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Kelly Clarkson’s ongoing legal battle with ex-husband Brandon Blackstock is expanding with a new lawsuit aimed at potentially going much further than the $2.6 million ruling she won against him last fall.
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With Blackstock currently appealing that November decision, Clarkson filed a new case Monday in Los Angeles court, seeking a ruling that he and his father’s management firm had been violating state labor rules all the way back to back to the very start of their relationship.
Clarkson’s new lawsuit is seeking an order that would require the return of “any and all commissions, fees, profits, advances, producing fees or other monies” she paid to Blackstock’s father’s company, Starstruck Entertainment, dating back to 2007 – much further back than the earlier judgment, which only reached back to 2017.
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The new case is the latest development in a sprawling legal battle between the two ex-spouses, who split in 2020 after seven years of marriage. The divorce itself was finalized in 2022, but that personal settlement didn’t resolve tricky business entanglements with Blackstock’s father’s firm, which managed her for years.
Shortly after Clarkson filed for divorce, Starstruck sued her for millions in allegedly unpaid fees, claiming it had “invested a great deal of time, money, energy, and dedication” into her and had “developed Clarkson into a mega superstar.”
Clarkson responded by filing a complaint with California’s Labor Commissioner, arguing that Blackstock and Starstruck had violated California’s Talent Agencies Act (TAA) by serving not just as her personal managers, but as unlicensed talent agents who booked business deals.
In November, Commissioner Lilia Garcia-Brower ruled that Blackstock had indeed procured a number of deals for Clarkson, including her lucrative role as a judge on The Voice, that should have been handled by her talent agents at Creative Artists Agency (CAA). The decision ordered Blackstock to repay Clarkson more than $2.6 million in commissions she paid to him for handling those deals.
In December, Blackstock and Starstruck challenged that ruling in court, demanding that same questions be re-decided by a Los Angeles judge rather than by the Labor Commissioner. That case remains pending and is set for a hearing in August.
With her new lawsuit, Clarkson could win a ruling that would effectively confirm the findings of the Labor Commissioner. But the case could also give her a vehicle to expand the Commissioner’s decision – a ruling that went her way, but also rejected some of her core claims against Blackstock and Starstruck.
For instance, the commissioner rejected Clarkson’s claim that Blackstock was also required to pay back commissions he earned from helping to secure The Kelly Clarkson Show — which could have seen him owe much more. His involvement in that deal, including “strategizing” with her agents, was clearly “at the request of CAA” and thus not a violation of the law, the commissioner ruled.
An attorney for Blackstock did not immediately return a request for comment.
After a marriage of seven years, Clarkson filed for divorce from Blackstock in June 2020. The case was finalized two years later, with the singer agreeing to pay her ex-husband monthly child support of $45,601 for their two children, plus a one-time payment of just over $1.3 million.
A year ago, Matt Najdowski, like many business managers for top artists, was routinely going over royalty statements when he discovered an unusual plunge in revenue.
For years, Pandora, the internet-radio streaming service, had paid 50% of song royalties to the artists through a collection agency called SoundExchange. But suddenly, artists signed to Universal Music Group were receiving a much lower percentage, similar to what they received from on-demand streaming services like Spotify or YouTube. And the payments were now arriving directly from UMG instead.
Najdowski researched further and learned UMG was able to change the way it reported Pandora revenue because Pandora itself had changed. In 2016, the streaming service began evolving from webcasting to a Spotify-style “search and play what you want” model. Because Pandora now offers an interactive service, rather than a non-interactive webcaster, it needed to make new deals with labels rather than relying on a government-mandated compulsory license at a standardized rate.
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As such, UMG and other labels were able to change the flow of royalties so they collected and paid them directly — rather than SoundExchange distributing to artists, as law mandates under these compulsory licenses. With UMG’s change in policy last year it became the first and only label so far, according to sources, to take advantage of this change. With that, the royalty splits for artists changed, too, from a 50% split through SoundExchange to whatever, often smaller, percentage their record deals dictated for on-demand streaming revenues. That’s significant as the world’s biggest record label contributed $135 million to SoundExchange as part of its Pandora share for artists, according to Billboard estimates based on financial reports and other public information.
“That specific royalty stream can range from a couple hundred dollars per month to a couple thousand. It can be a significant amount of money,” says Najdowski, royalty manager for Farris, Self & Moore. This change in accounting, he adds, “is more or less taking money out of [artist’s] pockets.”
