In today's CMU Daily: Hipgnosis wants an EGM and we all know how those go; Spotify really not happy with Apple; MLC is going to do a massive audit but it's not as dramatic as it sounds.

Also today: Madonna is always really late for everything whine fans as they file a lawsuit + Jackson tribute trademark rumpus.

CMU's virtual masterclass Music + AI In 2024 takes place on Tuesday 20 Feb. Attendees can access the session live on Zoom and then on-demand via the CMU learning platform. Click here for information on all of the upcoming CMU online masterclasses and to book your place.

Hipgnosis war of words ramps up with Extraordinary General Meeting proposal for £20 million "bung"

Yesterday, Thursday 18 Jan, Hipgnosis Songs Fund - the London Stock Exchange-listed song rights investment company - circulated a proposal by its board to make a significant amendment to the legal articles that govern how the company operates.

At the heart of the announcement is the controversial “call option” that gives a private company, Hipgnosis Song Management Ltd, which is run by HSF founder Merck Mercuriadis and backed by private equity investment giants Blackstone, the option to purchase the copyrights owned by the stock market listed entity.

The notice, which was posted on the company’s website and sent to media as the London Stock Exchange opened trading on Thursday, asks for shareholders to endorse a proposal to give the company’s board of directors discretionary powers to pay fees up to a maximum of £20 million to “any prospective bidder(s) who approached the board seeking to make an acquisition of the assets of the company on terms recommendable by the board to shareholders”.

The board, says the announcement, thinks that this will “provide significant protection to prospective offerors against their due diligence and acquisition costs” and will help “ensure that they are not deterred from seeking to engage” with HSF should they wish to buy some or all of the fund’s assets.

In a statement HSF’s new Chair, Robert Naylor - formerly non-executive chair of LSE-listed Round Hill Music Royalty Fund, which was acquired by Concord for $468.8 million in September 2023 - said the company’s investors had previously “overwhelmingly voted for change” at the Annual General Meeting of Hipgnosis Songs Fund on 26 Oct 2023. He went on to say that “core to the requirement for change is addressing the call option held by our investment adviser, Hipgnosis Songs Management”. A week before that AGM the fund had announced a “strategic review” in an attempt to allay shareholder concerns.

It is this “call option” referred to in today’s announcement that is, apparently, causing problems. Addressing this, Naylor said that the call option “not only acts as a structural conflict between the interests of our shareholders and the investment adviser, but also creates a significant deterrent to potential bidders for the company’s assets, thereby depressing the value of the company”.

When Hipgnosis Songs Fund was established by Mercuriadis that company (HSF) appointed another company run by Mercuriadis - Hipgnosis Songs Management (HSM) - as “investment adviser”. As part of the contract between the two companies a “call option” was agreed, which means that if HSF terminates its contract with HSM then that company has the right to acquire the portfolio of music rights owned by the fund.

However, it’s not clear exactly why this call option would stop people from bidding for assets of the company, as this clause relates specifically to Hipgnosis Songs Fund being fired as investment adviser. However, in the event that Hipgnosis Songs Fund was taken over in its entirety, and an acquirer then terminated the agreement between the fund and Mercuriadis advisory company, then the call option may come into play.

Over the course of Thursday CMU spoke to a range of sources familiar with both sides of the current Hipgnosis war of words, and with a number of analysts and experienced City execs, seeking more clarity on the move to grant HSF’s board discretionary powers to offer potential bidders for its assets up to £20 million.

One of those sources said that - to use City parlance - a “bung” like this was “somewhat unprecedented”. Another analyst who spoke to CMU - Markuz Jaffe of investment bank Peel Hunt - said that the proposal was “unusual” and that it was “somewhat disappointing that shareholders are potentially on the hook for a substantial cost in order to attract potential bidders, and that there still appears to be potential for the current investment adviser to exercise its call option at a future date”.

More startlingly, CMU was able to establish - also later confirmed by the FT - that HSF may in fact be sitting on a proposal from HSM to remove the call option entirely.

A source familiar with the situation told CMU that this was, in fact, the case, adding “The investment adviser has been asked repeatedly to change the call options and to propose changes to the agreement. Very recently the investment adviser finally proposed some changes - but those changes are heavily caveated. These include the potential to make changes to the call option, but only in return for a new extended contract”.

That source went on to say that “a central part of the [HSF] strategic review is due diligence. That work remains ongoing and so the board would not be in any position to assess proposals for the future management of the company until that due diligence has been completed”.

One analyst CMU spoke to said that there were rumours circulating in the City that one part of that due diligence might be to look for ways to invalidate the call option due to “non-performance” of other contractual terms between HSF and HSM.

