In today's CMU Daily: Warner Music boss Robert Kyncl tells investors that Spotify’s new payment model “better aligns economics with the quality content that drives engagement” - and to expect more changes and price increases. He also predicts that Universal and TikTok will kiss and make up

One Liners: UMG, WIN and Merlin appointments; Daniel Ek sells Spotify shares; MEGS funding; MOBO winners; Nick Cave to score Amy Winehouse biopic; ††† and Chelsea Wolfe dates; Contro Pop closes; new music from Olly Alexander, Caroline Polachek, Ghetts, Beth Gibbons, Anna Prior, Les Savy Fav, and more

Also today: The 3tone saga continues, this time pulling in SonoSuite; Kakao denies it wants to sell the SM Entertainment shares it fought so hard to acquire; the UK commercial radio sector calls on OfCom to block the BBC’s big plan to launch four new radio stations

Plus: The talent pipeline in the music business is blocked by an image problem says Becky Ayres in an exclusive CMU op-ed

Warner Music’s Kyncl goes big on importance of major labels and data, says he is confident UMG TikTok dispute will be resolved

Warner Music CEO Robert Kycl has told investors that “the role of large music companies is growing exponentially relevant”, and that WMG’s “ability to aggregate large volumes of rights across recorded music and publishing provides individual artists and songwriters with more collective bargaining power when dealing with complex existing and new distributors and technologies”. This was going to be even more important “in the age of AI”, he added.

The Warner boss was talking to investors and analysts earlier today about Warner Music Group’s Q4 2023 earnings. A recurring theme throughout the call was Kyncl’s emphasis on the value of Warner’s catalogue. He said that the company is taking a “holistic approach” to both “deep and shallow” catalogue and is “priming” its entire catalogue to achieve “maximum impact on the digital service providers”.

He praised Spotify’s recent changes to its payment model as something that “better aligns economics with the quality content that drives engagement” and hinted at more changes to the model yet to come, saying “we view this as just the beginning and we’re continually engaged with our partners to drive faster growth”.

Further price increases at the DSPs also seem likely. In a direct question from a Morgan Stanley analyst he expanded further saying, “pricing overall is a very, very large opportunity for the industry. We just need to do it responsibly so that we maintain growth, together with our DSP partners”.

He later expanded in another answer saying, “none of this should be interpreted as we want to increase pricing dramatically, but then slow down growth”.

Talking in detail about how technological transformation was driving value for Warner, he gave details of an internal AI tool the company has developed to give them a competitive edge to deliver fresh thumbnails for tracks to DSPs.

“When you manage millions of copyrights, that’s a lot of metadata. That’s a lot of thumbnails, and freshness of thumbnails helps revenue, but it’s really difficult to do that manually across such a large volume of content. We developed an AI tool that helps us update and create new ones”.

He was also asked about Universal Music’s big bust up with TikTok, which has seen that major’s recordings removed from the social media app after the two companies failed to agree a new licensing deal.

He said he knew “exactly” what both Universal CEO Lucian Grainge and TikTok boss Shou Zi Chew “are feeling”, adding. “I’ve gone through all of those feelings multiple times. The thing that I can tell you is I am confident that they will at some point sign an agreement”.

He went on to say that the current dispute was about “what is the right fair value exchange” but that “they are both reasonable people that will find a compromise”.

Expanding further on the value of TikTok to the music industry, Kyncl said, “music is incredibly helpful to virality and content. That’s valuable to a platform. Conversely, TikTok, YouTube, Reels - all of those platforms are obviously helpful to making music popular. User engagement is great”.

Warner agreed a new licensing deal with TikTok last year. And on the investor call, WMG CFO Bryan Castellani highlighted the growth TikTok is driving for the company, saying ad supported revenue from the platform “grows at 10% a quarter, and the deal we executed last quarter certainly contributed to that. We like our TikTok deal and it continues to be a driver of growth”.

Universal has said that its dispute with TikTok is not just about money, also citing concerns about how the social media firm is dealing with AI generated content.

On AI, Kyncl said that the company’s priority was focused on “making sure that the rules of the road” at platforms like TikTok “respect copyright”, because whatever generative engines are being used to create AI content, it is going to end up on the big digital platforms - so focusing on those platforms is really important.

