Good evening, and welcome to Universal Music Group's first quarter earnings call for the period ended March 31st, 2023. My name is Nadia, and I'll be your conference operator today. Your speakers for today's call will be Lucian Grainge, Chairman and CEO of Universal Music Group, and Boyd Muir, Executive Vice President, CFO, and President of Operations. They will be joined during Q&A by Michael Nash, UMG's Executive Vice President and Chief Digital Officer. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there'll be a question and answer session. If you would like to ask a question during this time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by 2. Please let me remind you that management's commentary and responses to questions on today's call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may vary in a material way. For a discussion of some of the factors that could cause actual results to differ from expected results, please see the Risk Factors section of UMG's 2022 annual report, which is available on its website at universalmusic.com. Management's commentary will also refer to non-IFRS measures on today's call. Reconciliations are available in the press release on the investor relations page of UMG's website. A supplemental historical revenue fact sheet is also available on the investor relations page of UMG's website. Thank you. Sir Lucian, you may begin your conference. Thank you, greetings from Hilversum. Welcome to everyone. I'm pleased to report to you tonight on UMG's strong start to 2023. Boyd will take you through the numbers in more detail in a bit, in brief, during the first quarter, our revenue grew 9%, with recorded music up 10% and music publishing up 12%. Our adjusted EBITDA grew by 13%. Proud as I am to announce financial results as positive as these, as I've said before, how UMG performs over any three-month period is merely a snapshot of a moment in time. It does not, by any means, constitute the best way to understand and evaluate our business or its potential for growth or the next steps that we are taking to reach our key strategic goals. Accelerating our geographic expansion, improving the business model for streaming, leveraging new technology, including AI, as well as the many challenges and opportunities it presents, will not be achieved overnight. We look at our business in multi-year cycles, so progress along quarterly time frames is not immediately apparent. What we are confident in is that there's a new cycle of growth and that has already begun. I'll say more about our strategic initiatives in a moment, but first, I want to tell you a little about what is readily apparent, and that is our undeniable consistency around the world in breaking new artists and helping established artists reach higher levels of success. This last quarter was no exception, and I'll cite just a handful of highlights to make the point. For example, UMG's Republic Records division, for the first time in the 56-year history of Billboard's 200 chart, a single label, Republic, had seven of the top 10 albums. These came from a mix of genres and emerging and established stars, namely Drake, Metro Boomin, Taylor Swift, TOMORROW X TOGETHER, Shania Twain, Morgan Wallen, and The Weeknd. Another highlight is Morgan Wallen. His latest album has been a phenomenal hit. That album not only had the biggest streaming week ever for a country album, but it also had the fifth-biggest streaming week for any album, regardless of genre. Its lead single, Last Night, spent multiple non-consecutive weeks at number one. Morgan also became the first country artist in history to have five tracks in the top 10 on the Billboard Hot 100. First off, this year in the U.S., UMG has had five of the six most consumed albums, with releases by Drake, Metro Boomin, Taylor Swift, and Morgan Wallen, who had two. We also had the top four album debuts, thanks to Jimin, Tomorrow by Together, Twice, and Morgan Wallen again. Making history in the U.S., Karol G, who is signed to our Latin division. Her latest album became Billboard 200's first all-Spanish language album by a female artist to hit number 1, with 11 of its tracks landing on the Billboard Hot 100. In the U.K., UMG had the number one album for 10 of the first 15 weeks this year, with a wide range of different artists topping the chart, including Boygenius, The Courteeners, Lana Del Rey, Ellie Goulding, The Lathums, Sam Smith, Taylor Swift, Shania Twain, and U2. In Japan, King & Prince continue to break records. Their latest single sold over 1 million CDs in the first week, the first time in 3 years that that sales threshold was crossed. Finally, our music publishing division ranked number one in Billboard's fourth quarter 2022 publishers quarterly, according to the Hot 100 chart data. This marked UMPG's first consecutive quarter topping the list, and in doing so, it became the first publisher to hold a greater than 30% market share in 3 consecutive quarters since tracking began in 2014. I could go on. Frankly, I'd like to, but I think it's readily apparent UMG's record-setting performance is the direct result of how we continue to evolve and refine both the way recording artists and songwriters are signed and developed and the way their music is marketed around the world. By around the world, I don't just mean the world's biggest music markets. We are strategically focused on building our domestic repertoire in those music markets that possess high growth potential. Accelerating the expansion of our geographic reach through a combination of organic investment and opportunistic M&A is one of the three key strategic initiatives we are laser-focused on advancing. As an organization, we never stand still, we never rest on our laurels. The result is unmistakable. The billions and billions of our artists' streams that fans across the globe enjoy 24 hours a day. That remarkable fan engagement underscores the pressing need to redefine the streaming model in a manner that appropriately rewards those artists whose music drives fans to engage and remain engaged on platforms in the first place. As I mentioned on our last call, the development of this model, what