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BERLIN — After introducing himself in German — a daring act for a foreigner — Warner Music Group CEO Robert Kyncl said a few words about why he was so excited to be at the opening of the company’s new Berlin office. “The world is noisier than ever,” he said, just as the roar of nearby S-Bahn made it so, but there was considerable excitement about the music coming out of Germany. He shared one example: “Komet,” a recent hit by veteran rock artist Udo Lindenberg and rapper Apache 207 that has broken chart records.
While the German music business has historically been divided among its major cities, Berlin is emerging as the country’s music capital, and although Warner’s German headquarters will remain in Hamburg, it celebrated the opening of its new Berlin office with a big party. (The new office is for both Warner Music Central Europe and Warner Chappell Music Germany.) Next week, during the Reeperbahn Festival, the company will have a second “hauswarming” party at its remodeled Hamburg offices.
“We see this new space, alongside our revitalised Hamburg headquarters, as a sign of our commitment to local players in the creative and cultural scene,” said Doreen Schimk, co-president of Warner Music Central Europe, who spoke in German. “It shows the importance of Berlin as a European metropolis and a location for the music industry.”
Fabian Drebes, also co-president of Warner Music Central Europe, spoke about how the new building would serve as a “new creative hub with possibilities for events, concerts and more to support our national and international artists.”
Lars Karlsson, Managing Director Warner Chappell Music GSA & Nordics, Doreen Schimk, Co-President Warner Music Central Europe, Natascha Augustin, Vice President Warner Chappell Music Germany, Fabian Drebes, Co-President Warner Music Central Europe
Doering Agency
Warner occupies the top floor of the Schicklerhaus, a late-19th-century building near the Jannowitzbrücke S-Bahn stop, a block from the River Spree, not far from where the Berlin Wall once divided the city. These days, it’s about a mile from AEG’s Mercedes-Benz Arena. It’s a sleek, modern office, with prime roof space that overlooks the river. As about 500 partygoers mingled on the roof and a terrace, a drone hovered overhead taking photos. German artists attending included Peter Schilling, Katja Krasavice, and Shirin David.
“The music industry is of increasing importance for Berlin,” said Franziska Giffey, a deputy mayor for business, energy and labor. Speaking in what she called “Berlinish” — a mix of German and English that’s increasingly popular in a city filled with newcomers from all over the world – she said that music business jobs increased by 700 to about 6,800 this year, and that Warner would add another 150.
“Without the scene of such a vibrant city, we wouldn’t be the No. 1 publisher,” said Natascha Augustin, vp of Warner Chappell Music Germany. Warner Chappell leads the German music publishing business partly because of Augustin and her signings in German hip-hop. She told a story about starting out with a small Berlin office, moving to a slightly bigger one, and ending up here.
“Berlin,” said Lars Karlsson, managing director of Warner Chappell Music Germany, Switzerland and Austria, and Scandinavia, “is one of the most important cultural cities in the world.”
I’m a California-raised Filipino American who spent my formative years (in the mid-aughts) worshiping bands like Death Cab for Cutie and much of the Myspace-era Warped Tour scene. So when I was 16, I decided to pursue my dream of starting my own band. But as I took a closer look at the artists I loved, the realization hit: Apart from Joey Santiago of the Pixies (who is Filipino), there was no one who looked like me.
Even as I transitioned into the business side of the music industry — working at large management companies, agencies and in touring — the lack of diversity was hard to ignore. And while the industry has changed a lot since I was a teenager, it still has so much room to grow.
As an active songwriter and senior director of A&R at Angry Mob Music Publishing, I’m a big advocate for songwriting camps and the significant opportunity they offer to everyone involved. I recently joined an organization called Mono Stereo Groove, which focuses on the representation of AAPI songwriters in the industry, and, inspired by all of the amazing work being done by those involved in the organization, I wanted to spearhead my own initiative. So at Angry Mob, I decided to introduce a diversity initiative into all creative areas, including by focusing on one of the most important elements in all of songwriting: the community.
This is why I recently launched the New Normal Writing Camp — an all-inclusive, diversity-forward camp that says it all in the name. I wanted to show that diversity should be represented not only on the artist level but also within the writing rooms, which have been very slow to catch up in terms of diversity. Our first annual New Normal Writing Camp, held in June 2023, featured 70% female artists/writers and 50% women producers representing more than 12 cultural backgrounds and featured artists including UMI, Deb Never, Yuna and Paravi. The hope is that camps like this will continue to push the industry to embrace all of the beautifully diverse writers and producers who deserve to be in high-level writing rooms.