This ties into increasing the value of music, said Kyncl. “Copyright has to be respected, and training on our copyrights has to be respected. Eventually the law will reflect this,” he added, “but the platforms will run ahead of the law”.

The investor call followed the circulation of a memo to Warner Music’s employees, which was also included in the major’s latest filing with the US Securities & Exchange Commission.

In it Kyncl outlined “a plan to free up more funds to invest in music and accelerate our growth for the next decade”. This, he admitted, “includes reducing our workforce by approximately 10%, or 600 people – the majority of which will relate to our owned and operated media properties, corporate and various support functions”.

ATG // Senior Regional Programmer - Music & Comedy (London)

Union Chapel // Visitor Engagement Coordinator (London)

Live Music Booker // The Halls (Wolverhampton)

AEG Presents // Marketing Manager (London)

Music Declares Emergency // Directors' Assistant (London)

ATG // Senior Regional Programmer - Music & Comedy (London)

The Royal Albert Hall // Programming Manager, Hire (London)

The Royal Albert Hall // Engagement Executive (London)

SJM Concerts // PR Coordinator (Manchester)

ICE // Netsuite (ERP), Functionality/System Tester (London)

AEG Presents // Marketing Manager (London)

AEG Presents // Touring Manager (London)

ONE LINERS

Olly Alexander, Daniel Ek, MOBO Awards + more

APPOINTMENTS

Tom March has been announced as the new CEO of Universal Music’s Capitol Music Group, following the departure of Michelle Jubelirer. “I’m THRILLED to be charged with leading Capitol Music Group”, he says. “The company’s deep legacy includes so many iconic artists and records that have long played important roles in my life, and the opportunity to help write CMG’s next chapter is a dream come true”.

The World Independent Network has announced five new board members: Dario Draštata (Dallas Records, Croatia), Fran Sandoval (IMICHILE, Chile), Marty Ro (Sound Republica, South Korea), Alejandro Varela (S-Music, Argentina) and Sridhar Swaminathan (SIMCA, India). Partisan’s Zena White and AIR’s Maria Amato were reappointed as Chair and Treasurer, respectively.

Indie label digital licensing agency Merlin has announced several new appointments. Carol Zuma-Hall joins as Financial Controller, Martin Vovk as Director Of Insights, Gary Watson as Technical Project Manager, Maria Lavric as Manager Of Data Operations, Matthew Price as Data Engineer, Emilia Walsh as Paralegal, and Molly Kempen as the new Royalty Reporting Coordinator.

DIGITAL

Daniel Ek sold 250,000 shares in Spotify yesterday for $57,505,000. Make of that what you will.

FUNDING

UK record label trade group BPI has announced the latest round of Music Export Growth Scheme funding, distributing £1.6 million to 67 artists - the highest amount since 2014. Recipients include Blossoms, Pip Millett, Black Country, New Road, Nubiyan Twist, Nova Twins, Warmduscher and Max Cooper. MEGS is a government-funded scheme to support independent artists and labels pursuing opportunities in new markets.

AWARDS

Central Cee emerged the big winner at last night’s MOBO Awards, the only act to take more than one trophy, winning Best Male Act and Song Of The Year. Elsewhere, Raye won Best Female Act, Little Simz took Best Hip Hop Act, and Sault were named Best R&B Act. BBC One will air a highlights show on Friday night at 11.30pm, and you can watch the full ceremony on YouTube here.

ARTIST NEWS

Nick Cave and Warren Ellis are to write the score for Amy Winehouse biopic ‘Back To Black’. “Nick and Warren were the only musicians in my mind to score ‘Back To Black’”, says director Sam Taylor-Wood. “Over the years, I’ve listened to everything they’ve composed and longed to realise the dream of working together. Their sensibility as well as understanding of this story has led to a profoundly deep and moving film score”.

GIGS & FESTIVALS

††† have announced their first ever European shows, with UK dates set for June in Bristol, London and Manchester. Tickets go on sale on 15 Feb. They’ve also just released the video for their track ‘Big Youth’, featuring El-P.

Chelsea Wolfe has announced UK and Ireland tour dates in October this year, including a performance at Koko in London on 29 Oct. Tickets go on sale tomorrow.

