International
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Women in Music honoree Doreen Schimk has one of the more interesting backstories in the music business: She escaped from the former East Germany as a teenager.
In the late 1980s, she and her sister Susann, both promising athletes, went to an East German training camp where she met a teenage boy she liked. Schimk took a bigger step than most girls her age, though, sneaking across the border in his car and moving to Hamburg in what was then West Germany. In 2011, this journey became the subject of the fictionalized German film Westwind.
In 1990, not long after the fall of the Berlin Wall, Schimk moved to London, and later New York, where she says she “picked up English on the street.” “But I was obsessed with music – I was a DJ for a few years – and I thought this was the place I could get into the business, but I didn’t know the difference between an agent and a manager and a label.”
Then a friend from back home called about an opening for an internship at the German indie label Edel Records. Schimk moved back within 48 hours and then spent six years learning about promotions before taking a job at Sony Music Germany – and then, eventually, at Warner Music.
In August 2021, she and Fabian Drebes were named co-presidents of Warner Music Central Europe, which oversees operations in Germany, Austria and Switzerland. One priority is “cultural change,” she says. “There’s a huge opportunity to create a new way of working in terms of changing the mindset and breaking these barriers in terms of hierarchies.” Another is focusing more on dance music and German language hip-hop.
“With dance and EDM we have a huge opportunity to grow globally,” she says. For hip-hop, she and Drebes founded Atlantic Records Germany “to be a new door for German rap artists,” she says. “It’s based in Berlin” – Warner Music’s German headquarters is in Hamburg – “and it’s growing out of the culture there.” Change takes time, she says, but Warner Germany has shown strength this year on the singles chart.
As for the movie, she recalls, “I was in my 30s, sitting with my twin sister Susann on a balcony in Berlin, having a drink, and one of the guys we were with said, ‘Why don’t you make a movie about it?’ — [Her sister is a movie producer] — “From such a young age when I made that decision,” she says, “being fearless has always been a driver for me.”
The 2023 Billboard Women in Music Awards take place tonight (March 1) at the YouTube Theater at Hollywood Park in Los Angeles. The event will livestream here on Billboard.com and via Billboard’s YouTube account.
French music streaming company Deezer reported on Tuesday that its 2022 revenues rose 13% to 451 million euros ($478 million), as the company reduced its losses by 18 million euros ($19.1 million) through a combination of growth through partnerships and eliminating marketing spend.
The company reported its adjusted gross profit rose 16% to 98 million ($104 million) euros in 2022 versus 2021 on greater margin improvement. The 18 million euros ($19.1 million) the company reported in savings came partly from growth — Deezer grew its top line by 51 million euros ($54 million) and improved gross margins by 30 million euros ($32 million) — and partly from reducing its marketing spends in certain emerging markets.
For years since its 2007 launch, the Paris-based company angled to gain customers by partnering with telecommunications companies. But under new chief executive Jeronimo Folgueira, Deezer has focused on a business-to-business (B2B) approach, aiming to gain more streaming users in major markets through partnerships with companies that already have established customer bases.
That piggy back approach — which is already in place with Sonos in the United States, RTL in Germany and DAZN in Italy — allows Deezer to reach prospective customers in major markets without investing to build a brand first. Folgueira, who joined Deezer in June 2021, says 2022’s earnings show the strategy has legs, and he expects his company to generate revenue growth of more than 10% in 2023 as they work toward achieving profitability by 2025.
“All of the ground work on B2B that we’ve been doing is starting to pay off,” Folgueira tells Billboard. “Those deals are just the beginning. We want to enter markets through partners, and we are targeting the United Kingdom and other major European markets like Spain.”
Last year, Deezer partnered with German broadcast giant RTL Deutschland to deliver music and video content over the app RTL+ Musik, putting Deezer in a position to compete in the crowded streaming space in the world’s fourth-biggest recorded-music market, and it teamed up with the Italian sport subscription streaming platform DZAN.
This year, Deezer struck a long-term agreement with the U.S. speaker and hardware company Sonos to power its Sonos Radio and subscription service Sonos Radio HD, a deal that will extend Deezer’s reach to 16 countries, including the United States, Canada, the United Kingdom, France and Germany.