The music industry can be difficult to work in, and these songwriting camps give the participants a chance to be themselves, get out of their comfort zones and make music in an intimate, safe space. Through these camps, I have the opportunity to create a diverse environment where songwriters and other professionals can network with those who do and don’t look like them, be exposed to a variety of genres and work with people with whom they otherwise may not have had the opportunity.
The best parts of these week-long writing events are the beautiful songs that are created and the lasting friendships that come out of them. It’s truly special to see people connect through their life stories, cultures and interests, creating music that reflects those. Unless you’re a person of color, it might be hard to grasp how crucial it is to see others who look like you pursuing their dreams and being given a fair shot in a white male-dominated industry. That’s why camps like these — also including Spotify’s GLOW camp for LGBTQ+ writers, Spotify’s Frequency camp for black writers and ASCAP’s She Is the Music camp for women songwriters — are so important.
When chatting about my intention to create writing environments that reflect the world we live in, the response from some industry professionals is usually one of surprise. While that response isn’t necessarily bad, it proves this inclusive approach is far from the norm. But it shouldn’t be. What the industry is blinded to is the potential to miss out on this generation’s next big artist/songwriter/producer — all because its leaders aren’t investing in underrepresented songwriters. All companies need to prioritize this issue, and I feel incredibly lucky to have the Angry Mob team behind me, championing my passion and continuously working alongside me to ensure we’re building a diverse roster of clients and organizing diverse writing camps.
It’s obvious that the music industry has a lot of growing to do, and I could have given up on it a long time ago due to my own experiences with close-minded gatekeepers — but I know that my work, however small, can really move the needle in the right direction. I am extremely proud to be a Filipino American, and it’s important to me to create spaces in the industry where the AAPI community and other underrepresented POC can grow and pursue opportunities that are often not given to them, helping ease the need to work twice as hard to even be considered.
My hope for the future of our industry is equity. I am honored to write about this topic and even share my experience, but I would also like for opportunities in the music industry for underrepresented groups to look the same as everyone else’s. Harkening back to the name of the songwriting camp I launched at Angry Mob, I’m optimistic that we can make diversity in songwriting camps the new normal and not something we need to push for any longer. When combined together, the small steps we take within the industry to provide opportunities to underrepresented groups will impact the future of music in immense ways.
Ralph Torrefranca is the senior director of A&R at Angry Mob Music. He is also a songwriter and the singer/guitarist in the post-punk band Cuffed Up.
European independent labels trade group IMPALA says it has concerns that the new “artist-centric” streaming model being rolled out by Deezer and Universal Music Group (UMG) later this year could create a “two-tier” music market that unfairly disadvantages indie artists and labels.
In an announcement on Friday (Sept. 15), Brussels-based IMPALA says that Deezer’s plans to introduce a new methodology for paying out streaming royalties for UMG artists from October 1 — at first only in France, Deezer’s biggest market — risks impacting independent and micro labels, which provide 80% of all new releases in Europe.
Among those whom IMPALA warns could be affected by the new streaming model announced by Deezer and UMG last week are new artists yet to be discovered, acts that deliberately cater to niche audiences and musicians from smaller markets.
The European trade body, which represents nearly 6,000 independent companies and labels, including Beggars Group, Cooking Vinyl, Epitaph and PIAS Music Group, says “the fact that the Deezer proposal has been developed in a vacuum” with UMG, the world’s biggest music company, “instead of the sector generally is also a concern.”
In response to its members’ worries, IMPALA says it is seeking “more clarity” from Deezer about its new streaming royalties model, which replaces the existing pro-rata setup — whereby one stream equals one play, with the total number of plays proportionally divided up by artists and labels — with a new system that prioritizes active listening, meaning users who intentionally search for or click on an artist’s song.
Under the new “artist-centric” model, “professional artists,” which Deezer and UMG categorize as artists who have accumulated at least 1,000 monthly streams from at least 500 unique users, will receive a higher share of streaming royalties, while Deezer will remove “non-artist noise” — essentially, white noise and nature sounds, which the company says accounts for 2% of streams — from the available royalty pool. As part of its reforms, Deezer has also vowed to crack down on streaming fraud and malicious actors exploiting the system.
At present, Universal is the only label signed up to the new streaming royalty allocation model, although in an interview with Billboard, Deezer CEO Jeronimo Folgueira said the Paris-based company is in discussions “with all content providers” and anticipates that more than 50% of its repertoire will be on the new model come its launch in October. He said the company also plans to expand the offer beyond France, where it will be piloted this fall, to “all providers in all countries” in 2024.
