📑 CMU Digest: WMG + Spotify earnings, backlash at BBC radio plans, 3tone just won’t stop + more

Every Sunday CMU sends a summary of five key music business stories from the past week plus a round-up of other news.

This week: It’s Q4 earnings time – and both Warner Music and Spotify released their financials and held earnings calls with analysts and investors; the UK ditched a proposed voluntary code for AI + copyright; commercial radio groups are unhappy at the BBC’s plans for new stations, which they see as direct competition; and dodgy distributor 3tone is at it again – this time desperately trying to find a new back-end distribution partner.

ICMYI: Big news at UK physical music specialists Key Production; (more) Apple spatial ructions; the image problem that’s blocking industry talent; LGBTQ+ discrimination highlighted in new report; Kakao x SM Entertainment drama; Hipgnosis board’s big bung gets overwhelming shareholder approval.

And Finally… Everyone loves golf (OK, not everyone) and golfiest of all the golfs are Eddy “The Niblick” Cue and Irving “Birdie” Azoff who golf so much golf they’ve only gone and bogeyed up their dream golf course together.

📈 Warner Music CEO Robert Kyncl said that the major music companies are growing ever more relevant

Speaking to investors, Kyncl said that the ability of a business like Warner to “aggregate large volumes of rights across recorded music and publishing” gives it – and the artists and songwriters it works with – greater bargaining power when negotiating with new and existing digital platforms, and this will be even more important with AI. He also spoke positively about the changes being made by streaming services to their payment models, and the role TikTok plays as both a marketing channel and revenue generator. 

Before the investor call, Kyncl outlined in a memo to employees “a plan to free up more funds to invest in music and accelerate our growth for the next decade”. This, he admitted, “includes reducing our workforce by approximately 10%, or 600 people – the majority of which will relate to our owned and operated media properties, corporate and various support functions”.

🤡 Spotify boss Daniel Ek discussed the recent job cuts at the company and hinted at more to come

In an investor call, Ek said the company would get better at focusing its efforts on products and projects that “really drive value”, which means being “more diligent in shutting down things that have sort of worked but that may not work as well going forward into the future”. The cutbacks are part of Spotify’s bid to become profitable. Its latest financial figures showed further growth in subscriber numbers but revealed losses in the final quarter of 2023 of €75 million, with a total loss for the year of €446 million.

As part of its cost-saving efforts, there have been significant cuts in Spotify’s podcasting operations, though that didn’t stop it signing a new mega-bucks deal with its most famous podcaster, Joe Rogan. Under the new arrangement, Rogan’s podcast will no longer be exclusive to the Spotify platform. However, with the streaming firm needing to grow its advertising revenues, having the Joe Rogan Experience available on more platforms will probably be a good thing.

⛔️ Plans for a voluntary UK code on copyright and AI were shelved

The Intellectual Property Office said that a working group of representatives from the creative and tech sectors had failed to agree a code of practice. The government said it would “now lead a period of engagement” so that the copyright and AI industries can “grow together in partnership”. 

But the Chair of Parliament’s culture select committee, Caroline Dinenage MP, said that “wooly words” from ministers won’t provide rightsholders with the certainty that they need, and that the government should “urgently reconsider” its approach to copyright and AI.

Meanwhile in the EU, member states agreed the final text of an AI Act to regulate artificial intelligence across Europe. The music industry welcomed what the act has to say about copyright and transparency.

📻 The UK commercial radio sector said that plans to launch four new BBC radio stations should be blocked​

The planned new stations would be available on DAB+ and within the BBC Sounds app, and are spin offs of existing stations focused on specific genres or decades. The BBC said the new services would build on its “commitment to new music and British artists” and would offer more choice to audiences currently “underserved by the BBC”, addressing a key concern of media regulator OfCom.

However, commercial radio trade group Radiocentre said OfCom should block the plans because the proposed new services will just compete with existing commercial radio stations. The BBC, it said, “is required to provide services that are truly additional, distinct and incremental to what is already provided by commercial operators, not duplicate it”.

💩 Dodgy distributor 3tone desperately needs a new deal – but no one wants to take on its business

Bristol-based distributor 3tone has been surrounded by controversy for failing to pay its artist and label clients, as well as its own staff. It emerged earlier this month that it had been cut off by the company it previously relied on to actually deliver music to the digital platforms. As a result it could no longer distribute music and its clients’ tracks would disappear from the streaming services. 

