Sep 24th | Is UMG poised to win the battle for the superfan?

Hey everybody,

Welcome back to another Indie Insider newsletter. Last week I summarized some data that suggested record labels should be spending more time developing physical and merch strategies to hedge against plateauing streaming revenue in the US—this week, we’re going to dive into how UMG has been developing one of the strongest DTC operations out there, and see if there are any lessons that us Indies can steal for ourselves.

As a reminder, we are experimenting with our release schedule as we try to nail down the day that this newsletter will get the most engagement. So thanks for playing along as we try a Tuesday for the first time ever! As always, Indie Insider is brought to you by Habitat Financial, the easiest royalty and accounting solution for labels, publishers, and other music businesses. Click this link to earn more and try it free today: www.habitat.financial

Miley Cyrus Faces Lawsuit Over “Flowers”

Miley Cyrus is facing a lawsuit filed by Tempo Music , a major music rights-acquiring fund, for allegedly copying key elements of Bruno Mars' hit song, “When I Was Your Man,” in her 2023 chart-topping single, “Flowers.” According to the lawsuit, Tempo Music acquired a percentage of the copyright for “When I Was Your Man” in 2020 and is now claiming that “Flowers” includes "numerous melodic, harmonic, and lyrical elements" that closely resemble Mars’ original composition. Because “Flowers” was the best-selling single globally of 2023, the lawsuit could bring significant financial consequences for Cyrus, Sony Music, and co-writers Gregory "Aldae" Hein and Michael Pollack, who are also named in the suit.

The lawsuit points to various alleged similarities, including the melodic structure, bass-line, chord progressions, and lyrical elements. One of the most notable claims is that the lyric "I can buy myself flowers." In “Flowers” is derivative of the lyric "I should have bought you flowers," in Bruno’s song

What’s unique about this lawsuit is that goes beyond just the creators of Flowers. DSPs Amazon Music, Apple Music, and TIDAL, along with physical retailers like Target and Walmart, are also targeted. The argument being they profited financially from copyrighted work just like Cyrus.

I hate this lawsuit for two reasons. Firstly, I think that copyright lawsuits in cases where lyrical or recorded content is not lifted in a demonstrably 1:1 way are weak and often blatant cash grabs by firms with weak operational business models. Art is not created in a vacuum and often, the best work is created in conversation with other contemporary work. Most other forms of art have realized this and are not as aggressive in pursuing copyright infringement charges.

Secondly, I’m worried about the precedent being set by including retailers in this suit. I think the argument is reasonable. The stores can control what content they distribute and monetize, but at what point do we start seeing infringement lawsuits that include work for hire session musicians, marketers, and graphic designers, that were also gainfully employed because of the success of the song?

TikTok vs. DOJ Update

Speaking of legal matters, it’s time for an update on TikTok ’s battle with the US Department of Justice (DOJ) over the so-called TikTok ban.

As a refresher, TikTok’s parent company, ByteDance, is facing a January 2025 deadline to divest its US assets or face a total ban. Since the law was signed, TikTok’s lawyers have been busy appealing the decision in court.   

During a hearing last week at the US Court of Appeals, The DOJ emphasized the national security risks, arguing that the data collected by TikTok could be exploited by the Chinese government. 

In response TikTok's legal team argued that this law violates the First Amendment rights of the company and its 170 million US users. They claimed that this divestment would set a dangerous precedent for internet freedom and limit free speech for millions of users.

I expect TikTok to argue that we don’t restrict the ability of most other foreign organizations to operate in the US—Americans for example can access Russian state new sources—and that this law targets TikTok unfairly. Either way, TikTok is fighting back hard, and this case could end up in the Supreme Court if unresolved by early next year.

Universal Music Group’s Supercharged Superfan Strategy

For years now, Universal Music Group has recognized the value of superfans—die-hard music lovers who are willing to pay more for exclusive experiences, rare merchandise, and a closer connection to their favorite artists. UMG has gone on the record to correctly point out that In decades past superfans accounted for the majority of music spending. They also are a leading voice in a more recent movement that believes that superfans could play a critical role in a time when the industry is looking for new ways to grow revenue beyond streaming. This week UMG announced a 33% increase in in direct-to-consumer revenues. UMG doesn’t view this growth as just revenue booster—it's also a competitive advantage that helps attract artists who are looking for innovative ways to connect with their audiences.

 Streaming transformed how people access music, and the behaviors associated with music consumption. While the number of paying subscribers to services like Spotify has exploded, this has leveled the playing field—everyone pays roughly the same subscription fee, regardless of how intensely they engage with music. As UMG’s Executive Vice President, Boyd Muir, put it, superfans are streaming music for hours every day, while casual listeners are tuning in for just a few hours a week. Yet, they’re all paying the same. This "one-size-fits-all" model is flattening revenue potential. It doesn’t help that paid stream subscriptions are plateauing in the US, the world’s largest music market.

Now is the time for labels to be thinking about how to grow revenue beyond simple streaming royalties. UMG’s approach? Move from a wholesale model, where music is sold via streaming platforms, to a direct-to-consumer model. They want to create more personalized, high-value experiences for superfans, providing things like limited edition merch drops, exclusive digital content, virtual meet-and-greets, and immersive virtual experiences. Michael Nash, UMG’s Executive VP and Chief Digital Officer, pointed to examples like Billie Eilish’s listening parties and their virtual presence on Roblox, where fans can interact with artists like Olivia Rodrigo and Post Malone in the digital space. 

Rumor has it that UMG has partnered with Spotify to develop a new "super-premium" subscription tier, aimed at superfans who want even more flexibility and exclusive features. While details are still under wraps, this could include high-fidelity audio and priority access to music and events. UMG also sees potential for further segmenting the music streaming market, drawing inspiration from the video streaming industry, where companies like Netflix use multiple tiers to maximize customer spending.

While indie labels and artists don’t have the leverage the UMG does with streaming giants, they should still take inspiration from the major when it comes to activating their most passionate fans and getting creative when it comes to monetizing them! Superfan experiences and products not only help your bottom line, but also increase fan loyalty and satisfaction!

Ok, that’s it for this week! Check back on Friday for a quick update on what’s new in the world of indie music!