Responding to the UMG-Deezer plan, IMPALA’s executive chair Helen Smith said she welcomes Deezer’s “commitment to improve the streaming market” but cautions that “more debate is needed on this vital question… and its potential impact on the music ecosystem.”
In April, IMPALA published an updated version of its own 10-point plan to reform streaming, which proposed various changes to how digital royalties are allocated, including attaching a premium value to tracks that the listener has sought out as well as a so-called “Fan Participation Model,” whereby artists and rights holders could generate incremental revenue within digital services through offering special features and extra tracks.
The trade group says it has discussed its proposals with multiple digital services and will continue to push for “meaningful streaming reform.”
“It’s a common thread through the history of recorded music that the great artistic advances and changes have come from, and through, the independent sector. I don’t expect Goldman Sachs to know that but Deezer and UMG certainly do,” said Mark Kitcatt, chair of IMPALA’s streaming reform group.
Kitcatt added, “We hope that services will join with us to reform the streaming world in a way that increases opportunity and reward for all dedicated music creators, and enhances and enriches the experience for fans, rather than just diverting more royalties towards the biggest artists.”
23 PR (or Twnty Three) expands its presence in the United States with the appointment of James Rainis as head of U.S. public relations, Billboard can exclusively reveal.
The independent comms and artist management firm recruits Rainis from Shore Fire Media, where he worked on campaigns for the likes of Bruce Springsteen, Bon Iver, Ghostface Killah, Oneohtrix Point Never, and PJ Morton, over a nine-year stint.
Founded in 2014 by Melody Forghani, 23 PR is based in Sydney, Australia and represents a diverse roster of talent, including RAYE, Little Simz, Obongjayar, KAYTRAMINÉ, Caroline Polachek, Skepta, and Joji.
In 2019, Amanda Perlstein, formerly of Stones Throw, Partisan, Shore Fire, and Big Hassle, launched 23 PR U.S. With Perlstein at the helm, the American arm secured relationships with Logic1000, CLIP, Baird, Luna Li, Haviah Mighty, and others, and works in tandem with HQ to offer tailored U.S.-only, Australia-only, and, when required, joint campaigns.
“Melody and Amanda have built a formidable press operation both in Australia and the U.S. while always honoring the vision and goals of the musicians they represent,” comments Rainis in a statement. “I’m thrilled to join the team and to expand 23’s U.S. operations, all while working with a diverse roster of artists on the bleeding edge of music today.”
Adds Perlstein: “Melody and I are thrilled to welcome James to our U.S. team. We can’t wait to see where he takes the company next with his keen eye for spotting talent early, extensive knowledge of music, and a commitment to developing an inclusive company culture.”
Since the U.S. division opened for business, the indie firm has brought acts like Kucka, Maple Glider, altopalo, Sunset Rollercoaster, MAY-A to the “global stage,” reps say.
A statement from the company reads, “Our love of music is at the center of every campaign through the promotion and protection of artists and their stories.”
Universal Music Group Nashville has launched a comedy label, with the first release coming from Nashville-based comedian Nate Bargatze. Capitol Comedy Nashville will kick off with Bargatze’s Hello, World, out Friday (Sept. 15) on digital service providers (DSPs). The Grammy-nominated Bargatze has released several specials on streaming outlets, including Hello, World, which premiered on Amazon’s Prime Video earlier this […]
Olivia Rodrigo is proving that artists don’t need expensive technology or a sprawling staff to make sure their lowest-priced tickets end up in the hands of fans — and not scalpers.
Ticket brokers were crawling around Rodrigo’s website on Wednesday (Sept. 13), assessing their odds of scoring tickets for the superstar’s freshly announced Guts World Tour, which kicks off in February at Acrisure Arena in Palm Springs, Calif. An early spring tour headlined by Rodrigo is a pretty good bet for ticket resellers based on the singer’s continued chart success: “Vampire,” the first single from her new album, Guts, is currently enjoying its 10th week on the Hot 100, while the set’s second single, “Bad Idea Right?”, debuted in the top 10 last month. Meanwhile, the album itself earned more than 126 million on-demand streams in its first four days of release. More importantly, her 2022 Sour trek was an underplay first run tour — Rodrigo had kept her ticket prices reasonable, averaging about $75 a ticket — that saw demand far exceed supply and drove prices into the stratosphere.
