Since Switzerland-headquartered Utopia Music launched in 2016, it has turned heads with its aggressive acquisitions of companies within the music house.
Nevertheless, over the previous six months, as the corporate has rolled again a few of these purchases and applied successive rounds of layoffs, many have checked out its acquisitions and requested: What’s it that Utopia Music is making an attempt to do?
The corporate has offered itself as a Huge Information agency for music, growing a proprietary music monitoring platform generally known as the Utopia Open Platform. The expertise retains observe of songs performed on radio stations and different broadcasters world wide, in addition to figuring out performs on streaming platforms, primarily trying to be a one-stop-shop for music measurement.
It has additionally sought to ascertain itself as a music companies and royalty assortment platform, working underneath the motto “truthful pay for each play.”
One factor that has been clear for a while is that Utopia constructed itself into what it’s via a collection of acquisitions.
In 2021, it bought Quincy Jones-backed AI company Musimap, which makes use of proprietary AI expertise to develop emotional metadata about music for shoppers. The tech can be utilized to create playlists that match with persona profiles, or that mirror sure genres or moods, or to seek for music.
That was adopted quickly by the acquisition of Lyric Financial, a Nashville-based agency that gives musicians advances on the royalties they’re owed. (As will turn out to be clear in a while, this was a key buy for Utopia.)
At that time, Utopia’s acquisition spree was simply getting began. The corporate soon bought US-based music trade listing ROSTR, and Austria-based music knowledge analytics platform ForTunes. Utopia rolled the 2 corporations collectively to turn out to be its new Creator Providers Enterprise Unit, which it mentioned would “present creators with a complete analytics platform, an trade listing and different advertising instruments.”
It went on to buy Liverpool-based music writer and publishing administrator Sentric Music Group, which Utopia transformed into its new Royalty Administration Providers unit. Little greater than a month later, it acquired UK-based Absolute Label Services, a distributor and repair supplier to indie artists and labels.
Round this time, the corporate raised €300 million in a Collection C funding spherical that implied a market capitalization of round €2.5 billion – making the corporate a double unicorn, and one of many greatest success tales within the music enterprise over the previous decade.
In early 2022, Utopia went in an sudden path – it acquired into the bodily music media recreation, with the acquisition of UK-based distributor Correct Music, giving the corporate a foothold in bodily and digital music distribution.
Little greater than a 12 months later, it expanded its holdings within the bodily music world with the purchase of Cinram Novum, a UK-based warehouse, achievement and distribution firm. And most not too long ago, the corporate signed a £100-million take care of logistics agency DP World to offer warehousing and logistics for bodily media within the UK.
However in late 2022, issues started to go sideways. In November of that 12 months, Utopia announced a spherical of layoffs that reportedly impacted about 20% of the corporate’s workers, which might have been round 1,200 individuals at that time. Lower than six months later, the corporate slashed one other 15% of its workforce.
What’s extra, Utopia appeared to have developed purchaser’s regret about a few of its purchases throughout that multi-year buying spree. It sold its music trade listing and knowledge platform ROSTR again to the corporate’s founders, following that up with a sale of music writer Sentric to France-headquartered Believe.
Amid all this, reports swirled of unpaid tax money owed in Sweden and workers going with out pay.
So what occurred to this musical unicorn, and the place is it going subsequent?
In a rare interview on the Dealmakers podcast with Alejandro Cremades, Utopia founder Mattias Hjelmstedt dropped some hints as to what has been occurring with the corporate, and the place it sees itself going subsequent.
Hjelmstedt was brought back into the CEO place earlier this 12 months, after Markku Mäkeläinen departed the function in January.
MBW listened in on Hjelmstedt’s podcast interview; listed here are among the highlights of what he needed to say.
1. The monetary world is not rewarding “hypergrowth” corporations like Utopia
It’s no secret that the monetary world has been turned the wrong way up over the previous 18 months, as central banks have begun elevating rates of interest in a struggle in opposition to inflation that has confirmed longer-lasting than most individuals had anticipated.
On this surroundings, tech corporations – together with music-related tech corporations – have discovered it more and more tough to lift cash.
“We went via that hypergrowth. We went from 40 to 1,100 individuals. We recruited a workforce that was specialised [and came] from among the largest development corporations on the planet. And that labored fantastically effectively up till the world didn’t reward it anymore.”
Mattias Hjelmstedt, Utopia Music
“The final 20 years, and particularly the final 10, [have] been extraordinarily centered on hypergrowth,” Hjelmstedt mentioned. “Take loads of the massive corporations that exist at present. They went via these hypergrowth situations which massively elevated the worth of them. Not all the time from a profitability standpoint, not all the time from a income standpoint – simply having the ability to seize market [share] by development.
“This has been how the world of financing has appeared [for] the final 20 years, and a 12 months in the past that every one got here to a cease… We’re [caught up] in a wake of corporations which might be failing due to it. You’ve even seen banks being disrupted by it and and it’s not going to cease anytime quickly.”