we call the artist-centric model, is underway. One of the issues that this new model is designed to address is the flood of content on platforms that fans neither want nor choose to consume. Here's an example from one music platform's own publicity-disclosed data. Of the 9 million content uploaders on that platform, yes, 9 million, 8.3 million of them, more than 92% of them, have fewer than 1,000 monthly listeners, and only 2% are quote-unquote, professional or professionally aspiring artists. As I said, the music by our artists drives meaningful engagement on these platforms. Yet the majority of content hosted on these platforms represents an insignificant percentage of what is actually consumed. Included in that oversupply is also AI-generated content. Not many people realize that AI has been a major contributor to this content oversupply already. Most of this AI content on DSPs come from the prior generation of AI, a technology that is not trained on copyrighted IP, and thus produces very poor quality output with virtually no consumer appeal. However, the recent explosive development in our generative AI will, if left unchecked, both increase the flood of unwanted content posted on platforms and create rights issues with respect to existing copyright law in the U.S. and other countries, as well as laws governing trademark, name and likeness, voice impersonation, and the rights of publicity. Further, we have provisions in our commercial contracts that provide additional protections. Unlike its predecessors, much of the latest generative AI is trained on copyright material, which clearly violates artists' and labels' rights and will put platforms completely at odds with the partnerships with us and our artists and the ones that drive success. Should platforms traffic in this kind of music, they would face the additional responsibility of addressing a huge volume of infringing AI-generated content. Any way you look at it's oversupply. Whether or not AI-created is simply bad for artists, bad for fans, and bad for the platforms themselves. That's where our artist-centric model can come in. With the right incentive structure in place, platforms can focus on rewarding and enhancing the artist-fan relationship and, at the same time, evaluate the user experience on their platforms by reducing the sea of noise, better highlighting the artists and the music their customers care about most, and eliminating unauthorized, unwanted, and infringing content entirely. Let me be clear, as with every technological advance, it would be foolish and shortsighted to view AI as nothing but a threat. On the contrary, we do view AI, when properly developed and employed, as a powerful tool for our future. In fact, we're already employing AI in a variety of ways, identifying new audiences for our artists, optimizing the production, mixing and mastering of recordings, and enhancing the quality of music experiences such as immersive sound. In fact, we hold several patents in these kinds of AI applications already. I'm confident that in the service of artists, AI will meaningfully accelerate our business in the years to come. Since unchecked generative AI, and I repeat, generative AI poses many dangers, we are also leading the industry in an effort to ensure that AI thrives as a technology that embraces rather than threaten humans' creativity, and one that will evolve as an ethics-based technology that protects the rights of artists, their livelihoods, the creative ecosystem, and culture as a whole. In addition to exploring other options in this rapidly developing area, UMG is actively cultivating ethical AI opportunities by seeking to partner with leading AI music companies and by advocating with early-stage AI companies as their own technology unfolds. We'll have more to announce in this space in the future. This approach is at the heart of the cross-industry Human Artistry Campaign, of which we are a founding member. Its membership has grown at breathtaking speed over the last few weeks. Today, it includes not only musical organizations and artist groups representing songwriters, composers, publishers, independent and major labels, but also more than 80 organizations across sport, journalism, photography, voice actors, and labor unions as well. Even as we work to exploit the promise of this technology, we are reminding lawmakers and governments everywhere of the critical need to protect and defend the rights of human creators in every walk of life and industry. With its rapid growth, the coalition is poised to speak authoritatively on how AI can develop in ways that give birth to new creative and commercial opportunities while strengthening the creative ecosystem. We must never fail to recognize the unique and irreplaceable role of human artistry in culture and the arts. Let me turn to this. Universal's success has been directly connected to our ability, time and time again, to harness technology and to put it to work for our artists. We've led the monetization of streaming in subscription, in social, in health and wellness, in audiovisual, in short-form video, and other categories. That's the lens by which we are working to embrace AI while simultaneously vigorously protecting the rights of our artists. As we survey the landscape, we see four basic truths from which we envision many extraordinary opportunities for growth, including. First, more music is being consumed than at any time in human history. As a consequence, because our artists consistently produce the music that drives the greatest demand and consumption around the world, and because of the awesome depth and breadth of our catalog and IP that goes back decades, we are the company best positioned to benefit. Second, in addition to the enormous room for growth in subscription and streaming in established music markets, we see great possibility for us in markets across Asia, Latin America, Middle East, and the African continent, where populations are enormous and our global reach is expanding. Third, there are more avenues to monetize music than ever before. Just as we pioneered the creation of commercial opportunities in subscription with Spotify, for