US court orders Utopia Music to pay $1.9M to former owners of Lyric Financial

A US federal court has upheld an arbitration panel’s ruling that financially troubled music company Utopia Music must pay nearly USD $1.9 million to the former owners of Lyric Financial.

As part of a multi-year acquisition spree, Switzerland-headquartered Utopia acquired Lyric Financial in October 2021.

According to court documents, Utopia Music – which recently rebranded itself as Proper Music Group – agreed to pay $8 million for Lyric Financial, with $5 million to be paid upfront, plus two deferred payments of $1.5 million to be made at later dates.

Lyric Financial’s former owners went to court in September 2023, stating that they had never received the final $1.5 million payment from Utopia. The case was sent to a London-based arbitration tribunal, which ruled in favor of Lyric Financial’s former owners in June of this year.

The arbitrator ordered Utopia to pay the full amount owed, plus interest and expenses, which came to $1.863 million.

On Friday (July 19), the US District Court for the Southern District of New York upheld that decision in a civil judgment, ordering Utopia to pay the full amount owed, plus additional interest from the time the court petition was filed to the moment Utopia makes the final payment. The full order can be read here.

Lyric’s former owners include Tennessee-based Music World Entertainment Corporation and EDE LLC, a company owned by Richard Eli Ball, and Claritas Private Credit Fund, among others.

Lyric Financial provides advances to artists, songwriters, producers, record labels and music publishers, in exchange for future royalty income streams. It was one of more than a dozen acquisitions made by Utopia as the company scaled up in an apparent bid to establish itself in numerous aspects of the music industry, including distribution, financing, data, and royalty management.

Those wide-ranging plans began to sour as the company faced increasing financial pressures, which Utopia has hinted resulted from the spike in interest rates seen in recent 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.

The company also sold off some of its many acquisitions, including music publishing platform Sentric, which it sold to France-headquartered Believe in the spring of 2023, and Absolute Label Services, which Utopia sold to its original management team in the summer of 2023.

Despite the significant scaling back of its operations, Utopia – now officially Proper Music Group – continues to grapple with financial problems. The company went to shareholders earlier this year, asking for an emergency €6 million (approx. $6.4 million) cash infusion.

In the London arbitration hearings, Utopia argued that it failed to make the final payment for Lyric Financial because Lyric hadn’t delivered on a new tool, ARTiE, that would enable Lyric customers to integrate multiple revenue sources within a single account.

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.

The arbitrator rejected that argument, accepting the claim by Lyric’s former owners that it was the second payment, and not the third and final payment, that was contingent on ARTiE’s delivery, and that Utopia had effectively accepted delivery of the product by making the second payment.Music Business Worldwide