State Champ Radio fintech
LONDON — Swiss-based tech company Utopia Music is undertaking a fresh round of job cuts, eliminating around 15% of its global workforce, co-founder and interim chief executive Mattias Hjelmstedt said in a memo to staff on Monday.
Hjelmstedt said the cost-trimming measures follow a review of the organization’s business and form part of an ongoing “strategic shift” towards a focus on delivering financial services for labels, publishers and distributors. Billboard understands that around 100 jobs are being cut.
In the staff memo, which has been seen by Billboard, Hjelmstedt says that Utopia’s distribution companies are not affected by the staff cuts. They include Proper Music Group, the United Kingdom’s leading independent physical music distributor, which provides distribution services for 1,000-plus indie labels and service companies, and Cinram Novum, which provides warehouse, fulfilment and distribution services to a range of labels, including UMG, Sony Music Entertainment and [PIAS].
Monday’s announcement is the second round of layoffs to take place at Utopia in the past six months.
In November, the Zug, Switzerland-based tech company cut its workforce by around 20%, representing about 230 jobs. That was followed by a restructuring of Utopia’s business into two separate divisions: Music Services and Royalty Platform in December and the exit of former CEO Markku Mäkeläinen in January. Earlier this month, U.K.-based Roberto Neri announced that he too was leaving his position as CEO of Utopia’s Music Services division to join French music company Believe.
The start of this year has also seen Utopia, whose motto is “Fair pay for every play,” divest two of the 15 companies it acquired over the past two years during a frenetic buying spree. On Feb. 7, Utopia announced that it had sold U.S.-based music database platform ROSTR — which has a directory of artists, managers, booking agents and record labels — back to ROSTR’s founders for an undisclosed sum.
Last month, French music company Believe acquired U.K.-based publisher Sentric, which represents more than four million songs and over 400,000 songwriters in more than 200 territories, from Utopia in a deal worth €47 million ($51 million). Utopia owned Liverpool-based Sentric Music Group — which also has offices in London, Hamburg, New York and Los Angeles – for just over a year before selling it to Believe.
“Today’s market requires that companies that embarked on a hiring spree during ‘hyper growth’ now restructure,” wrote Hjelmstedt. “We are a company that is not afraid to adjust when necessary. That means we take active decisions, however hard they may be, to ensure we can deliver our vision to serve the music industry.”
Hjelmstedt went on to say that adjusting to these strategic changes “has been a big, but necessary undertaking” that has optimized the company’s client offering “and already seen an uplift in customers.”
Referencing recent reports by Scandinavian news outlet Breakit that some Utopia employees had not been paid and the company’s Swedish arm, Utopia R&D Tech, owes 8 million SEK ($770,000) to the Swedish tax authorities, the CEO said “all outstanding tax debts have been cleared” and legacy issues regarding staff payments were “in the process of being cleaned up.”
“We continue to actively work on this process to ensure that we never find ourselves in this position again,” said Hjelmstedt, adding that the company – which had a workforce of around 1,000 employees internationally prior to sale of Sentric – will soon share information on “commercial initiatives, deals, and sales strategies” that will drive future revenue growth.
Read the memo in full here:
Dear Utopians,
Since taking on additional responsibilities as your Executive Chairman, I’ve been committed to sharing the steps we must take for Utopia to become a profitable and sustainable business. The new leadership team and I have had to make some important, and sometimes very tough, decisions as part of this ongoing process. Today I need to share news of that nature.
Together, we’ve very carefully reviewed our organization against our refocused product and commercial roadmaps, and specific needs, and must share the unfortunate news that, as part of this strategic shift, we need to say goodbye to around 15% of our Utopian colleagues. Our distribution companies are not affected by this review.
Thomas and I created Utopia by combining two of our great loves – music and technology – and we’ve built it together with you. That’s why this is the most difficult decision we’ve had to make so far, and I fully appreciate that after these past few months this will be hard to read. If you are one of the affected individuals: Please know that this is in no way based on your individual performance – we hired you because we value you and you are great at what you do – this is about doing what is necessary to secure the future of the company. We’re truly sorry to see you go and feel both humbled and grateful for all the amazing work you have done for Utopia.