example, and in social media with Facebook, UMG is leading the expansion of music monetization in new and blossoming categories such as short-form video, health and wellness, gaming, and yes, AI. Fourth, the explosion of content has made the relationship we have with our artists even more essential than it's ever been. Artists need a partner that can help them cut through all of the noise and clutter in an ecosystem plagued by constant oversupply, and to build a significant and committed fan base to propel worldwide success. The global organization UMG has built does just that, and it does it better than anyone else out there. We have the resources to partner with artists anywhere in the world and at any stage in their careers, and across recorded music publishing, merchandise, branding, film and television, and more. Through our own direct-to-consumer channels with artist products offered through our partners, we see an opportunity for even greater monetization by dramatically growing the number and commitment of our artists' super fans. The deep and broad experience of our team has been invaluable as we face the challenges and capitalize on the opportunities we see before us during this next wave of growth, driving strong and consistent results on behalf of our artists as well as our shareholders. Thank you for that. Now I'd like to turn it over to Boyd to walk you through our numbers, and he's smiling. Thanks, Lucian. As Lucian indicated, 2023 is off to a strong start. Figures are laid out in the press release, let me provide some additional color. I'd remind you that any growth rates we discuss today are in constant currency. Total revenue in the quarter grew 9% year-over-year to EUR 2.45 billion, with widespread growth throughout recorded music and music publishing. This broad-based growth profile continues to underpin our confidence about the sustainability of the positive direction of our business. To break it out, recorded music grew 10%, with subscription and physical revenue both exhibiting strong growth. Subscription revenue grew 10% to EUR 1 billion, driven primarily by the growth in, excuse me, subscribers, with some additional initial benefits from certain ASP price increases. It's worth noting that in the U.S., the world's largest music market, our subscription revenue grew 12%. Ad-supported streaming revenue declined 2% in Q1. As we have noted, this result is driven by macro pressure on the advertising market, and we hope to see some improvement towards the end of the year. Engagement and activity on the platforms remains incredibly strong, and we have confidence that this revenue will grow as the broader market rebounds, and we continue to work to right-size some of our social media deals. Physical revenue grew 33% over the prior year. We had strong performance in Japan this quarter, with significant CD and DVD sales from artists King & Prince. We also had strong vinyl sales in the U.S., the U.K., and Germany from artists including Taylor Swift, Bo Burnham, Lana Del Rey, and U2. While we are encouraged to see super fans' willingness to spend to support the artists they love, we do continue to urge caution around sustained growth in physical sales. Physical results are more release-driven than streaming and subscription, and skew towards certain genres, certain artists, and certain geographies. Another area of growth within recorded music was in our license and other revenues, which were up 8%. This was largely driven by improvements in neighboring rights income. Neighboring rights refer to those royalties generated from a broadcast of sound recordings on non-interactive digital services, such as satellite and internet radio, on terrestrial radio outside the U.S., as well as on TV and in public spaces and businesses. Turning to music publishing, our revenue grew 12% over the prior year quarter. This strength was driven by 19% growth in digital revenue, thanks to continued growth in streaming and in subscription activity. We also had 8% growth in synchronization. While mechanical revenue was in line with the prior year and performance revenue declined 2% year-over-year, as the prior year quarter benefited from a post-COVID recovery. That we have experienced a full year on accrual accounting basis, this quarter's result is comparable to last year's first quarter. As a reminder, the only quarter of 2023 where this is not the case is in Q2, as the second quarter of 2022 included a catch-up accrual of about EUR 100 million related to prior years. We expect continued healthy underlying growth in music publishing in Q2, the reported growth will be impacted by this unusual comparison. Moving on to merchandising. Following last year's very strong rebound in post-COVID touring, this quarter faced a difficult comparison. Our merch business, which represents over 200 artists, saw many of its artists on the road in 2022. Merchandising revenue declined 4% in the quarter, with touring and retail both lower. This was partially offset by strong growth in our direct-to-consumer sales. Turning to adjusted EBITDA. Adjusted EBITDA grew 13% in the quarter to EUR 522 million. Adjusted EBITDA margin expanded to 21.3% compared with 20.7% in the prior year quarter. The margin expansion came from a combination of operating leverage in our recorded music business and EUR 9 million in cash compensation savings as we roll out our equity plan. EUR 9 million in savings is on track with our plan to see EUR 60 million-EUR 80 million in cash compensation savings in 2023, as these savings ramp up over the course of the year as more employees move into the equity plan. Adjusted EBITDA excludes non-cash share-based compensation expenses of EUR 260 million during the 1Q 2023, compared to just EUR 1 million in the 1Q 2022. The EUR 260 million expense is on track with our previously disclosed estimate of about EUR 630 million of non-cash share-based compensation expense this year. As is true for the margin benefit coming from cash compensation savings, we also expect our underlying adjusted EBITDA margin expansion to increase over the remaining quarters of the year. Every quarter has a slightly different margin