CMU Daily 10.08.23: Utopia's DP World deal raises more questions, Universal in talks with Google over AI product

Utopia outsources physical distribution logistics to DP World - but are jobs secure?
Utopia Music pushed out more details about its previously announced Bicester warehouse deal earlier this week, which provided more information about its move to outsource the warehousing and logistics side of its subsidiary Utopia Distribution Services to Dubai-owned logistics company DP World.

According to Utopia, its new Bicester operation will handle "70% of the UK's physical music, for clients including Universal Music Group, Sony Music Entertainment and [PIAS], as well as 35% of the UK's physical video market - amounting to over 50% of the UK music and home entertainment markets combined".

The announcement has given Utopia an opportunity to push out some big numbers and positive stats, presumably in an attempt to counter recent coverage that has centred on the rapid downsizing of its core business, the liquidation of it's UK R&D division, the bankruptcy of it Finnish R&D division, and the recent divestment of various businesses it had previously acquired.

Current headcount for Utopia globally is just 430, of which around 275 people work in its physical distribution businesses, leaving just 150 employees at the rest of the company - a far cry from its peak of more than 1100 staff as recently as November 2022.

The new warehouse facility - which was first announced back in May - replaces the warehouse previously operated by Cinram, the music and video distributor that Utopia acquired last year via a "prepack" liquidation. The former Cinram business then became Utopia Distribution Services Limited.

As part of the deal to acquire Cinram's business out of liquidation, 132 permanent employees and 100+ "temporary" Cinram staff transferred to UDS. Now, as part of the new deal with DP World, 78 of those permanent employees are being transferred to the Dubai-owned business, as well as "over 100 temporary staff".

On one level the new partnership with DP World - which will handle the logistics, warehousing and fulfilment side of UDS's operations moving forward - seems like a positive move.

It secures a key hub relied upon by a significant portion of the UK record industry, and one which handles an apparent majority of the logistics and fulfilment for the music sector's still important physical product sales.

However, the involvement of DP World raises its own questions - not least because both UDS and DP World have refused to clarify whether the 78 permanent employees who will be transferred from UDS to DP World have secure jobs after the transfer.

When CMU explicitly asked DP World to confirm that the jobs of employees now transferring from UDS to the company were safe from any future "fire and rehire" policy - as took place at DP World subsidiary P&O Ferries, where the entire UK workforce was summarily dismissed on a video call last year - the only response from DP World, through their spokesperson, was "no comment".

A UDS spokesperson asked the same specific questions was unable to offer much more in the way of clarity, simply stating that the move from the old Cinram base to the new DP World facility "has seen all jobs protected. 132 permanent and 100+ temporary Cinram staff initially transferred into UDS; 78 of the permanent staff will now move over to DP World via TUPE, with the rest remaining at UDS".

When pushed to clarify whether staff could be subject to "fire and rehire" no further detail was added, and we were referred to DP World for comment.

DP World is largely unknown outside the warehousing and logistics industry, but the company is a globally significant operator of ports, economic zones and logistics services. It was formed after the merger of the Dubai Port Authority and Dubai Ports International, and is ultimately owned by the state of Dubai - and its royal family.

In March 2022, the company found itself mired in controversy after DP World subsidiary P&O Ferries abruptly fired its entire UK workforce of nearly 800 people on a video call, with staff then being escorted off its ships by security guards.

At the time, Diana Johnson MP, speaking in Parliament, alleged that those security guards were "wearing balaclavas", while Mick Lynch, General Secretary of the Rail, Maritime And Transport Workers Union, said in a statement that they had been carrying handcuffs.

P&O was forced to issue a statement denying those allegations, stating that: "Contrary to rumours, none of our people have been wearing balaclavas nor directed to use handcuffs nor force. Instead, they have remained professional, sympathetic and calm in a challenging situation for everyone, trying to ensure the safety of all the people on board".

P&O Ferries CEO Peter Hebblethwaite was later questioned by a Parliamentary committee about the move, which was dubbed 'fire and rehire', and which was designed to reduce P&O's costs by replacing permanent UK staff with foreign agency workers paid at significantly lower rates and with less employment protection. He admitted to MPs that the way to company went about implementing the fire and rehire policy probably broke the law.

Grant Shapps MP, the then UK Secretary Of State For Transport, said in a statement to Parliament: "Peter Hebblethwaite, in front of Parliament no less, set out how he deliberately broke the law. And, in an act of breathtaking indifference, suggested he would do the same thing again".

