From the Desk Of
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Last year, a 17-YEAR-old artist from Houston named d4vd released “Romantic Homicide,” a track he had made using BandLab, the Singapore-based social music creation platform. “He recorded a song in his sister’s closet on his mobile phone with Apple earbuds, using a stock preset,” says CEO Meng Ru Kuok — stock presets being one of many things aspiring musicians can find on BandLab, which wants to make it possible for anyone with an idea, no matter their skill set, to create music.
“Romantic Homicide” became an example of that ideal: The brooding, guitar-hooked track caught fire on TikTok, and d4vd (pronounced “David”) signed to Interscope, with the song peaking at No. 45 on the Billboard Hot 100
“I was cheering him on,” Meng says of d4vd. “We’re so excited and rewarded when people move on to other places, whether they stay independent or get signed by major labels.”
BandLab, which was founded in 2015, doesn’t receive royalties from music made on its platform. Instead, the company makes money on artist services (which include distribution, livestreaming and BandLab Boost) that allow acts to turn their profiles or postings into ads on the platform to better reach the 50 million registered users BandLab has.
Meng, 34, has aggressively expanded BandLab’s assets, which are grouped under the holding company of Caldecott Music Group. Along with instrument manufacturing and sales (including Michigan-based Heritage Guitars and Asia’s largest musical instrument retailer, Swee Lee), Caldecott has editorial properties like Guitar.com, Uncut and NME. (BandLab acquired 49% of Rolling Stone in 2016 before selling it in 2019 to Penske Media, Billboard’s parent company.) In September, Billboard and BandLab launched the Bringing BandLab to Billboard portal to expose emerging artists to a global audience.
“On a day-to-day basis, it is not just geographically split, but also mentally in terms of all those areas,” Meng says.
In November 2021, BandLab announced the acquisition of independent artist platform ReverbNation from its parent company, eMinor. And in April, it announced it had raised $65 million in series B funding, bringing the valuation of the platform upwards of $300 million. BandLab envisions a different sort of future — shorter songs made by anyone, using presets or even artificial intelligence (AI) — with the idea that the more music that exists, the more need there is for its range of offerings, from equipment cases to advertising. Business, says Meng, is “gangbusters, in terms of focusing on product and improving the experiences that we bring out.”
Do you feel that d4vd’s success validated your business model?
Yeah, it’s extremely rewarding. We’ve seen stories like that happening thick and fast. Earlier this year, we had an amazing viral success with an incredibly talented young rapper. He was 13 when he started making music on BandLab. He’s 14 now. His name is Cl4pers. He has 1.2 billion views on his hashtag on TikTok alone. It’s not just the viral success but the incredible talent — like d4vd, like Cl4pers — that, prior to BandLab, wasn’t making music with the capabilities that their creativity would have afforded them. D4vd is now signed to Interscope Records and [its artist development/management joint venture] Darkroom and has changed his personal career and the life of his family. Millions of people around the world have listened to his song and have really connected with it. It’s truly special, and it just reminds us of what we’re doing every day, beyond just creating a great business that we’re excited about.
What are the numbers behind that growth at BandLab?
Our last public figure that we shared, we have over 50 million registered users around the world. More than 16, 17 million songs are being made a month on BandLab. I still feel like we’re a small platform getting started. We have 80 full-time staff, 140 if you include all team members around the world. That has grown relatively quickly, and we have a lot of hiring plans in place to expand even further in the next six to 12 months.
Do the creators get royalties?
Yeah, that goes to the artists. We don’t take a position on artists’ rights. There’s a big movement, obviously, toward independent creators being fully in control of what they own. That’s really important to us. We’re focused on empowering the artists. The music is their content. So they are generating their own royalties if they’re distributed by BandLab or ReverbNation or via TuneCore, CD Baby, DistroKid — that’s one way they can be generating money off their music. The artist gets 100%. That’s what we do.
You don’t take commission?
We don’t. Actually, we have a lot of creator economy features on BandLab. For example, someone can tip users on BandLab in their profiles. We allow users to subscribe to other users, similar to Patreon or OnlyFans. We have features where artists can sell their tracks and albums, similar to the iTunes Store or Bandcamp, for example, and the artist keeps 100%. We don’t take a commission from the artists’ earnings after processing fees; Stripe and PayPal are involved in that transaction. We as a platform don’t take a cut of the creator economy. We believe it’s very important the artists are able to monetize. Especially in the United States, you guys get taxed enough. They don’t need more taxes on top from a platform.
How do you make your cut?