profile depending on revenue mix, segment mix, repertoire mix, and so many other factors. Hence why we encourage you to look at our business over the course of at least a year rather than any individual quarter. Our margin in Q1 2023 was in line with our expectations, and we remain on track to see over 1 point of adjusted EBITDA margin expansion in 2023 compared to the 20.6% we reported in 2022. Before I conclude, I wanted to note one other item with regard to our equity plan. Employee share grant settlement started in this first quarter, and instead of selling newly issued shares on behalf of our employees to cover their withholding tax, the company decided to cover the tax burden using cash of approximately EUR 123 million, lessening the dilutive impact of these equity settlements by approximately 5 million shares or over 40%. You will see this when we report our first half results as it will impact cash and shares outstanding. We expect shares outstanding at mid-year to be about 1,821 million, and expect our shares at the end of 2023 to be only slightly higher than this. Overall, 2023 is off to a very solid start. We remain encouraged by the growth trajectory of the business and excited by the opportunities that lie ahead. Lucian, Michael, and I would be happy to take your questions. Operator, if you could please open the line for Q&A. Of course. If you would like to ask a question, please press star followed by one on your telephone keypad. If you choose to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. We ask you please limit yourself to two questions per person. Our first question today goes to Adrien de Saint Hilaire of Bank of America Merrill Lynch. Adrien, please go ahead. Your line is open. Good evening, everyone, and thanks very much for taking the question. I've got two of them, please. First of all, the growth of subscription in recorded music slowed down a bit in Q1 versus Q4. How do you think about the next quarters for the year? Lucian, on your point about generative AI, I'm just wondering if you see a potential for UMG to license your content directly to these platforms like OpenAI, for example. Thank you. Thank you for your questions, Adrien. On the first question regarding the growth of subscription, we reported a 10.3% growth in the first quarter, which is actually a slight uptick from the 10% flat in the previous quarter. Growth was broad-based and largely driven by the organic expansion of the adoption of subscription. There was also some initial benefit from price increases on two of the platforms. We also saw a very positive indication from the U.S. market with subscription growth of 12%. You know, there's been some speculation that developed markets might slow down on a relative basis as penetration increases. As we've indicated before, what we're actually seeing in developed markets is a pretty significant consideration set that we expect to be in the next wave of subscription adoption. If you look at our top 13 developed markets on the basis of our consumer research, we believe that there's a consideration set of another 100 million subscribers in those markets that are ready to on-ramp. This is because of the inherent value appeal, value proposition appeal of subscription. You know, we're, we're seeing, you know, positive indications. With respect to our outlook, I don't think we're prepared to comment, you know, beyond noting that we see the extension of the mega-trends that are driving consumer adoption of subscription, well supported, you know, by the fundamentals. 5 billion smartphones, expectation of 20% of growth in the expansion of the footprint of consumers that are, you know, accessing the Internet, you know, through mobile devices. The continuing increase in the attachment rate of paid plans for mobile subscribers. You know, expansion of, you know, the overall access, f or people to be able to access streaming content. You know, all the fundamentals continue to be in place. You know, then in terms of, you know, outlook with respect to optimizing pricing with the very, very strong, you know, value proposition. We've been encouraged by the move of a couple of platforms. There's obviously, you know, further opportunities with respect to other platforms. You know, we feel, you know, very good about the subscription growth that we're reporting for this quarter, about the, you know, number of elements that I covered there. The outlook is, you know, generally very positive in terms of our expectation for continued growth. In saying that, I haven't really touched on the opportunity with respect to the emerging markets beyond the consideration set that I talked about in terms of, you know, developed markets. There's obviously breakthrough opportunity there. There are many reasons to be very positive about the continued growth of subscription. I would just add on also part of your question, we're open to, in terms of licensing any business solution. Obviously, we have to respect our artists and the integrity of their work. My philosophy for the company has always been we should be and can be the hostess with the mostest. Yes, we're open for business with businesses, which are legitimate, which are supportive, and which we can create a partnership for growth. Thank you. The next question goes to Omar Sheikh of Morgan Stanley. Omar, please go ahead. Your line is open. Yeah, thanks very much. Just a couple then for me. Maybe first on generative AI, as well, maybe I could ask a legal question. Could you maybe just walk us through the protections that you think you have, that copyright law essentially provide to you? If a track was generated by an AI trained on your copyrighted material, you know, can you take it down? Does that qualify as a derivative work? Can you require DSPs to exclude it from their platforms, or restrict it in any way? It'll be helpful if you could just kinda walk us through your understanding of how the law works for you. Then what feedback are you getting from artists about, you know, their overall attitude or the initial attitude, if you like, to the use of their the technology on their material? Do they want to encourage it as a potential