Since Switzerland-headquartered Utopia Music launched in 2016, it has turned heads with its aggressive acquisitions of companies within the music house.

Nonetheless, over the previous six months, as the corporate has rolled again a few of these purchases and applied successive rounds of layoffs, many have checked out its acquisitions and requested: What’s it that Utopia Music is making an attempt to do?

The corporate has offered itself as a Large Knowledge agency for music, growing a proprietary music monitoring platform generally known as the Utopia Open Platform. The expertise retains observe of songs performed on radio stations and different broadcasters all over the world, in addition to figuring out performs on streaming platforms, primarily making an attempt to be a one-stop-shop for music measurement.

It has additionally sought to determine itself as a music companies and royalty assortment platform, working below the motto “honest pay for each play.”

One factor that has been clear for a while is that Utopia constructed itself into what it’s via a collection of acquisitions.

In 2021, it purchased Quincy Jones-backed AI firm Musimap, which makes use of proprietary AI expertise to develop emotional metadata about music for purchasers. The tech can be utilized to create playlists that match with character profiles, or that replicate sure genres or moods, or to seek for music.

That was adopted quickly by the acquisition of Lyric Monetary, a Nashville-based agency that gives musicians advances on the royalties they’re owed. (As will develop into clear afterward, this was a key buy for Utopia.)

At that time, Utopia’s acquisition spree was simply getting began. The corporate quickly purchased US-based music business listing ROSTR, and Austria-based music information analytics platform ForTunes. Utopia rolled the 2 corporations collectively to develop into its new Creator Providers Enterprise Unit, which it stated would “present creators with a complete analytics platform, an business listing and different advertising and marketing instruments.”

It went on to purchase Liverpool-based music writer and publishing administrator Sentric Music Group, which Utopia transformed into its new Royalty Administration Providers unit. Little greater than a month later, it acquired UK-based Absolute Label Providers, a distributor and repair supplier to indie artists and labels.

Round this time, the corporate raised €300 million in a Sequence C funding spherical that implied a market capitalization of round €2.5 billion – making the corporate a double unicorn, and one of many greatest success tales within the music enterprise over the previous decade.

In early 2022, Utopia went in an surprising path – it obtained into the bodily music media sport, with the acquisition of UK-based distributor Correct Music, giving the corporate a foothold in bodily and digital music distribution.

Little greater than a 12 months later, it expanded its holdings within the bodily music world with the acquisition of Cinram Novum, a UK-based warehouse, achievement and distribution firm. And most not too long ago, the corporate signed a £100-million cope with logistics agency DP World to offer warehousing and logistics for bodily media within the UK.

However in late 2022, issues started to go sideways. In November of that 12 months, Utopia introduced a spherical of layoffs that reportedly impacted about 20% of the corporate’s workers, which might have been round 1,200 folks at that time. Lower than six months later, the corporate slashed one other 15% of its workforce.

What’s extra, Utopia appeared to have developed purchaser’s regret about a few of its purchases throughout that multi-year buying spree. It bought its music business listing and information platform ROSTR again to the corporate’s founders, following that up with a sale of music writer Sentric to France-headquartered Imagine.

Amid all this, experiences swirled of unpaid tax money owed in Sweden and workers going with out pay.

So what occurred to this musical unicorn, and the place is it going subsequent?

In a uncommon interview on the Dealmakers podcast with Alejandro Cremades, Utopia founder Mattias Hjelmstedt dropped some hints as to what has been taking place with the corporate, and the place it sees itself going subsequent.

Hjelmstedt was introduced again into the CEO place earlier this 12 months, after Markku Mäkeläinen departed the function in January.

MBW listened in on Hjelmstedt’s podcast interview; listed below are among the highlights of what he needed to say.

1. The monetary world is not rewarding “hypergrowth” corporations like Utopia

It’s no secret that the monetary world has been turned the wrong way up over the previous 18 months, as central banks have begun elevating rates of interest in a battle towards inflation that has confirmed longer-lasting than most individuals had anticipated.

On this atmosphere, tech corporations – together with music-related tech corporations – have discovered it more and more tough to boost cash.

“We went via that hypergrowth. We went from 40 to 1,100 folks. We recruited a crew that was specialised [and came] from among the largest development corporations on the planet. And that labored fantastically effectively up till the world didn’t reward it anymore.”

Mattias Hjelmstedt, Utopia Music

“The final 20 years, and particularly the final 10, [have] been extraordinarily targeted on hypergrowth,” Hjelmstedt stated. “Take lots of the massive corporations that exist at this time. They went via these hypergrowth situations which massively elevated the worth of them. Not at all times from a profitability standpoint, not at all times from a income standpoint – simply with the ability to seize market [share] by development.

“This has been how the world of financing has appeared [for] the final 20 years, and a 12 months in the past that each one got here to a cease… We’re [caught up] in a wake of corporations which are failing due to it. You’ve even seen banks being disrupted by it and and it’s not going to cease anytime quickly.”