SonoSuite – which previously provided back-end distribution for 3tone in 2020 and 2021 – admitted that it had been approached by the company again. This followed information from CMU’s sources that SonoSuite had been reaching out to digital platforms on 3tone’s behalf. A spokesperson confirmed that that outreach had started before the company completed ‘know your customer’ checks on 3tone. Those checks then highlighted all the recent controversies and SonosSuite opted to not enter into a new deal.

🎙️ Setlist Podcast: AI developments cause celebration and concern

In this week’s Setlist Podcast: Chris Cooke and Andy Malt discuss new developments on AI in the EU and UK that have given the music industry cause for both celebration and concern, and the commercial radio industry’s anger as BBC Radio looks to give music fans more choice. Click here to listen – or search for ‘Setlist Podcast’ wherever you normally listen.

ICMYI:

📦 Key Production, purveyors of fancy cardboard boxes (and, to be fair, much more) to the music industry, has some big news. The UK-based European leader in bespoke physical music and packaging founded by Karen Emanuel in 1990 is entering its next phase as she passes ownership of the business into an Employee Ownership Trust. She will remain CEO, as well as serving as a director of Key Production and Key Production Employee Owned Trust. The other two directors of the trust are Lisa Edwards – an employee of Key for 28 years – and Rebecca Mills. This means the trust’s board is 100% female.

🍎 Apple Music faced more criticism about its implementation of a so-called ‘bonus‘ for “spatial available” tracks. After CMU broke the exclusive news showing that the bonus would skew significantly in favour of the majors, a follow-up piece by the FT voiced criticism from a number of prominent indie labels with one source saying the new deal is “literally going to take the money out of independent labels… to benefit the biggest companies in the marketplace”.

👀 The music business is facing a critical challenge: a blockage in its executive talent pipeline that begins at the very foundation of the education system. That blockage, says Liverpool Sound City MD Becky Ayres, is because of an image problem. In an exclusive op-ed written for CMU she talks about how the industry can address this, saying, “At best, there is a lack of basic awareness of the roles available within the industry. At worst, the common image of a music executive is still some cigar chomping (male) mogul sitting at the top of a skyscraper, surrounded by stacks of dollar bills”.

🏳️‍🌈🏳️‍⚧️ Rates of discrimination and sexual harassment are high for LGBTQ+ musicians, while financial pressures also cause barriers to progression in the music industry. These are among the findings of a new report published by the Musicians’ Union, Help Musicians and Come Play With Me. The music industry must “work together to tackle discrimination as a matter of urgency”, says MU General Secretary Naomi Pohl.

🤡 Kakao definitely won’t be dumping its SM Entertainment shares, and nor will it be firing its senior executives. After a hard-fought battle to acquire its stake in K-pop powerhouse SM, Kakao has been forced to issue a statement denying recent media rumours suggesting it would divest itself of its ownership in SM, or replace top-level SM execs. Management at both SM and Kakao have now “effectively communicated” – according to an official statement – and are “opting for co-growth and to collaborate on businesses to create synergies”. And who doesn’t love creating synergies?

💸 In the music industry’s other best weekly soap opera, Hipgnosis Songs Fund – or ‘SONG’ – has won overwhelming approval from shareholders to go ahead with its £20 million “bung” for anyone who might want to kick the tyres and poke through the dustier filing cabinets of the stock market listed music rights investment fund. In an EGM vote the resolution passed with 825 million shareholder votes in favour – and just 1.1 million against. What would be interesting to know is whether those 1.1 million votes are under the control of just one or two people. Will we ever know? Probably not.

And Finally…

⛳️ Isn’t golf great! Such an elevating experience, with the clubs and the bags and the little toy town cars that tip over if you drive them too fast. Golf brings a lot of joy to a lot of people. Two of those people are former Live Nation bigwig and veteran artist manager Irving Azoff and Apple exec Eddy Cue. Golf brings them so much joy that they play 70 rounds of golf together each year – which seems a lot of golf to fit into their presumably fairly busy schedules. Not only do Azoff and Cue buddy up to play an insane amount of golf, but they’ve taken their bromance to the next level by joining forces to open up their own golf course.