The minister then called on the company to return the £11 million that P&O received from the government in furlough support during the COVID pandemic, saying: "I don't think it's right that having claimed that money, they then sacked the workers in such a premeditated way".

In an interview with the Financial Times two months later, DP World CEO Sultan Ahmend Bin Sulayem praised Hebblethwaite for doing an "amazing job" and "expressed irritation" with the UK government's stance, claiming that the choice was to dismiss workers or "bring down the company".

Back at Utopia - despite not giving an explicit answer to the questions about "fire and rehire" - the UDS spokesperson was keen to emphasise that the staff being transferred are "protected by TUPE, a long contract term between UDS and DP World, and a requirement for their expertise".

TUPE refers to the Transfer Of Undertakings (Protection Of Employment) Regulations, rules that seek to protect employees when they shift from one employer to another via a commercial transaction, so that the new employer accepts the obligations of the former employer.

The UDS spokesperson went on to say: "Over 100 temporary staff will also transfer to DP World. Both groups of staff have received an above inflation pay rise and had legacy pension debts from the last 24 months of Cinram paid".

Technically speaking, those legacy pension debts appear to have been paid directly by the liquidators of Cinram Novum, with the most recent liquidators' report showing a payment of £225,000 into the employee pension scheme, with another payment expected to be made soon.

Meanwhile TUPE - while offering some protection for employees - doesn't actually prevent workers from being dismissed, it simply protects the existing terms and conditions of the employment contracts of those employees.

If an employee is dismissed solely because of the transfer from one employer to another they can bring, and would likely win, an employment tribunal claim. However, if an employee is dismissed and the new employer can show a valid "economic, technical or organisational reason" for doing so, then things are not so clear cut.

Critically, one primary "ETO exception", according to employment law specialists Davidson Morris, relates to the "nature of the equipment or production processes that the new employer operates including, for example, increased computerisation or mechanisation of activities reducing the number of employees required to carry out a particular function".

When announcing the deal back in May, Utopia's press release highlighted that the DP World operated warehouse "will showcase technologically advanced solutions such as high-density storage and robotic transfer of product, to enable smooth and efficient distribution of over 30 million units a year across the UK and export markets".

Which means, while on one level this week's announcement seems to suggest that the physical distribution side of Utopia is on a more solid footing in the short term than the group's core data business, those moving over to DP World as part of this deal could do with a lot more reassurance about the future.

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Uberspace takes down youtube-dl web-page while it continues to appeal court order
German web hosting company Uberspace has confirmed that it has taken down the website for stream-ripping software youtube-dl in response to an order issued by the courts in Germany earlier this year.

That court order was the result of legal action pursued by the major record companies. For the music industry, of course, stream-ripping services - which allow people to grab permanent downloads of temporary streams - have been a top piracy gripe for some time.

Meanwhile music and movie companies have also started pursuing legal action against a wider range of internet firms in a bid to block access to piracy services, including DNS resolvers, VPNs and web hosting platforms.

Which is why the majors went after Uberspace, which doesn't actually host the youtube-dl software itself, but does have on its servers an official youtube-dl web-page that links through to where the software is available.

The music companies argued that youtube-dl infringes copyright and that, by hosting its web-page, Uberspace should be held liable for that infringement, unless it removes said web-page. And back in March the Hamburg Regional Court basically agreed with the music companies and ordered the web-page's removal.

For its part, Uberspace has been critical of the major music companies and the court that issued the injunction.

It disputes the conclusion that stream-ripping services infringe copyright, arguing that those services don't usually host any copyright infringing content and have legitimate as well as illegitimate uses. It also argues that a web hosting company should not be the target of anti-piracy legal action.

With all that in mind, Uberspace decided to appeal the ruling in the German courts. And, according to Torrentfreak, because it was appealing the ruling, Uberspace wasn't obliged to comply with the court order unless the majors posted a €20,000 bond.

It wasn't initially clear whether that would happen, but at the end of last month the bond was posted, meaning that Uberspace was obliged to remove the youtube-dl web-page even while the appeal works its way through the system.

Uberspace owner Jonas Pasche told Torrentfreak: "I received information from the plaintiff's side on 27 Jul, with proof that they did the security deposit at a bank. So I no longer have a choice but to follow the judgment. Otherwise, I would face a fine of €250,000 or jail time".