This means that HSF may be looking for a way to fire HSM for breach of contract that was significant enough to make the call option unenforceable. However, said the source, “no one wants to be drawn into some long drawn out litigation over this sort of thing - it’s generally sorted out behind closed doors, and this drip feed of information as and when both sides are compelled to communicate on a particular issue is not too unusual”.

This aside, it’s clear that there’s a fresh episode coming in the continuing Hipgnosis drama with an Extraordinary General Meeting that seems to have the support of key shareholders almost certain to take place.

ATC Management // Day-to-day Manager (London)

Full Time Hobby Music // D2C Marketing Assistant (London)

terrible* // D2C Customer Service Representative (London)

terrible* // Logistics & Production Assistant (London)

Como No & La Linea // Director (London/Hybrid)

UK Music // Chief Executive (London/Hybrid)

Deviate Digital // Digital Marketing Assistant (London)

ONE LINERS

Aurora, Gossip, BRIT Awards + more

APPOINTMENTS

Sony Music UK has hired Brooke Salisbury to fill the newly created role of SVP International Marketing & Digital Partnerships. She joins from Warner Music’s distribution and labels services division ADA, where she was General Manager. “I’m delighted to welcome Brooke to her new role where she will help bolster our service for both artists and digital partners”, says CEO Jason Iley.

MEDIA

Steve Lamacq and music business journalist Stuart Dredge are set to launch new podcast ‘The Price Of Music’. “We’ll be examining stuff like how musicians get paid, who earns what from gigs and how money gets shared out from big hits”, says Lamacq. “I’m hoping it’ll be not only really revealing and interesting for music fans, but also informative for emerging artists, managers and anyone else who wants to carve out a career in the industry”.

ARTIST NEWS

Lawrence of Felt, Go Kart Mozart and more has announced that a marble bust of his own head will go on display in The Fitzrovia Chapel in London between 26 Jan and 9 Feb. “It is unlike anything the pop world has to offer, this unique event showcases the coming together of old and new styles – the ancient and the modern – combined”, he says. “You really haven’t seen anything like this before”. Two panel discussions will also take place on 1 and 5 Feb.

Chai have announced that they will split after upcoming Japanese tour dates in March. “To continue our journey of self-love, as Chai have always said, and to continue to fulfil our own personal visions, we have decided to go our separate ways”, said the band in a statement. “We are so sorry to surprise you with this news”.

AWARDS

This year’s BRIT Awards nominations will be revealed in a livestream on Instagram and Facebook on 24 Jan at 4pm. Tickets to attend the actual awards event on 2 Mar are on sale now.

GIGS & FESTIVALS

Skepta has announced the line-up for his Big Smoke Festival in London on 6 Jul in London’s Crystal Palace Park. He will headline, with other performers including The Streets, Mahalia, JME, Flowdan and more. Full details here.

Karol G has announced that she will play The O2 Arena in London on 18 Jun. Tickets are on sale now.

RELEASES

Aurora has released new single ‘The Conflict Of The Mind’.

Gossip have released new single ‘Real Power’, the title track from their upcoming new album, which is out on 22 Mar.

Norah Jones will release her ninth studio album ‘Visions’ on 8 Mar. Out now is lead single ‘Running’.

Nia Archives has released new single ‘Crowded Roomz’.

Rachel Chinouriri has announced that she will release her debut album ‘What A Devastating Turn Of Events’ on 2 May. Out now is new single ‘Never Feed Me’ featuring Florence Pugh.

Jlin will release new album ‘Akoma’ on 22 Mar, with guest appearances from artists including Björk and Kronos Quartet. Out now is new single ‘The Precision Of Infinity’ featuring Philip Glass.

Spotify hits out at Apple's "outrageous" new App Store rules

Spotify has declared that the way Apple has decided to comply with a US court order relating to in-app payments is "outrageous" and proves that the tech giant will "stop at nothing" to protect its profits.

Apple has been forced to make a change to its app stores rules in the US after the country's Supreme Court declined to consider its long-running dispute with Fortnite maker Epic Games, which means an order previously issued by a lower court in California stands.

Both Spotify and Epic have long criticised Apple's rules that force many app-makers to use the tech giant's commission charging transactions platform to take in-app payments and which prevent the signposting of alternative payment options outside of the app, for example on the app-maker's website. It is the signposting rule that was deemed to violate Californian law.

As a result, Apple announced earlier this week that all app makers in the US will now be able to link to other payment options within their apps. However, that will only be allowed on the condition that the app maker pays Apple a 12-27% commission on any sales processed via the link. Which is only a 3% discount on the 15-30% charged by Apple's own system.