Deezer remains strongest in France, where it is bundled with telecom company Orange and has 4.4 million subscribers, and in Brazil, where it partnered with TIM Celular in 2016 and has 2.7 million subscribers, according to company filings. Worldwide, Deezer has 9.4 million subscribers compared with Spotify’s 195 million subscribers and 273 million free (ad-supported) users, while TME has 82.7 million paying subscribers, according to the companies’ latest earnings reports.
The company was among the first DSPs to raise prices last year when it upped the price for an individual plan to 10.99 euros ($11.66) per month from 9.99 euros ($10.60) and family plans to 17.99 euros ($19.09) per month from 14.99 ($15.91).
Those hikes helped deliver a 14.3% increase in the company’s average revenue per user (ARPU) in 2022. Deezer had 9.4 million subscribers as of Dec. 31, 2022, down 2.2% from a year earlier.
“On the year as a whole, there was basically no impact on churn despite a roughly 10% price increase,” Folgueira says. “People are willing to pay more for proper quality music.”
U.K. labels trade body BPI has appointed Jo Twist as its new chief executive, replacing Geoff Taylor who exited the London-based organization in December after more than 15 years at the helm.
Twist has been CEO of Ukie, the U.K. trade body for the games and interactive entertainment industry, since 2012 and was awarded an OBE (Order of the British Empire) for services to the creative industries in 2016. BPI’s chief strategy officer, Sophie Jones, will continue as interim chief executive until Twist takes up her role in July.
The labels trade body celebrates its 50th anniversary this year and represents the U.K. arms of all three major labels, as well as more than 500 British independents. BPI says its total membership accounts for approximately 85% of legal music sales in the United Kingdom and around one in 10 streams globally.
Last year, a record 159 billion music tracks were streamed in the U.K., up 8.2% on 2021, and the equivalent of 166 million albums were streamed or purchased across digital and physical formats, up 4.3% on the previous 12 months, according to BPI figures.
The U.K. is the world’s third biggest recorded music market behind the U.S. and Japan with sales of just over $1.8 billion in trade value, according to IFPI’s 2022 Global Music Report.
In a statement announcing her appointment, Twist said she was looking forward to supporting BPI label members and the wider music community “in fully realizing the value of music – growing the market, boosting exports and ensuring the recognition and backing the industry deserves.”
“The industry’s talent, so passionately nurtured by innovative major and independent record labels, is world leading, and the BPI plays an important role in creating an environment where labels and their artists can thrive,” said Twist, who sits on a number of industry and charity boards, including the Creative Industries Council.
Prior to joining Ukie, Twist held senior roles at the BBC and commercial U.K. television station Channel 4 and was awarded a doctorate by Newcastle University in 2001. BPI chair Yolanda Brown said the incoming chief executive’s “fresh perspective” and “rich breadth of experience” across the creative industries will prove invaluable to the organization’s members “as we navigate great changes in our industry.”
Among Twist’s duties as head of BPI is overseeing the BRIT Awards, the U.K.’s biggest annual music awards show, and the Mercury Prize, its independent-leaning sister event, recognizing what judges determine to be the 12 best albums of the year by U.K. and Irish artists.
BPI also runs a number of international trade functions, including its annual LA Sync Mission event, and administers the Music Export Growth Scheme (MEGS), which awards U.K.-based indie artists and labels grants of between 5,000 pounds ($6,000) and 50,000 pounds ($60,000) to help them break international markets.
In 2021, more than 60 U.K. artists whose music was streamed at least 20 million times worldwide received funding from the scheme, including Bicep, Beabadoobee, Wolf Alice and Rina Sawayama.
U.S. government bans on Chinese-owned video sharing app TikTok reveal Washington’s own insecurities and are an abuse of state power, a Chinese Foreign Ministry spokesperson said Tuesday.
The U.S. government “has been overstretching the concept of national security and abusing state power to suppress other countries’ companies,” Mao Ning said at a daily briefing.“How unsure of itself can the U.S., the world’s top superpower, be to fear a young person’s favorite app to such a degree?”
The White House is giving all federal agencies, in guidance issued Monday, 30 days to wipe TikTok off all government devices. The White House already did not allow TikTok on its devices.