new revenue opportunity, or are they looking to you to restrict it? That's kind of a rather long first question. Secondly, just on streaming revenue, could you maybe just talk about, you know, whether you think the first quarter streaming revenue growth is gonna be the trough for the year, and would you expect it to improve? I know, Boyd, you said that you expect it to improve in the second half, but do you sort of expect that to, you know, maybe Q2 to also be an improvement sequentially? Would you expect that to be driven by, you know, the pure advertising revenue that you get from YouTube and Spotify Free, or will that be driven by new platform revenue from the likes of Meta and Snap? Thanks very much. Thank you for your questions, Omar. Let me address the questions around AI first, then I'll hand it off to Boyd to address your streaming question. I'm glad that you asked the question about our legal view of AI, because I do think that there's been a little bit of confusion. It's a new issue, and there's been some fresh reporting on it with some recent developments. We're happy to have the opportunity to be very, very clear about our view of the legal landscape. Let me break it down here. First of all, in terms of copyright, to reiterate our very clearly articulated position and to echo Lucian's excellent summary earlier, sophisticated generative AI that's enabled by large language models, which trains on our intellectual property, violates copyright law in several ways. Companies have to obtain permission and execute a license to use copyrighted content for AI training or other purposes, and we're committed to maintaining these legal principles. Now, in terms of international scope, we believe that most key markets' copyright laws are fit for purpose right now, we don't see a requirement for new legislation per se. I think it's very important that governments around the world interpret and enforce the existing laws correctly and actively. In terms of accessing of, training materials for AI, let me break this down on several different levels. Copyright covers all training of AI and copyrighted music regardless of the technical means employed. We have further protections beyond copyright laws under our commercial DSP agreements. We've put all of our partners on notice regarding their responsibility to ensure that no third party has unauthorized access to their services for the purpose of training generative AI. We know how critical it is to vigorously enforce our rights here and the rights of our artists regarding any such unauthorized training. That's why we've taken some added steps to be very, very clear with our partners on this issue. We have other remedies beyond copyright law. There are various exploitations of generative AI, some of which we've seen recently, that are exploitations without authorization running afoul on a number of protections, including trademark, name and likeness, voice impersonation, right of publicity. All of these are instruments that can protect our work. With respect to voice, I think there's been some confusion here, and I wanna be really, really clear on this point. We own all sounds captured on a sound recording. That is, in fact, the very nature of sound recording copyright and ownership. Here too, depending on the instance, we may also employ name and likeness, voice impersonation, right of publicity protections as well. Specifically, sound-alikes which serve to confuse the public as to the source or origin, or which constitute a commercial appropriation of likeness in the form of a distinctive voice, those are all clearly illegal. That's our reading of the, of the legal landscape, and I hope that clarified our position, and, helped address some of the questions that have come up in the recent past. With respect to the artist community and what we're hearing, we've heard a number of artists expressing their concerns about AI being employed to create content that's training on their work without consent. This is really content that's attempting to hijack their brand, exploit their celebrity for a moment of attention that's given to an anonymous uploader. Not to mention the numerous other very nefarious uses of their content that disrespect and tarnish their reputation. There's a lot of concern from the artist community there. It's important to keep in mind that the potential of AI is much broader, and we have certainly heard from leaders in the creative community that are excited about its potential. As Lucian highlighted in his remarks, when technology like AI is put in the service of artists' voices and visions, when it's directed by their artistic intent, we see great creative results being possible. We're already working towards those kind of possibilities by integrating AI technology throughout our studio system. The key here is for technologists to respect artists and value their work, focus on ethical approaches to the development of AI. When that happens, we expect many artists will enthusiastically embrace the creative innovations that AI can support. Then just turning briefly to streaming, Omar. You know, I don't really think it's appropriate for us to predict a change in, you know, the macroeconomic headwinds that have negatively impacted these advertising revenues. What I would say, though, is that I'd say a couple of things, actually. One is these advertising dollars left the ecosystem very, very quickly, and I would hope that when they do return and the headwinds allow, that they will return quite quickly. We're not actually seeing any real indication of that in the immediate term. Again, as I mentioned, you know, we're still hopeful that later in the year we'll see, you know, a change in the macroeconomics and the advertising revenues. I think one of the things that makes us very confident about this, you know, when you actually look at the levels of engagement and the activity on the platforms, it continues to grow. I mean, the engagement is really staggering. That really does support our confidence that the revenues, you know, will grow as the advertising spend returns to the platforms. Just add one last thing to the first part of