Perhaps most notably, Najdowski discovered that the many UMG artists who are unrecouped – meaning they have yet to earn back the money the label spent on recording, marketing and other costs – were receiving a worrisome amount: zero. These acts were previously being paid directly by SoundExchange, so their unrecouped status with UMG was not an issue for these royalties. “A lot is being withheld, and it feels like a grab for money from the labels,” says Heather Gruber, royalty manager for Fineman West, a business-management firm that represents artists.
Although Pandora has struggled in recent years – monthly users have dropped from 81.5 million in 2014 to 46 million in 2023 – it remains a potent outlet for hitmakers such as SZA, Megan Thee Stallion and Lil Durk, as well as bubbling-under singles like contemporary-Christian singer-songwriter Lauren Daigle’s “These Are the Days.” Newer artists rely on the exposure, too, and Pandora royalties have provided crucial revenue while they absorb touring and merch expenses. “If you’re making millions of dollars, this isn’t going to have a big impact on you,” says Harold Papineau, associate lawyer for King, Holmes, Paterno and Soriano, which represents Metallica and others. “But if you’re living paycheck to paycheck, then this is a significant problem. Now you’ve lost money that you may have relied on to pay your bills.”
In a statement, a UMG representative responded by explaining the difference between interactive (like Spotify, YouTube and Apple Music) and non-interactive streaming services (like internet radio). For the former, recording royalties are “subject to direct negotiation between an individual rights owner and the service,” the rep said, adding that Pandora “has substantially changed its functionality such that it has evolved into an interactive service, where users can select tracks on demand.” In other words: The label has every right to make this change.
Still, UMG didn’t fully change the way it reported the royalties to artists until 2022, and it caught many business managers and music attorneys by surprise. “It kind of happened in the dead of night,” says Mike Merriman, a business manager for the firm PARR3 who represents DJ Alison Wonderland, singer 6lack and producer Louis Bell, among others. “It does create some ambiguity and lack of transparency.”
When the Pandora change first kicked in, business managers were confused about the streaming service’s identity. “We’re still running analysis on it,” says Erica Rosa, owner/vp of royalties and contract compliance at FBMM, a business management firm that represents top artists. “I’ve asked a lot of questions to attorneys and various industry figures: ‘How would you define Pandora? Would you consider it to be an interactive or non-interactive stream? I don’t know that anyone has given a clear definitive answer yet.”
Additional reporting by Glenn Peoples.
D.C. Stadium LLC and Grand Rising Curations today announced a multi-year partnership that will expand Audi Field into a Sports & Entertainment complex primed to host concerts and festivals in the Nation’s Capital. Explore Explore See latest videos, charts and news See latest videos, charts and news The deal between D.C. Stadium LLC and Grand […]
Position Music has acquired the catalog of French producer, artist and DJ Gesaffelstein. As part of the deal, Position will own and administer the publishing rights to the catalog prior to his 2016 Sony Music Publishing deal. In addition, the company has also acquired the writer, artist and producer royalties for Gesaffelstein’s entire catalog, including “Lost in the Fire” ft. The Weeknd, “I Was Never There” and “Hurt You” by The Weeknd, “Black Skinhead” by Kanye West, and more.
UMPG has signed Yusuf/Cat Stevens to an exclusive global publishing administration agreement. Known for hits like “Father and Son,” “Wild World,” “The Wind” and “Morning Has Broken,” the singer-songwriter recorded music and publishing catalogs are now united under one roof for the first time at UMG.
Reservoir Media has signed Kings of Leon to a go-forward publishing agreement, including the group’s upcoming project Can We Please Have Fun. The deal arrives just after Kings of Leon announced their 2023 world tour, including 26 cities across the U.S. and Canada.
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Warner Chappell Music has signed Yellowstone actor and artist Luke Grimes to a global publishing deal, in collaboration with Range Media Partners. His debut song “No Horse To Ride” was featured in the mid-season series finale last year, driving Grimes up the Billboard Country charts. His debut album will be released on March 8 under UMG Nashville’s Capitol Records.
