to up our game and find a partner so that we don’t get left behind; so we can grow and give an even better service and better investments to our trusted partners and our labels and artists. We are in it for the long term and we wanted a partner for the long term.
Our biggest strength has always been our culture. People come to us because they know what we can offer. The [staff] turn around in our company is low. They know that if they have someone they have a relationship with within [PIAS], that person is unlikely to move on.
It’s a culture which is great. But we also need a war chest. We found a commercial relationship that ticks all the boxes.
Tell us about the timing of the announcement of the deal. Why have you decided to announce the deal now?
KG: To be honest, we’ve been negotiating this deal for 18 months. It’s taken 18 months for two or three reasons. One being COVID and the other is because we wanted it to be right.
The deal being right for us is to remain completely independent. So it took a long time and it just so happens that it closed in the last few days. As it’s hard to keep a secret in this business, we didn’t want to keep it a secret because it’s exciting news to know that there is money at [PIAS]. It’s not only nice guys.
“The deal being right for us is to remain completely independent.”
Kenny Gates
It’s unrelated to Believe, it’s unrelated to Tommy Boy, it’s unrelated to Reservoir and it’s unrelated to the 10% [of UMG] sold to a billionaire. It just so happens to be now. I’m happy to have that partner, knowing that all that money is coming into the market and that we’ve now got the funding to grow the company to where it should be.
ML: And by the way, the fact the deal took so long to get signed was a reinforcing factor that they were really the right partner. Everything has been discussed, every single word has been polished. Because of course, they wanted to make sure they would get their money back one day and we wanted to make sure that we will suffer no interference from Universal.Music Business Worldwide
