📑 CMU Digest: Spotify damps supremium hype, PRS sues Live Nation, hammer falls on Utopia

CMU Digest is our weekly round-up of the most interesting music business news stories from the last seven days.

This week: Spotify has found its big boy boots and wants everyone to know that it will dictate the future of streaming rather than kowtowing to the demands of major labels; in the US, the breakneck pace of AI development is keeping Shira Perlmutter, the boss of the US Copyright Office, awake at night as she warns copyright reform is inevitable; zombie-Unicorn Utopia Music has been sent to the glue factory as the Swiss courts reject its bankruptcy appeal - and now shareholders want to sue, and employees are asking who signed off on doctored payslips; touts on Viagogo are listing thousands of tickets they don't own in an "industrial scale" ticketing scam; and songwriter collecting society PRS is suing Live Nation in the UK over the way it breaks out the costs of VIP tickets

ICYMI: Hipgnosis is back, groaning with cash and looking to go shopping; Pershing Square’s Bill Ackman wants Universal Music to ditch the Dutch stock market; the UK government has told the live sector to introduce a ticket levy “swiftly” before it steps in; German collecting society GEMA has sued OpenAI for copyright infringement; Live Nation CFO Joe Berchtold has said the company is hopeful that Donald Trump's electoral win will mean the DOJ is less likely to break up the company

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Spotify boss puts damper on hype over ‘super premium’, bigs up AI and innovation as the future of streaming and makes it clear that Spotify - not labels - will dictate that future

Almost exactly a year ago, when its share price was hovering around $170 a share, Spotify announced that it would be making changes to how it paid royalties, to tackle “three particular drains on the royalty pool”: stream manipulation, functional audio and music made by what it called ‘non-professional musicians’. That last “drain” saw whole swathes of indie music creators face demonetisation, with a 1000 streams per track per year threshold put in place before any money was paid out by Spotify.

That move - which followed shortly after Deezer rolled out a Universal Music-endorsed change to its own royalty calculations - was widely viewed at the time as Spotify being forced by the major labels, and in particular Universal - the largest, most powerful and most outspoken of the three majors - to adapt its business model to placate its most powerful partners. Shortly after, Universal went to war with TikTok, pulling its catalogue from the short form video service, a clear indication of what could happen to platforms who didn’t play ball by UMG’s rules.

Since then, Universal has been talking up the incredible opportunities that a ‘super premium’ streaming tier could offer, with the major saying that its own calculations show that one in five people would stump up extra cash. As a result everyone expected Spotify to toe the line and swiftly introduce its long-heralded ‘supremium offering’ with Daniel Ek, during the company’s Q2 earning’s call in July, teasing a new tier “probably around the $17 or £18 price point, but sort of a deluxe version of Spotify that has a lot more control, a lot higher quality across the board, and some things that I’m not ready to talk about yet”.

The problem is, no one could really agree what ‘super premium’ would offer, how it would tally with the majors’ focus on the ‘superfan opportunity’, or how it would work.

On this quarter’s earnings call, LightShed Partners analyst Richard Greenfield - known for asking pointed questions - said “there doesn’t appear to be a consensus of what the record labels or artists want the [super premium] offering to be”. This time round - just 90 days on from teasing a supremium launch, and with Spotify’s share price at an all time high of around $420 - Ek’s lack of enthusiasm to talk about a super premium future was stark. It’s amazing the confidence a soaring share price can give you. Gone is the kowtowing to Universal.

“We are excited about this and just to set expectation, we are moving from the one-size-fits-all market that quite often happens early in the development where you have fewer SKUs to then as you keep growing into more and more mature marketplaces, you add more SKUs to address more of the market”.

SKUs! Growth! Mature marketplaces! It would be hard to make it sound less exciting. “I can’t really talk about specifics for it”, continued Ek, “but again, I can talk about the principle that’s driving this. The principle for us is always the same, which is how do we create something that consumers love but that also delivers value back to creators”.

The message was clear: Spotify knows best, Spotify knows what will move the needle, and Ek sees the opportunity as one that is firmly owned by Spotify, not by the labels, driven by what Spotify subscribers actually want, and what they respond to. If Universal doesn't like it? Well, the numbers suggest that’s increasingly its problem, not Spotify’s.

The rapid development of AI is keeping the head of the US Copyright Office awake at night while the big split over fair use may require imminent copyright reform

Shira Perlmutter, boss of the US Copyright Office, told US Senators this week that she is “kept up” at night by “the speed at which all of this [AI technology] is developing”.

Speaking in front of a congressional hearing, Perlmutter told the US Senate Judiciary's subcommittee on intellectual property that - as a result of the impact of AI - it is likely that Congress will be asked to reform copyright law at some point. That will require lawmakers “to be ahead of the curve with regards to generative AI, in a way that does not “impede the development of this exciting technology” while also ensuring that “what is special about human creativity can continue to thrive”.

Based on the Copyright Office’s recent consultation on AI, Perlmutter revealed that both technology companies developing AI and the copyright industries currently believe that US copyright laws, as they currently stand, are perfectly adequate for dealing with the copyright challenges posed by generative AI. The only problem is that they have wildly different opinions on how those copyright laws should be applied.

At the heart of the issue is the debate over whether AI companies need to get permission from copyright owners before using copyright protected content to train their AI models. Both technology companies and copyright owners believe that the principle of ‘fair use’ in American copyright law deals with this issue. But they totally disagree on whether or not AI training falls under fair use.