The Contra Pop experimental music festival in Ramsgate, which launched in 2015, has announced that its 2022 edition was its last - it having not returned in 2023. “Today's political and economic climate is challenging, to say the least, and huge respect goes to those who keep fighting to make art and music free - or at least affordable - at the point of engagement”, say organisers in a statement.

RELEASES

Olly Alexander will unveil his Eurovision entry ‘Dizzy’ on 1 Mar. Here’s a little teaser.

Caroline Polachek has released new single ‘Butterfly Net’ featuring Weyes Blood. The track is taken from a new deluxe edition of her 2023 album ‘Desire, I Want To Turn Into You’.

Ghetts has released new single ‘Double Standards’ featuring Sampha. His new album ‘On Purpose, With Purpose’ is out on 23 Feb and he will be touring the UK in March.

Portishead’s Beth Gibbons has announced that she will release her debut solo album ‘Lives Outgrown’ on 17 May. Out now is new single ‘Floating On A Moment’. UK tour dates are set for June.

Metronomy’s Anna Prior has released new solo single ‘Tech Não’.

Les Savy Fav are back with their first new music for fourteen years, a track called ‘Legendary Tippers’. The band have also announced UK and Ireland shows later this month and in May.

The Lemon Twigs will release new album ‘A Dream Is All We Know’ on 3 May. Out now is new single ‘They Don’t Know How To Fall In Place’.

Bo Ningen have released new single ‘The Climbing’. It is taken from their new album, an alternative soundtrack album to Alejandro Jodorowsky’s film ‘The Holy Mountain’, which is out on 1 Mar.

Mui Zyo has released new single ‘Everything To Die For’.

Op ed: Sound City’s Becky Ayres: “The music business’ talent pipeline is blocked by an image problem”

Becky Ayres is Managing Director of Sound City, the Liverpool-based event promoter and talent development organisation. Here she considers a blockage in the music industry's executive talent pipeline caused by young people simply not being aware of the different roles in the sector, and how they might go about pursuing a music business career. The solution, she argues, is more outreach by the industry into education and especially schools.

The music business is facing a critical challenge: a blockage in its executive talent pipeline that begins at the very foundation of the education system. While a lot of attention is rightly dedicated to enriching the music business workforce by attracting a more diverse range of candidates, there is a more fundamental issue that is often overlooked - that is societal perceptions of the music business itself.

Spanish distributor SonoSuite reached out to DSPs on behalf of dodgy distributor 3tone - but now claims “3tone is not a client”

In the latest development in the continuing scandal surrounding Bristol-based distributor 3tone - run by Dean Roberts and Christoffer Borud - is has emerged that Spanish distributor SonoSuite has been reaching out to digital service providers on 3tone’s behalf asking how quickly delivery feeds could be re-established after the UK company lost its ability to deliver content last week.

Founded by Maarten van Wijck and José Luis Zagazeta Vinatea, SonoSuite is headquartered in Barcelona. The company’s website says that its “white-label solution has been designed to help music businesses from across the globe to run their digital distribution independently, without using third-parties or intermediaries”.

SonoSuite had previously facilitated 3tone’s operations from late 2020 to mid-2021 when - according to several people familiar with the matter - founder Dean Roberts had a “sudden falling out” with the company.

Sources familiar with the DSP ecosystem contacted CMU on Thursday afternoon to express alarm after they discovered that SonoSuite had approached a number of DSPs asking how quickly delivery feeds could be re-established for bad actor 3tone.

3tone has “very basic” technical infrastructure of its own, and has never been able to deliver music directly to Spotify, Apple Music, Amazon Music and other similar streaming services. Instead it has always relied on distribution intermediaries or ‘back end distributors’. Its most recent back end distribution partner terminated its contract with 3tone last week, and as a result all tracks belonging to artists and labels who had used 3tone for distribution vanished from streaming services.

The response from 3tone was a garbled message pushed out to customers by email and social media to try to cover up the fact that the plug had been pulled on the company. Simultaneously the company was desperately trying to find a back end provider to step in to allow it to perpetuate the facade that it is a legitimate music distributor.

