Merlin Network - Are they intent on taking the control of the flow of revenues shared between the music platforms, indie artists and labels?

>> PUBLISHED ON SEPTEMBER 12, 2019

INTRODUCTION:

VIDYPS 79 d.o.o. is a software development company from the Republic of Serbia (Europe). Doing business as Blue2Digital, throughout the period 2012-2015 it operated as a music distribution service with the aim of connecting its clients with multiple digital music platforms including Vevo, Google Play, Spotify and many others.

Before we started, the most of the music platforms required that we should sign a Membership Agreement with the company called "Merlin", i.e. "Merlin Network". We had no idea who they were, so we looked up the information available on their website www.merlinnetwork.org.

INTRODUCING THE CASE:

As officially stated, Merlin B.V. is the "global digital rights agency for the world's independent label sector". It is formally headquartered in the Netherlands (Europe), but actually run in the United Kingdom. It is said to be "100% transparent with their members regarding deal terms" in a way that it is "helping to ensure that independent music is appropriately represented and valued in the digital market".

Things were clear to us from the very beginning. Technically, Merlin had nothing to do with music or video distribution itself, but the digital platforms demanded that all the agreements and payments for the digital music sales be made through Merlin. It was not a matter of our choice, that was the deal - take it or leave it. We took it and made a mistake.

First of all, we found that in the case of any issue, we couldn't count on Merlin. The only way to solve a problem was to contact the stores directly and discuss the matter with their officials. It was no problem for Mr. Vladimir Milicev, CEO of VIDYPS 79, who was the contact person, but what was Merlin's role in all this? What was their purpose as a mediator, if we had to do it all by ourselves?

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Second, Merlin did send us the sales reports and invoices on time, but there were a few cases when the reports seemed to have been "corrected" prior to being sent over to us. Should we have an impression of our revenues having been "corrected" too?

Third, we realized that Merlin's exclusive mission was to have insight into what the so-called independent distributors do and control the flow of revenues shared between the music platforms, Merlin's participiants (artists and labels) and Merlin itself. Some might say that this is usual in business. Not exactly true, but let's say that it is acceptable as long as all sides share the responsibility and fulfill obligations as determined by the agreements they have signed. It was not the case with Merlin.

The role of Merlin's CEO, Mr. Charles Caldas, was also unknown. Other than wordy and colorful emails he used to send time and again, we didn't notice any particular activity or venture he'd undertake. The key person in Merlin was (and probably still is) Mr. Charlie Lexton, currently holding the position of Chief Commercial Officer and General Counsel. This is his page on LinkedIn:

https://uk.linkedin.com/in/charlie-lexton-b434a4

Charlie Lexton was meddling in everything - business affairs, finances, membership agreements, renewals, counting video views on Vevo... We were very reluctant to let the money of ours and our clients' go through the hands of people like Mr. Lexton and his associates, but we had no other choice. Expectedly, it didn't end up well.

THE MEMBERSHIP AGREEMENT WITH MERLIN SHOULD HAVE BEEN TERMINATED ON TIME:

But the time had run out. In April 2015 one of the most valued music video platforms, Vevo, sent us the royalty reports for January 2015 that did not reflect the actual number of views generated from the videos owned by our company's clients for that month. It tended to become a serious issue as millions of views were missing from the reports, so Vladimir Milicev contacted Merlin and asked for more details on the matter.

The first person to talk to was Ms. Lucilla Green, Royalties Manager at Merlin, who left Merlin just a few months later. Contacting Ms. Green didn't help, just like contacting Merlin had never helped about anything at all.

Nearly two months later, we received an email from Charlie Lexton on behalf of Vevo. It was rather unclear why Vevo would choose someone from a "global digital rights agency for the world's independent label sector" to represent their interests. Neverthless, the idea was to abolish their responsibility of anything and lay a guilt trip on VIDYPS 79 and its clients.

In his letter Mr. Lexton explained that there was a technical error with the embedded software which counted streams and it means that - believe it or not - VIDYPS 79 was "overpaid" in the past and Merlin had the right to confiscate all the unpaid royalties VIDYPS 79 had with them:

"VEVO has already recovered this from Merlin thereby triggering VIDYPS' liability to Merlin, all royalties reported under Merlin Deals will be offset against this liability"

According to Charlie Lexton, Vevo picked up the money from Merlin's account which automatically triggered Merlin's right to recover that same amount from VIDYPS 79?! The officials at Vevo and Merlin sat together and made a decision having consulted with nobody else. The Membership Agreement we had with Merlin did not envisage any possibilty of "triggering" one's liability or confiscating our company's earnings prior to exposing evidence to assert as a position in the argument. So what made them do it, or should we say, who made them do it? Did Charlie Lexton seek advice from Pryor Cashman LLP, a New York law firm which he once introduced in this context?