TikTok is used by two-thirds of American teens, but there’s concern in Washington that China could use its legal and regulatory powers to obtain private user data or to try to push misinformation or narratives favoring China.
Congress and more than half of U.S. states have so-far banned TikTok from government-issued mobile devices.
Some have also moved to apply the ban to any app or website owned by ByteDance Ltd., the private Chinese company that owns TikTok and moved its headquarters to Singapore in 2020.
China has long blocked a long list of foreign social media platforms and messaging apps, including YouTube, Twitter, Facebook and Instagram.
Washington and Beijing are at odds over myriad issues including trade, computer chips and other technology, national security and Taiwan, along with the discovery of a suspected Chinese spy balloon over the U.S. and its shooting down earlier this month.
On Monday, Canada announced it was joining the U.S. in banning TikTok from all government-issued mobile devices.
“I suspect that as government takes the significant step of telling all federal employees that they can no longer use TikTok on their work phones many Canadians from business to private individuals will reflect on the security of their own data and perhaps make choices,” Canadian Prime Minister Justin Trudeau told reporters after the announcement.
Canadian Treasury Board President Mona Fortier said the Chief Information Officer of Canada had determined that TikTok “presents an unacceptable level of risk to privacy and security.”
“On a mobile device, TikTok’s data collection methods provide considerable access to the contents of the phone,” Fortier said.
The app will be removed from Canadian government issued phones on Tuesday.
The European Union’s executive branch said last week it has temporarily banned TikTok from phones used by employees as a cybersecurity measure.
TikTok has questioned the bans, saying it has not been given an opportunity to answer questions and governments were cutting themselves off from a platform beloved by millions.
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.”
J-Hope is ready to enter the South Korean military for his mandatory service stint, BigHit Music announced on Sunday (Feb. 26). On the same day, it was also announced that the BTS member will soon release a new single, “On the Street.”
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“We would like to inform our fans that j-hope has initiated the military enlistment process by applying for the termination of his enlistment postponement,” BigHit said in a statement released to the BTS ARMY on Weverse. “We will inform you of further updates in due course. We ask you for your continued love and support for j-hope until he completes his military service and safely returns. Our company will spare no effort in providing support for our artist.”
J-Hope will be the second BTS member, following Jin, to enlist for the nation’s mandatory 18-month military service.
In another post on the same day, BigHit shared an update about J-Hope’s new music release: “We are happy to inform you that BTS member j-hope will be releasing a solo single ‘on the street,’” they wrote.
“On the Street” will be released on March 3 at 2PM KST.
“j-hope wrote the track to share his candid feelings toward his fans,” the message said. “The title ‘on the street’ refers to j-hope’s roots — street dance — from which his dream to become an artist began, and the path the artist and fans will continue to walk together. We hope that j-hope’s ‘on the street’ serves as a meaningful gift to everyone who supports the artist. Please look forward to j-hope’s new song!”
J-Hope’s Disney+ documentary, J-Hope in the Box, is now streaming, and it was just announced that he is the luxury brand Louis Vuitton’s newest ambassador.
See the updates from BigHit Music below.
The process of collecting public performance royalties from DJ sets has long been a tricky one in the United States, with uneven data collection processes often obscuring what songs are played at dance festivals. That makes it difficult for artists with the rights to the music to get paid what they’re due.
But one music market with a firm grasp on the performance royalties collection and distribution process as it relates to the dance world is The Netherlands, where electronic music is deeply woven into the country’s social fabric.
Buma/Stemra, one of the world’s most progressive collective management organizations (CMOs) for electronic music producers, operates within a live music market that generated 34 million euros ($36 million) in public performance royalties in 2022. Of this revenue, 7.2 million euros ($7.6 million) came from dance festivals, with roughly 1 million euros ($1.1 million) from clubs, making dance music comprises a quarter of the Netherlands’ total performance royalties
Since dance music incorporates so much different music from different artists in a set, that leaves a lot of rights holders to be identified. For this, Buma/Stemra uses audio fingerprinting technology that monitors and identifies songs played during sets.
“In the Netherlands, we have such a wide range of successful DJs with worldwide success,” says Juliette Tetteroo, accounts manager of dance events at Buma/Stemra. “As Buma/Stemra, that’s also why we find it really important to be at the front of developments like fingerprinting technology.”