The 100 Percenters has linked with Spotify to offer ten $2,500 career stimulus grants for songwriters and producers. The grants are supported by Spotify’s Creator Equity Fund. Applications will open Friday, March 15, and will close Monday, April 15. Applicants must be members of the 100 Percenters community and must have at least two years of professional experience, have three or more commercial songwriting or producer credits, be a U.S. citizen, earn an annual income of less than $100,000 and submit verifiable proof of income.
SMACKsongs has signed an exclusive publishing deal with Sarah Buxton, the Nashville-based hitmaker behind songs like “Stupid Boy” and “Put You In A Song” recorded by Keith Urban, “Sundaze” by Florida Georgia Line, “Don’t Let Me Be Lonely” by The Band Perry, and “Fix” by Chris Lane.
BMG has extended its publishing agreement with Grammy-nominated DJ and producer Robin Schulz, which began in 2016. As part of the extension, BMG has also acquired the co-publishing rights to Robin Schulz’s entire song catalog, including “Waves,” “Prayer,” “Sugar,” “Alane,” “All We Got,” and “Young Right Now.”
The Other Songs Live, a songwriter night featuring performances by some of music’s top hitmakers, will be returning to the London Palladium on Monday, May 20. Presented by indie music company The Other Songs in partnership with The Ivors Academy, the event will raise money for three music-related charities, including The BRIT School, The Ivors Academy Trust and Nordoff and Robbins. In the past, the show has featured artists, including Raye, Andrew Lloyd Webber, Nile Rodgers, Dave Stewart and Katie Melua.
peermusic UK has signed Nothing But Thieves to a global publishing deal. The deal includes the band’s fifth studio album, which will be released later this year. Their prior catalog remains with Sony Music Publishing.
Warner Chappell Music and Katy Perry‘s Unsub Publishing have signed rising singer, songwriter and producer Debbii Dawson to a global co-publishing deal. Perry says of Dawson, “She’s a rare find and someone I believe has the brightest of futures ahead of her as an artist, songwriter, and creative force.”
The Nashville-based Edgehill Music Publishing has signed songwriter Carys Selvey to a global publishing deal. Founded by Josh and Tara Joseph, Edgehill adds the London-based Selvey to a growing roster that also includes Dave Villa, Rob Williford, LOCASH and more.
Spirit Music Group has signed worldwide publishing administration deals with Chris Robinson and Rich Robinson of rock band The Black Crowes. The deal includes the band’s albums Warpaint and Before The Frost…Until the Freeze as well as their latest album Happiness Bastards, out March 15.
Warner Chappell Music has signed a global publishing deal with AntsLive, the viral London rapper behind the popular song “Number One Candidate.” Nominated for two MOBO Awards in 2024, including Best Newcomer and Best Video, the musician says he decided to join the WCM roster after attending the company’s songwriting camp in Las Vegas.
BMG has acquired 100% of the catalog of Cologne-based record label Coconut Music, including the recorded rights to tracks by Haddaway, Bad Boys Blue, London Beat, and Wolfgang Petry. The deal builds on BMG’s 2022 acquisition of Haddaway’s recorded music royalties. Under the new agreement, BMG now controls 100% of Haddaway’s biggest track “What Is Love.”
Major Bob Music has re-upped its publishing agreement with writer/producer Colin Healy. Before signing a publishing deal, Healy got his start as bassist and music director for Dustin Lynch, a gig he held for thirteen years. Then, in 2019, he signed to Major Bob Music to further his career as a writer. Since then, Healy has landed cuts with Megan Moroney, Avery Anna, Tayler Holder and more.
Warner Chappell Music has signed Nashville-based talent Josh Montgomery to a global publishing deal. Known for his ability to work across genres, Montgomery has already earned cuts with Ashley Kutcher, Jessie Murph, Tyler Halverson, Graham Barham, Jax, and Dasha.
Wise Music Group‘s Chester Music has signed a new publishing agreement with performer, composer and Olivier Award-winning choreographer Dickson Mbi. Born in Cameroon and raised in East London, the multi-talented Mbi has worked with artists like Russell Maliphant, Boy Blue Entertainment, Robbie Williams, Corrine Bailey-Rae, Black Eyed Peas and choreographed the “Leave A Trace” music video for CHVRCHES.
Wise Music Group has signed Icelandic composer Högni Egilsson has signed a worldwide publishing agreement with the newly opened office, Wise Music Iceland, marking the first signing of the Iceland office, since it launched in November 2022. A leading voice in Iceland’s music scene, Egilsson will be administered by Wise for all future works.