Charlie Lexton openly attempted to extort money from our company:

Charlie Lexton at Merlin B.V. is informing me on his intention to reimburse Merlin with over $95,000 - four years later, we are still waiting for Becky to send their bank details...

* Charlie Lexton at Merlin B.V. is informing me on his intention to "reimburse Merlin with over $95,000" - four years later, we are still waiting for Becky (Bishop, Head of Finance at Merlin B.V.) to send their bank details...

It was a different story that Merlin was telling to the Authorities (their company is registered in the Netherlands). In December 2015 the status of all the invoices on our company's dashboard was changed from "PENDING" to "PAID", although no payment to VIDYPS 79 was made on their end:

In December 2015 Merlin changed the status of the invoices from PENDING to PAID, although no payment to VIDYPS 79 was made on their end

Merlin falsely tried to present that all the money owed to VIDYPS 79 was regularly sent to us. Ms. Becky Bishop, Head of Finance at Merlin, explained why they had to do it:

"I had changed the status from PENDING to PAID in preparation for our end of year accounts" ?!

Although caught in the act, Merlin showed no regard for what was right or honorable, not even a little sense of self-consciousness or shame. This incidence was reported to FIOD - Fiscale Inlichtingen en OpsporingsDienst (Tax Information and Investigation Service) on February 22, 2016.

CHARLIE LEXTON DENIES TO SIGN HIS OWN ALLEGATIONS:

There were a lot of bizarre statements in the letter Charlie sent in June 2015. Just to mention a few of them:

"After a lot of investigation they have discovered that there was a technical error with the embedded software which counts streams"
"Vevo saw a huge drop off in views of the above videos when they switched their tracking software from superbeacon to comScore"
"Some traffic was coming from an embeddable Facebook player, which Vevo has not to date been able to find or recreate"

On February 22, 2016 Vladimir Milicev sent an email to Charlie Lexton with three Affidavits Of Fact attached to the email (available for review HERE, HERE and HERE, respectively). Mr. Lexton was just to officially confirm his own allegations from the aforementioned letter he authorized in June 2015:

Hello Mr Lexton,
Please sign and get publicly notarized the attached within 3 business days, starting today.
Merlin has never sent any official document based on the alleged "VIDYPS issue", and being that you were the only one involved with the matter (except Lucilla Green, who left Merlin), it is you to sign and get the attached documents publicly notarized only. No comments were ever made to your previous email's statements, because they were not official, but now they will be (if you agree to sign, of course).
The date you'll see at the bottom of each Affidavit is the date when they were originally made, and were as such signed by our clients.
Please reply to this email if and only if you intend to provide the documents as required. Otherwise, I'll consider that you disagree...

It is no surprise to say that Charlie Lexton disagreed. His reply was sent nearly 2 hours after Vladimir's initial request. Did Charlie seek advice from "Pryor Cashman" once again?

The email was addressed to "Vladimir", "Frank" and "Charles". "Vladimir" is Vladimir Milicev (CEO at VIDYPS 79), "Charles" is Charles Caldas (CEO at Merlin) and "Frank" is Frank Scibilia (attorney at Pryor Cashman LLP).

It was the last time we ever heard from Charlie Lexton.

PUTTING TWO AND TWO TOGETHER:

It became clear why all the payments must have been made through Merlin. It may sound ironic, but it is because Merlin is actually representing an elegant way for artists and labels to give up their rights and revenues in favor of powerful individuals in the music industry. There is nothing unusual in what Merlin did, collecting money in favor of the rich people is not unusual. Not even Merlin's connections with those suspected of submission of forged, falsified and altered documents are unusual, Charlie Lexton could testify about this. It was our reaction that was unusual. Many others would have bowed their heads, but we didn't.

It took us quite a long time to investigate the issues Merlin was involved with. According to what we have found out, things are far from being simple. It's such a reckless behavior and poor experience that, eventually, made us launch our own digital watermarking service to help people protect their copyrights.

CONCLUSION:

If you should listen to our advice and you are a music distributor or label, only distribute your songs and videos to the platforms which enable you to sign direct deals with them. This goes particularly to those who intend to be successful in their business and make a lot of money. In this particular case, if you are required to go through Merlin B.V. - don't do it. Stay away from such "global" indeterminate business entities.

* This content is in compliance with our Terms Of Use. We are a socially responsible company whose goal is to warn people of the inconvenience and damage that irresponsible companies and individuals can cause.

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