For its fingerprinting, Buma/Stemra primarily uses Amsterdam-based DJ Monitor, an electronic music monitoring technology. DJ Monitor functions much like Apple-owned audio-recognition mobile app Shazam, identifying tracks within its library — a database of roughly 100 million songs submitted to DJ Monitor by global performance rights organizations (PROs) — and creating set lists for any given set with 93% accuracy, the company reports. (Billboard‘s recently published lists of the top 50 tracks and the top 50 artists played at Dutch dance festivals in 2022 was made with data collected by DJ Monitor.)
DJ Monitor is one of a number of music recognition technologies, including Pioneer’s KUVO, that can make the monitoring and reporting of DJ sets easier and more accurate. Buma/Stemra says that DJ Monitor has the highest identifying rates of all audio fingerprinting technology.
DJ Monitor is currently employed by CMOs in France, Germany, Finland, Belgium, Australia, New Zealand, the U.K. and The Netherlands, where it fingerprints 70% of all festivals. (Another fingerprinting company, Soundware, is also used by some Dutch events.)
Buma/Stemra’s work collecting performance royalties from a given event begins well before any tracks are even played. The CMO begins by determining licensing fees for any given event; for festivals with revenue lower than 110,000 euros ($116,000), the festival organizer pays the standard 7% licensing rate for events. This percentage is based on the assumption that more than two-thirds of songs played during the course of a given event are in Buma/Stemra’s repertoire. (If the event organizer provides a setlist showing that less than two-thirds of the music played was Buma/Stemra repertoire, the licensing fee drops to between 3% and 5%.)
For festivals with revenue higher than 110,000 euros, the event organizer provides Buma/Stemra with audio from the events to be fingerprinted. The festival can submit the audio manually, or upload it to the Buma/Stemra server, where it is then fingerprinted by DJ Monitor. The festival can also let DJ Monitor monitor audio during live performances, in which case DJ Monitor tech is implemented at every stage at the festival.
For bigger events, Buma/Stemra pays for fingerprinting costs, as, they say, it serves their goal of paying royalties on every song played at a given event.
“Our goal is to work towards one-on-one collection and distribution,” says Tetteroo. “It is all about the quality of what we do. [Paying for fingerprinting costs] also helps in encouraging organizers to pay, because they know that the money they pay goes to the composers and their publishers of the songs that have been paid. This is why we happily invest in technology that points in this direction.”
Buma/Stemra receives hundreds of songs from any given festival, given that most events host multiple stages and often run for three days. DJ Monitor typically identifies between 80% to 90% of this music (more than 80% if monitoring electronic music; 90% if monitoring open format/pop music) and sends formatted lists of the data to Buma/Stemra. Buma/Stemra imports this data, 60% to 70% of which is typically imported automatically — given that roughly that amount of music from any given event is recognized as something already in the Buma/Stemra database.
The percentage that’s not automatically recognized goes to an outsourced supplier in India that works to manually identify it. Money collected from a festival is then divided and paid out based on a system that assigns points to songs.
Given that a certain percentage of songs aren’t recognized, hundreds of hours of unclaimed music aggregates over the year because, says Buma/Stemra’s music processing manager Rob van den Reek, “we have a real lot of festivals here in the Netherlands.”
Buma/Stemra publishes this unclaimed music on their website, where artists can find and claim their songs. Artists are able to make a claim for up to three years after the song is posted online. If no one has claimed it after three years, the money owed to all unclaimed music is divided between rightsholders included in what’s called a “reference repertoire” — or a Buma/Stemra-compiled sample of common songs played at festivals. Introduced four years ago, this claiming system adds another layer of transparency — and more opportunity for creators to get the money they’re owed.
“Transparency is one of the benefits that stands out the most from the way we work,” says Buma/Stemra marketing manager Annabel Heijen. “That’s where we’ve made the most progress.”
There is one fault with the Buma/Stemra system that’s in the process of being addressed. Currently Buma/Stemra pays out based on the length of a full song that’s registered — not how much of it was actually played in a DJ set. If a song was registered at a length of three minutes, but only played for two minutes, Buma/Stemra pays based on that full, original timestamp. Buma/Stemra is currently building a new system that will pay out against the real timestamp identified during DJ sets that the organization expects to release by the end of 2023 or early 2024.