Companies now must reorient themselves, and take a look at sustainability and profitability, Hjelmstedt mentioned.
“Expertise-wise, we went via that hypergrowth,” he continued. “We went from 40 to 1,100 individuals. We recruited a workforce that was specialised [and came] from among the largest development corporations on the planet. And that labored fantastically effectively up till the world didn’t reward it anymore. We had been in a position to increase capital each single time at excessive multiples and we had been additionally in a position to get oversubscribed [in our funding rounds].”
Now the corporate is feeling the friction of a world the place capital is more durable to return by. However even the current restructuring “requires cash, and that’s been… not the simplest factor to do, even for us, a unicorn-level firm,” Hjelmsted famous.
2. Utopia’s downsizing is working, and has resulted in a 75% discount in money burn
If there’s excellent news to be present in Utopia’s half a 12 months of sell-offs and layoffs, it’s that the corporate has been in a position to get a grip on its monetary state of affairs, Hjelmstedt asserted.
“We’ve gone via the lifecycles that… you see on the planet of expertise at present. We’ve had downsizing. We’ve had to take a look at operations. What number of places of work do now we have? What’s the value? How can we function? How can we [do] value controls?” Hjelmstedt mentioned. “So in about six months we’ve been in a position to decrease our [cash] burn [by] about 75% and we’re nonetheless growing our income this 12 months [by] about 80%.”
“It’s been a tricky however fascinating journey, but in addition sort of a tragic one as a result of there’s been so many nice individuals [who were let go] however [in] the tip, the imaginative and prescient of constructing the world of music higher is just too essential to not take all the choices to get there.”
Mattias Hjelmstedt, Utopia Music
Nonetheless, Hjelmstedt mentioned the layoffs had been laborious on the corporate.
“We created an organization with very excessive human values. We [couldn’t] title [ourselves] Utopia with out it. After which truly having to let go [of] individuals which might be there for the imaginative and prescient, to have the ability to get there,” he mentioned.
“It’s been a tricky however fascinating journey, but in addition sort of a tragic one as a result of there’s been so many nice individuals [who were let go] however [in] the tip, the imaginative and prescient of constructing the world of music higher is just too essential to not take all the choices to get there.”
3. Utopia needs to be the “working system” for the music trade
So the place does Utopia see itself going from right here? Hjelmstedt paints an image of a enterprise that’s planting roots in seemingly each facet of the music trade, bodily media included.
“We do all the things, [even] precise distribution of music,” he mentioned. He claimed additional: “We even… do about 98% of all deliveries of bodily vinyls within the UK as an illustration, so within the UK each single [vinyl] report you… purchase has been delivered by Utopia.”
But his imaginative and prescient of an information firm that integrates world measurement of music performs and assortment of royalties for creators, making the trade extra environment friendly, stays intact.
“We work with precise [royalty collection] societies within the completely different territories to improve them and make them trendy, so… it’s virtually like an working system for an trade,” he mentioned.
The concept is to create programs that save time, as a result of “while you save time you may truly spend extra of that point to create extra. Extra… music comes out and folks can take heed to extra music, which is helpful for the entire trade.”
4. Financing for musicians and rights holders is a significant a part of Utopia’s enterprise mannequin
One factor Hjelmstedt harassed within the interview is the fintech facet of Utopia’s enterprise mannequin in a solution to a candid query from Alejandro Cremades: “How do you guys make cash?
“We do the precise assortment [of royalties] and distribution of cash. We even have advances so when – this going to sound insane, however in the event you’re, as an illustration, an American artist and also you [got airplay] on radio in Germany, it might probably take two years so that you can receives a commission,” Hjelmsted mentioned.
“And even in the event you’re a songwriter and also you uploaded your music to a distribution platform, to Spotify, [on] Spotify the typical payout time to the system is 9 months, so it’s loads of of legacy in there. … So we are able to acknowledge [that a song got] play and we are able to truly advance the cash to the [rights holders]. You may get the cash tomorrow as a substitute of ready for years to get the capital, which implies that you’re once more [in] management over your future… as a substitute of promoting your property, you may even have them and management them and work with them.”
Utopia’s 2021 acquisition of Lyric Monetary appears to be a key transfer in growing this facet of the corporate’s enterprise. The enterprise specializes in royalty advances to music rights holders, and in its 2021 tie-up with Utopia, Lyric Monetary mentioned it gained “aggressive benefit, power, and optimized market positioning within the quickly rising music expertise market that allows quicker funds for creator rights.”
Hjelmstedt capped off the interview with some recommendation born of Utopia’s hard-fought experiences of current months.
“The largest… recommendation I may give to everybody [is] take selections. Function. Don’t hesitate. Go ahead all the time, as a result of that’s what makes an organization profitable, and when after we speak about valuations, top-of-the-line people [sayings] I’ve ever heard is, The valuation of [a company is] often equal to the quantity of issues you solved to get there. And I feel that’s the lifetime of an entrepreneur.”Music Enterprise Worldwide
