Jun 30, 2024 10 min read

📑 CMU Digest: SXSW's Saudi money; labels sue Suno and Udio + more

Also: will hedge funds trip up Hipgnosis deal? Plus: AI bumper update

📑 CMU Digest: SXSW's Saudi money; labels sue Suno and Udio + more

CMU Digest is a weekly round-up of the most interesting music business news stories from the last seven days. 

This week: SXSW announced it was ditching its ‘problematic’ sponsors, but what about its far more problematic ties to Saudi Arabian money? The record industry’s first big legal battle with music AI begins as the major record companies sue Suno and Udio. PRS has been sued by a group of its own songwriter members who say it puts in place “unreasonable and unnecessary hurdles” when they try to directly license live performances of their songs. More Hipgnosis dramas amid speculation that hedge funds could be about to trip up Blackstone’s deal to acquire Hipgnosis Songs Fund. And lots more music AI news involving YouTube, Anthropic, AI:OK, Stability and Apple. 

ICMYI: EU confirms that Apple’s amended app rules still don’t comply with Digital Markets Act; judge says Kneecap can take legal action against UK government; Live Nation boss Michael Rapino sued by shareholder over DoJ action; KKR acquires Superstruct; Believe shareholders resoundingly support founder’s “amicable buy-back”

Also this week: MIA says $100 tin foil hat is a “necessity” but will it make Diplo happy?


SXSW ditched some ‘problematic’ sponsors - but will it cut its ties to its far more problematic Saudi Arabian money?

Having the US military as a sponsor - and allowing weapons companies to be involved in its conference - caused controversy at this year’s edition of SXSW’s Austin showcase festival. After a boycott by artists, and although it previously defended its partners, this week SXSW said it had “revised” its sponsorship model and “as a result, the US Army, and companies who engage in weapons manufacturing, will not be sponsors of SXSW 2025”.

The move was widely welcomed, although, as a CMU report pointed out, SXSW still has problematic backers. The festival’s majority owner, Penske Media Corporation, has received hundreds of millions of dollars from the Saudi Research and Media Group, a media company closely associated with the Saudi royal family and crown prince Mohammad bin Salman or ‘MBS’. 

MBS is best known for - according to US intelligence - ordering the murder and dismemberment of journalist Jamal Khashoggi, a prominent critic of the Saudi regime. Saudi Arabia consistently comes close to the bottom of the various indices that track human rights and freedom around the world. 

Meanwhile, SXSW’s new London edition is being pulled together by Ali Munir, a director of Penske, and formerly Terra Firma’s ‘man in the Middle East’. For some reason Munir has licensed the SXSW brand via an offshore company in Jersey, a notoriously opaque jurisdiction.

Munir has previously waxed lyrical about the “bright prospects for the private equity industry in Saudi Arabia”, and is the son-in-law of the owner of one of Saudi Arabia’s most successful investment banks. SXSW London’s PR firm, Freud Communications - which has previously worked for the Saudi government - claims that there isn’t any Saudi money in SXSW London, but can’t provide any proof to back that up.


The major record companies are suing AI music platforms Suno and Udio

In a lawsuit coordinated by the RIAA, the labels said both AI businesses have trained their generative AI models with existing music without getting permission, and are therefore liable for copyright infringement. “AI companies, like all other enterprises, must abide by the laws that protect human creativity and ingenuity”, the lawsuit stated. 

Although both Suno and Udio have been vague about what music they have used to train their models, the lawsuit said it was clear they have used large quantities of commercially released tracks. Users can use Suno and Udio to generate  “sound-a-likes of numerous sound recordings”, and Suno even “left producer tags on their outputs”. Anticipating that both AI companies will claim training AI models with existing music is ‘fair use’ under US law - meaning permission is not required - the labels insisted that defence does not apply. 

Responding, Suno CEO Mikey Shulman accused the labels of reverting to their “old lawyer-led playbook”, referencing the lawsuits filed by the record industry in the early days of file-sharing. Udio published a blog post insisting their technology listens to rather than copies existing music. Both also argued that their aim is to enable more music-making. The RIAA was scathing about both responses, insisting that “supporting real creativity means getting permission before using someone’s work”.