the question about AI and the support of our artists. We've seen great support in our partnership with Drake, The Weeknd, Stapleton. These are just 3 or 4 of the multitude of our artists and our artist partnerships. If it's not theirs, doesn't actually affect their artistic intent. We in the music business, the North Star is artistic intent. I can't just go in and argue with an artist or can any of our dozens of creative executives around just change a mix, change a backing vocal, do a 12-inch dance mix, change a producer. One always hear about us supporting and backing the artist's vision, and we will continue to do that. I want you to understand that's one of the reasons why that partnership with us is in order and the support that we have from not only the artist community, but the creative people around the world and these campaigns and this defensive work that we're doing purely on the generative AI is because it's protective of their art and their work. Thank you. The next question goes to Michael Morris of Guggenheim Partners. Michael, please go ahead. Your line is open. Thank you. Good afternoon. I have a couple questions. First one is on pricing, and it's great that you guys have seen a couple of these DSP price increases that you referenced. Do you see a path to additional and more regular price increases from these on-demand streaming music platform partners? Is that an important goal for you as you enter into rights renewals with the platforms? How can you help incentivize or drive continued top-line growth for the industry at large? My second question is on the payouts. You mentioned that the artist-centric model is on the way. I'm hoping maybe you could provide an update. I know it's a topic that comes up on a quarterly basis, but it's relatively new. It sounds like some progress has been made there. I'd be curious at what that progress was and how far away a change in the model might be. Thank you. Michael, this is Boyd. Perhaps I'll, you know, address your first question on pricing. You know, as we said, several times, we're really not in a position, A, to comment on pricing or to drive the agenda with regard to pricing other than what we've continued to do historically and will continue to do is to work with the platforms and provide them with all of the features that they require to ensure that their subscribers are content and remain actively engaged with the platform. We've always been very anxious to try and improve the feature sets of the products that the platforms provide. You know, therefore, you know, that really, you know, for us, that removes any kiddnd of impediment or restriction with regard to their ability to increase pricing. You know, we believe that the pricing, existing current pricing model, which has been around, you know, for many years so far, it just represents incredibly good value, you know, to have all of the music, you know, created in the world wherever you want on whatever device for whatever is, let's just call it a $10.99 or $10 price point is incredibly good value. We're also confident that the artist-centric model will work because it's in everyone's interests, including the platforms. The real issue is this flood of content. This oversupply will only increase with generative AI. Adds to the complexity of artists and rights issues. As I said, it's in everyone's interest to make sure that the platforms don't become awash with problematic content that fans and artists don't want. We're confident in our partnerships and in our long-term joint strategic goals that we will all have the outcome that we want. Importantly, artist-centric also has the opportunity to unlock the super fan and the super fan monetization, which creates a path for more compensation for artists and inevitably higher output for platforms. The super fan is going to be more and more interesting for all of us. We know, we value, we love the quality of our artists, of our libraries, of our catalogs, of our audiovisual rights, and we will continue to monetize those rights with all these opportunities. To add a little bit to that in terms of the question about status, Michael, as we mentioned last quarter and based on, you know, that win-win dynamic that Lucian articulated, we were very encouraged by the early response across the industry and from our partners. We've announced partnerships with TIDAL and Deezer, and those are progressing well. We're engaged with other parties. We're in discussions with all of the large global DSP partners. We expect this process is going to take time, in part because we need to go platform by platform. You've got different dynamics on the platforms in terms of customer acquisition and engagement and subscriber retention. You have, you know, different metrics that provide the basis to be able to model out the shared objectives in terms of refinement of the model. Obviously, the platforms are looking for on-platform metrics that would be the basis for model adjustments and not metrics that are developed elsewhere. We have to take a very careful platform by platform approach. We're engaged right now in deep data science in looking at the platform data with our partners to get the level of understanding required in terms of how we implement the objectives so that we can successfully make the modifications in the model with the partners that we're working with. We expect that we're gonna be able to continue to make progress. The sleeves are rolled up. This is hard work. We have to get into the details, but we're in the details now with a number of different partners. Thank you. The next question goes to Silvia Cuneo of Deutsche Bank. Silvia, please go ahead. Your line is open. Thanks for taking my questions. Good evening, everyone. My first question is on the potential changes to the music streaming monetization model. A follow-up regarding the super fan monetization. Can you please share some thoughts around what could be more likely to change? Is that content segmentation, something like we've seen at Apple Music with the launch of Classical, for example, or additional pricing tiers that you're thinking about? The second question is a follow-up