Nashville’s Big Loud Records has inked a multi-year distribution deal with Mercury/Republic for all releases, effective immediately.
Previously, only releases from Morgan Wallen, Lily Rose and Dylan Gossett had gone through the partnership, while the rest of the Big Loud roster was distributed through Stem and Amped.
In a memo to the staff obtained by Billboard, Big Loud founders/partners Seth England, Craig Wiseman and Joey Moi stressed that the move is not an acquisition and that the full staff will remain intact: “This partnership allows for Big Loud Records to remain fiercely independent while leveraging their global distribution and resources, as needed, to best serve our world-class roster. Artists and our staff will see increased creative opportunities, robust international support, new multimedia partnerships, additional multi-format promotion muscle and merchandising resources, among many other benefits. And to clarify: Big Loud Records has not been acquired in any way. Our full staff will remain intact and will continue to lead with the artists we represent.”
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The move comes as Mercury/Republic parent Universal Music Group is undergoing a massive restructuring, with the East Coast labels realigning under a new structure called Republic Corps under chairman/CEO Monte Lipman. Mercury will continue to be led by president Tyler Arnold and general manager Ben Adelson.
The announcement arrives as Wallen’s One Day at a Time spends its 19th non-consecutive week at No. 1 on the Billboard 200, breaking the previous record of 18 weeks held by Garth Brooks more than 30 years ago.
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The memo is in its entirety below.
Good afternoon everyone,
We’re writing to share an important update regarding our distribution for Big Loud Records and our affiliate labels.
After many incredible years with Stem and Amped we have decided to enter into a new multi-year distribution deal with Mercury Records/Republic, amplifying our existing partnership with Monte & Avery Lipman as well as Tyler Arnold and the greater Mercury Records/Republic team.
We are immensely grateful for the tireless efforts of Milana, Kristin, Bobby, Alison, and the entire team at both Stem and Amped who have supported our releases for the better half of a decade. Both teams have been an integral part of our growth story and remain a highly recommended distribution and artist resources solution for self-determined artists and companies. We remain proud investors of Stem to this day.
The Big Loud partners and executive leadership team are immeasurably proud of what this roster and staff have accomplished over the past eight years. Our songs, albums, artists, and company have seen the top slots of nearly every chart in our format. Best of all, we’ve earned those accolades with integrity. We’re reaching new heights with broadened creative ventures and international outposts leading our growth into new genres and markets. With this next chapter, we are thrilled to elevate with a like-minded, best-in-class team that’s effectively been the #1 all-genre record label in the business for the last decade. Rest assured, Mercury Records/Republic both mirrors and supports our renegade spirit.
This partnership allows for Big Loud Records to remain fiercely independent while leveraging their global distribution and resources, as needed, to best serve our world-class roster. Artists and our staff will see increased creative opportunities, robust international support, new multimedia partnerships, additional multi-format promotion muscle and merchandising resources, among many other benefits. And to clarify: Big Loud Records has not been acquired in any way. Our full staff will remain intact and will continue to lead with the artists we represent.
Our hope is that this announcement makes you as excited as the partners and the executive leadership team feel because we achieved this together. From the smallest artists to the biggest, it takes the entire village – we are confident Big Loud will be a force to be reckoned with for years to come.
Please feel free to reach out to your department head, Patch, Austen, or Seth if you have any questions.
Sincerely,
Seth, Craig, and Joey
LONDON (AP) — Adidas said Wednesday that it’s donated or is planning to give away more than $150 million to groups fighting antisemitism and other forms of hate from the sales of Yeezy shoes last year after it severed ties with Ye, the rapper formerly known as Kanye West.
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The German sportswear brand had 1.2 billion euros ($1.3 billion) worth of popular Yeezy sneakers piled up in warehouses after it broke off its partnership with Ye in October 2022 over his antisemitic and other offensive comments on social media and in interviews.
Adidas decided to sell some of the remaining shoes in batches, with two releases last year and another that launched late last month, and donate a portion of the proceeds to anti-hate groups.
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The company has made donations to the Anti-Defamation League and the Philonise & Keeta Floyd Institute for Social Change, run by social justice advocate Philonise Floyd, the brother of George Floyd.
Net sales of what’s left of Adidas’ former banner line of sneakers brought in about 750 million euros last year, compared with over 1.2 billion euros in 2022, the company reported.