It’s been very hard to see how Utopia was treated last year and you already know how I feel about decisions taken that put us in a difficult situation. Additionally, like the rest of the tech industry, we’re facing challenges brought on by changed market conditions. We’ve seen several waves of redundancies from companies large and small – Meta, for example, recently announced its “year of efficiency” to cater to its long-term vision. Today’s market requires that companies that embarked on a hiring spree during “hyper growth” now restructure. The likes of Spotify, Microsoft, and PayPal (and so many others) now need to adapt to the new reality of focused sustainable growth – just like we have to at Utopia. We are a company that is not afraid to adjust when necessary. That means we take active decisions, however hard they may be, to ensure we can deliver our vision to serve the music industry with technology for processing royalties, distributing music, and facilitating Fair Pay for Every Play while reducing complexity for our customers.
Adjusting to these changes has been a big, but necessary undertaking. We’ve sharpened our strategic focus these past three months through targeted sales (ROSTR and Sentric) – bringing in further capital as an additional benefit – and we appointed a new, mature leadership team that’s equipped to move Utopia towards profitability. We have optimized our offering and already seen an uplift in customers – we have strong products on the market that we will continue to improve, a top-of-the-line platform, a world-class distribution arm that represents 98% of UK labels (including all majors), and a plan to first break even and then grow even further, sustainably. The legacy from last year is in the process of being cleaned up. All outstanding tax debts have been cleared, including our financial obligations in Sweden. We continue to actively work on this process to ensure that we never find ourselves in this position again. We’re humbled and grateful to all of you who stepped up to support this large, strategic shift, and have shown patience while we do so.
Soon we will share more information on commercial initiatives, deals, and sales strategies that will drive Utopia’s revenue growth. But for now, let’s allow ourselves time to reflect and give the great people that will unfortunately have to leave us a proper goodbye. Some colleagues will receive difficult news and some will lose teammates and friends, so please be there for them.
I want to express my sincere apologies to everyone affected. Utopia was built to be a high-impact company and we have attracted extremely talented people who we truly appreciate and respect. That’s why this decision is so hard to make. I know you will have a lot of questions, please know that more information on next steps will be provided by the P&C team shortly.
Take care of yourselves and each other,
Mattias
LONDON — In early February, Universal Music Group chairman/CEO Lucian Grainge drew a line in the sand between the traditional record business and financial companies entering the fray to tap into the global growth of streaming. “Our industry is entering a new chapter where we’re going to have to pick sides,” Grainge said at the Billboard Power 100 launch event in Hollywood. “Are we on the side of fintech [financial technology] and functional music, functional content? Or are we on the side of artistry and artists?”
Though Grainge didn’t name names, he could well have been talking about Utopia Music, a Zug, Switzerland-based tech company that delivers financial services for labels, publishers and distributors. Over the past two years, Utopia, whose motto is “Fair pay for every play,” has embarked on a frenetic buying spree of 15 companies, including music tech company Musimap; Lyric Financial, a Nashville-based provider of royalty-backed cash advances; and Proper Music Group, the United Kingdom’s leading independent physical music distributor, which provides distribution services for 1,000-plus indie labels and service companies.
Industry executives don’t quite know what to make of Utopia’s rapid growth, its direction or where exactly the company fits in today’s multifaceted global music business. It’s one of several fintech companies, many backed by venture capitalists, that have penetrated the music business to varying degrees amid the streaming boom. “At its core, Utopia is a royalty tech company,” co-founder and executive chairman Mattias Hjelmstedt tells Billboard in a rare interview. “It’s about fixing the many data gaps in the industry.”
Hjelmstedt says he understands and even agrees with Grainge’s opposition to “pure fintech” companies that “go in and try to optimize [their] revenue versus the rest of the industry.” But that, he insists, is not what Utopia is about. His company uses technology — leveraging what has been described as “a database of more than 213 billion global data points” — to better capture royalties and process them accurately, faster and with greater transparency. That, in turn, will “help all facets of the industry earn more money,” not just Utopia’s slice of it, he says.
