Utopia Refocuses on ‘Fixing’ Music Royalty – Billboard

LONDON — In early February, Chairman/CEO of Universal Music Group Lucian Grainge drew a line in the sand between the traditional record industry and financial companies entering the fray to take part in the global growth of streaming. “Our industry is entering a new chapter where we have to choose sides,” Grainge said at the Billboard Power 100 launch event in Hollywood. “Are we on the fintech side [financial technology] and functional music, functional content? Or are we on the side of artistry and artists?”

Although Grainge did not mention names, he could well have been talking about Utopia Music, a Zug, Switzerland-based technology company that provides financial services to labels, publishers and distributors. Over the past two years, Utopia, whose motto is “Fair pay for every play,” has embarked on a frenzied acquisition spree of 15 companies, including music technology company Musimap; Lyric Financial, a Nashville-based provider of royalty-backed cash advances; and Proper Music Group, the UK’s leading independent physical music distributor, providing distribution services for over 1,000 indie labels and service companies.

Industry executives don’t quite know what to make of Utopia’s rapid growth, its direction or exactly where the company fits into today’s multifaceted global music business. It is one of several fintech companies, many backed by venture capitalists, that have penetrated the music industry to varying degrees amid the streaming boom. “At its core, Utopia is a royalty technology company,” co-founder and executive chairman Matthias Hjelmstedt says 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 is using 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 make more money,” not just Utopia’s part of it, he says.

“We are on the side of anyone who owns the copyright, who is a creator, who is an artist, who 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’s actually completely in line for me to have a clear path from use to creator.”

Utopia is hardly alone in pitching ways to use technology to give artists more control over their music deals than they have traditionally had with record deals. Hifi, a fintech with backers that include industry leaders such as Quincy Jones and Capitol Records Chairman/CEO Michelle Jubilates — as well as artists Diplo and G-Eazy — are launching an “enhanced royalty acceleration service” that promises to pay artists upfront based on estimated streaming royalties. Los Angeles-based beatBread offers financing for existing music catalogs and uses artificial intelligence to help artists secure advances of up to $1 million for unreleased music. And Brazilian fintech firm Hurst Capital says it has set up a “hyper-specialised team” to manage royalties from catalogs it has acquired from Sertanejo (Brazilian pop-country) stars such as Gusttavo Lima and the late Marília Mendonça.

Hjelmstedt is a Swedish serial entrepreneur known for founding the gaming platform Electronic Sports Network, which Electronic Arts acquired in 2012, and co-founded the video-on-demand platform Voddler, which filed for bankruptcy in 2018 (several years after Hjelmstedt had left ). He founded Utopia in 2016 with Thomas Gullbergbased in the city of Zug, where around 60 of the company’s 1,000 employees are based.

Details of Utopia’s finances and funding remain opaque. The company’s only listed investors are Switzerland-based investment companies CV VC and FiveT Fintech (formerly Avaloq Ventures). Hjelmstedt says the firms are “by far not among the biggest investors”, but declined to reveal any others. Utopia, which he says generates more than 100 million euros ($107 million) in revenue a year, recently completed an investment round, but Hjelmstedt declined to discuss numbers or what the capital will be used for.

Recently, the company has been characterized by change. In November, Utopia cut its workforce by about 20%, or about 230 jobs, according to a company representative. Hjelmstedt says the job cuts were a result of the global economic downturn combined 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 management, with the former managing director Markku Mäkeläinen leaves the company and Hjelmstedt takes over as temporary managing director. (UK-based Roberto Neri is managing director of the Music Services division.)

As part of the reorganisation, Utopia announced on 7 February that it had sold US-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 acquired 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 would be further sales or acquisitions this year, claiming the company would reveal more about future plans, including new product launches, in the coming months.

Utopia’s music services division is led by a former UK center manager Roberto Neri and includes the acquired companies Proper, Absolute Label Services, Liverpool-based publisher Sentric Music Group and Cinram Novum, one of the UK’s leading providers of physical home entertainment. (Cinram Novum provides warehousing, delivery and distribution services to brands including UMG, Sony Music Entertainment and [PIAS].)

Utopia’s royalty platform arm, which Hjelmstedt oversees, handles the company’s financial technology services, data operations, copyright and royalty management.

Hjelmstedt declines to comment on whether splitting 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 building a sustainable business. The company’s myriad acquisitions, he says, were made “to better understand different parts of the industry so we can serve them better with the data.” Despite buying a significant portion of the UK music distribution business, he says, it was “never the idea of ​​Utopia to be a distributor.”

“We’re never going to be a fundraising company or a [performing rights organization], says Hjelmstedt. “We will never sell data and we will not take investment from a large strategic player in the industry, and by doing so we can safeguard the core of what we stand for.”