For Guts, Rodrigo is taking a simple, innovative step to protect what she is calling “Silver Star tickets,” a two-seat package she’s selling for $40 a pop to individuals her team can verify as fans.
Needless to say, scalpers will want to get in on that. A $20 ticket to a high-demand concert can generate a big markup and quick profits, especially compared to tickets priced between $50 to $200 — the price range for the Live Nation-booked tour. Tickets in the $50 to $200 range, meanwhile, will leave some room for markup on resale sites but make profitability less certain, especially on top-tier tickets.
To pull this off, like a game of cat and mouse, Rodrigo’s team must keep the Silver Star tickets out of scalper’s hands for the program to be a success. Few details about how this will work have been made public, but Rodrigo’s registration site hints that the singer’s team will directly select fans to participate. The real innovation, however, is a requirement that fans pick up their $20 tickets at will call on the night of the show; only then will they learn where their seats are located.
That’s not too different from how box offices used to use will call-only pick up to fight scalping, but where that strategy would typically aim to protect the most expensive tickets this time it’s being used on the cheapest. The limited number of tickets involved here will also help keep from overwhelming staff, whereas previously such a strategies became an unmanageable burden. Meanwhile, not knowing the section or row of a ticket makes it very difficult to sell it on secondary sales websites like StubHub, which requires scalpers to list tickets in the general vicinity of where they are located.
The plan isn’t fool-proof — when it comes to resellers, nothing is — but it places enough hurdles in front of scalpers that most will hopefully be deterred from taking advantage of a program that’s meant to get discount tickets into the hands of fans who otherwise wouldn’t be able to afford to see Rodrigo in concert. And if the strategy is successful, it’s easy to see it being duplicated by other artists, whose biggest frustration with ticketing tends not to be that their best seats are landing on the secondary market, but that seats affordable to their younger and less economically advantaged fans are ending up there too.
Consumers and the marketers who sell to them agree: They “hear from too many influencers — and not enough real people — in marketing.” That’s according to an iHeartMedia study the company unveiled Wednesday (Sept. 13) that explores the gap between marketers and their audiences and tries to identify biases and blind spots.
Though the wording is a little bit confusing — most influencers are still real people, with a few exceptions, i.e. Lil Miquela — this conclusion aligns with what many music marketers have been saying for over a year. In essence: Throwing bags of money at popular TikTok accounts and hoping this will magically lead to music discovery and drive streams is not an effective or efficient approach.
Marketing spends “started becoming less effective when people and brands were really looking at people’s influence based upon follower count,” says Coltrane Curtis, founder of the marketing agency Team Epiphany. Curtis has been an active proponent of the notion that “the pay-to-play model is ineffective, oversaturated and counterintuitive.” “Influence is about trust,” he adds. “When you start seeing everyone paying for it, you feel duped and taken advantage of.”
Last year, the music consulting agency ContraBrand analyzed TikTok’s top 200 from the first half of 2022. The company determined that “paid-for tactics, such as influencers and ads, accounted for success in under 12% of the platform’s viral tracks.” In 2020, as industry after industry awoke to TikTok’s power as an advertising tool and started pouring money into the platform, “you would literally have an influencer’s rate to post go from $500 to $1,500 in a day,” ContraBrand co-founders Sean Taylor and Jacorey Barkley told Billboard last year. “That was happening day in, day out. Influencer campaigns have become both less accessible and less effective.”
iHeart laid out its new study — and gently prodded marketers to think about spending more on podcast advertising (a sector in which the company is highly invested) — during a chat between Conal Byrne, CEO of the company’s digital audio group, and author and podcast host Malcolm Gladwell in Manhattan.
The conclusions of the study echoed many of the think pieces written after Donald Trump won the 2016 presidential election: Coastal cities are out of touch with large swathes of the country. In this case, the focus was on marketers themselves, who spend time in their own “bubbles,” never taking the time to notice that others might not share their passions and priorities.
This point was driven home through a barrage of statistics. While all the marketers surveyed were familiar with NFTs, 40% of consumers had never heard of them. Marketers have the hots for artificial intelligence — 66% “are excited about the potential” the tech “will unlock for society” — but consumers are tepid about the robot-driven future, with only 39% excited. Marketers are apparently “motivated by fortune, fame and fear;” “consumers are motivated by friends and family.”
The study did not address itself to the music industry. But in her opening remarks, Gayle Troberman, iHeart’s chief marketing officer, sounded much like a major label executive. There is “more competition than ever before… for consumer attention,” she said. “We’ve never had more data, and yet, it’s never been harder to win.”