We’re focused on empowering artists in creating, making that accessible and free, and truly democratizing music. What Apple did with GarageBand was obviously an incredible progression in democratizing music creation, but 80% of the world uses Android. To be able to afford an iPhone is already out of reach for many people around the world. We don’t believe that people’s creativity or their ability to make music or to express themselves should be limited by their spending power or their knowledge of how to write a song.
Where we make our money is actually in artist services. If you are spending to distribute your music to Spotify, Apple Music, if you are running a promotional campaign — things to help promote your music or develop your career as an artist — that’s where we charge. We have a subscription service that we’ve just announced. There’s our BandLab Boost membership. We also have ReverbNation services that come through membership and various a la carte services.
Your business also supplies royalty-free music packages?
We do provide royalty-free samples. One of our features is BandLab Sounds: We collaborate with artists, commission our own sample packs for people to use in their music-making. And those are provided royalty-free — loop samples, one shots, which are utilized by musicians all around the world to make music. We also have an AI feature called SongStarter, which helps people generate royalty-free song ideas to start off their songwriting process.
All the music on BandLab is original music and original content. We’re very strict and pro-rights owners because we’re trying to protect the creators and all rights holders. This is something that we take very seriously with regard to licensing. It’s about protecting rights holders both on platform and off platform.
Do you train your AI to mimic popular human artists?
No, we don’t.
In the United States, the presumption, based on the Copyright Office, is that only works by human authors can be copyrighted. Who will own the copyright to AI-created portions of songs?
Ownership of content that is developed further from our AI SongStarter tool is owned by the user.
Do you offer marketing services?
We provide a variety of services through BandLab but also through our ancillary services. We acquired ReverbNation last year, which allows you to run third-party advertising campaigns on sites like Billboard, NME and Rolling Stone. They can buy campaigns and centralize their music for promotion on Instagram, Facebook and to promote videos they release on YouTube, for example. We recently announced the beginning of the rollout of BandLab Boost, which allows users to promote, for a fee, their posts and their profile on the BandLab network.
Do you have relationships with the streaming services?
Absolutely. We’re not a [digital service provider]. We believe there are platforms out there that do their job incredibly well. We’re here to empower the music that has been created that ends up on these platforms. We obviously have commercial relationships, like our distribution relationships, but also where we can funnel exciting talent that blows up on their platform.
Whom do you see as a rival?
I’ve been asked that question a bunch. BandLab is creating a whole new category of platform. There are certain services out there that do similar things, but our whole perspective on the ecosystem is that music is collaborative. By nature, it’s not just about the tools — it’s about collaboration, it’s about different influences when people get together. Services need to collaborate as well. That’s where we work closely with other platforms that people outside may see as competitors. There are lots of ways a platform like BandLab can have relationships as a funnel to other services through affiliate partnerships. There are many businesses that have the full suite of tools that we have as BandLab, and it’s our core objective to work closely with all of them. If the music market grows and the creator market grows, everyone benefits.
How has the democratization of music creation that BandLab and other companies and applications have enabled changed music?
The barrier to making a hit is now fundamentally more accessible to anyone. You don’t have to have had a long education or engineering degree to do so. So much of this is being empowered by short-form video and changes in the music industry where a hit song is no longer three minutes long but 10 to 30 seconds — which is really scary and meaningful at the same time.
Overnight sensations are largely a myth in the music business, and Brookfield Asset Management’s surprise emergence in early October as one of the biggest players in the song-catalog investment and management market was no exception.
Angelo Rufino, the managing partner behind the company’s $2 billion investment in music publisher Primary Wave, says the deal “was a real creative endeavor that took many twists and turns over six months until we both said, ‘We’ve got it. This makes complete sense.’ ”
The 41-year-old East Fishkill, N.Y., native is referring to Primary Wave founder/CEO Larry Mestel, whose business model, he says, convinced Brookfield it was time to make its first foray into the music industry. “We found, after a very long search, the manager who really spoke to how we invest as a company. Larry doesn’t buy an asset, then sit back and say, ‘Well, streaming’s growing at 18% this year. I’m going to get my beta just participating alongside that industry growth.’ He’s got a massive team of branding experts, content experts to proactively drive growth.”
Rufino predicts that strategy will be crucial to future success. “As more money comes in and as things become more competitive,” he says, “we think the ability to grow and compound these assets with a value-added component will be the single differentiator between the winners and losers.”
