Jul 25, 2023 3 min read

Utopia calls in liquidators at UK R&D division

Utopia calls in liquidators at UK R&D division

Late last week Utopia Music announced that it was "winding down" its UK R&D division. However, today CMU has learned that Utopia UK (R&D) Ltd – the entity through which Utopia’s UK R&D team were employed – has in fact been put into liquidation, as confirmed by a spokesperson for the company.

Sources close to the business say that staff employed by the R&D division were expecting to be paid their regular monthly salary today. Instead, it is claimed that they have been told to pursue the appointed liquidators for the wages that they are owed.

In response to that allegation, a spokesperson for Utopia told CMU: “We cannot comment on any individual cases as this is managed by the liquidator. An independent specialised company not affiliated with Utopia has been engaged to provide specialised assistance to each employee in claiming their entitlements. Our commitment remains steadfast in ensuring that all aspects are handled with utmost care and diligence”.

Last week Utopia co-founder and CEO Mattias Hjelmstedt said in an internal memo that the company was “consolidating” its R&D offices in order to create a “leaner and more efficient setup”. As a result, he said, its “relatively small” R&D offices in the UK and Finland would be wound down, leaving one in Sweden remaining.

What he didn’t say was that the UK R&D entity was in fact being placed into liquidation – a key difference and something that generally happens only when a company cannot meet its financial obligations.

Commenting on this, Utopia’s spokesperson said: “A liquidator has been appointed to manage the process concerning Utopia UK (R&D) Ltd. The proceedings concerning the affected individuals are managed by this liquidator and are subject to local regulations. Unfortunately, we cannot provide detailed information about the specific processes related to individual cases. All impacted employees will be considered for new positions”.

The R&D restructure reportedly involves around 25 people – although it is not clear how many of those were employed in the UK.

The sudden liquidation of the UK R&D company opens the wider question of why parent company Utopia Music AG couldn’t send funds to Utopia UK (R&D) Limited to wind the operation down cleanly.

When asked whether Utopia Music AG is solvent, and if so why it decided to call in the liquidators for the UK company, the spokesperson added: “As part of our pursuit of sustainability and profitability, we have made some difficult decisions. Unfortunately, we could not maintain the UK entity’s sustainability, which is why we have entrusted it to the liquidators. Nevertheless, we remain committed to delivering services to the music industries through our other ten operational entities”.

Whatever the circumstances, with staff caught in the crossfire, this is a bad look for Utopia. It also follows the recent divestment of a number of the companies that Utopia bought in late 2021 and early 2022 during a period of rapid growth. Meanwhile, earlier this year the company was sued in the US over an alleged failure to complete an acquisition of another business, LA-based music rights management and licensing platform SourceAudio.

Following the liquidation of the UK R&D division – as well as the sale of data platform ROSTR back to its founders in February, the sale of music publisher Sentric Music to Believe in March, and the reacquisition of label services company Absolute by its original management team last week – one of the most significant parts of Utopia’s business is its UK-based physical distribution division.

Utopia Distribution Services combines Proper Music – the distribution firm acquired by Utopia at the end of 2021 – and the former Cinram Novum, another physical distribution business that Utopia bought in a “pre-pack administration” in September 2022.

This distribution division controls a significant portion of the infrastructure for distributing physical releases in the UK – something acknowledged by Utopia earlier in the week when the company said that its physical distribution businesses were “both unaffected” by the shuttering of the R&D division and would “continue to deliver world-class distribution services to the music industry and to the many labels (including all majors) that we represent in the UK”.

With 130 people employed by Proper at the time the company was acquired, and as many as 250 more at Cinram, those people represent a huge portion of Utopia’s overall employee numbers and have long-standing relationships with thousands of labels from tiny indies through to the majors, as well as with the majority of the UK’s physical music retailers.

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