“We’re on the side of anyone who owns the copyright, which is a creator, which is an artist, which is also a Universal [Music Group] or a copyright fund or a publisher,” he says. “I don’t think there is a mismatch there [between fintech and artists]. It is actually fully aligned for me to have a clear path from usage to creator.”
Utopia is hardly alone in pitching ways to use tech to give artists more control over their music royalties than they’ve traditionally had with label deals. Hifi, a fintech with backers that include industry executives like Quincy Jones and Capitol Records chair/CEO Michelle Jubelirer — as well as artists Diplo and G-Eazy — is launching an “enhanced royalties acceleration service” that promises to pay artists advances based on predicted streaming royalties. Los Angeles-based beatBread offers funding for existing music catalogs and employs artificial intelligence to help artists secure advances of up to $1 million for unreleased music. And Brazilian fintech company Hurst Capital says it has set up a “hyper-specialized team” to manage the royalties of catalogs it has acquired from sertanejo (Brazilian pop-country) stars like Gusttavo Lima and the late Marília Mendonça.
Hjelmstedt is a Swedish serial entrepreneur known for founding gaming platform Electronic Sports Network, which Electronic Arts acquired in 2012, and co-founding video-on-demand platform Voddler, which filed for bankruptcy in 2018. He co-founded Utopia in 2016 with Thomas Gullberg, basing it in the town of Zug, where around 60 of the company’s staff of 1,000 are based.
Details about Utopia’s finances and funding remain opaque. The company’s only publicly listed investors are Switzerland-based investment firms CV VC and FiveT Fintech (formerly Avaloq Ventures). Hjelmstedt says the firms “are by far not among the largest investors” but declined to reveal any others. Utopia, which he says generates over 100 million euros ($107 million) in revenue a year, recently completed an investment round, but Hjelmstedt declined to discuss figures or what the capital will be used for.
Lately, the company has been characterized by change. In November, Utopia cut its workforce by around 20%, or about 230 jobs, according to a company representative. Hjelmstedt says the job cuts resulted from the global economic downturn coupled with the company’s goal of achieving sustainable growth. A month later, in December, Utopia restructured its business into two separate divisions: Music Services and Royalty Platform. Then in January, Utopia reshuffled its senior leadership, with former CEO Markku Mäkeläinen exiting the company and Hjelmstedt taking over as interim chief executive. (U.K.-based Roberto Neri is CEO of the Music Services division.)
As part of the reorganization, Utopia announced on Feb. 7 that it had sold U.S.-based music database platform ROSTR — which has a directory of artists, managers, booking agents and record labels — back to ROSTR’s founders for an undisclosed sum. Utopia purchased the company in December 2021 to strengthen its direct ties with the artist community. But Hjelmstedt says Utopia will now primarily focus on delivering financial services. He declined to comment on whether there will be further divestments or acquisitions this year, claiming the company will reveal more about future plans, including new product launches, in the coming months.
Utopia’s music services division is headed by U.K.-based former Downtown executive Roberto Neri and includes the acquired companies Proper, Absolute Label Services, Liverpool-based publisher Sentric Music Group and Cinram Novum, one of the U.K.’s leading physical home entertainment suppliers. (Cinram Novum provides warehouse, fulfillment and distribution services to labels, including UMG, Sony Music Entertainment and [PIAS].)
Utopia’s royalty platform arm, which Hjelmstedt oversees, looks after the company’s financial technology services, data operations, copyright and royalty processing.
Hjelmstedt declines to comment on whether dividing Utopia into two separate divisions signals an intention to make the split between distributor and royalty platform permanent. He rejects speculation that Utopia is a tech scale-up looking to capitalize on the growth of the music industry rather than to build a sustainable business. The company’s myriad acquisitions, he says, were made “to understand different parts of the industry better, so we can serve them better with the data.” Despite acquiring a significant chunk of the U.K. music distribution business, he says, it was “never the idea of Utopia to be a distributor.”
“We will never be a collecting society or a [performing rights organization],” says Hjelmstedt. “We will never sell data and we will not take investments from a large strategic player in the industry, and by doing so, we can safeguard the core of what we stand for.”
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