Warner Music arm seeks Russian deals despite business suspension | Music industry
Executives at the Russian arms of Warner Music, home to artists including Ed Sheeran and Dua Lipa, and French company Believe, have continued to try to broker deals despite the suspension of business after the invasion of Ukraine, the Guardian has learned.
The $15bn (£13bn) publicly listed Warner Music – which is owned by Sir Leonard Blavatnik, the Ukrainian-born billionaire with US and UK citizenship – owns ADA Russia, which works with local independent labels and artists such as Zemfira and Gorky Park. The wider ADA operation lists artists including YouTuber and rapper KSI as clients.
A marketing email sent by a top executive at ADA Russia, which is located within Warner Music’s offices and whose staff have Warner Music email addresses, tried to drum up business with local labels almost a month after its parent company announced a suspension of all operations in Russia in March.
The email, sent in April and seen by the Guardian, sought to discuss “potential cooperation”, offering premium rates for a range of music services and citing a string of Russian artists the company already represents.
“I would like to note that our streaming rates are much higher, we can do vinyl releases as well, and we offer advanced analytics,” the executive said in the email. “Everything is ready, and we’d like to demonstrate it in examples. We would like to meet up with you and discuss in person all the opportunities and our potential cooperation.”
The division, which calls itself the distribution department of Warner Music Russia, does not work with big name international artists signed to the world’s third-biggest record label.
The email directly contradicted Warner Music Group’s announcement on 10 March that it was “suspending operations in Russia, including investments in and development of projects, promotional and marketing activities, and manufacturing of all physical products” after the invasion of Ukraine in February.
A spokesperson for Warner Music Group confirmed that the executive should not have been conducting business in Russia and said it has launched an investigation.
“We suspended our operations in Russia in March,” he said. “This email is more than five months old, but it should not have been sent. We’re investigating what happened and we’ve also reiterated the rules of our suspension to our local team.”
The transgression by the music executive notwithstanding, it is not thought that the Russian business is operating in breach of Warner Music’s rules on a day-to-day basis.
However, French music group Believe, which has worked with artists including Slayer and La Roux, is continuing to operate in Russia on a much larger scale including making payments to a local streaming service that until recently was owned by the country’s largest lender, Sberbank, which is on UK, EU and US sanctions lists.
After the invasion of Ukraine, Believe, one of France’s biggest tech businesses, which is valued at more than €800m (£702m) on the Paris Stock Exchange, advised Russian partners how to continue to work around sanctions while also saying it remained in full compliance with international sanctions.
After a Guardian investigation, the company said that it had stopped hiring and new investment in Russia and suspended activities including releasing music from independent artists that use its services, as well as terminating relationships with local labels and artists it works with directly under international sanctions.
However, it has emerged that Denis Gorshkov, the managing director of Believe’s Russia operation, is continuing to try to sign deals with artists and for new catalogues.
One email, seen by the Guardian, includes a follow-up on a €3m “new offer” with a Russian label to “monetise new releases and the back catalogue”.
The company said this does not break its pledge made in March as it is a new deal with an existing partner, not a new investment in Russia.
“Believe has pledged for peace and made the choice to continue to operate with its local clients, artists, and partners in the Russian market in compliance with all applicable laws and regulations,” said a spokesperson for Believe. “Believe is maintaining all its operations in Russia in order to support its artists, labels and protect its people’s safety as well as ensure access to music production and distribution. Believe’s mission always remains to protect creation, artists, music and its people all over the world, and to support both teams and people.”
Believe – which was founded in 2005, launched in the UK in 2010 and floated on Euronext last year – has also continued to hire staff for roles including label manager and creative producer.
A spokesperson for Believe said that the new hires are to replace natural staff turnover and do not represent an expansion of its Russian operation.
A financial report of a Russian artist’s activity with Believe, seen by the Guardian, also shows that it conducts business with local streaming service SberZvuk, which until recently was owned by state-controlled Sberbank.
In May, Sberbank, which acquired the streaming service in 2020 to create a competitor to Apple Music, Spotify and local rival Yandex, sold its stake as part of a wider divestment of positions in Russian tech companies after the invasion.
A month later, the UK also added the new owner of the streaming service, JSC New Opportunities, to its list of sanctioned businesses stating that the deal with Sberbank meant it is “involved in obtaining a benefit from or supporting the government of Russia by carrying on business in a sector of strategic significance, namely the Russian information, communications and digital technologies sector”.
JSC New Opportunities, the new owner of Zvuk, has not been sanctioned by the EU.
“Believe confirms that its assessment concluded that Zvuk has never been under EU, neither US sanctions regarding Believe’s activities,” the company said. “Should Zvuk be under European Union and/or US sanctions at any time, Believe will immediately drop out all its catalogue from this platform and terminate any kind of partnership.”
The company owns brands including New York-based music distribution platform TuneCore and in 2018 bought a controlling stake in Germany’s Nuclear Blast, one of the biggest labels in rock and metal music that is home to acts including Slayer, Sepultura and Machinehead.
Other music labels listed on Believe’s brands page include: Allpoints France, which has worked with Björk; AFM records, which has Anvil and Lordi on its roster; and Naive, home to French acts M83 and Youssou N’Dour.