Of the 300 million-euro profit it earned from the sales of Yeezy shoes last year, the company said it had given away or planned to donate over 140 million euros (about $152 million).
Adidas said deciding to sell a big chunk of its Yeezy inventory and improved operations helped it pull out operating profit of 268 million euros last year, a nearly 60% plunge from the previous year. It blamed a high tax rate for ending the year with a net loss of 58 million euros, a massive turnaround from net income of 254 million euros in 2022.
“Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year,” said CEO Bjørn Gulden, who took over the top job last year.
Looking forward, Adidas expects to make about 250 million euros in sales of the remaining Yeezy shoes this year.
But the Herzogenaurach, Germany-based company points to North America as a persistent problem spot, expecting revenue to decline in the mid-single digits this year and grow everywhere else. It said that North America was “particularly affected by the negative Yeezy impact” and that revenue there dropped 16% last year.
Adidas expects to almost double operating profit to about 500 million euros this year despite “macroeconomic challenges and geopolitical tensions.” It plans to further scale up popular shoe lines like Samba that are seeing “extraordinary demand,” launch new ones and get a boost from major sports events like the Paris Olympics this summer.
Adidas shares were up slightly in late morning trading.
Believe benefitted from geographical expansion and strong streaming growth to post revenue of 880.3 million euros ($952.8 million at the average exchange rate) in 2023, up 15.7% from the prior year, the company announced Wednesday (Mar. 13). Organic growth was 14.4%, matching the guidance the company provided in October of organic growth exceeding 14%. After adjusting for foreign currency headwinds, Believe’s adjusted organic growth rate was 19.5% in 2023 and 21.8% in the fourth quarter.
The current growth rate should extend into the current year. Believe expects to achieve organic revenue growth in excess of 20% in 2024, adjusted to 18% to account for expected foreign currency headwinds. That high growth rate stems from a healthy paid streaming market and the belief that the ad-supported streaming market will rebound in the second half of the year. Believe also expects to make market share gains, especially in countries where it is not yet a top three company for local artists.
In 2023, Believe was helped by price increases at music streaming services in 2023 — Amazon Music in January, Spotify in July and Deezer in November. The company had market share gains in all key countries and with all key digital service providers, Xaiver Dumont, chief financial and operating officer, said during Wednesday’s earnings call.
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Adjusted earnings before interest, taxes, depreciation and amortization (EDITDA) of 50.3 million euros ($54.4 million) was up 45%. Adjusted EBITDA margin rose to 5.7%, surpassing guidance of at least 5.5%. Free cash flow was -3.1 million euros (-$3.4 million), although free cash flow turned positive in the second half of the year.
The earnings release arrived as Believe is the subject of a bid to be taken private by a consortium led by CEO Denis Ladegaillerie and investment firms EQT X and TCV. Warner Music Group (WMG) revealed last week that it’s interested in pursuing Believe and willing to beat the consortium’s offer. Believe’s executives did not address questions about the take-private bid during Wednesday’s earnings call, however.
The publicly traded French music company’s business model is built around helping to develop artists and using digital marketing and distribution to impact local charts. That approach is increasingly relevant when any artist can go viral on social media. Case in point: Believe landed a hit in 2023 when a 2022 single, “Si No Estás’” by Iñigo Quintero, become a TikTok hit in Spain before topping charts in France, Germany, Norway, Sweden, Austria and Belgium. “These success at the top are being achieved in a wider variety of genres of music” including hip-hop, pop and metal, Ladegaillerie said during the earnings call.
Believe also landed 42 albums in the top 200 in its home country and 48 singles in the Top 100 in its second-largest market, Germany. In the United Kingdom, consumption was up 394%. In China, Believe expanded to 80 staffers in five offices that serve 300 record labels. In India, where Believe acquired White Hill Music’s catalog in December, the company had 66 songs on local charts.
Revenue in France, where Believe is in the top three recorded music companies for local artists, rose 14.9% to 147.8 million euros ($160 million). Revenue in Germany dropped 2.4% to 110.9 million euros ($120 million), while revenue in Europe, excluding France and Germany, rose 25.9% to 264.6 million euros ($286.2 million). The Americas accounted for 128.1 million euros ($138.7 million), up 17.4% on strength in Brazil and Mexico. Asia-Pacific and Africa contributed 228.9 million euros ($247.8 million), up 14.9%, with China and Japan being particularly strong. India and Southeast Asia grew at slower paces due to those regions being affected by weakness in the ad-supported streaming market.
