On 18 December 2014 a Finnish company sold a music streaming service to a Japanese one, and two licences granted by Africori moved with it. So did one granted by Electromode (Pty) Ltd, and four granted by SAMRO. None of those companies sold anything. None of them, on the face of the document, had to say yes.
The document is a Business Sale Agreement between Microsoft Mobile Oy as seller and LINE Corporation as buyer, for the MixRadio business. It became public because LINE filed it as Exhibit 10.5 to the registration statement for its 2016 initial public offering. Buried at page 63 of its schedules is something the music industry almost never gets to see: a complete, named list of every music licence underpinning a streaming service, with counterparties, dates and purposes. This desk downloaded all 2,293,227 bytes of it and read the African entries.
What the schedule actually lists#
Schedule 7 Part 3 is headed “The Music Licences”, capitalised in the original. It splits in two. “Part 3A, Major Music Licences” carries the Sony, Warner, Universal and EMI agreements. “Part 3B, All other Music Licences” carries everyone else, 287 distinct counterparties by this desk’s count, across 352 rows for the download store and 259 for the streaming service.
Africori is in Part 3B, twice. One row reads “Digital Music License Agreement / 13/08/2013 / Auto renew / Digital Music License to sell mp3 tracks & albums on Nokia Music Store”. The other reads “Content License Agreement for Radio Service / 13/08/2013 / Auto renew / To exploit and sublicense audio recordings and related content for use on Nokia Mix Radio streaming service.” Note the second verb. Africori had granted the right to sublicense.
Electromode appears once in the entire 408,000 character document: “Electromode (Pty) Ltd. / Digital Music License Agreement & One Amendment / 26/01/2012 / Auto renew”, for the download store only. It has no row in the streaming table. Neither do the other Africa-linked names in the list, which are ALTIUS Trading 437 PTY Ltd trading as Bozza, Exact Mobile (PTY) LTD, Matchboxology trading as Song King, and Lusafrica. On the publishing side, four SAMRO entries appear, an agreement from 13 August 2009 and three amendments, all carrying an end date of 31 December 2014, which is thirteen days after the agreement was signed.
Africori, in other words, was the only sub-Saharan African company in the schedule whose recordings were licensed into the streaming product rather than just the download shop.
The contract was the assignment#
This is the part that matters structurally. Clause 12.1 reads: “This Agreement shall constitute an assignment by the Seller to the Buyer or Nominated Buyer Company, as applicable of the benefit of each Assignable Contract with effect from the Effective Time.”
Read that again. For any licence that was assignable, no separate assignment document was needed, no consent was needed, and no notice to the licensor was required. The moment the deal completed, the African licensors had a different counterparty. Clause 12.9 handles the licences that were not assignable, giving a three month window from completion to obtain consent to novation, after which either side could terminate the licence and treat it as an excluded asset.
The schedule does not say which category the Africori or Electromode licences fell into. That is the single most important thing this desk could not establish, and it is worth being blunt about it: the public record does not show whether either company was asked, told, or neither.
The price went down by what was owed to rights holders#
Clause 1 defines the “Purchase Price” as US$40,000,000. That figure is a defined term, not a cheque. Clause 6.1 builds the actual consideration by taking the Purchase Price, then subtracting restructuring costs, subtracting an estimated employee liability amount, subtracting an “Estimated Music Licence Liability Amount”, subtracting any amount by which the actual music licence liability exceeded the estimate, and adding the buyer’s assumption of liabilities.
The third of those deductions is the interesting one. Money accrued to rights holders but not yet paid to them reduced what Microsoft received and travelled to LINE as debt. Unpaid royalties became a line item in a purchase price negotiation between two parties who did not own the music.
How much? Not disclosed. No filing read by this desk puts a number on any of those deductions. What the filings do say is that LINE’s audited accounts record completion on 16 March 2015 and total consideration of 2,299,444 thousand yen paid in cash, plus 2,095,184 thousand yen of liabilities assumed. Those numbers and the US$40,000,000 cannot be reconciled from the public record, and this piece does not pretend they can.