regarding generative AI. What are your views regarding the potential to perhaps open up a new revenue stream in a way that still protects artists and user of intellectual property as well, something that could be added in contracts negotiations, for example, that could be royalties around the use of the singer's voice? Just wondering about other scenarios around the topic. Thank you. With respect to the first question, as I understood it in terms of the opportunity around the super fan and what form it would take, what we know right now is that we've had tremendous growth in the adoption of subscription, as a basic across the board all access, all consumers priced the same model. I think that level of simplicity was necessary to get us to the point where according to the IFPI, we reached nearly 600 million subscribers last year. On our journey to 1 billion subscribers over the course of time, you know, growth continues to be important. With all the consumers valued the same, clearly we left behind the monetization we enjoyed for more valuable fans during the digital download era, where your most valuable customers as a group were three times more valuable than your average customer. What we've seen is that in many markets, you know, 15% of the consumers may be responsible for 35%-40% of the spend. Our consumer research says that among subscribers, about 30% of those subscribers are super fans of one or more of our artists. We have clear indication of a significant opportunity. How does that relate to artist-centric? When you start to focus on the artist-fan relationship, those high-value relationships that are driving the economic model of the platform, you're segmenting around high-intent, high-integrity artist-fan relationships. You're starting to move the platform towards a deeper level of engagement with fan bases, the opportunity to monetize affinity, we think flows very naturally from that. As the platforms start to work on the adjustment of economic model to look at high value relationships between artists and bands, we think that there is an opportunity at the level of platform scale to build in various kinds of offers that could target the super fan. It's interesting what you would point out in terms of genre and that's a way you can think about it. You know, you can also think about it in terms of provisioning unique digital goods of gamifying the fan experience and, you know, badging fans, creating pay gate access to unique experiences with artists, virtual meet and greets, live streams, things like that. As you can tell, I'm not the product guy, so these are kind of rudimentary concepts. We believe that collaboration between our labels and the platforms, once you start to focus more on the artist fan relationship, that naturally leads into an opportunity to go after the super fan with the platforms at a level of scale. Now, I think in terms of your second question with respect to how we're looking at the AI model and what value we can potentially unlock, I think it's a little bit too early to get into any specifics there. You know, I think that the first step here is really establishing, you know, the foundation, which is the rights of our artists and the interests of our artists. Making artists, really the central, you know, nexus of the dialogue, of the conversation, focusing on their interests first. I think that, you know, as we start to look at the ethical development of AI, as we start to look at what licensing relationships could mean as a part of that, we'll start to get a clearer idea. I think, as I understand your question, it's a little bit too early to get into any specifics about what kind of model would make sense. Thank you. The next question goes to Christophe Cherblanc of Societe Generale. Christophe, please go ahead. Your line is open. Yes. Thank you. Thanks for taking my question. I had two. First one was on the artist-centric new model. Can you give us what's your best estimate of the share of the pool, which is today going to what you would call a problematic or lower quality content versus higher quality content that you have at UMG, just to give us a sense of the potential upside. The second one was on catalog acquisition. That market has gone very quiet, which should be good for you. What do you see there? Is the market frozen? Do you see opportunities? Do you see any upside? Any indication would be super helpful. Thank you. Thanks for your questions, Christophe. In terms of artist-centric and what that could potentially mean, in terms of share shift, obviously you're gonna see variance platform by platform. It comes down to the model itself. It's hard to address your question. I would point to the fact that there are industry estimates that the range of fraud on the platforms could potentially be in the mid to high single digits, perhaps more in some instances. You've got platform data that gives you a sense of, you know, the scope of this very low value long tail kind of non-artist content, what Lucian was referring to before when he talked about, you know, only 2% of 9 million uploaders being artists by the definition, you know, of the platform. All this non-artist content on the platforms. I think if you were to look at the buckets of that, content, and fraud, you maybe start to get a sense of how you could enrich the royalty pool that would be shared by all artists. You know, then the, you know, the, the question of, you know, how that impacts individual companies would flow from there. Christophe, sorry. On, on catalog acquisitions, we still see quite a lot of activity in all fairness. I mean, the, you know, your comment is a well-made one. You know, you would expect to see with the interest in, you know, increase in interest costs that would, you know, that would curtail the activity in some way, shape, or form. I think what the reality is what we're seeing, there's still quite a lot of undeployed capital that's chasing after IP and acquisitions. Really, you know, the reality is that, you know, we're only. We're very, very, you know, I've used the words before, very opportunistic, very selective. It's only the best of the best. I don't think really