Confirming that his company continues to appeal the ruling, he added: "We are confident that a higher court will overturn the judgment of the Hamburg Regional Court, [and] we will be able to unblock the site as soon as this happens".

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Universal Music in talks with Google over voice cloning AI, posing lots of questions for the music community
Universal Music is in talks with Google about licensing a new AI platform that will seemingly allow users to legitimately generate tracks that imitate the voices, lyrics or sounds of established artists.

Or at least that's according to sources who have spoken to the Financial Times. Talks are at an early stage, the sources say, with YouTube Music boss Lyor Cohen involved in the conversations.

With generative AI technologies becoming ever more sophisticated, there has - of course - been lots of debate in the music industry in recent months about the threats and challenges posed by artificial intelligence, and especially AI models that can generate original music.

There are already a number of platforms that use AI - or at least very clever algorithms - to generate original music by pulling together segments and stems from a catalogue of existing audio. And then there are those companies developing AI models that can generate music from scratch, including Meta's MusicGen and Google's MusicLM.

Though the AI tools that have garnered the most headlines in the music space are those that help people to create tracks with vocals that sound like established artists. The 'fake Drake' track 'Heart On My Sleeve' was particularly newsworthy, it popping up on the streaming services until Universal, as Drake's label, demanded it be removed.

Music-making AI models are 'trained' by being exposed to existing music. The music industry is adamant that, whenever that is commercially released music, the AI companies must first secure licences from the relevant copyright owners.

Not all AI companies agree, which is why the music industry has been increasingly calling on lawmakers to clarify the obligations of tech firms in this domain.

That said, at the same time, the music industry is keen to stress that it also recognises the opportunities presented by generative AI. That includes making use of AI tools that assist artists and songwriters in the creative process, and also developing new business models around AI models that will result in new revenue streams for the music business.

Noting how people have been using AI tools to generate unofficial 'deep fake' tracks that imitate the vocals of established artists, the FT reports that the ongoing talks between Universal and Google aim "to develop a tool for fans to create these tracks legitimately and pay the owners of the copyrights for it".

As the majors enter into more talks with AI companies - Warner has also reportedly spoken to Google about this new product - a whole bunch more questions are posed within the music community.

While music-makers and music companies are generally aligned on the need for AI businesses to secure licences whenever they utilise existing music to train their technologies, the music community is likely less aligned when it comes to how the licensing of AI platforms should work, and how any monies generated should be shared.

It's no secret that artists and songwriters have often been kept in the dark about the deals done between the music industry and the streaming services.

Often those services have been operational for years before most artists and writers figure out how the deals work and how royalties are paid. And even then, their business partners often deny them access to key information, citing those dreaded NDAs that are inserted into the contracts between the industry and the services.

The music-maker community will likely demand more clarity much earlier on this time round. Partly because the ongoing debates around the economics of streaming have created a forum via which they can make those demands. And partly because of the fears that AI poses some fundamental threats to the music-maker community.

And also partly because the training of an AI model possibly exploits rights beyond the copyrights that the record companies control.

Certainly where an artist's voice is being overtly imitated, there's an argument that an artist's publicity rights - and possibly other data and privacy rights - are being exploited too.

And that would require the consent and involvement of the artist. Which is possibly why the sources who have spoken to the FT were keen to stress that, under the plans being discussed by Universal and Google, artists will be able to choose whether or not to opt in to the opportunity.

But - artists and their managers will likely want to know - how much information will be provided about how any one AI licensing deal or business model works, and how monies will be shared, in order for them to properly decide whether it's an opportunity they want to opt into?

If it's anything like previous digital opportunities, very little information indeed. Though, if artist opt in is going to be required, then better information sharing may be necessary.

Then, of course, there are additional complexities in all this too, because recording rights and song rights are generally licensed separately, and the song rights are often co-owned. And as soon as an AI company copies recordings from a label onto their servers, it is also exploiting the song rights. And how exactly are they going to be licensed?

That said, Google - more than most of its competitors in the generative AI space - has plenty of experience navigating these licensing challenges. Which could give it the edge here, providing those in the tech sector still pushing the "we don't actually need a licence" line do not win any legal arguments.

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Simon Cowell launches Syco Publishing with Universal
Simon Cowell and his Syco Entertainment company have announced a new partnership with Universal Music Publishing around the launch of a new Syco publishing company, which will be - and I quote - "a boutique publisher dedicated to supporting and developing global songwriting talent".