Given there will be processing fees associated with the alternative payment platforms too, it's likely the app-maker will be no better off - or perhaps even worse off - if it chooses to circumvent Apple's transactions platform.

While Apple seems confident that this move satisfies the court order, app-makers are not impressed. Earlier this week Epic said Apple's plan "totally undermines” the court's injunction. Now Spotify has said it "flies in the face" of what the court intended.

According to the BBC, the music service added: "Once again Apple has demonstrated that they will stop at nothing to protect the profits they exact on the backs of developers and consumers under their app store monopoly".

Whereas Epic has gone the litigation route to try to force a change to Apple's rules, Spotify has adopted a lobbying approach, urging lawmakers to intervene. That includes in the UK, where the music streaming service hopes that the proposed Digital Markets, Competition And Consumer Act could force a change.

"The UK's Digital Markets, Competition And Consumer Bill must put an end to this false posturing, which is essentially a recreation of Apple's fees", Spotify's statement to the BBC continued. "We strongly urge UK lawmakers to pass the bill swiftly to prevent Apple from implementing similar fees, which will help create a more competitive and innovative tech industry for UK consumers and businesses".

In the US, lobbying efforts to force a change to Apple's rules through legislation are led by the Coalition For App Fairness, of which Spotify is a member. It supports the Open App Markets Act, which would regulate app stores. And its Executive Director, Rick VanMeter, has also criticised Apple's proposal for complying with the Californian court order.

"The new 27% commission on payments [which Apple] does not process defies the intention of the district court’s injunction and undermines competition", he said. "These changes do nothing to enhance consumer choice, lower prices for in-app purchases or inject competition into Apple’s walled garden. It is precisely this type of abusive, monopolistic behaviour that makes it imperative for Congress to pass the Open App Markets Act".

MLC planning massive audit of all streaming services - but it’s not as dramatic as it sounds. Yet.

US collecting society The Mechanical Licensing Collective has issued 'notices of intent' to conduct audits of the streaming services it licenses, including Spotify, Apple Music, Amazon Music and YouTube Music.

“Ensuring digital service providers have reported royalties accurately is one of the MLC’s statutory responsibilities,” says Kris Ahredn, the organisation’s CEO.

The audit covers usage that took place between 1 Jan 2021 and 31 Dec 2023 across 49 different DSPs.

Although carrying out audits on such a significant scale sounds like a dramatic move - and has been interpreted by some as a suggestion that there may be significant issues with the way some streaming services report and pay - these audits, though substantial, are simply a “statutory function” of the MLC under US copyright law.

The MLC administers the US compulsory blanket licence that covers the mechanical rights in songs and was set up following the 2018 Music Modernization Act which changed the way the compulsory licence operates.

The audit covers the first three years of the MLC’s operations and will be a significant technical and operational undertaking. To manage this process, says Ahrend, the MLC has asked Jane Bushmaker, the society’s Director DSP Audit, to oversee the work.

Bushmaker has two decades of royalty audit experience holding senior positions at specialist accountancy firms Adeptus Partners LLC and Prager Metis before joining the MLC in 2022.

Alisa Coleman, chair of the MLC’s board, said: “The MLC’s audit right is a first in the 115 year history of the US compulsory licence and provides enhanced protections for songwriters and music publishers”.

Many entities - including record labels, music publishers and collecting societies - have audit rights in their licensing agreements with the DSPs. However, those agreements, and whether a particular organisation chooses to enforce its audit rights, are usually confidential.

Generally speaking the costs of an audit are borne by the party conducting the audit. However, - while the MLC will technically cover the audit costs too - it will do so from its operational budget which is funded by DSPs, meaning there will be no cost to the songwriters or music publishers that the MLC represents.

The scale and scope of the undertaking doubtless has auditors rubbing their hands in anticipation as the work will be contracted out by the MLC to “experienced outside audit firms”, overseen by Bushmaker and her team.

How long the audit should take is unclear and there is no deadline in the MMA for how long the MLC has to conduct its audits. However, DSPs must respond to “reasonable requests” and make “reasonable efforts” to make a wide range of information available to the MLC’s auditors.

Whether or not songwriters and publishers will see adjustments - up or down - to their royalty statements remains to be seen. However, many people within the industry will be following the results of the audit closely.

Efforts by many of the streaming services to keep the rates in the compulsory licence down - which was done in the public glare via the Copyright Royalty Board - caused considerable reputation damage, especially for Spotify as the market leader.

Should it turn out that Spotify - or any other major DSPs - has significantly misreported royalties due to the MLC, that would be a major controversy. However, given all services licensed by the MLC would be fully aware of their responsibilities relating to audit, this would seem highly unlikely.

