Nearly three years after Utopia Music bought music financing platform Lyric Financial, Lyric’s former owners are still fighting for full payment from the embattled Swiss music company.
The former owners of Lyric have asked a federal court in New York to uphold an arbitration ruling ordering Utopia – which recently rebranded itself as Proper Music Group – to make the final payment on its October, 2021, acquisition of Lyric Financial.
According to court documents, Utopia agreed to pay USD $8 million for Lyric Financial, in the form of a $5 million upfront payment and two deferred payments of $1.5 million each.
Utopia still hasn’t made the final $1.5 million payment, the sellers said in a petition filed with the US District Court for the Southern District of New York, which can be read in full here.
Lyric Financial provides advances to artists, songwriters, producers, record labels and music publishers, in exchange for future royalty income streams.
It was one of 15 acquisitions that Utopia made during a buying spree over the past several years, which is believed to have led to the music company’s ongoing financial problems.
The company has hinted that its financial issues stem from the spike in interest rates seen over the past few years.
Utopia has implemented multiple rounds of layoffs, which have resulted in staffing levels falling from around 1,200 to some 250 full time equivalent positions, excluding contractors and staff at its UK physical music distribution warehouse.
Despite the staffing cuts, the company appears to continue to struggle financially. This past spring, it went to its shareholders asking for an emergency €6 million (approx. $6.4 million) cash infusion.
In arbitration hearings held in London, Utopia Music argued that it hadn’t made the final payment to Lyric’s former owners because they had failed to deliver on a condition of the sale, which was the delivery of ARTiE, a new tool for Lyric Financial customers that allows users to combine “dozens of online revenue sources that all require separate logins into one simple dashboard for all revenue sources.”
Utopia said that the ARTiE product delivered by Lyric Financial didn’t live up to the conditions set out in the sale agreement, and Utopia had to spend its own money to build a replacement.
Lyric Financial’s owners – which include Tennessee-based Music World Entertainment Corporation and EDE LLC, a company owned by Richard Eli Ball, as well as Claritas Private Credit Fund – argued that they had delivered ARTiE as promised.
They said that it was the second payment of $1.5 million payment that was conditional on ARTiE’s delivery, and not the third and final payment of $1.5 million. They argued that, since Utopia had made that second payment, the music company had in effect accepted delivery of ARTiE.
In its decision, issued on June 17 of this year, the London Court of International Arbitration (LCIA) largely sided with Lyric’s former owners, noting that records showed Utopia’s executives had accepted delivery of ARTiE on a Zoom call in May 2022.
The arbitration panel also noted that Utopia had failed to describe in what ways ARTiE was deficient.
It ordered Utopia to pay Lyric Financial’s former owners the $1.5 million, plus legal costs, arbitration costs and interest from the time that the payment was originally due in April 2023. The arbitration panel’s ruling can be read in full, here.
According to documents filed in the New York District Court, that amounts to more than $1.86 million. The former owners of Lyric said the payment had not been made as of the time they had filed the paperwork on Wednesday (July 3).
The former Lyric owners’ petition asks the court to enforce the earlier decision by the arbitration court, and implies that the money for the final payment can be extracted from Lyric Financial’s royalty revenues, which now flow to Utopia Music.
“Utopia Music is accruing and due royalties, inter alia, from the American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music, Inc. (BMI), Sony Music Publishing, and TuneCore,” the petition states.Music Business Worldwide