Revenue for the company’s premium solutions division rose 15.8% to 825.1 million euros ($893.1 million), while the division’s adjusted EBITDA improved 16.8% to 118.3 million euros ($128 million). Premium solutions mainly consists of the sale, promotion, marketing and delivery of digital content for artists and labels. It also includes some physical sales, synchronization services, neighboring rights and music publishing.
In the automated solutions division, revenue increased 14.6% to 55.2 million euros ($59.7 million), and adjusted EBITDA rose 53% to 10.1 million euros ($10.9 million). The slower growth rate was expected, said Dumont, because of lower ad-supported monetization and a new TuneCore pricing structure launched in 2022 that led to lower average revenue per client and was “not yet compensated by the ramp-up in new clients.”
Ladegaillerie has formed a consortium with two of its shareholders, investment firms EQT X and TCV, to take the company private at 15 euros ($16.43) per share. That offer ran into competition last week when WMG revealed its interest in Believe and said it might be willing to pay at least 17 euros ($18.62) per share. The consortium has attempted to speed the process and waive the board’s condition that an independent expert provide a report to Believe’s ad-hoc committee on the offer’s fairness from a financial viewpoint. The parties are now waiting for French financial regulators to say if the consortium can unilaterally waive the independent expert’s report and whether WMG’s preliminary proposal prevents the waiver of the board’s condition.
In February 2022, Farruko turned his La 167 Tour into a religious experience when he opened up to fans about his beliefs during his Miami concert.
“God loves you just the way you are. We’re all sinners, none of us are perfect,” he told the packed venue. At the show, he didn’t perform his biggest hit to date, “Pepas,” and in fact, asked fans to forgive him for the lyrics, which are about drugs and partying.
Since then, the Puerto Rican artist has steered away from the sultry and provocative lyrics that made him a household name and changed his words to more feel-good ones, as heard in singles like “Nazareno” and “Pasa_je_ro.” The latter is part of the latest Transition album, a 20-track project that highlights his personal journey as well as a new era for his label, Carbon Fiber Music.
“What we are currently living and experiencing with Carbon Fiber, with my life, with Farruko’s life, with the life of Raymond Guevara (formerly and artistically known as Lary Over) and other artists in the company is simply that God has called us to serve him,” Franklin Martinez, the label’s president and Farruko’s longtime manager, tells Billboard. “I can’t tell you what made this change, but I can tell you how it came into my life.”
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In the fall of 2021, and in the midst of “Pepas” having major success (it scored Farruko his first No. 1 hit on the Billboard Hot Latin Songs chart on the Aug. 28, 2021-dated tally, where it crowned for 26 weeks), Martinez admits he was going through a deep depression that made him feel “empty, completely unhappy, and feeling dead.”
“I made the decision [to change my life] about seven months before Farruko did,” he elaborates. “I tried not to throw it in his face, but instead I told him that I was going through a personal situation and over time I would tell him, but I didn’t even have time to explain to him because God collided with him. That explanation, that trying to convince him, did not come from me, it came from Jesus directly.”
Though Carbon Fiber Music launched in 2014, Martinez had no explanation as to why the label’s literal transition is occurring a decade later, only saying that “God’s timing is perfect.”
Transition is packed with optimistic and motivational messages about relationships, life and praise —backed by hard-hitting hip-hop beats, mid-tempo reggaeton, infectious Afrobeats and dance melodies. In addition to Farruko, it includes Carbon Fiber artists such as Akim and Menor Menor as well as renowned Christian acts like Christian Ponce, Indiomar and Lirios.
Without naming names, Martinez says that some Carbon Fiber artists have left the label since the change in direction while others are supporting it, though he calls it “a constant battle and not easy.”
“We can no longer and don’t want to continue carrying a message of destruction to humanity,” he says. “I don’t want to continue sending messages of violence and sex, I think that God has given us a talent to be able to transmit a message that fills and not a message that destroys.”
He concludes: “‘Transition’ is just that. We are going through a process and this album is a stage that represents what’s happening with the label.”