Ukrainian president Volodymyr Zelenskyy made a surprise appearance, via a pre-taped video, at the 64th annual Grammy Awards on April 3, 2022, less than six weeks after Russia invaded his country. He could play an even larger role at the 66th Grammys early next year – he could be a nominee as a featured artist on Brad Paisley’s “Same Here.”
The song, which was released Friday (Feb. 24), the one-year anniversary of the start of the war, ends with Paisley and Zelenskyy in conversation, recorded during a video call. Zelenskyy talks about Ukrainians’ desire for freedom, noting, “There is no distance between our two countries in such values.”
The Recording Academy confirms that Zelenskyy would be eligible for a Grammy nomination if the track were to be nominated. The most likely category for it would be best country duo/group performance.
There is a precedent for a world leader receiving a Grammy nomination. Former Soviet leader Mikhail Gorbachev won a Grammy in 2004 for best spoken word album for children, alongside former President Bill Clinton and screen legend Sophia Loren. This most unlikely collaboration won for Prokofiev: Peter and the Wolf/Beintus: Wolf Tracks.
While “Same Here” doesn’t mention Ukraine specifically, the song’s theme is that people are more alike than they are different, despite distance and surface differences in language and customs.
“I think he understands that art is how you reach the most people, especially in the heart,” Paisley told The Associated Press of Zelenskyy. “He can give as many speeches as he can give, but it’s a lot easier to hear something with a melody maybe.”
Zelenskyy didn’t just sign off on the song; he also suggested some changes to it, Paisley told The AP.
Paisley’s royalties for the song will be donated to United24 to help build housing for thousands of displaced Ukrainians whose homes were destroyed in the war, Paisley also said.
Paisley co-wrote the song with frequent collaborator Lee Thomas Miller (co-writer of such Paisley hits as “The World,” “I’m Still a Guy” and “Perfect Storm”) and Dawes frontman Taylor Goldsmith.
Zelenskyy’s appearance at the 2022 Grammy Awards included a brief speech which led into an introduction of John Legend and three Ukrainian artists. Zelenskyy urged those in the audience to continue offering support in whatever way they could to his homeland. “The war — what is more opposite to music? The silence of ruined cities and killed people,” he said. “We defend our freedom. To live. To love. To sound. On our land, we are fighting Russia, which brings horrible silence with its bombs — the dead silence. Fill the silence with your music.”
Legend then took to the stage, bathed in white light and seated at a grand piano to perform his song “Free.” Legend was joined by two Ukrainian artists – Denver-based musician Siuzanna Iglidan, originally from Odessa, Ukraine, and Mika Newton, a Ukrainian singer. Finally, they were joined by Lyuba Yakimchuk — a Ukrainian poet who offered a prayer-like stanza to close the performance.
“Same Here” is Paisley’s first single from his upcoming album, Son of the Mountains, to be released later this year on Universal Music Group Nashville. This will be Paisley’s debut on UMG after moving over from Sony’s Arista Nashville label, for whom he recorded 12 studio albums from 1999 to 2017.
Paisley has received 18 Grammy nominations since 2000. He has won three times.
In the latest episode of the battle of K-pop giants, HYBE, the home of BTS, took some swings at SM Entertainment’s business partnership with tech company Kakao, owner of a popular messaging app, Kakao M, and music streaming service Melon.
On Feb. 6, Kakao announced it would purchase a 9.05% stake in SM Entertainment, whose roster includes NCT 127 and Red Velvet. Three days later, HYBE announced it would acquire a 14.8% stake in SM Entertainment by purchasing the majority of shares of the company’s founder and legendary K-pop producer, Lee Soo Man. Following a campaign by an activist investor for SM Entertainment to reduce Lee’s role, the company canceled his producer contract on Dec. 31, 2022.
SM Entertainment called HYBE’s investment “hostile M&A” and said its partnership with Kakao is “the first step” in its long-term transformation plan. HYBE sees SM Entertainment’s relationship with Kakao as one-sided and bad for shareholders.
