CMU Digest is our weekly round-up of the most interesting music business news stories from the last seven days.
This week: Warner Music announces significant lay-offs at Atlantic Music Group in the US as part of the major restructuring of its recorded music business. New AI rights for performers are signed into law in California, while a white paper proposes a remuneration right for creators on the outputs of generative AI. Amicus briefs submitted on both sides urging the US Supreme Court to intervene in the Cox v major labels piracy dispute. Lucian Grainge tells investors that the industry is heading into the “Streaming 2.0” era. European consumers sue Apple over the Apple Tax on music services.
ICMYI: Lib Dems conference passes motion on music industry; Diddy denied bail after arrest on sex-trafficking charges; Lyte board seeking buyer after ticketing service ceases operations; Johnny Marr responds to Morrissey moans; TikTok lawyers scrutinised as they try to block sell-or-be-banned law; Eddy Grant wins in copyright dispute with Donald Trump.
Considerable lay-offs announced at Atlantic Music Group
In a recent rejig of Warner Music’s US recorded music operations, there was a change at the top of the Atlantic Music Group, which includes Atlantic Records and 300 Elektra Entertainment, and labels like Roadrunner Records. Elliot Grainge, who previously allied his own company 10K Projects with Warner, will now head up the Atlantic group, with former chiefs Julie Greenwald and Craig Kallman respectively departing and moving into an A&R role. Grainge is expected to announce a new top team for his WMG division imminently, but before that a considerable downsizing was announced, believed to have impacted 150 to 175 people.
Among those departing are some very senior and long-serving execs. Two days before the lay-offs were revealed in a memo to staff, it was also announced that 300 Entertainment CEO Kevin Liles was departing. It’s all part of a radical restructuring of Warner Music by CEO Robert Kyncl, which has seen more than a 1000 jobs cut since 2023. The latest changes at the Atlantic US division, Kyncl said this week, will result in “a new dynamic structure for the label group”, adding, “WMG is transforming swiftly this year, in a fast-paced, fiercely competitive industry”.
New AI rights for performers and creators introduced and proposed
New protections for performers in the context of AI were signed into law in California. Where studios and labels secure rights to exploit a performer’s voice or likeness to create digital replicas, contract terms will need to include a “reasonably specific description of the intended uses of the digital replica”. Existing laws relating to protections for a deceased person’s voice or likeness were also amended, so that permission will be required from the performer’s estate. Exemptions for film and TV were removed when it comes to digital replicas.
Meanwhile a white paper was published proposing the addition of a new remuneration right to copyright systems around the world that would see creators earn royalties on the outputs of generative AI models that were trained with their works. There remains a dispute over whether or not tech companies need to get permission from copyright owners before ingesting copyright protected works to train AI models. Legal debates over the outputs of those models are even more complex. The white paper proposes that, whatever licensing deals are ultimately done on ingestion, creators should also have a statutory right to remuneration on the output.
Amicus briefs submitted in major labels v Cox Communications case
US internet service provider Cox Communications was found liable for contributory copyright infringement after being sued by the major labels for failing to do enough to stop its users from illegally accessing and sharing music. Cox has asked the US Supreme Court to reverse that decision and this week four other ISPs submitted an amicus brief backing up their rival’s arguments. The precedent set by the Cox case, they said, puts “extortionate pressure” on internet companies, negatively impacting on their ability to “fulfill Congress’s goal of connecting all Americans to the internet”.
The majors also want the Supreme Court to intervene, because Cox was originally also found liable for vicarious infringement, on the basis it profited from its users’ infringement. That decision was overturned on appeal, which will reduce the damages the majors now receive. Six organisations representing music creators and copyright owners this week said that the appeals court was wrong to overturn the vicarious infringement judgement. It applied an overly narrow definition of vicarious infringement, they claimed, which, if allowed to stand, will “prompt a race to the bottom” among ISPs “to see how little can be done to deter online piracy”.
We are entering the era of “Streaming 2.0”, according to UMG
UMG CEO Lucian Grainge made that statement at a Capital Markets Day event in London, adding that streaming needs to shift from a single consumer value proposition of ‘all the music, any time, anywhere’ - and simple digital monetisation strategies focused on subscriber growth (‘get people to pay, and then get more people to pay’) - to a more complex model that maximises customer value and focuses on both subscriber and ARPU growth.
Part of growing the average revenue per user is about better serving the super-fan. Back in the download era, Grainge said, superfans were paying around three times as much compared to the average consumer, whereas today the spend of a superfan and an average consumer is the same. Which is why UMG have been bigging up the super-fan opportunity so much of late.
In terms of growing the total number of subscribers, while emerging markets are important, UMG insists there is still considerable room for further growth in more mature markets too. “Both established and high potential markets have significant headroom for continued subscriber growth”, CFO Boyd Muir said, adding “subscription penetration is still below 50%, even in our most established markets, with most still below 30% penetration”.
European consumers go legal over Apple Tax on music services
Lawsuits have been filed in Belgium, Italy, Spain and Portugal - coordinated by consumer rights group Euroconsumers - arguing that Apple enforced illegal rules on its App Store that resulted in iPhone owners paying 30% more for subscriptions on music services like Spotify. Those rules forced music services to use Apple's commission charging transactions system when taking in-app payments on iOS devices and stopped the sign-posting of alternative payment options outside the app where Apple’s fees could be avoided.
Streaming services passed on Apple’s commission to the consumer, which is why subscribers on iOS devices might have ended up paying 15-30% more for a subscription. Following a complaint from Spotify, the European Commission ruled earlier this year that the prohibition on sign-posting other payment options breached EU competition law. It’s on that basis that these lawsuits have now been filed, looking to force Apple to refund the extra money music service subscribers paid because of its commissions, which could top €62 million in total.
ICYMI
🎫 The UK’s Liberal Democrats passed a motion at their annual conference calling for greater support for the music sector, including in relation to ticketing, music education funding and planning policy around venues. It also says that the government must introduce a ticket levy on large-scale shows to support the grassroots live sector.
🔒 Sean ‘Diddy’ Combs remains in jail following his arrest on sex-trafficking charges last week after twice being denied bail because of concerns he might seek to intimidate witnesses. Indictment documents set out in lurid detail the allegations against Combs, all of which he denies.
🧑⚖️ The board of ticketing company Lyte are trying to find a buyer for the business after it recently ceased operations following the departure of founder and CEO Ant Taylor. Insiders say that the firm’s 2022 acquisition of UK ticketing outfit Festicket contributed to its problems.
😤 Morrissey has been complaining about Johnny Marr of late over him blocking a Smiths greatest hits album and reunion tour. Then he accused Marr of trademarking the name The Smiths without his consent. That prompted Marr to issue a statement, insisting Morrissey’s people knew about the trademark, and defending the decisions regarding the album and tour.
🤳 Judges scrutinised lawyers from TikTok last week as the social media company tries to block the sell-or-be-banned law passed by US Congress earlier this year. It argues that the law violates free speech and is therefore unconstitutional.
⚡️Eddy Grant succeeded in his copyright lawsuit against Donald Trump, in doing so demonstrating that using music in political campaign videos does not qualify as fair use under American copyright law, so a licence must be secured. Trump posted a video using ‘Electric Avenue’ during the 2020 US presidential election campaign.