The following op/ed comes from Music ComeOn founder, Tim Ingham. It originally appeared in Tim’s MBW+ Review newsletter, sent exclusively earlier this week to MBW+ subscribers.
Sued-sued-s-Udio
Look. The commercial world feels a mite dismal right now, not least in the wake of the US economy shrinking in Q1.
So forgive my assumption, but I reckon we could all do with a laugh.
Luckily I have to hand the funniest one-liner from a professional comedian that 2025 has provided so far.
At least, I assume being a professional comedian is what Audible Magic CEO, Kuni Takahashi, does when he’s not in the office – because his timing and sense of the absurd is at Richard Pryor levels.
Audible Magic has just signed a “content identification” partnership with Udio, the AI music platform that spits out 10 songs a second and is being sued by the major record companies for alleged mass copyright infringement.
This partnership will apparently help digital services and distributors identify when music has been made on Udio, enabling them to differentiate bot-created tunes from their human-made rivals.
Takahashi said on Wednesday (April 30) that the new partnership “demonstrates Udio’s substantial commitment to rights holder transparency and content provenance”.
🤣
This would be the same Udio – to date, unlicensed by major music companies – that has breezily created songs with lyrics like “Yesterday, all my troubles seemed so far away”; “See that girl, watch that scene, digging the Dancing Queen”; “Look at the stars, see how they shine for you”; and, my personal favorite, “Today is gonna be the day that they’re gonna throw it back to you”.
I know in these Trump-defined times, the truth can be a slippery mackerel.
But on this evidence, Udio’s, ahem, “substantial commitment to content provenance” extends to ripping off the most famous songs of all time – without paying their creators.
Why UMG remains ‘confident’ of closing Downtown
I can hear you, you know, snickering into your sleeve.
In my last MBW+ Review column, I detailed the reasons why I believe the European Commission and the FTC in the United States will ultimately wave through Universal Music Group‘s proposed $775 million acquisition of Downtown. A week later, the EC announced it was launching an investigation into the buyout.
In truth, this development was expected. As you can read in Murray Stassen’s excellent MBW Explains piece on the matter, the EC has effectively been forced to investigate by two of its smaller member states: the Netherlands and Austria.
“The EC approved both of these deals… I continue to expect we’ll see the same with UMG/Downtown.”
The EU’s economic heavyweights – Germany, France, Italy, amongst them – have declined to raise any objections to the deal.
To get the buyout investigated by the EC, the Netherlands pressed the button on a particular clause called Article 22, which allows one nation to push for an EU-wide probe.
Previous examples of Article 22 investigations include Apple‘s acquisition of Shazam in 2017/2018, and Nvidia’s acquisition of Run:ai last year.
The EC approved both of these deals without any required disposals. I continue to expect we’ll see the same with UMG/Downtown.
As does Universal, by the way, which made a rare public statement on the matter last week, commenting via a spokesperson: “We are confident that we will close this acquisition in the second half of [2025], on its original timeline.”
So why didn’t the indies buy FUGA when they had the chance?
Holland’s objection to the Downtown deal – cheered on by parties in the independent sector, not least IMPALA – really comes down to one, Netherlands-hedquartered company: FUGA.
From one angle, indie activists’ objection to UMG’s acquisition of Downtown-owned FUGA is fair enough. As a B2B content delivery service, FUGA works with over 1,000 music rightsholders, and even claims to be “the largest full-service B2B music distributor in the world”. (Quite often, when a label services company says it distributes music, it’s actually quietly going via FUGA.)
Meanwhile, financial filings I’ve tracked down in Holland (see below) show that FUGA’s gross revenues hit USD $203 million in 2023, the last year for which documentation is available.
“In operating/net terms, FUGA is a significantly smaller company than its gross revenue figures first suggest.”
Yet much of FUGA’s role in the independent community actually resembles that of a CMO: it collects digital royalties, then pays the vast majority of them out to independent members such as Beggars Group, Secretly Group, Domino, and Epitaph.
In fact, around 85% of the revenues collected by FUGA, documents show, are paid out as ‘cost of sales’ – i.e. handed back to indie partners post-collection.
In operating/net terms, then, FUGA is a significantly smaller company than its gross revenue figures first suggest.
In 2023, for example, FUGA generated approximately USD $30 million in gross profit, and just USD $4.2 million in operating margin.
Those looking to argue that FUGA is a commercial behemoth – the likes of which UMG shouldn’t be allowed to own – may find pause for thought in this net/gross disparity.
I can’t help but look at FUGA’s annual numbers above and think two things:
(i) Justin Kalifowitz, the founder of Downtown, took a bold gamble on FUGA when his firm (via AVL) acquired it for a reported USD $40 million in 2020. The prior year, in 2019, FUGA posted a slight operating loss. Yet Kalifowitz clearly saw the future: that FUGA would not only turn profitable, but continue to grow its margin and global reach.
I assume he knew that FUGA could also potentially act as a ‘feeder’ platform, connecting Downtown with indie labels/artists outside its ecosystem. Downtown could then potentially upsell these indies into its other service offerings, from neighbouring rights to label services and publishing admin.
The price Kalifowitz paid for FUGA was just a fraction – around 5% – of the $775 million UMG is now offering for Downtown (with FUGA as the crown jewel). This tells its own story about Kalifowitz’s foresight; he saw value as others shied away from the opportunity.
(ii) If the indies truly valued FUGA as much as they claim today, where were they in 2020? Why couldn’t a community of indies gather together to best Kalifowitz’s bid to acquire FUGA back then, or raise the money to do so?
Merlin – the collective licensing organization that represents tens of thousands of indie labels and distributors – would have been a smart vehicle to facilitate this. (Not least because FUGA is on its board.)
In a way, Merlin was designed for precisely this kind of situation – to give indies collective bargaining power in a market dominated by multi-national competitors.
That’s what real independent-mindedness looks like. Not committees. Not consensus-building. And not moaning after the fact.”
When Kalifowitz placed his bet on FUGA in 2020, it was an audacious move.
Here was an independent music entrepreneur making an eight-figure gamble on digital infrastructure at a time when most were still obsessing over catalog acquisitions.
While other large music companies were throwing cash at buying hit songs, Kalifowitz was obsessing over the plumbing – the unglamorous but essential infrastructure that would power the next decade of music distribution.
That’s what real independent-mindedness looks like.
Not committees. Not consensus-building. And not moaning after the fact.
The same people who passed on buying FUGA for ~$40 million are now arguing it’s unfair that the person who did buy it might sell it in a deal worth twenty times that price.
Is this not trying to have your cake and eat it too?
Merlin’s annual global revenues in 2023, according to filings (see above), stood at GBP £1.19 billion (USD $1.48 billion). The org spent over USD $10 million on admin costs in the same 12 months, and banked a USD $6.7 million pre-tax profit.
Finding $40 million to secure a critical piece of independent infrastructure in 2020 shouldn’t have been insurmountable.
Somehow, it was.
Anti-Downtown/UMG indies might now find themselves in an uncomfortable position: hoping regulators protect them from the consequences of their own acquisitive meekness.Music ComeOn