A group of songwriters are suing PRS over its approach to the direct licensing of live music

When songs are performed live, usually the promoter of the show gets a licence covering the performing rights in those songs from a collecting society, so PRS in the UK. However, some songwriters pull out of the collective licensing system in some scenarios, usually around their own shows, so that the promoter has to do a deal directly with the writer. 

A group of writers - including King Crimson founder Robert Fripp and two members of the Jesus & Mary Chain - say that when they go that route, PRS puts in place “unreasonable and unnecessary hurdles” which adds to the complexity of employing direct licensing. That, their lawsuit argues, is to discourage writers from directly licensing live performances.

The lawsuit also criticises PRS’s Major Live Concert Service, which is available to PRS member artists who play shows with a capacity over 5000. The scheme makes the licensing of shows through the collective licensing system more efficient. But the lawsuit says PRS, as a collecting society, should not be giving the most successful artists preferential treatment. 


Hedge funds could be about to trip up Blackstone’s deal to acquire Hipgnosis Songs Fund

Recent transactions involving a number of hedge funds could be about to add another dramatic twist to the investment firm’s plan to acquire Hipgnosis Songs Fund, or SONG. Having fought off rival bidder Concord, it looked like Blackstone’s deal to acquire SONG was a done deal. It seemed like everything was on course for its acquisition to be completed as a ‘scheme of arrangement’, making it easier to take 100% control of SONG - especially after Blackstone found a few million dollars spare to help sweeten the offer.

However, despite that sweetener a number of hedge funds have been buying up SONG shares in recent weeks, often at prices within a hair’s breadth of the $1.31 offer price. As a result, nearly 35% of SONG shares ended up in the control of just four hedge fund investors, leading to speculation that those funds were hoping to squeeze more money out of Blackstone. In response, Blackstone’s Lyra BidCo - the company that will acquire SONG - was forced to issue a statement making it clear that there would be no more money on the table, and its $1.31 offer was “final, and will not be increased”. Despite that, some hedge funds have still continued to buy up shares - with TIG snapping up another 2 million, and Glazer buying 3 million more - increasing speculation that the deal could falter.

This should all become clearer on 8 Jul when crucial meetings to determine the success of Blackstone’s offer will take place - but that still leaves a full week of trading days wide open, and it’s far from clear what the hedge funds’ end game might be. With various options on the table, it’s beginning to look like the quick and clean scheme of arrangement could falter - and then it’s anyone’s bet what might happen. Worst case scenario for Blackstone is the whole deal falls apart. The question is: would that also be the worst case scenario for the hedge fund investors - or could that be exactly what they are gambling on?


It’s been a big week for AI developments, including news from YouTube, Anthropic, AI:OK, Stability and Apple

It was reported that YouTube is in talks with all three major record companies about the next phase in its AI experiments. It wants to build on its Dream Track pilot, which involved ten artists, and allows YouTube creators to use AI to generate vocals that imitate those artists. Sources say that YouTube is now offering lump sum payments to try and get dozens of major label artists to collaborate in its next generative AI project. 

Universal Music has previously commended YouTube for working with the music industry on its generative AI experiments, rather than using existing music to train AI models without permission. Unlike, say, Anthropic, which is accused by the music publishers of training its chatbot Claude with their lyrics without permission. They filed a lawsuit against the AI company in Tennessee, but this week a judge said the legal battle should be fought in California

The music industry is keen to encourage AI companies to work with record labels and music publishers, partly by suing (or threatening to sue) those who don’t, but also by championing those that do. This week a new scheme was launched called AI:OK which seeks to identify what constitutes the responsible use of music in AI - and AI in music - and to kitemark the companies and platforms that meet those criteria. 

Elsewhere in AI related stories this week, Stability announced a new round of funding and the appointment of Napster co-founder and early Spotify advisor Sean Parker as Chair, and Apple said that rules in the EU’s Digital Markets Act will delay the roll out of some of its new features in Europe, including generative AI tool Apple Intelligence.


ICYMI:

🍎 The European Commission has published details of why it thinks that Apple’s App Store rules are still not compliant with the European Union’s Digital Markets Act. It specifically focuses on the rules around the sign-posting of alternative payment options within iOS apps, something that Spotify has been particularly vocal about. “Our preliminary position is that Apple does not fully allow steering”, says Margrethe Vestager, the Commission’s EVP in charge of competition policy. Apple changed its rules so that developers are allowed to sign-post users towards alternative payment options. However, there are restrictions on how that works, and Apple currently charges a 12-27% commission on any purchases that begin with a link in an iOS app.