Tory Lanez will remain in prison pending appeal after a Los Angeles court judge denied his motion for bond on Thursday (Sept. 14). The ruling, reported by Meghann Cuniff who was in person at the hearing, was handed down by Judge David Herriford, who last month sentenced Lanez to 10 years in prison for shooting […]
Last week, French music streaming service Deezer joined with the Universal Music Group to roll out what they called an artist-centric music streaming model, which they said was “designed to better reward the artists and the music that fans value the most.” It’s the result of a six-month partnership announced in March that promised to examine the current “pro-rata” streaming royalties model, in which artists and labels are paid according to their share of streams out of the available pool of revenue generated by streaming services. They aim to identify a new way of paying out that revenue, at a time when streaming service catalogs have exploded to north of 200 million tracks and fraud and streaming manipulation have proliferated on platforms.
The artist-centric model, which Deezer says will begin rolling out Oct. 1 in France for UMG artists with plans to expand it to more content owners and additional territories, relies on a “boost” model that rewards artists who are actively searched for by users, as well as those who maintain a level of 1,000 streams per month from at least 500 unique accounts — what Deezer/UMG are terming “professional artists.” And it has generated plenty of scrutiny from many corners of the industry, despite its initial limited scope.
Here’s how it works: Under the “old” pro-rata model — or the one still in effect at every major streaming service — one stream equals one play, and the total number of plays is divided up by artists and labels according to how many they accrue. Under this “artist-centric” model, if an artist qualifies as a “professional artist,” one stream would get “boosted” to count as two plays; and if a user actively searches for or clicks on an artist’s song, that stream would get “boosted” to count as two plays. If a user actively searches for or clicks on a song by a “professional artist,” that stream counts as four plays when the pool of revenue gets divided up. As part of this, “non-artist noise” content — essentially, things like the sound of rain or a washer/dryer that contains no music — will be removed from eligibility from the royalty pool, and eventually deleted from the service altogether, to be replaced by in-house noise uploaded by Deezer that will not generate revenue.
That’s the headline change, but there are many other elements to this switch as well, some designed to root out streaming fraud or bad actors gaming the system, and others that are designed to promote human artists at the expense of general audio. Deezer also released some statistics to support the changes, including that “non-artist noise” content accounts for 2% of all streams; that in 2022, 7% of all streams on its platform were fraudulent; and that, contributing to the clutter on the platform, 97% of all uploaders to Deezer generated just 2% of total streams. All told, Deezer eventually expects the changes to increase artist royalties by as much as 10%.
Still, there is work to be done for the service to implement this more widely. Deezer CEO Jeronimo Folgueira says the company is actively looking to bring more partners aboard, and expects to have more content providers on the system by the time of the Oct. 1 launch, with a full rollout with all providers across all territories intended by next year. In the meantime, “the royalty structure of labels and artists that are not signed on yet will not be affected during the transition period,” he says. The model will also initially only cover recorded music royalties, though he says “our goal is to include publishing royalties as well and will begin discussions with publishers in the near future.”
Folgueira spoke to Billboard to explain how it all works and break down how the companies created the thresholds and distinctions that underpin the new system.
Billboard: Can you walk me through the last six months of how you guys got to this point?
Jeronimo Folgueira: Deezer has been promoting a change in the model for more than four years, advocating for UCPS [User-Centric Payment System]. UCPS is much better than the old model that we had, but we figured that there’s a better way of implementing this, which is artist-centric. Artist-centric is better than UCPS, which is why we were able to get this one over the finish line, whereas with UCPS there was a lot more resistance.
Basically, given our background, it was obvious that we would engage in reviewing the system. And Universal has, in the last few months — since Lucian Grainge took on this topic personally very strongly — supported changing the model to artist-centric, so we announced a collaboration with them where we looked into the data with a consultant that they hired to see, basically, what would be the right way of moving the model.
It started from different parts. We came from a UCPS base, Universal came from an artist-centric point of view that was different from where we ended up, and we tried to find something that would make sense and would be fair for the whole industry and achieve the benefits of what we wanted while minimizing the negative impact. Because with UCPS, there were some really good artists who got negatively affected. But with the artist-centric model we’ve created now, basically all professional artists creating valuable content will get a benefit. Some get a huge benefit, and some get a small benefit, but creators making high-value content all benefit. With UCPS, there was more shuffling for artists.
