Hello! Last week’s newsletter was all about companies carving out a niche to raise money for emerging musicians and I entirely forgot that Water and Music, run by Cherie Hu, features a database of music tech startups and so I overlooked a number of companies in the mix, so read and subscribe to W&M if you haven’t. On a related note, our sponsor Infinite Catalog also name checks W&M in their message below - don't forget to check them out for your royalty accounting needs. Now let’s look into the world of digital concerts and livestreaming.
The sudden closure of the live music sector because of coronavirus last year set off a rush to find digital replacements of formally in-person experiences. The live music industry was no exception. If fans weren’t sure when they could go see their favorite band, then why not try and livestream? This created a rather sudden flood of artists creating Twitch accounts, Instagram/YouTube livestreams, and for those not directly creating music it presented an opportunity to frame digital concerts as an urgent future path of the business. More than a year later, with the concert business still in a state of on-again, off-again status there’s now a rush of cash into the space. Yet, it’s still not clear the demand for such an experience.
Last month, Cherie Hu covered an emerging contradiction within this space. She noted that hundreds of millions of dollars have been raised just within 2021 to support livestreaming or virtual concert startups, but the nascent industry data around the space shows low stagnant interest. This could be seen in the plateauing of people engaging with music content on Twitch or an MRC Data report that said only 5% of the US general population watched a virtual concert in 2020 with no growth projected for 2021. Consumer interest may be low but plenty of firms are ready to throw dollars their way.
Digital concerts certainly aren’t a new idea. They’ve existed awkwardly alongside music streaming and downloads for a couple of decades now but the arrival of the coronavirus pandemic suddenly made people care. Or rather, it made investors care. Though there are dozens of companies that are swimming in these waters, there appear to be few broad categories of investors within these spaces. First up is record labels.
Sony Music Entertainment, along with a number of others, helped push $15 million into Maestro; Warner Music Group invested in Wave with a press release touting digital avatars and “unique” fan-to-artist interactions. Then Deezer also made a couple of big livestream moves by investing in Dreamstage and Driift, so it could start to really own more of the live-streamed concert market. (I’ll note that one of Deezer’s biggest investors is Access Industries, which is the primary owner of Warner Music Group). These investments also rest alongside Sony’s investment into Epic Games, creator of Fortnite, and WMG’s backing of Roblox, so both companies are ready to test multiple paths for virtual music experiences.
Outside of traditional labels and streaming platforms, there’s another cluster to be found in artist-backed ventures. The platform Moment House raised $12 million from Halsey, Unitedmasters, Kaytranada, a number of music industry executives; and another platform Riff got $4 million from Empire, Quality Control, and Top Dawg Entertainment. What’s curious about these ventures is that it isn’t super clear what about these companies would distinguish them from others beyond the big name attached to their press releases. Even if some of these lean more on social aspects or a more refined digital concert, they’re all relatively hard to differentiate with compelling content. This is worth keeping in mind for the last cluster of firms.
Music companies and artists aren’t the only ones pumping money into this space. A number of livestream platforms have received venture capital funding with seemingly the same goal of capturing a still rather undefined market. This summer saw Mandolin raised $12 million from 645 Ventures, Foundry Group, High Alpha Capital, and Marc Benioff’s TIME Ventures; Flymachine got $21 million from the likes of Greycroft Partners, SignalFire, Primary Venture Partners, Contour Venture Partners, Red Sea Ventures and Silicon Valley Bank; Livecontrol secured $30 million from Coatue, Box Group, First Round Capital, Susa Ventures and TriplePoint. Even all of those combined don’t match the $122 million that DICE, a ticketing app, raised then quickly got to spending through acquiring the livestreaming series Boiler Room.
What’s noticeably missing from these startups are the big players like LiveNation or AEG. That’s not to say these companies haven’t dived into this space (LiveNation did buy Veeps) but while LiveNation continues to expand into markets like Mexico, it doesn’t appear to be all that concerned about this market segment cutting into their primary business. And I think that’s for good reason.
Cherie Hu, when closing out her thoughts on this topic was rather straightforward about what may be driving this influx of money: “The music livestreaming pie could also look bigger from the perspective of a startup’s exit strategy. There are a lot of major entertainment corporations and streaming platforms that will probably want to acquire music livestreaming startups in the next year — more for the sake of owning the infrastructure than for the inherent market opportunity per se.” Ring ring.
That some startups in this space also frame themselves as being a point of entry into the metaverse says a lot about this emerging sector, the music industry. Midem research wrote a white paper on this topic and in interviews with industry professionals and musicians, it appeared there was a solid consensus of this space being additive, not substitutional to the live music experience. And that could point to Cherie Hu’s initial inquiry into this space. While Fortnite and Roblox big-name events may capture media headlines, most musicians aren’t orienting themselves towards making music that is only experienced digitally, and removing the scarcity and community of live shows is still fairly under conceived of at the moment. That might be why Billboard on Monday ran with this headline: “Livestream Concerts' Next Step: Consolidation”. If there’s little market for these firms and money is still running into them, then start cranking out those sale pitch decks.
Series #5: Major Label and Big Tech dominance...
... are the top two concerns of Water & Music’s recent inaugural member survey. Someone even said “What we don’t have are enough tech entrepreneurs who find a way to make money while still giving artists the control they need.” Whoever that is, take heart: IC is a customer-funded tech platform built by and for independents, that gives everyone the tools + expertise to start & grow their catalogs, all while giving artists unprecedented access to their data. It *can* be done!