🦵 Belfast rappers Kneecap have secured permission from the high court to take legal action against the UK government over its blocking of a grant from the Music Export Growth Scheme. Kneecap member DJ Próvaí insisted that the band’s legal action was not about the money they lost when their grant was blocked, but the principle of the government’s conduct. The government’s decision, he said, was “an attack on artistic culture, an attack on the Good Friday Agreement and an attack on us and our way of expressing ourselves”. It emerged earlier this year that Kneecap’s application for MEGS funding had been approved by a music industry panel but then blocked by the department of Business Secretary Kemi Badenoch, seemingly because of the group’s political views. The group’s lawyer Darragh Mackin said this week that Badenoch’s intervention to block the grant was an attack on identity, freedom of expression and the fundamentals of the Good Friday Agreement.

🤡 A Live Nation investor has sued members of the live giant’s board - including CEO Michael Rapino and CFO Joe Berchtold - in response to the recent filing of legal action against the company by the US Department Of Justice. The government department accuses Live Nation and its Ticketmaster subsidiary of anticompetitive conduct, and has asked the court to force Live Nation to sell off the Ticketmaster business it acquired back in 2010. The government's legal action, shareholder John Williams claims, will “severely damage and injure” Live Nation and its shareholders. This is the fault of the board members, Williams alleges, because following the Live Nation/Ticketmaster merger they “continued to cause Live Nation to engage in anticompetitive conduct” in “defiance” of a consent decree agreed with the DoJ. 

💸 Festival operator Superstruct has been acquired by investment firm KKR. Financial terms of the deal are not known, but the business was estimated to be valued at £1.5 billion earlier this year. Founded by equity firm Providence and Cream founder and former Live Nation exec James Barton in 2017, Superstruct runs festivals including Sonar, Benicàssim, Sziget, Bluedot and Boardmasters. In a joint statement, KKR partners Philipp Freise and Franziska Kayser said Superstruct has established itself as “a leader in delivering unparalleled live music experiences globally”. Superstruct’s portfolio of events now consists of 80 music festivals across nine European countries and Australia, giving them a potential reach of nearly seven million attendees.

🇫🇷 A consortium led by founder Denis Ladegaillerie has completed an “amicable buyback” of Believe shares, with an “overwhelming” majority of shareholders tendering at €15 per share. Upbeat BidCo, formed for the takeover, now holds 94.99% of Believe’s shares and “at least” 94.29% of voting rights. Despite potential for a squeeze-out, Upbeat opted against mandatory action, allowing minority shareholders to retain their stakes. However, with tradable shares falling below 15%, Believe faces removal from certain stock indices, limiting liquidity. The exit of previous investor Ventech, which secured a 36x return on its €175 million investment, marks France's largest VC exit in a decade.


🎙 Setlist podcast: AI lawsuit warns of “devastating impacts” on human creativity

In this week's Setlist Podcast: Chris Cooke and Andy Malt discuss the launch of the record industry’s first major lawsuits against music-generating AI companies - with the RIAA coordinating litigation against Suno and Udio - plus a group of songwriters are suing PRS. 

🎧 Click here to listen - or search for ‘Setlist Podcast’


And Finally! Would you buy MIA’s $100 tin foil hat?

Are you tired of people laughing at your homemade tin foil hat when you pop out to stock up on cans of beans? Well, don’t worry, MIA has you covered. Literally. She’s just launched a range of streetwear for the doomsday prepper who also wants to look good.

Under the brand name Ohmni, items on offer include “the tin foil hat you’ve been waiting for” (a silver bucket hat with copper lining), a “full shield” t-shirt, a “full protection poncho”, “potency jeans” (just the crotch area protected, to stop 5G making you infertile), “potency boxer shorts” (just to be extra sure), and a “data protection” bag. 

That ensemble will set you back $950. And that’s before you’ve got a data blocking phone case to allow you to go off grid at any moment. I’m joking, of course. The back pocket of the jeans is lined with a faraday cage, so you don’t need to buy the phone case.

👉 Read the full story and more of this week's funniest music news

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