CMU GUIDE: AI + MUSIC

Artificial intelligence + the music business: CMU's guide to (nearly) everything that mattered in 2023

There was a lot of discussion in 2023 within the music community about how AI will impact on music creation, music marketing, and the music business more generally.

There are clearly opportunities created by AI, and many ways that AI technologies will enhance the business.

An increasing number of music creators and music companies are exploring and identifying way to capitalise on those opportunities, and figuring out which AI products and services may offer ways to enhance their work.

Read CMU's (very) deep dive guide to the deals, disputes and debates, lawsuits and lobbying, and innovation and exploration that informed the conversation.

Time really does go by so slowly: Madonna sued over slack time-keeping on ‘Celebration’ tour

Slack time-keeper Madonna has been sued by two fans over her slack time-keeping.

In a new lawsuit filed with the courts in New York, gig-goers Michael Fellows and Jonathan Hadden have accused Madonna, her promoter Live Nation and the Barclays Center arena of “unconscionable, unfair and/or deceptive trade practices”, and all because the musician rarely makes it to the stage on time.

Their lawsuit claims that three dates on Madonna's 'Celebration' tour that took place at the Barclays Center were all advertised to start at 8.30pm. But, in fact, they didn't start until some time after 10.30pm.

This meant that the gig wasn't over until after midnight, when the fans were “confronted with limited public transportation, limited ride-sharing, and/or increased public and private transportation costs”.

The legal filing notes Madonna's well known reputation for starting shows late, which means promoter and venue "were aware that any statement as to a start time for a show constituted, at best, optimistic speculation".

Given Madonna's reputation for starting shows late, most of her fans presumably also realised the advertised start-time was "optimistic speculation". I don't know whether that could be any sort of defence to this lawsuit.

Either way, Fellows and Hadden reckon that Madonna and co are liable for breach of contract, false advertising and negligent misrepresentation, and they want class action status for their lawsuit so that a win would benefit everyone who attended the shows.

This seems like a somewhat ambitious legal claim that is unlikely to ever get to trial. Though if it did happen to be successful, it could impact on a bunch of other big name musicians who are famously unpunctual when it comes to their shows.

I wonder if that would result in better time-keeping by those acts, or would promoters just start putting "who knows" as the start time in marketing materials? The latter seems like a simpler solution.

Michael Jackson tribute show promoter goes legal over trademark dispute

The promoter of a Michael Jackson tribute show called ‘MJ Live’ has sued the late musician's estate after it sent cease and desist letters to various American venues that are set to stage the production. The estate wants those performances cancelled on intellectual property grounds.

The lawsuit filed by promoter MJL 12 LLC states: "Defendants have recently sent cease and desist letters to … venues in California, Florida, Illinois, Ohio and Wisconsin where plaintiff intends to perform its 'MJ Live' shows and … demanded that plaintiff and these venues cancel the 'MJ Live' performances altogether".

The estate accuses MJL of infringing one of its trademarks, it having formally registered 'MJ' as a standalone mark with the US Trademark Office last year. However, the promoter argues that - because it has been staging 'MJ Live' shows since 2012 - it has "superior rights" in that title.

There is also an allegation that the tribute show is infringing Jackson's publicity rights. However, on that, the promoter argues that "it has a First Amendment right of free expression under the constitutions of the United States and the state of Nevada ... to impersonate Michael Jackson [in] its 'MJ Live' performances".

The promoter has gone legal in Nevada, because - while it also tours - the primary base of 'MJ Live' is Las Vegas. The lawsuit seeks a declaration from the court that no trademarks or publicity rights are being infringed by its Jackson tribute show.

One of the reasons why the estate may have taken an interest in 'MJ Live' now is its involvement in the 'MJ The Musical' stage show, which opened on Broadway in 2021 and then embarked on a US tour last year. That project also presumably prompted the registration of the MJ trademark, the process of which began in 2019.

The MJL lawsuit notes this, and even accuses the estate-sanctioned musical of infringing its common law trademark in the title 'MJ Live', because - it says - the 'MJ The Musical' logo is similar to the one it uses for its tribute show.

So that's fun. The estate is yet to respond.

AND FINALLY...

Snoop vs smokeless fire pits

CMU's Andy Malt takes a look at this week’s funniest, weirdest or just plain ridiculous music news stories.

This week: Solo Brand's CEO found himself out of a job after a viral ad campaign using Snoop Dog backfired.

It's pretty well accepted that if you want to sell some stuff, just give Snoop Dogg a call and he’ll probably hawk it for you. At this point in his career, it’s hard to think of many products he hasn’t tried to sell - both his own brands and those of other companies.

Until now a lot of people thought that Snoop could literally sell anything. Are smokeless fire pits his achilles heel?