That’s why in this first version of artist-centric, we’re focusing mostly on eliminating noise from the royalty pool and giving a boost to professional artists that create valuable content that users love and want. We’ve been working on this for months, working on different versions of the model, running data to make sure that we eliminated the wrong incentive and created the right reward for the right content and behavior.
What do you expect the effect to be?
Overall, the pool doesn’t really change, it changes the distribution of the pool. But effectively what we’re doing is reducing the economic incentive for fraud and gaming the system. We’re eliminating the payouts to pure noise, and we’re boasting the payouts to real artists. So effectively there will be a shift of money from low-quality content — or not even real music — back to real, professional artists. So what we see is that producers of valuable content will get an uplift, on average, of around 10%.
What does a “boost” mean?
The boost is for a professional artist — and we consider that to be if you have more than 500 listeners a month and more than 1,000 streams. The threshold is very low, and any small, independent artist will reach those levels, so as long as you have a minimum amount of a following and fans, you’ll get to that boost. And if people search for your song, or add it to favorites or have it in a playlist, it gets another boost. So it basically means a stream of a song from one of those artists will count four times for the pool system. So it’s still a pool system, but those streams will count four times. Whereas rain, for example, will count zero, and functional music will count once. So they get boosted 4x for producing content that people actually love.
And where does the extra money come from?
The pool is the same, but the way that pool gets distributed is based on the share of streams. But that’s where the boost comes from. Noise will not get paid at all, so that’s where some of the money comes from; functional music, or music from artists that do not qualify for the threshold, will get paid less; and then artists that create valuable content will get the boost, therefore they’ll get paid more.
How did you come to the “professional artists” distinction?
We looked at different thresholds. We wanted to create a threshold that was transparent and fair, so that a small, up-and-coming artist could get there, because we want to support new up-and-coming artists and independent artists. So it was very important that this was something that was good for all artists, not just artists that were signed to a major record label. With that threshold, even though a lot of the artists on the platform will not qualify to get that boost, the majority of the streams actually do. If an artist doesn’t get to 1,000 streams and 500 listeners a month, they cannot make a living [through streaming] regardless of what the payout of the model is. So you’re not technically a professional. And any up-and-coming artist that is rising up gets to those levels pretty quickly. You don’t need big marketing budgets or promotions behind that. We’re talking about levels that are relatively easy to achieve once you are a professional and do this seriously.
But wouldn’t those smallest artists need that money the most?
Yeah, but we’re talking about people that are making €3 or €5 euros per month; it doesn’t make any real difference. It will not change anything at all. That’s why the threshold is so low — that economically it makes no impact whatsoever.
What effect would this have on playlisting? If you click on an artist’s song, they qualify for the boost — is that just if you’re looking at an artist’s page and seeking out their music? Or if you click on their song that’s first on a playlist?
If a song is on a playlist, it will always get the active boost. You would not get it if it’s algorithmically pushed to you. So if you’re listening to [algorithmic playlist] Flow, for example, and you discover new songs on Flow, you haven’t really chosen them, so those would not get the boost. If you come across a song [on an algorithmic playlist] and favorite it, that would get the boost.
What do you define as “non-artist noise”? Is there a threshold there?
We wanted to be very fair and transparent and start in a very simple way, which is noise that has no music at all. Right now what we are going to stop paying, and eventually deleting, will be pure white noise — the sound of a washing machine, or rain, but without any music or anything else. That is the first stage, because it’s very easy to detect and very fair.
Then, there are different layers. Once it has music, then obviously it will not have the artist boost, most likely, and will probably not get to the active boost, but it will still be paid and still be there. So it won’t qualify for the boost, but it will still be paid and be available. Later on we’ll look into how that evolves and make sure that people aren’t abusing it, and if it becomes an issue then we will address it. It has to be a model that gets reviewed regularly, the same way that the Google search algorithm gets reviewed regularly to make sure that it’s always giving you the most relevant results, to make sure that there’s no gaming of the system, that it’s actually helping real artists.
What we’re trying to do here is support the creation of high-value content from real artists. And therefore we will continue to monitor it. Initially, it’s a very simple execution: pure noise gets kicked out, but anything with music will stay for the time being.
Where do you draw that line between what is “functional music” and what is artistry?
Right now, we don’t, because it’s a very difficult line to draw. If we find a way to draw that line then we will, but it has to be fair and it has to be very transparent. It cannot be subjective. We haven’t found a rule that is fair and transparent to define what is functional music and what is not, so that’s why we decided not to go there and went for the boost instead. Because what we see is, if it’s functional music, people don’t really add it to a playlist or follow it or search it or put it in favorites. So usually, things that are functional music, by nature, will not qualify for the boost. So the boost is basically a smart way of letting the behavior of the users boost what is real, high-value content, versus what is purely functional music.