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A criminal case against YoungBoy Never Broke Again over federal gun charges must be put on hold until the U.S. Supreme Court decides a closely-watched Second Amendment battle this spring, a federal judge says — likely delaying a trial that had been scheduled to start in July.
In an order Wednesday (Mar. 13), U.S. District Judge Shelly Dick said she would wait to proceed until after the justices had issued their gun-control ruling since the Supreme Court’s looming decision will likely touch on the same Second Amendment questions at play in NBA YoungBoy’s case.
YoungBoy’s lawyers say the law he’s accused of breaking — a ban on convicted felons possessing firearms — is unconstitutional under the Second Amendment, which protects the right to “keep and bear arms.” The pending Supreme Court case, meanwhile, will decide the constitutionality of a similar federal ban on gun ownership for domestic abusers.
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After years of house arrest, YoungBoy (Kentrell DeSean Gaulden) had finally been set for a trial in July. Wednesday’s order will likely delay that trial since it could be June before the high court even rules on the pending case. But the delay might be worth it: If the Supreme Court rules against the gun restrictions in that case, it could greatly help YoungBoy beat his charges altogether.
The rapper’s attorney did not immediately return a request for comment.
YoungBoy was indicted by federal prosecutors in March 2021 after he was allegedly found with two guns during a September 2020 incident in Baton Rouge, La. He was charged with violating a long-standing federal law that bans convicted felons from ever again possessing guns — a rule that applied to him because he was convicted in 2017 of aggravated assault with a firearm.
In a motion filed last month, attorneys for the rapper argued that the charges against YoungBoy must be dismissed without trial because that federal ban violates the Second Amendment. They cited a landmark gun control ruling issued by the high court in 2022, which struck down a New York state law that had placed strict limits on carrying guns outside the home.
Echoing the language of that ruling, YoungBoy’s lawyers said the federal felon-in-possession statute was similarly unconstitutional because it was “inconsistent with our nation’s historical tradition of firearm regulation.”
“This prosecution seeks to restrict and deny Mr. Gaulden’s Second Amendment right to possess a firearm based solely on his status a felon and his alleged failure to comply with bureaucratic regulations,” the star’s attorneys told the judge.
In a response this month, federal prosecutors sharply disagreed, arguing that the gun ban for convicts had already been upheld in “hundreds of cases” since the Supreme Court’s 2022 ruling. They acknowledged that a few judges had ruled otherwise, but that the “overwhelming majority of courts” had continued to enforce the law.
In Wednesday’s order, Judge Dick said she could not decide those arguments until the Supreme Court rules on United States v. Rahimi, the pending case challenging a federal law that prohibits the possession of firearms by persons subject to domestic violence restraining orders. The case, argued last fall, is expected to be decided by June.
It’s difficult to predict how the Supreme Court might rule on a given case, but the tea leaves don’t look good for YoungBoy’s position. After arguments in the Rahimi case in November, Reuters reported that the court “appeared inclined to uphold the legality” of the domestic violence gun restrictions, with several justices suggesting the Second Amendment wouldn’t stop the government from banning “dangerous” people from owning guns.
Whenever the Supreme Court rules on the Rahimi case, YoungBoy and federal prosecutors will have 14 days to file briefs on how the case should proceed.
When the board of directors at Hipgnosis Songs Fund (HSF) cut the value of the company’s catalog by 26% last week, it admitted something investors had long believed. Although the London-listed royalty fund had amassed an enviable collection of songs since going public in 2018, changes in market conditions and the very nature of some of those rights may have merited a significantly lower fair value all along.
A new valuation by Shot Tower Capital put the portfolio of music rights — which includes Neil Young, Shakira and Red Hot Chili Peppers, among other A-list artists and songwriters — at $1.8 billion to $2.06 billion. As recently as Sept. 30, the catalog was given a fair value of $2.62 billion by HSF’s longtime valuation expert, Citrin Cooperman (previously Massarky Consulting). Six months earlier, it was said to be worth $2.8 billion.
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HSF’s new board of directors hired Shot Tower in the wake of investors’ Oct. 26 votes against continuation and a partial catalog sale — effectively a vote of no confidence in both the previous board and the investment advisor, Hipgnosis Song Management. Shot Tower will give HSF’s board its final due diligence by Mar. 25, and HSF will provide an update on those findings by Mar. 29.