Companies now must reorient themselves, and take a look at sustainability and profitability, Hjelmstedt stated.

“Expertise-wise, we went via that hypergrowth,” he continued. “We went from 40 to 1,100 folks. We recruited a crew that was specialised [and came] from among the largest development corporations on the planet. And that labored fantastically effectively up till the world didn’t reward it anymore. We had been in a position to elevate capital each single time at excessive multiples and we had been additionally in a position to get oversubscribed [in our funding rounds].”

Now the corporate is feeling the friction of a world the place capital is tougher to return by. However even the latest restructuring “requires cash, and that’s been… not the simplest factor to do, even for us, a unicorn-level firm,” Hjelmsted famous.

2. Utopia’s downsizing is working, and has resulted in a 75% discount in money burn

If there’s excellent news to be present in Utopia’s half a 12 months of sell-offs and layoffs, it’s that the corporate has been in a position to get a grip on its monetary state of affairs, Hjelmstedt asserted.

“We’ve gone via the lifecycles that… you see on the planet of expertise at this time. We’ve had downsizing. We’ve had to take a look at operations. What number of workplaces do we’ve? What’s the value? How will we function? How will we [do] value controls?” Hjelmstedt stated. “So in about six months we’ve been in a position to decrease our [cash] burn [by] about 75% and we’re nonetheless growing our income this 12 months [by] about 80%.”

“It’s been a troublesome however attention-grabbing journey, but in addition form of a tragic one as a result of there’s been so many nice folks [who were let go] however [in] the tip, the imaginative and prescient of constructing the world of music higher is simply too necessary to not take all the selections to get there.”

Mattias Hjelmstedt, Utopia Music

Nonetheless, Hjelmstedt stated the layoffs had been laborious on the corporate.

“We created an organization with very excessive human values. We [couldn’t] identify [ourselves] Utopia with out it. After which really having to let go [of] folks which are there for the imaginative and prescient, to have the ability to get there,” he stated.

“It’s been a troublesome however attention-grabbing journey, but in addition form of a tragic one as a result of there’s been so many nice folks [who were let go] however [in] the tip, the imaginative and prescient of constructing the world of music higher is simply too necessary to not take all the selections to get there.”

3. Utopia needs to be the “working system” for the music business

So the place does Utopia see itself going from right here? Hjelmstedt paints an image of a enterprise that’s planting roots in seemingly each side of the music business, bodily media included.

“We do every thing, [even] precise distribution of music,” he stated. He claimed additional: “We even… do about 98% of all deliveries of bodily vinyls within the UK as an illustration, so within the UK each single [vinyl] document you… purchase has been delivered by Utopia.”

But his imaginative and prescient of a knowledge firm that integrates international measurement of music performs and assortment of royalties for creators, making the business extra environment friendly, stays intact.

“We work with precise [royalty collection] societies within the totally different territories to improve them and make them trendy, so… it’s virtually like an working system for an business,” he stated.

The thought is to create programs that save time, as a result of “if you save time you may really spend extra of that point to create extra. Extra… music comes out and folks can hearken to extra music, which is helpful for the entire business.”

4. Financing for musicians and rights holders is a significant a part of Utopia’s enterprise mannequin

One factor Hjelmstedt careworn within the interview is the fintech side of Utopia’s enterprise mannequin in a solution to a candid query from Alejandro Cremades: “How do you guys generate profits?

“We do the precise assortment [of royalties] and distribution of cash. We even have advances so when – this going to sound insane, however should you’re, as an illustration, an American artist and also you [got airplay] on radio in Germany, it might probably take two years so that you can receives a commission,” Hjelmsted stated.

“And even should you’re a songwriter and also you uploaded your music to a distribution platform, to Spotify, [on] Spotify the typical payout time to the system is 9 months, so it’s lots of of legacy in there. … So we will acknowledge [that a song got] play and we will really advance the cash to the [rights holders]. You will get the cash tomorrow as an alternative of ready for years to get the capital, which suggests that you’re once more [in] management over your future… as an alternative of promoting your belongings, you may even have them and management them and work with them.”

Utopia’s 2021 acquisition of Lyric Monetary appears to be a key transfer in growing this side of the corporate’s enterprise. The enterprise focuses on royalty advances to music rights holders, and in its 2021 tie-up with Utopia, Lyric Monetary stated it gained “aggressive benefit, power, and optimized market positioning within the quickly rising music expertise market that permits sooner funds for creator rights.”

Hjelmstedt capped off the interview with some recommendation born of Utopia’s hard-fought experiences of latest months.

“The most important… recommendation I can provide to everybody [is] take selections. Function. Don’t hesitate. Go ahead at all times, as a result of that’s what makes an organization profitable, and when once we speak about valuations, among the finest people [sayings] I’ve ever heard is, The valuation of [a company is] normally equal to the quantity of issues you solved to get there. And I feel that’s the lifetime of an entrepreneur.”Music Enterprise Worldwide