Infinite Catalog is the first royalty accounting software + service made for catalogs and artists alike, simplifying the process so you can grow your catalog, keep everyone in the loop, and get everybody paid.
Infinite Catalog is free to try for 30 days, and Penny Fractions readers get a 30% discount off your first three months.
Negotiations between songwriters and streaming platforms are heating up. David Israelite, CEO of the National Music Publisher Association, claims the biggest streaming platforms want to decrease the amount of money paid to songwriters and is preemptively countering with a demand of 20% of the company’s revenue. That’s a near one-third jump from the current proposed 15.1% rate, which is currently still caught in a legal battle. I covered this earlier in the year when giving a brief history of the Copyright Royalty Board, who’ll ultimately make the final decisions here. The NMPA’s initial offer might capture headlines but it should be noted many songwriter advocacy groups are still trying to get their own voices heard, in lieu of the NMPA, which speaks with the major publishers, hogging the spotlight.
Right now there’s a fight emerging that should concern anyone in the recorded music industry. Over the weekend, the International Alliance of Theatrical Stage Employees (IATSE) announced a deal with the Alliance of Motion Picture and Television Producers (AMPTP) that union leadership called a “Hollywood ending” after an overwhelming strike vote. However, within 24 hours nearly every Hollywood trade publication was reporting about rank-and-file deal dissatisfaction. If this deal is rejected and a strike is put on the table it'll be a big test of how much power organized labor can flex against the big tech companies that are pouring billions into their industry. Certainly some record industry workers may relate to that struggle.
A Note of Financialization
Where to even begin in the wild wacky world of songs as an asset class. The Blackstone Group, the private equity firm snatching up affordable homes and potentially helping push up inflation, is now best buddies with the Hipgnosis Songs Fund. The financial firm is investing a billion dollars into Hipgnosis Song Capital, a new venture between the companies, and they’re investing an “undisclosed amount of money” into Hipgnosis Song Management, an advisory company for the two funds now led by Merck Mercuriadis. Excited to see what song catalog will soundtrack America’s ongoing housing crisis.
That’s not all folks. The New York Times profiled Sherrese Clarke, formerly of Tempo Music Investments, who founded Harbour Equity Partners, which received one billion dollars from Apollo Global Management, an investment management firm that oversees nearly a half-trillion dollars. Spirit Music Group, received a $500 million influx of cash from Northleaf Capital Partners, a private equity company. A major investor in Northleaf was Caisse de dépôt et placement du Québec, a pension fund, whose history of music publishing investment goes back to the early 00s. That’s well over $2.5 billion being pushed into this space but don’t worry folks are indeed putting that money to usage.
BMG, though not with their KKR money, purchased a grip of Tina Turner’s song and image rights. KKR didn’t want to be left in the dust. Yesterday it was reported they linked up with Dundee Partners, a venture capital firm with an eye towards middle America investments, creating Chord Music Group and bought Kobalt Capital for $1.1 billion. I won’t unpack all of the details, check those here, but it does appear KKR is really, really, committed to music as an asset class. Kilometre Music picked up an undisclosed music catalog that included fractional shares of Drake and Dua Lipa hits; originally marketed as centering on Canadian music the company is already eyeing catalogs outside of its native market. Primary Wave paid over $50 million for part of Bing Crosby’s works and then another $20 million for songwriter Gerry Goffin’s publishing shares. And last, Raleigh Music Publishing, a company I previously never heard of, bought the publishing catalog of the songwriter Lee Morris. If folks know anything (i.e. who’s funding) this particular group I’d love to know.
6 Links 2 Read
An overabundance of music NFT platforms — and scams - Water and Music (Subscription) / TikTok’s ‘Messy’ NFT Gambit Is Spooking Its Biggest Artists - Rolling Stone
I won’t entirely write off the potential of NFT technology to provide intriguing alternative financial options for artists. However most mainstream coverage of them, and also where most of the money is going, are basically into digital assets squeezing money out of people who think they’re gonna see a return at a higher multiple.
The Case for a Post-Royalties Music Industry - Water and Music (Subscription)
A lovingly provocative essay. I hold a few points of disagreement but the willingness to not accept the status quo, nor fall straight into crypto-first solutions, made for a compelling read.
Always a pleasure to see where people identify problems within the record industry and what their policy solutions are.
A dual podcast recommendation. TrashFuture unpacks the desperation behind tech’s shift to the metaverse and last week’s episode of the Antifada goes into the ongoing global supply chain issues (you can skip the first 35ish minute if you wanna get straight into that discussion).
Stagflation: a demand or supply-side story? - The Next Recession
A few more thoughts on rising American inflation, global supply chain issues, and industry-specific labor shortage. Our current economic order is doing great folks.
Next month I’ll delve into the “creator economy” but this headline made me chuckle. Axios just discovered that in a capitalist society wealth accumulates at the top, even with niche nooks of the entertainment economy. Shocking! Again one reason why Li Jin, both an intellectual and financial creator of this market, favors proposals like an “universal creator income”. A policy solution that proposes the state or private firms, with the state’s approval, must lend financial support to anatomized creators. Basically, an admission that this isn’t a sustainable career proposition. Will give credit for the honesty.