“The contract between SM and Kakao, which grants acquisition of convertible bonds, undermines shareholder interest,” HYBE said in a statement Friday (Feb. 24). A clause grants Kakao or Kakao Entertainment the ability to “continuously increase its stake in SM” by allocating stocks issued through a paid-in capital increase to a third party, HYBE stated. “This will dilute the value of stocks owned by all shareholders other than Kakao or Kakao Entertainment.”
HYBE further argued the contract would hurt SM Entertainment’s chance of attracting “new strategic investors” and make it easier for Kakao “to seize control of SM’s management rights.”
HYBE also took issue with the Kakao’s role in managing SM Entertainment artists and distributing their music, arguing the contract gives Kakao an “unexpiring, exclusive” right to distribute SM Entertainment’s recorded music and allow Kakao Entertainment to manage SM Entertainment artists in North and South America.
In turn, SM Entertainment subsidiary SM Life Design will produce the recordings of Kakao Entertainment artists and provide a music video shooting set. “Compared with the important business rights that SM is handing over,” HYBE stated, “the return seems unreasonably small.”
After reviewing the contract’s legal issues, HYBE “will take all necessary legal measures, both civil and criminal,” it stated.
What’s TikTok without music? That’s the central question at the heart of debates between major rights holders and the Bytedance-owned social media platform negotiating rates for their content, and a group of Australian users have been pulled into the middle to try to find out.
Earlier this month, it was revealed that that TikTok is running tests in Australia that limits the amount of licensed music some users can encounter on the platform. The test impacts fewer than half of Australia-based accounts, and it doesn’t affect everyone in the same way, according to a person familiar with the situation. The test puts people into multiple cohorts and provides them with different libraries of sounds to use in video creation. So, not everybody in the test will have the same catalog to choose from. Likewise, users in the test cohorts have different encounters with audio. Some people in test cohorts will encounter muted music on other users’ videos. This allows TikTok to compare and measure the different ways people interact with the app.
The results may inform TikTok’s licensing strategy, but evidence that some Australians are unhappy members of the test cohort can be seen on Twitter. “Tiktok really ruining its own app with all this ‘sound removed’ garbage,” one Australian user tweeted last week. Another echoed the sentiment: “wtf is up with tiktok removing like half the sounds??? like i swear ive seen SO many tiktoks where the sound has been removed.”
The risk of upsetting users and creators isn’t lost on TikTok. “We appreciate it’s disappointing if a certain track is unavailable or if a sound is muted on a previous video,” the company said in a statement. “This change will not be in place for long and not all music is affected.” The test will run from a month to a month and a half, according to a source familiar with the situation, meaning it should conclude by mid-March.
Why would TikTok degrade its user experience even in a relatively small market like Australia? A source familiar with the company’s thinking said TikTok is using the experiment to study what is trending, how users are accessing the platform through different entry points and how they are enjoying it. It is not a negotiating tactic, the person said. Nonetheless, the company is gathering the data during a year when most, if not all, of TikTok’s agreements with music rights owners come up for renewal. The source said it is predictable that TikTok would gather this information ahead of high-stakes negotiations, like those ongoing with major labels and other stakeholders.
Around the music industry, there are different interpretations for TikTok’s actions. One explanation is that TikTok is doing what tech companies do all the time: run tests, collect data and analyze the results. That narrative fits with what’s known. Australia, an important yet small and isolated English-speaking market, is a popular place for tech companies — Spotify, Facebook, Google, Tinder and others — to test new products. Much like these other companies, TikTok is an engineering-led company with engineers who want to take data-driven approaches to making decisions on how much time and resources should be invested in projects, building systems and, yes, even licensing rights. Sometimes, as history has shown with most of those other companies, too, a different mindset puts them at odds with creative industries.
“I don’t think they truly understand music at these tech companies,” says a record label executive. “It just doesn’t resonate with them.”
Negotiating tool?
TikTok, of course, has numerous people from the music world on staff: Ole Obermann, global head of music, and Tracy Gardner, head of licensing and partnerships, are former Warner Music Group executives. Jordan Lowy, head of music publishing licensing and partnerships, previously worked at Universal Music Group and Disney Music Group, and dozens if not hundreds of other music industry alums work at TikTok in editorial and artist partnerships. But the company looks and acts like a social media company, not a music company.
