| We've covered the music business each day since 21 Jun 2002 Today's email is edition #5318 |
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| | | In today's CMU Daily: Put into bankruptcy by the Swiss courts, riddled with debt, the proceeds of the Sentric sale still locked in escrow, another UK company in liquidation, and its few remaining staff left in the lurch yet again as they wait months for salaries… what’s really happening at Proper Group AG
Also today: Fred Durst has sued Universal Music over its alleged failure to report and pay royalties he was due from Limp Bizkit’s records and a former label joint venture; multiple US states have filed lawsuits claiming that TikTok’s addictive-by-design features manipulate young users in a way that damages their mental health
Plus: Spotify’s HR chief has revealed that the company’s work-from-anywhere policy, instigated during COVID, will stay in place
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| | | The company formerly known as Utopia is riddled with debt and has left its few remaining staff high and dry with salaries unpaid for months | | Two weeks ago CMU broke the news that Proper Group AG - the company formerly known as Utopia Music - had been put into bankruptcy by the Swiss courts.
At the time Proper Group presented the bankruptcy proceedings as nothing more than a hiccup, a simple misunderstanding over a “minor debt” that had been settled as soon as it became aware of the problem. The company told CMU that it was “confident” that its appeal against the bankruptcy would be successful, putting it back on the straight and narrow.
As has so often been the case with Utopia/Proper Group, the reality is somewhat different. On a call today, John Mitchell, a key investor in the company and board chair - technically currently the former chair, pending the outcome of the company’s bankruptcy appeal proceedings - offered unprecedented detail on the current state of the company and told CMU “there’s nothing like truth to defeat the bullshit”.
However, it turns out that the “truth” includes the fact that the 25 staff employed by Proper Group’s Swiss entity didn’t receive their salaries in August or September, and the company now owes €474,090 in missed salary payments to staff - plus taxes, social security and pension commitments.
According to Mitchell, if the insolvency appeal is successful then “staff will receive their outstanding salaries inclusive of all AHV, ALV and pension”.
However, he added that, as of today, none of those employees have jobs “by definition and at law” and that it would be “up to the individuals in question and the company” as to whether they continued to work for Proper Group if the bankruptcy appeal is successful. He then noted that “in the case of rehire, the new contract would be a continuation contract, with all accrued rights included”, but that the company is “planning further redundancies as we enter the last quarter”.
Taking a notably different tone to the bombastic confidence of last week, Mitchell admitted in conversation that he is “not confident” that the bankruptcy appeal will succeed, saying “I’m as confident as I can be in a 200 page document that a small group of executives worked tirelessly on for ten days. I’m confident that, if I was looking at it in isolation, I’d lift it - because we have raised a significant amount of money on escrow for exactly this purpose”.
Should the company not be able to lift the insolvency proceedings, says Mitchell, then... | | Read the full story | | |
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Fred Durst sues Universal over systems that are “deliberately designed to conceal artists’ royalties and keep those profits for itself” | | Fred Durst has sued Universal Music accusing the major of failing to report and pay the royalties he was due from Limp Bizkit’s releases. This happened, his lawsuit claims, because Universal “designed and implemented royalty software and systems that were deliberately designed to conceal artists’ royalties and keep those profits for itself”.
Universal will deny that claim, of course, but - as Durst’s lawsuit notes - if true, it trashes the major’s claim to be “a pro-artist company that fights for the rights of artists”. The legal battle could also be costly for Universal in a more tangible way, because Durst claims that the major has breached the terms of his old contracts, allowing him to terminate those deals. The lawsuit then estimates that that means Universal now owes Durst “in excess of $200 million”.
The lawsuit runs through various deals Durst did with Universal and its Interscope division back in the early days of Limp Bizkit. The initial deals were actually with indie label Flip Records, which then did its own deal with Interscope. There was then a direct deal between Limp Bizkit and Interscope, and a separate agreement in relation to Durst’s own label Flawless Records, which operated as an imprint of the major label for a time.
Limp Bizkit “saw the height of its popularly in the late 1990s and 2000s”, the lawsuit concedes, but more in more recent years there has been renewed interest in the band and their music, resulting in a surge in streams. “Year-to-date in 2024, Limp Bizkit has over 450 million streams, and is on track to have over 793 million streams by the end of 2024", the legal filing explains. Which means the band’s recordings are generating quite a lot of money again.
Yet, when Durst hired new representatives earlier this year, he informed them that he’d never received any royalties from the major. Said representatives were “shocked because they were aware of Limp Bizkit’s phenomenal increase in popularity over the past several years”, the lawsuit reveals.
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| TikTok sued by multiple US states over design features that damage the health of young users | | TikTok has been sued by more than a dozen US states over allegations its app is deliberately designed in a way that damages the mental health of children. The lawsuits follow an investigation into the impact of TikTok on its users led by the attorneys general of a number of different states. For its part, TikTok insists that it “endeavoured to work” with the attorneys general on their investigation, before adding that it’s “incredibly disappointed” they have now decided to go the litigation route.
According to the lawsuit filed in California, TikTok “has designed and operated a social media platform intended to be addictive, and which is severely harmful to the physical and psychological well-being of young users”. The company, the legal filing adds, “preys on young people’s unique psychological vulnerabilities through an arsenal of harmful, addictive-by-design features that it targets to exploit and manipulate young users’ developing brains”.
More specifically, it says, “TikTok’s algorithms and design decisions are intended to cause young users to compulsively spend increasing amounts of time on the platform”. Those design choices, “exploit the neurotransmitter dopamine, which helps humans feel pleasure as part of the brain’s reward system to encourage reinforcement”.
The lawsuits acknowledge that TikTok is technically not available to children under thirteen and that there are restrictions on content for users under eighteen. However, they insist, “TikTok knows that many children bypass its ineffective age gate”.
The different lawsuits set out what laws they think TikTok has violated by designing its app in this way. Some also raise other issues with the app, including that it operates an “unlicensed virtual economy” with its TikTok Coins digital gifting system and that teenage users who livestream on the platform are “frequently sexually exploited by adults”.
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| | | Spotify committed to work-from-anywhere policy, except on the night shift | | It’s been a tricky year for people working at Spotify following the significant down-sizing undertaken by the company late last year, but at least the digital music business is standing by its work-from-anywhere policy, even as other tech companies start to force their employees back into the office. Unless you are an employee whose role involves a night-shift, in which case you can work anywhere but Sweden.
Spotify’s human resources boss Katarina Berg has given an interview to Raconteur where she speaks about that work-from-anywhere policy, the challenges it creates, and the impact of those job cuts on the employees that remained. The interview follows the recent ruling in the Swedish courts - reported last week by Swedish music business publication musikindustrin.se - that said Spotify doesn’t qualify for an exemption from the country’s ban on companies having employees work between midnight and 5am.
Asked about moves at the likes of Amazon and Dell to get their employees back into the office, Berg told Raconteur that Spotify is committed to the work-from-anywhere policy that was put in place during the COVID lockdowns. The other tech companies are “going back to what they know”, she says, but, she adds, “work is not a place you come to, it’s something you do”.
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