in terms of valuations, there's been any kind of lessening of the valuations of the best of the best. There's definitely less opportunity coming to the, you know, coming to the market. I'd like to add actually that we do not suffer from something called FOMO. It's fear of missing out. Never suffered from it. We'll see. Thank you. The next question goes to Richard Eary of UBS. Richard, please go ahead. Your line is open. Many thanks. Just sort of three questions for myself. Just firstly on sort of economics between physical and streaming. Boyd, maybe can you sort of help talk through sort of gross margins on those products to get us a better understanding of how the mix shift between physical and streaming impacts margins on a quarter-by-quarter basis, so we can get a better understanding of that. That would be helpful. The second thing is just on the streaming numbers, you talked 10% at a group level. There were some pricing benefits in there. Can you just break out maybe what was volume, what was price, and also do that for the U.S., so we can get some understanding? Then lastly, Lucian, just can I ask a sort of hypothetical question, is that back in 2017, there was sort of some ceding of economics to DSPs at that point in time? Would you contemplate ceding any more economics for price increases in the future? Let me perhaps go for the, you know, the economics of streaming subscriptions. You know, there's no one answer that applies across the board. It's all very, very different. By the way, again, I just want to point out, don't look at this on a quarter-to-quarter basis. I would really, really encourage you to take a longer term, you know, term view on that. You know, at the highest possible level, you know, it's clear that there are certain economics in the digital world that were that are different to the physical world. The obvious one is that there's no physical manufacturing of a physical product. There's no distributing of that physical product from the point of manufacture to the point of retail. That's all true. It's not the case that in the digital world that there is zero cost of the digital equivalent of manufacturer, the digital equivalent of distribution. There are still some costs attached to digital. Clearly there's a, you know, there is a benefit migrating from physical format to a digital format. Please, I would encourage you just to look beyond the quarter by quarter, which there will be items that happen on that short-term basis that will kind of confuse the overall direction. On the second question regarding, the growth in subscription, the 10.3% number and a breakdown, we're not prepared to make that kind of a breakdown. I would say that the growth's largely been driven by the organic expansion of the subscription marketplace and the continuing manifestation of the mega trends that I talked about that are driving consumer adoption. That's the largest factor by far. On the third part, obviously, I'm not going to speculate about what we would do or could do in the future. You referenced 2017. Our entire goal is to achieve the best economics and the best outcomes for everybody. The artists, ourselves, platforms, I'm obsessed with growth. I like 2 and 2 equal 7 scenarios. In the spirit of our partnerships with all of the platforms and everyone who we've ever done a deal with and anyone who we will ever make a deal with, I like win-win. Thank you. Our final question goes to Lisa Yang of Goldman Sachs. Lisa, please go ahead. Your line is open. Hi. Thanks for taking my questions. Only a few left. Firstly, on the margin, Boyd, I understand there's obviously a volatility on a quarterly basis, and we should really look at the full year. Just so like, you know, help us model the rest of the year, could you maybe talk about how you expect the fate of the margins to evolve? I think Q3 that comes off particularly difficult because of the settlement last year. Is it fair to say that you should see really meaningful, like well above 100 basis point improve in Q2, Q4? What are the main drivers of that? The second one is on merchandising. Obviously, understand you're facing extremely tough comps, given how strong last year was. You expect to see any sort of improvements from those sort of minor streaks that we saw in the first quarter based on the touring schedule and your investments into DTC? I think it's gonna be challenging to grow merchandising this year. Thank you. Yeah, Lisa, on margin expansion. The margin expansion that we saw in Q1 was basically in line with our expectations. You know, again, we're committing to over a 100 basis point increase in margins for 2023. You know, it comes really from two aspects. It comes from operational leverage, as the business grows and the cost base remains relatively in part fixed, you know, we get the benefit of that operational leverage. Secondly, there is the benefit that we are getting from the rollout of our equity plan. You know, we anticipate EUR 60-80 million of cash savings in 2023 from the rollout of the equity plan. Those two items combined will lead us to having a margin expansion of 100 basis points. Your merchandising, turning to that just for a second. I mean, one of the things to bear in mind about merchandising is it's a physical product. In many ways it's not release driven, but it's tour driven, it's activity driven. It can be quite volatile. Again, caution on quarter-to-quarter. Nothing to read into Q1 at all in relation to the reduction in touring income compared to last year. We still see quite a very active touring schedule for, you know, the rest of the year. Q1, funnily enough, is the quietest quarter for touring. It happens much more towards the summer into the back half of the year. Again, and again, if you look at this with sufficient long-term lens, you know, we definitely see growth for considerable future for our merchandising business and, you know, with the build in the direct-to-consumer, which is an important initiative to us, which you see in the... Thank you. That's all the questions we have time for today. This now concludes today's call. Thank you so much for joining. You may now disconnect your lines.