Majors were accrued on handsets, independents on plays#
Schedule 9 sets out how the money owed was calculated, and the two methods are not the same. For “Mix Radio Major Labels”, the liability is “the total sum across countries and months of (monthly device volume) times (per device minimum fee) times (major label activity ratio)”. For “Mix Radio Indie Labels”, it is “the total sum across countries and months of (monthly plays) times (per play fee) times (indie label activity ratio)”.
Majors earned against phones shipped. Independents earned against plays delivered. A major got paid when a handset left a factory whether or not anyone pressed play on it. An independent got paid only when someone did. That is a structural advantage written into the accounting of the service, and the independents in that second bucket included the African licensors.
One caution, stated plainly. The agreement never formally maps its “Part 3A” and “Part 3B” headings onto Schedule 9’s “Major Labels” and “Indie Labels”. What can be said is that Africori and Electromode sit in the part not headed “Major Music Licences”, and that the two accrual bases exist. It does not follow that these two specific companies were accrued per play, and this desk does not claim it.
The buyer was a company seventeen days old#
The UK register records MIXRADIO LIMITED, company number 09335334, incorporated on 1 December 2014 under the name LINE (UK) LIMITED, carrying that name until 19 March 2015, registered at 15 Canada Square in London, and dissolved on 20 May 2020. LINE’s own filing confirms the rename and lists the company as wholly owned.
So the vehicle was incorporated seventeen days before the agreement was dated, and renamed three days after completion. The agreement refers forty one times to a “Nominated Buyer Company” that could take the assignment instead of the buyer. The timing fits. It is not proof, because the agreement never names that company, and this piece will not join the two.
The rights were written off within fifteen months#
LINE recognised a separate intangible asset called “Music rights” at a fair value of 543,292 thousand yen when it acquired the business. Its board approved abandoning MixRadio on 12 February 2016, effective 21 March 2016. The music rights intangible was then written off in full at 446,408 thousand yen, alongside the goodwill, the software and the trademarks. Loss from discontinued operations came to 7,587,997 thousand yen for 2015.
Twelve months and five days after completion, the thing those licences had been assembled into no longer existed.
What this means for artists#
Three practical things, none of them specific to 2014.
First, your distributor’s licence to a platform is an asset on that platform’s balance sheet, and it can be sold without you being consulted. If your masters sit with an aggregator and that aggregator has licensed a service, the service can change hands and your recordings go along as part of a schedule. The question to ask a distributor is not whether this can happen. It is what the licence says about assignment, and whether you get told.
Second, when a platform is sold, money owed to you can become a negotiating chip between two companies that owe you nothing directly. Clause 6.1 is a perfectly ordinary clause. It is also a clause in which unpaid royalties reduce a seller’s price and become a buyer’s liability, with no mechanism in the document requiring anyone to tell the people owed.
Third, the contract is where the asymmetry lives, not the press release. Nobody announced that majors were accrued on handsets shipped while independents were accrued on plays delivered. It sat in a schedule for eighteen months until a stock exchange listing forced it into public view. When African companies ask what a platform deal is worth, the per-unit rate is less revealing than the basis on which the unit is counted.
What this does not establish#
Which Africori entity granted either licence, because the schedule names the counterparty as “Africori” with no company number, and the UK register returns four candidates on that name, three of which existed in August 2013. Whether Electromode (Pty) Ltd is the South African company of that name, because South Africa’s companies register publishes no public search this desk could reach. What either licence actually covered, because the licences themselves are not reproduced. Whether either was ever paid what the schedule says had accrued. And whether the 2015 version of this same exhibit differs from the 2016 one, because three attempts to retrieve it returned a server error and a maintenance notice.
The full evidentiary record, including every document fetched and every check that failed, is in the deal record for this transaction.