A less benign view of the test is that TikTok is looking for a rationale to argue music is not important to the platform – or not as important as labels believe. Annabelle Herd, the CEO of ARIA, the trade body for the Australian record industry, said TikTok “seeks to rationalize cutting artists’ compensation” and “downplay the significance of music on its platform.” Another industry executive believes the test is meant to lower expectations going into discussions with rights holders. “They’re looking to anchor their negotiating position near zero,” says a music industry source.
TikTok has spent years playing up music’s importance to creators, users and artists. “Music is at the heart of the TikTok experience,” Obermann stated in the opening words of the TikTok 2021 Music Report. That year, around 430 songs surpassed 1 billion views, up 200% from the previous year, and over 175 songs that trended that year charted on the Hot 100. In the company’s 2022 year-end report, Obermann reiterated TikTok’s value to artists, saying the platform “continues to unlock real-world opportunities for artists and labels, helping talent to secure record deals, brand collaborations, chart success, or be re-discovered decades later.”
And while the platform has certainly evolved beyond lip-syncing videos – book reviews and finance advice abound, for example – much of the recent news coming out of the company still involves music: StemDrop, an interactive, collaborative songwriting platform led by Max Martin, Syco Entertainment, Universal Music Group and Samsung; a Calvin Harris virtual reality concert; and welcomes to The Rolling Stones and Dolly Parton for joining the platform.
Anecdotally, exactly how important records labels’ music is to TikTok is debatable. Its top three trending songs of 2022 were independent releases, and the No. 1 song, “Sunroof” by Nicky Youre & Dazy, was originally released independently through SoundOn, TikTok’s music distribution business that’s been known to add promotion to music uploaded through its service. In all, only five of the top 10 of 2022 were signed to major labels. Major label music is arguably more important to on-demand streaming platforms and radio stations. By contrast, all the top 10 tracks of Billboard’s year-end Hot 100 and Radio Songs charts were released through major labels.
But major label music is everywhere on TikTok. Lizzo’s “About Damn Time” was the No. 4 trending song of 2022. Pharrell Williams’ “Just a Cloud Away” was No. 5. Kate Bush’s “Running Up That Hill” was No. 10. And TikTok’s ability to give unknown artists a large audience increases its need to license music from labels. “Sunroof” was so successful that Youre signed with Colombia Records and reached No. 4 on the Hot 100.
What’s past is prologue
TikTok has ample motivation to reduce what it pays music rights holders. Licensing costs eat up more than 70% of a music subscription service’s revenue with little left over after paying operating expenses. Social networks, on the other hand, generate huge sums of free cash flow. Facebook, for example, had an operating margin of 25% in 2022 and 40% in 2021.
Services that once butted heads with music rights holders decided it was wiser to build partnerships that enriched both sides. Like TikTok, YouTube began as an ad-supported platform built on user-generated content and characterized by minuscule royalties. Over time, YouTube attracted better advertisers, built a strong on-demand premium service and became a major source of revenue for labels and publishers. In the 12-month period ended June 30, 2022, YouTube paid music rights holders $6 billion through YouTube advertisements and fees from the YouTube Music subscription service.
Now, YouTube has “a phenomenal partnership” with rights owners after it “decided that music is important to us forever,” Warner Music Group CEO Robert Kyncl, YouTube’s former chief business officer, said during WMG’s Feb. 9 earnings call. It invested in music “holistically” by building a copyright management platform, Copyright ID, launching the YouTube Music subscription service and taking on TikTok with its short-form video platform, YouTube Shorts.
TikTok appears to share YouTube’s ambitions to offer a multitude of services that segment the market into ad-supported and paying customers. Parent company Bytedance already has an on-demand music service, Resso, operating in Brazil, Indonesia and India, and a separate on-demand service, Qishui Yinyue, in China. But in major markets like the U.S., TikTok users that want to listen to an entire track and explore an artist’s catalog end up going – in large numbers – to on-demand services like Spotify and Apple Music. Pairing its short-form video platform with an on-demand service would give TikTok a “significant opportunity” to leverage data and manage customers across multiple platforms, says one of the music industry sources. “Why would they not want to capture that demand themselves?”
“TikTok needs to do that [also],” Kyncl said during Warner’s earnings call. “It’s the right decision for them to evaluate.”
Additional reporting by Liz Dilts Marshall