The revelation that SonoSuite has been testing the waters for 3tone came as a shock to a number of CMU sources. When CMU approached SonoSuite to ask why it was apparently starting to work with a company with a reputation as bad as 3tone, it took some time for the company to respond. Eventually, a comms executive emailed a brief statement that said simply, “Thanks for reaching out and bringing this situation to our attention. While it’s correct that 3tone recently reached out to use our white-label distribution platform, they are not our clients”.

We pushed for further clarification and asked SonoSuite to clarify why it would contact DSPs on behalf of a company that is not a client. SonoSuite eventually said, “3tone was a client from late 2020 to mid-2021. We lost track of their activity until they reached back out recently. We kick off several processes at the same time, including KYC and reaching out to DSPs. 3tone did not pass the KYC. So, as we mentioned before, they are not our clients”.

For a distributor to contact DSPs with queries on behalf of a known bad actor who is not a customer and has not yet passed its own ‘know your customer’ processes was “unusual” and “somewhat hard to believe”, one source who spoke to CMU said. Either SonoSuite dropped the ball and kickstarted distributor outreach early, or it had actually begun onboarding 3tone only to pull back when it realised the potential consequences.

When we pushed again, asking directly for “a clear explanation of why SonoSuite would start reaching out to DSPs for a known bad actor who is not a client and hasn’t yet gone through KYC”, SonoSuite refused to answer, simply reiterating its previous statement and adding “to gain agility we do different processes in parallel”.

While it’s entirely possible that SonoSuite’s conversations with the DSPs were perhaps simply exploratory feelers prior to establishing a formal relationship with its possible new client, it’s also a little hard to believe that a service provider would start those sorts of approaches - informally or formally - for a bad actor with a reputation as poor as 3tone’s. Another source who spoke to CMU - from the intermediary distribution space - said unambiguously that there was “no way” that the intermediary distributors that they were familiar with would begin that sort of outreach without having signed a customer.

One possibility is that no one at SonoSuite was aware of 3tone’s reputation, despite it having previously been a client, and despite a basic Google search making it clear how bad the company’s reputation now is - including earlier coverage from CMU and the BBC. This raises significant questions about how reliable SonoSuite’s customer qualification processes are and what sort of first line due diligence processes SonoSuite has in place.

With the 3tone scandal shining a light on the ‘back end distributor’ business, it’s increasingly important for upstreaming distribution aggregators who provide services to smaller distributors to conduct proper and robust due diligence on customers. It seems one previous potential partner for 3tone failed to do this a couple of weeks back, an error now repeated again by SonoSuite.

SonoSuite did, at least, have a KYC process, which - according to the company itself - ultimately meant it declined to take on 3tone as a customer again. There is currently a lack of transparency in the distribution sector regarding the KYC processes that different businesses employ. More clarity on this would help provide some reassurances to artists and labels - many of whom assume that if a company has access to the DSPs it must have been checked and is legit.

With the pool of potential partners for 3tone growing increasingly narrow - and DSP sources saying that they will pay closer attention to any attempts by the company to deliver content via any third party - it looks like 3tone’s ability to continue operating is likely to hit a dead end soon.

However, artists and labels are still owed substantial amounts of money, staff remain unpaid with months of wages owing, and High Court bailiffs are trying to locate Dean Roberts to execute debt enforcement orders.

The question now is how many times do distributor scandals like this need to happen before the music industry gets its house in order - and how can intermediaries like SonoSuite be trusted if they’re prepared to shop an outfit as dodgy as 3tone round their DSP partners - all the while denying that they are a client.

Kakao insists it isn’t selling the SM Entertainment shares it fought so hard to acquire

K-pop powerhouse SM Entertainment has denied recent media reports that its biggest shareholder, internet firm Kakao, is either planning to overhaul leadership at the company or to sell off its stock. Management at both SM and Kakao have "effectively communicated" and are now fully focused on collaboration and synergies, an official statement insisted.

Kakao also put out a statement late last month claiming that the rumours it is planning on selling its SM shares are not true. In its statement earlier this week, SM itself added that “several media outlets have reported that top-level SM executives might be replaced, but Kakao is not considering doing so - we have effectively communicated with Kakao regarding the matter".

“Kakao, Kakao Entertainment and SM Entertainment are opting for co-growth and to collaborate on businesses to create synergies", the statement concluded, according to Korea JoongAng Daily.

