Utopia desires to be the ‘working system’ for the music trade, and three different issues we discovered from founder Mattias Hjelmstedt’s new interview

Since Switzerland-headquartered Utopia Music launched in 2016, it has turned heads with its aggressive acquisitions of companies within the music house.

Nonetheless, over the previous six months, as the corporate has rolled again a few of these purchases and carried out successive rounds of layoffs, many have checked out its acquisitions and requested: What’s it that Utopia Music is attempting to do?

The corporate has introduced itself as a Huge Information agency for music, growing a proprietary music monitoring platform typically known as the Utopia Open Platform. The expertise retains observe of songs performed on radio stations and different broadcasters all over the world, in addition to figuring out performs on streaming platforms, basically 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 by means of a sequence 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 purchasers. The tech can be utilized to create playlists that match with character 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 provides 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 information analytics platform ForTunes. Utopia rolled the 2 firms collectively to turn out to be its new Creator Companies Enterprise Unit, which it stated would “present creators with a complete analytics platform, an trade listing and different advertising and marketing instruments.”

It went on to buy Liverpool-based music writer and publishing administrator Sentric Music Group, which Utopia transformed into its new Royalty Administration Companies 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 largest success tales within the music enterprise over the previous decade.

In early 2022, Utopia went in an surprising route – it bought 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 just lately, the corporate signed a £100-million cope with logistics agency DP World to supply 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 purchasing spree. It sold its music trade listing and information 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 staff 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 below are a few of the highlights of what he needed to say.

1. The monetary world is not rewarding “hypergrowth” firms 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 combat in opposition to inflation that has confirmed longer-lasting than most individuals had anticipated.

On this atmosphere, tech firms – together with music-related tech firms – have discovered it more and more tough to lift cash.

“We went by means of that hypergrowth. We went from 40 to 1,100 individuals. We recruited a group that was specialised [and came] from a few of the largest progress firms on this planet. And that labored fantastically properly 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 stated. “Take a whole lot of the big firms that exist immediately. They went by means of these hypergrowth eventualities which massively elevated the worth of them. Not at all times from a profitability standpoint, not at all times from a income standpoint – simply with the ability to seize market [share] by progress.

“This has been how the world of financing has seemed [for] the final 20 years, and a 12 months in the past that each one got here to a cease… We’re [caught up] in a wake of firms which can 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 stated.

“Expertise-wise, we went by means of that hypergrowth,” he continued. “We went from 40 to 1,100 individuals. We recruited a group that was specialised [and came] from a few of the largest progress firms on this planet. And that labored fantastically properly up till the world didn’t reward it anymore. We have been in a position to elevate capital each single time at excessive multiples and we have 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 tougher to come back by. However even the latest restructuring “requires cash, and that’s been… not the best 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 by means of the lifecycles that… you see on this planet of expertise immediately. We’ve had downsizing. We’ve had to have a look at operations. What number of workplaces do now we have? What’s the price? How will we function? How will we [do] price controls?” Hjelmstedt stated. “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 attention-grabbing journey, but additionally 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 vital to not take all the selections to get there.”

Mattias Hjelmstedt, Utopia Music

Nonetheless, Hjelmstedt stated the layoffs have 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 can be there for the imaginative and prescient, to have the ability to get there,” he stated.

“It’s been a tricky however attention-grabbing journey, but additionally 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 vital to not take all the selections to get there.”

3. Utopia desires 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 side of the music trade, bodily media included.

“We do all the pieces, [even] precise distribution of music,” he stated. He claimed additional: “We even… do about 98% of all deliveries of bodily vinyls within the UK for example, so within the UK each single [vinyl] document you… purchase has been delivered by Utopia.”

But his imaginative and prescient of a knowledge 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 totally different territories to improve them and make them fashionable, so… it’s nearly like an working system for an trade,” he stated.

The concept is to create programs that save time, as a result of “if you save time you possibly can truly spend extra of that point to create extra. Extra… music comes out and other people can take heed to extra music, which is helpful for the entire trade.”

4. Financing for musicians and rights holders is a serious a part of Utopia’s enterprise mannequin

One factor Hjelmstedt burdened within the interview is the fintech side of Utopia’s enterprise mannequin in a solution to a candid query from Alejandro Cremades: “How do you guys generate income?

“We do the precise assortment [of royalties] and distribution of cash. We even have advances so when – this going to sound insane, however in case you’re, for example, an American artist and also you [got airplay] on radio in Germany, it may well take two years so that you can receives a commission,” Hjelmsted stated.

“And even in case 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 a whole lot of of legacy in there. … So we will acknowledge [that a song got] play and we will truly advance the cash to the [rights holders]. You will 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 belongings, you possibly can 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 side 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 stated it gained “aggressive benefit, energy, and optimized market positioning within the quickly rising music expertise market that allows sooner funds for creator rights.”

Hjelmstedt capped off the interview with some recommendation born of Utopia’s hard-fought experiences of latest months.

“The largest… recommendation I can provide to everybody [is] take selections. Function. Don’t hesitate. Go ahead at all times, as a result of that’s what makes an organization profitable, and when once we speak about valuations, top-of-the-line folks [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

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