Is this also about AI protection? Protecting “real” artists vs. AI artists?
Initially, we’re not taking any steps against AI. The model is not designed against it. However, it is a model that is built in a flexible way that can protect real artists from AI in the future, and what we said is that the real artist boost should be applied to real, human artists, so if it’s a machine it should not qualify for the active boost.
Your press release also mentioned a “stricter provider policy” that you guys are implementing. What does that entail?
Basically right now, like every other DSP, we allow people to upload music through these do-it-yourself [distribution] platforms; there’s plenty of them. And there’s a lot of content being uploaded. What we want to do is make sure that we get content that is valuable. We don’t want more noise getting uploaded to the platform and we want to be very strict with fraud and gaming [the system]. There are certain providers where more than 50% of what they uploaded we had to take down because of fraud. So we’re going to potentially block those providers altogether. We do not want to be used to game the system. Until now we had been allowing everything, and only when something gets detected as fraud did we deal with it. Now we want to be a lot more strict with what we allow to be uploaded.
But as you were saying, so much gets uploaded every day. How do you screen that?
AI. There will be clear rules, and then the machine will be screening all content that gets uploaded, and once you get to certain thresholds where they’re providing too much content that is detected as fraudulent or gaming the system, then we will just block them, the same way that Google will penalize anyone that is gaming their SEO and will remove them from search results for at least six months. There are penalties for bad behavior. Right now in streaming there are no penalties for bad behavior, and we’re trying to introduce them, the same way that Google and many other platforms do.
What other practices are you instituting to combat this fraud?
One really important aspect of eliminating the fraud element is we’re going to put a cap on the impact of a single user on the pool of streams: only 1,000 streams per user per month will count. So if you listen to 2,000 streams, then your streams will count half. That way, you cannot have one account racking up 10,000 streams and stealing money from the pool. A normal human will consume anywhere between 400 and 600 tracks per month, so we’ve set the threshold at 1,000. At 1,000, more than 90% of the behavior is captured and then only the outliers go beyond that. Some of it is not fraudulent — it’s usually young kids listening to K-pop or rock day and night. But the behavior of the fraudulent accounts, or gaming the system, happens by hacking accounts and generating huge amounts of streams to steal money from the pool. So by putting a cap of 1,000 streams per user, we are eliminating the economic incentive. You’d have to fake or hack a lot of accounts to have an economic impact, whereas right now with only a handful of accounts you can have a massive impact on the pool.
That 400-600 tracks, that was a result of your research?
Yes, our data. We have 10 million monthly subscribers, and over the last 15 years it’s pretty statistically significant that a normal human will listen to something in the range of 500 tracks. It really depends on age; the younger you are, the more tracks you listen to. But generally speaking, in normal human behavior, everything will be captured below 1,000 streams. If you’re above 1,000 streams you’re an outlier, and we don’t want those outliers or gamers of the system to have an impact on the pool.
What other tweaks are possible as you guys start to roll this out?
One thing we left out that we looked at was potentially adding another layer, which was streaming time. So instead of calculating it by stream, calculating it by the time you spend streaming a song. But what we saw is that with the current boost, the impact is already captured. So if you added listening time on top of the current layers that we created, the impact is minimal, because if you love a song, you usually listen to the whole song. We explored it, looked at the data and decided it wasn’t needed, and we wanted to keep it as simple as possible. But we haven’t completely ruled out listening time.
The other thing we haven’t completely ruled out is moving more and more towards a user-centric approach. Right now we cap things at 1,000 streams. But that can come down eventually to make it closer and closer to a UCPS approach. So that’s another variable that we’ll want to keep an eye on. And the other one is the threshold for a “professional artist.” We need to make sure that the 1,000 streams and 500 listeners a month is the right level and that it doesn’t have negative consequences. Because we really care about new, independent up-and-coming artists. We want to support them. So we will be reviewing that and its impact on new artists as well.
What might make you lower that threshold?
We have looked at so much data, which is why I feel like the level is in the right place. But feedback from the community and if there were any unintended consequences that we couldn’t see in the data that we already have.
When you roll this out, does this only apply to UMG artists?