With a slew of lawsuits heading to trial in US courts next year, it’s likely that - whatever the outcome of those cases - lobbyists from one side of the fair use divide will ultimately push for legal reform.

If the courts start to decide that AI training is not fair use then AI companies will want copyright law to be amended to say that it is. While if the decisions of the courts begin to indicate that AI training is considered fair use, the copyright industries will push for amendments to copyright law to say that it is not.

Hammer blow for Utopia Music as bankruptcy confirmed by Swiss courts, while former employees ask questions about doctored payslips

What a year it has been for the company formerly known as Utopia Music. In the last few days of 2023 a group of investors orchestrated a Christmas coup to seize control of the chaotic company. For a while things seemed back on track, with a new and credible looking executive team in place, a less bombastic approach, and a rebrand to Proper Group AG. That lasted all of about five minutes before the company turned back to being a barely functioning circus and the laughing stock of the music industry.

The new executive team were never heard of again, and then the company lost a lawsuit brought against it by the founders of Lyric Financial, and was told to pay the nearly $2 million they were owed. From there, things went bad to worse.

As its remaining subsidiaries across Europe were shuttered, a Swiss law firm got a bankruptcy judgement against the company over an unpaid bill for a comparatively tiny sum: just 23000 Swiss Francs. That bankruptcy apparently came unexpectedly, with sources saying the post at Utopia’s Swiss HQ was going unopened - because there was no one left to open it. CMU then discovered that the last few staffers comprising the company’s skeleton staff in Switzerland hadn’t been paid for months.

Despite this, Proper Group AG top banana John Mitchell said he was confident that the company would successfully appeal the bankruptcy proceedings, and then started an internal witch hunt claiming that someone inside the company must have leaked information to us. We then discovered that Peter Löhr, a prominent advisor to the company throughout its chaotic history had previously been convicted of embezzlement, and a former director of Mitchell’s own Australian financial services outfit, Mitchell Asset Management, had been struck off by Australian regulators - also for embezzlement.

This week the hammer fell, and Proper Group AG’s appeal against bankruptcy was rejected. Creditors - who are owed tens of millions - are left high and dry, and investors are incandescent over the company’s squandering of hundreds of millions of euros of backers’ cash, with one shareholder telling CMU that they did not understand how the company could have “thrown itself down the toilet” due to an apparent admin hiccup over the unpaid invoice.

While it’s unclear what’s next for the company in the immediate future, it looks increasingly likely that although this is the end of the company, it is only the start of a series of acrimonious lawsuits, with a number of investors indicating to CMU that they now regard legal action against the company’s current executive team as the only viable option to recover funds. Meanwhile former staff across Europe are asking who in the company was responsible for apparent widespread “manipulation” of payslips that saw “obviously forged” documents being issued to employees as companies were put into insolvency.

Touts are operating “industrial level” ticketing fraud on Viagogo selling tickets they don’t own and pulling last minute bait-and-switch

The UK’s FanFair Alliance, which takes a stand against profiteering in the secondary ticketing market, has uncovered “industrial level” touting fraud on Viagogo, with ticket scammers selling thousands of tickets that they do not own, a practice known as speculative selling which was among the practices identified when two touts were convicted for fraudulent trading earlier this year .

FanFair was able to track the speculative selling because, under UK consumer rights law, a seller is obliged to list the seat number a ticket is attached to, which means tickets being touted can be compared to the tickets still on sale on the primary sites. If tickets for a specific seat are simultaneously on sale on Ticketmaster and Viagogo, the tout must be speculatively selling that ticket.

When traders on Viagogo are unable to fulfill tickets they have speculatively sold, they sometimes offer buyers alternative - and inferior - tickets for the same show. That bait and switch offer is usually made at the last minute, with touts knowing that buyers, desperate to see the show - and often with travel or accommodation bought and paid for - will have no option but to accept the offer.

CMU’s own investigations show numerous reviews on Trustpilot from people who bought tickets on Viagogo and who were then contacted by email or WhatsApp just hours before the show to be told the tickets they had purchased were no longer available. One Trustpilot reviewer who described themselves as disabled said that they were sold two tickets which were described as stalls tickets “with a photo of the seats”, only to be contacted five hours before the concert to be told that the tickets were, in fact, standing tickets and that they would need to meet the seller outside the venue.

PRS is suing Live Nation in the UK’s High Court claiming the live giant shows “disregard” for creators’ rights to proper payment

UK songwriter collecting society PRS is suing Live Nation, saying that it is not properly breaking down the way VIP ticketing works, meaning that music creators could be missing out on money due to them from live performances.

In an exclusive statement to CMU, PRS said that “the vast majority of promoters and venues” comply with the requirements of the live music licensing tariff, “ensuring that music creators receive rightful payment for their works”. Live Nation has shown “disregard for these requirements”, it continued, which, for “a company which is dominant in the live music market is unacceptable”.

Specifically, PRS is taking issue with the way that Live Nation accounts the value of VIP tickets and packages when calculating how much should be paid to PRS.

The dispute comes at a time when Live Nation is actively expanding its premium and VIP offerings. In the company’s Q3 earnings call earlier this month, CEO Michael Rapino emphasised the role VIP and premium plays in the company’s forward strategy, stating “we've been selling to the superfan for quite a while... We think it can grow up to 20% and more. We think premium experiences is a big underpin to our entire growth forecast”.