Some longtime critics of HSF’s previous valuation found validation in Shot Tower’s lower number. Stifel analysts claimed the new number shows HSF “clearly overpaid for catalogs,” they wrote in a Mar. 4 investor note. To date, HSF has spent about $2.2 billion on acquisitions. It raised over 1.3 billion pounds ($1.67 billion) from an IPO and seven successive offerings and has drawn $604 million from a revolving credit facility.
Such a large decline in the valuation suggests the various experts had differing opinions on both the catalog’s revenues and the riskiness of those revenues. Shot Tower calculated HSF’s net revenue after third-party royalties and administration expenses at $121.7 million for the 12-month period ended June 30. The accounting firm BDO calculated a similar amount — $119.4 million for the 12-month period ended Sept. 30 — for a quality of earnings analysis.
The higher $2.62 billion valuation appears to be based on a higher annual net revenue. A July 2023 investor presentation put HSF’s annual revenue at $134 million (based on a $2.8 billion portfolio fair value and an implied historic net publishers share, or NPS, multiple of 20.89). That’s $12.3 million more than Shot Tower’s figure and $14 million more than BDO’s estimate. The difference in annual revenues, however, only explains part of the difference in valuations.
The discount rate appears to have also played a major role in HSF’s lower valuation. Shot Tower used a weighted average discount rate of 9.63% for the entire catalog, more than 1.1 percentage points higher than the discount rate used for previous valuations. Experts Billboard spoke with called the rate “on the high side” and “a particularly high number.” Some other recent valuations used a lower discount rate. Discount rates and valuations are inversely related: A higher discount rate will produce a lower present value of cash flows, and vice versa.
Until this week, HSF had been valued using an 8.5% discount rate since the Sept. 30, 2020, valuation conducted by Citrin Cooperman. FTI Consulting’s valuation of a Kobalt portfolio used in an asset-backed security (ABS) offering in February used an 8.5% discount rate for songs older than 18 months (and 11.75% for songs aged 3 to 18 months). FTI’s valuation of the portfolio behind Concord’s $1.65 billion ABS used an 8.25% discount rate for catalog songs (and 11.75% for recorded music frontline content and options for future releases).
The HSF discount rate has been a point of contention amongst analysts and investors in recent years. When HSF lowered its discount rate to 8.5% in 2020, analysts complained the valuation increased even though the investment manager had not yet added value and market assumptions hadn’t changed. When interest rates started rising in 2022, analysts wondered why HSF stuck with the 8.5% discount rate.
The discount rate depends on the riskiness of those future cash flows. Perfectly safe revenue is discounted using a risk-free rate of return such as a 10-year U.S. Treasury Rate. Because no business is without risk, a company’s revenues would merit a higher rate. If a company carries debt, its borrowing cost — also more than the risk-free rate — would also be baked into the discount rate.
Shot Tower’s discount rate took a variety of factors into account, according to the press release, which could explain how it got to 9.63%. For example, Shot Tower found that 65% of HSF’s revenue derived from passive rights where the company does not control publishing, administration or licensing. In many cases, HSF owns only a songwriter’s share rather than the publisher’s share, or the producer’s royalties from a sound recording. Investors might have assumed that HSF had more control over administration, distribution and licensing: In HSF’s annual report for the year ended March 31, 2022, it said it had 100% interest ownership in 96% of the songs in its catalog (138 of the 146 catalogs).
“That control has a lot of value,” explains an industry insider. Strategic buyers — usually music publishers and record labels — will pay a premium to control a song’s administration and licensing or a recording’s distribution. Passive rights typically trade at a discount because they carry more potential risks of counterparts (co-writers, for example) and potential collection risk (as is the case when royalties are re-directed from a label rather than received from a PRO). With a writer’s share, “you’re a lot more along for the ride,” this insider says. The producer royalties that HSF acquired — such as RedOne, Jimmy Iovine and Timbaland — are also passive.
For a company looking to bolster its credibility with investors, Shot Tower’s valuation was a double-edged sword. The lower number confirmed some investors’ long-held belief that the portfolio is worth less than HSF had claimed. But the decrease in valuation further hurt HSF’s share price. Shot Tower’s lower valuation prompted HSF’s board to commit to using its cash to pay down debt rather than resume the dividend it suspended in October. So, while the lower valuation better reflected HSF’s market capitalization, the continued loss of a dividend was the likely cause behind the stock dropping 11% the day of the announcement.