Yes and no. Right now, the agreement is with Universal, however we’re in discussions with all content providers. The majority of content providers are very happy with the artist-centric model, because everyone who produces high-quality content gets a boost, whether you’re a major record label, an independent record label or a small indie artist distributing yourself. As long as you create content that people value, you will benefit from the model. I expect a big chunk, if not more than half, of our content will be on the new model by the time we launch this on the first of October. And our intention is to roll this out to all providers in all countries in 2024.
What would be a mark of success for this program? Six months from now, what would tell you that this is working?
I think it’s if real artists really get the boost, if they see an uplift in royalties, that’s where we would say that this model is working and helping good artists create valuable content. That’s ultimately what we want to do. The pool of money is the pool of money. Obviously we’re working to raise the ARPU [average revenue per user] and grow the pie, but that’s a different discussion. But from the pie that we have, more of the money has to go to artists who create valuable content, to implore them to continue to create valuable content. If those boosts work as intended and the real artists creating valuable content see an uplift in royalties, this model will have succeeded.
The board of directors of Hipgnosis Songs Fund said on Thursday that the music royalty fund founded by Merck Mercuriadis plans to sell two portions of its song catalog in a bid to increase its stock price and pay down debt.
The proposed sales include one package of assets that consists of 29 catalogs worth roughy $440 million, which the Blackstone-backed entity, Hipgnosis Songs Capital, has agreed to acquire. The second package of assets, worth $25 million, includes songs Hipgnosis Songs Fund acquired in 2020 from Kobalt, and is being shopped to external buyers.
The board introduced the proposed sales, which have a combined value of $465 million, alongside a proposal to buy back up to $180 million of its own stock, to pay down $250 million of its revolving debt and to introduce new, lower advisory fees to be paid to Hipgnosis Song Management Limited. The board says it believes the package of proposals, which must be approved by shareholders, will serve as a “catalyst for a re-rating of the company’s share price … (which) over the last 18 months … has not reflected the fundamental value of the company.”
This follows news last week of Concord’s $469 million bid for rival Round Hill Music Royalty Fund, a move that gave Round Hill and Hipgnosis’ stock prices a much-needed boost. Round Hill’s stock price spiked 65% after the acquisition announcement to $1.13.
“Given the substantial share price discount to fundamental value in recent months, share buy backs enable (Hipgnosis Songs Fund Ltd) to invest further into the remaining portfolio at a material discount to its fundamental asset value,” according to the statement. “These disposals are of the smallest magnitude possible that would provide the required capital to execute on this strategy, whilst ensuring that the ongoing investment case for Hipgnosis Songs Fund remains intact by protecting the strength of the remaining portfolio.”
The board says that the proposed sale worth $440 million that would go to Hipgnosis Songs Capital, a fund run by Mercuriadis’ Hipgnosis Song Management and Blackstone, reflects a multiple of 18.3x historical Net Publisher Share and is “designed to protect the strength of the remaining portfolio” because it will leave the London Stock Exchange-listed Hipgnosis Song Fund with a “concentration of culturally important and successful songs.”
Those songs, it says, represent 81% of the existing portfolio by fair value, including ownership in seven of the Fund’s 10 largest catalogs, and are mostly older vintages, such as 47 of Rolling Stone’s 500 Greatest Songs of All Time (down from the Fund’s current ownership stake in 52 of those songs.
The board says the sales price represents a 51% premium, compared to the asset’s valuation based on the company’s 30-day average market capitalization up to Sept. 13, 2023. It also represents a discount of 17.5% to the fair value of the package of assets compared to the valuation disclosed in the company’s most recent annual report, out March 31.
By comparison, Concord’s cash bid of $1.15 per share for Round Hill’s Music Royalty Fund represented a 67% premium to the share price and a 11.5% discount per-share net asset value ascribed to Round Hill by Citron Cooperman, a leading valuation expert.
With regards to the second proposed sale of rounghly $25 million-worth of songs, the board said it had long anticipated it would need to sell some of what it acquired from Kobalt’s Fund One.
“They were considered non-core as the company does not have perpetual ownership rights or the songs require ongoing accounting and reporting obligations that take up significant bandwidth which can be better focused on active song management,” the board said in the statement.
Billboard reported that a package of non-core assets was being shopped in July.
Hipgnosis Songs Fund will hold meetings for shareholders to vote on the proposals as well as the company’s first continuation vote on or before Oct. 25, according to the statement. If approved, the $440 million asset sale to the Blackstone-backed Hipgnosis fund will result in the the publicly listed Hipgnosis fund paying $6.7 million in corporation tax.