Under the alliance, Syco will sign and develop songwriters and song catalogues, while Universal will handle all the tedious admin. At launch, the new publishing firm has Lucy Spraggan and John Samuel Gerhart on its roster, plus a catalogue of rights in songs released by the likes of Fifth Harmony, James Arthur, Grace VanderWaal and Camila Cabello.

Says the MD of Universal Music Publishing UK, Mike McCormack: "Simon has been a good friend for decades and I'm THRILLED he has finally decided to launch a publishing business with UMPG".

"His track record is incredible", he goes on, "he's always had great instincts and passion for outstanding songs, and brings incredible value to every songwriter, producer and catalogue he works with. The UMPG team looks forward to working closely with Simon on Syco Publishing and providing the best global support to develop tomorrow's stars".

Cowell himself adds: "There is nothing more important than a great song. I started my career in music publishing. Mike and Universal have given me the chance to build a music publishing company. They are a brilliant company and share my wish to work with amazing songwriters".

Cowell, of course, had a long term business partnership with Sony Music, having joined the major via its merger with the original BMG. However, in 2020, that alliance came to an end when Cowell bought Sony out of the Syco TV business, while the major retained the Syco label and music catalogue.

He then partnered with Universal Music last year on a TikTok-based project called StemDrop.

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Concord appoints Tom Becci to new role of CEO of its label group
Concord has announced the hire of Tom Becci to the newly created role of CEO at its labels business. Reporting into overall Concord CEO Bob Valentine, Becci will head up the Concord Label Group, overseeing all of the firm's recorded music operations, including frontline labels and catalogue.

Becci previously had a long career at EMI in the US, having joined the major in 1993. When it was acquired by Universal Music in 2012, he became COO of Universal Music Group Nashville.

He then moved over to management firm Red Light in 2016 where he worked with founder Coran Capshaw on organisational structure and planning, and helping the company identify and pursue new business and investment opportunities.

Both Becci and his new boss Valentine are "THRILLED" about him joining Concord. "Having admired the work of Concord for years, I am THRILLED to join this incredible company", Becci says.

"It is abundantly clear that the label group's passionate, dedicated team works day in and day out in service of its artists and has built something truly unique", he goes on.

"With the help of the label presidents, the entire Concord staff, and inimitable artists like Pierce The Veil, Killer Mike, Thirty Seconds To Mars, Allison Russell and so, so many more, I can't wait to continue building on what has been established and usher Concord Label Group into a new era".

Valentine adds: "Concord is at a pivotal point in its company story. We have assembled an incredible and diverse roster of artists and a terrific, artist-centric staff around the world... and we are not slowing down".

"Tom has spent his career helping to operate and lead some of the most important recorded music and artist management groups in the US", he continues. "He knows what it takes to keep a music enterprise culturally, financially and operationally healthy".

"I am eager to work with him as we continue to bolster our global footprint in support of artists and creators, as well as their legacies", he concludes. "As we enter this next chapter for Concord Label Group, I am THRILLED to have him at the helm along with our label presidents and Concord's senior team".

Valentine himself took on the CEO job at the wider Concord company last month, after previous CEO Scott Pascucci and Chief Label Officer Tom Whalley stood down from their day to day roles at the top of the business.

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Taylor Swift confirms '1989' re-record to be released in October
Taylor Swift yesterday announced that her next re-record album will be out in October and this time it's 2014's '1989' that is getting the 'Taylor's Version' treatment.

It will be the fourth re-recorded album that Swift has released. She began the re-record project, of course, after Scooter Braun acquired the Big Machine label that released the original versions.

Angry at that deal, she pledged to put out new recordings of each of her previous albums as soon as the re-record restrictions in her old record contact lapsed. And she made good on that pledge in 2021, even after Braun sold on her Big Machine catalogue, possibly in part because the pandemic meant she had more time on her hands.

Each re-recorded album also includes some extra songs 'from the vaults', with 'Taylor's Version' of '1989' set to have five extras in addition to the original tracklisting.

Swift confirmed the October release date during a show on her 'The Eras Tour' last night. She then posted to social media: "Surprise!! '1989 (Taylor's Version)' is on its way to you soon! The '1989' album changed my life in countless ways and it fills me with such excitement to announce that my version of it will be out 27 Oct".

"To be perfectly honest", she went on, "this is my most favourite re-record I've ever done because the five from the vault tracks are so insane. I can't believe they were ever left behind. But not for long!".

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