The involvement of Kakoa in SM has been pretty eventful ever since it decided it wanted a sizable stake in the K-pop firm. SM's founder Lee Soo-man was against any deal that allied his company with Kakao’s own entertainment division, instead proposing an alliance with HYBE, best known as the home of BTS.

As a result, Kakao ended up in a very public bidding war with HYBE, which it ultimately won. Though Kakao was subsequently accused of misconduct during that bidding war, with its Chief Investment Officer Bae Jae-hyun facing allegations that he violated South Korea's Capital Market Act by purchasing over $180 million worth of SM stock in a bid to inflate the company's share price.

Then in December, Kakao launched its own investigation into SM's financial statements, with the internet firm reportedly concerned that SM management had closed deals without its consent. Several computers used by SM execs were confiscated as part of that investigation.

As the rumours began to circulate last month that Kakao might be about to bail on SM entirely, there were reports that HYBE was again considering a possible bid, most likely in partnership with a private equity company. However, if the recent statements reaffirming Kakao's commitment to SM are true, that won't happen.

Commercial radio sector calls on OfCom to block BBC's plans for four new radio stations

The UK commercial radio sector has hit out at plans by the BBC to launch four new digital radio stations focused on specific genres or decades. The proposed new stations, says trade group Radiocentre, simply imitate what commercial radio stations are already doing, and the BBC is simply "attempting to compete directly with commercial radio stations, interfering with the market and failing to provide distinct public value".

Media regulator OfCom, it adds, "should reject these proposed market interventions that would just offer duplicate services and not deliver against the BBC’s obligations, at the same time as harming commercial innovation".

Last time the BBC launched a genre spin-off station, Radiocentre actually took OfCom to court for not blocking it. It remains to be seen how the regulator responds this time.

The BBC announced plans yesterday to launch four new radio stations on the DAB+ digital network and within its BBC Sounds app, each one a spin off from one of its existing radio brands. The new services, it says, will "build on the BBC’s commitment to new music and British artists" and "delve deeper into specific genres and periods of music with context, curation and storytelling done in a way only the BBC can do".

There will be a new Radio 1 spin off focused on music from the 2000s and 2010s; a Radio 2 spin off playing pop music from the 1950s, 1960s and 1970s; and a Radio 3 spin off that will provide a "classical music experience that helps listeners unwind, destress and escape the pressures of daily life". The existing Radio 1 Dance station, currently only available within BBC Sounds, will also be expanded and launched on DAB+.

The new stations will combine some newly commissioned shows with relevant programmes that are currently only available on-demand within BBC Sounds and material from the BBC archives. They are, says the Beeb, "a cost-effective way to reach audiences on DAB+ where listening is growing as people move over from FM".

"The plans have been developed to ensure the BBC serves all its audiences and better meets the expectations of listeners", it adds. "They will give more choice especially to those who currently are underserved by the BBC, and whom OfCom have challenged the BBC to do more for".

But, says Radiocentre, the audiences being targeted by these new services are already well catered for by commercial radio stations, many of which have launched genre or decade specific spin-offs in recent years. Some commercial radio groups are also using those spin-offs in order to build subscription products within their apps in a bid to diversify their revenues beyond the advertising sales of their FM and DAB services.

BBC bosses - the trade groups adds - "don’t seem to acknowledge that this is not what the BBC, with its taxpayer funding, are supposed to be doing. They are required to provide services that are truly additional, distinct and incremental to what is already provided by commercial operators, not duplicate it".

Radiocentre was also critical when Radio 1 Dance launched on BBC Sounds in 2020, with its supporters in Parliament - including Andy Carter MP - questioning whether OfCom was properly scrutinising the evolution of the BBC's audio app, and how it was competing with commercial radio and streaming services.

That criticism led to legal action, with Radiocentre arguing in court that OfCom did not go through the proper process when assessing the plans to launch the dance music service.

Ultimately, it all came down to whether the launch of Radio 1 Dance constituted a “material change” to the BBC’s output. OfCom concluded that it did not and therefore a full ‘public interest test’ was not necessary to approve the new service. A judge ultimately concluded that OfCom had properly applied the rules.

A public interest test will be required this time, as these are new DAB+ services. Radiocentre will be following the process OfCom now goes through very closely, while also piling on the pressure for the regulator to block the plan.