Are you a musician, rapper, recording artist or startup looking for a master class in turning an industry crisis into an opportunity? If so, read on.
Over the past two decades, a revolution has occurred in the world of recorded sound. While on the one hand, there’s no way around the hard graft needed to hone one’s voice, fingers, dance moves or sonic masterpieces, today’s artists can take comfort in the existence of Kobalt and its suite of music services.
Rising from the ashes of a record industry radically disrupted by the proliferation of MP3 and file-sharing platforms like Napster and Limewire, Swedish entrepreneur Willard Ahdritz created Kobalt in 2000 to support artists – or ‘creators’ as he is fond of calling them.
Fast-forward 19 years and the company is valued at nearly $800 million. The Kobalt website proudly claims to represent “over 40% of the top 100 songs and albums in both the US and UK”, with signed artists including CXLOE, Little Sims and Lauv, as well as established acts such as the Wombats, Nick Cave & The Bad Seeds, David Gray and Neneh Cherry.
Secret to success
How did Ahdritz pull it off? Again, like the army of inspired creative minds fighting for a music career, he put in a ton of work. But there is a lesson, too. Like many successful startups, Kobalt aimed to strip out all unnecessary intermediaries within its supply chain – remove the complexity and suggest a good use for the freed-up capital.
In this case, Kobalt’s MO was to strip out the middlemen between artists and those that consume their music, which the company identified as soaking up around 80% of the revenue paid in by people buying albums and using streaming services.
By offering a simple one-stop shop for artists to distribute music to streaming services like iTunes, Spotify and YouTube, collect revenue from those services, then directly paying the creators, while leaving them 100% of their recording rights and easy access to detailed data on their where, when and how many people listen to their music.
Does it work? Speaking at the Collision new tech conference last year, rather than expressing gloom about lost revenue to piracy and file sharing, Ahdritz was hugely optimistic, saying he would be disappointed if the total sales revenue from music publishing didn’t just double, but more than triple to $50 billion a year by 2024.
Today there are around 5,000 commercial artists worldwide making a living in the music business, but “efficiently monetising” the global audience through paid services could in time grow that number to 100,000, Ahdritz said.
That’s an encouraging, if not somewhat confusing statement. Let’s unpack it. The ‘monetisation’ he’s talking about is the monthly fee that Spotify charges its customers or what iTunes charges to download a song or album. In theory, the more people join and use those streaming services, the greater the pool of ‘monetisation’. Luckily, the record – no pun intended – seems to show that customers are comfortable with those price points.
In his native Sweden, Ahdritz said around 90% of music in the country used to be pirated in some form. The latest statistic: 4%.
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