Rufino and Mestel worked together to craft a three-pronged structure without outside help — unusual in today’s world where investment bankers are often relied-upon go-betweens. They set up a permanent capital vehicle, which they filled partly by buying out some of the investors in Primary Wave’s first and second funds. They rolled $700 million in assets from those funds into the new structure. Brookfield threw another $1 billion on top, and Creative Artists Agency (CAA) joined as a strategic partner and minority shareholder. The result: one of the biggest single funds aimed at catalog acquisitions in the music industry.
Angelo Ruffino’s desk plaque serves as a reminder “that contrarian thinking is required, as things tend to come full circle.”
Krista Schlueter
Rufino, who holds a seat on the company’s newly formed board, sees the music intellectual-property (IP) asset class eventually becoming a $100 billion market and Primary Wave doubling or even tripling in size — while generating returns exceeding 20% — through movies, gaming partnerships and international expansion.
“It just so happens that Brookfield is the largest private investor in Brazil — a country that has an enormous music culture,” Rufino says. “We’ve also made strong footholds in India as a company, and it’s a market we are interested in exploring with Primary Wave.”
That’s not all. Brookfield’s limited partners — clients on the side of Brookfield’s business that manages money for a fee — remain extremely interested in investing in artists’ rights, especially now that some of the frenzied buying of last year has calmed, Rufino says. “We believe music [IP] as an asset class is still in the very early innings.”
Brookfield’s investment in Primary Wave is its first in the music industry. What should people unfamiliar with your firm know about Brookfield and how it invests?
We are a 100-year-old asset manager that has its roots in a Canadian holding company. We always take a contrarian view to value investing. We want to own things that we view as the backbone of the global economy. We began as a company that owned and operated assets, as opposed to just invested in them from a financial perspective. We started in real estate [and] very quickly branched out into infrastructure, renewables, corporate private equity. We’ve ticked every box of the global ecosystem of asset classes while [building on] our heritage as owner-operator with the best of both worlds — permanent capital and third party-managed money.
Where does Primary Wave fit in Brookfield’s $750 billion portfolio of assets?
Our CEO, Bruce Flatt, wants us to own the backbone of the economy. With Primary Wave, we own the backbone of the music industry with a super-long tail and very stable cash flows. When you own Bob Marley, Whitney Houston, James Brown, these are brands. He’s the best I’ve ever seen at leveraging brand extensions to supercharge the growth of these assets. When we saw the catalogs, we said, “These are the types of assets we can own forever if we so choose.”
Who brought in CAA?
That was Larry’s relationship. He introduced us to [CAA president] Jim Burston, and it became very obvious very quickly that they would supercharge Larry’s core competency. There is an absolute grab for content at this point. Netflix, Hulu and 30 others need to keep us engaged. We are going to keep seeing these artists weave their way into our lives, and CAA has the relationships to help us do that across many entertainment venues while also providing intros to artists.
The Buddha statuette “was a gift from a friend and colleague to bring our team good luck and fortune,” says Rufino.
Krista Schlueter
The market for investing in song catalogs and other intellectual property has grown crowded over the last two years. What’s your outlook for this asset class?
I’d actually argue it’s not that crowded. Somewhere around $7 billion has been raised to go after this asset class, and we think the total addressable market is well in excess of $100 billion. We think there’s going to be a massive opportunity over the next three to four years to acquire these rights. The other thing is that the opportunity set will become much more nuanced. These are really emotional, sensitive transactions for artists, and Larry has emerged as somebody whom artists trust, and that’s important when you are selling something as incredibly important as your life’s work. We wanted to buttress that by saying, “What would be better than partnering with the best steward for my assets and a financial partner that understands this asset class and has an ability to hold the asset forever?”
Why do this deal now?
I was resigned to thinking we wouldn’t get something done in the space until we met Larry earlier this year. What we knew was that 2021 didn’t feel like a good time to do this type of transaction. 2021 was a year of madness in the markets — sky-high valuations across anything you could look at. Brookfield is patient and has the capital base and buy-in from our CEO and investors to wait until opportunities are ripe and fit our organization. So we continued studying the space, gaining conviction in the asset class and understanding that the macro environment would eventually present the opportunity to acquire these assets at a good value.
Do you expect to deploy additional capital beyond what was already committed?
If the business model plays out the way we expect, yes, this entity will just keep receiving capital from us.
As you look to scale Primary Wave, what other companies might make sense to buy?
There are many things we can look at. There are going to be things that touch future mediums of how music is disseminated. Maybe it’s channels of distribution that might make sense for us. Maybe it’s song-catalog managers — people who are doing what we’re doing but need assistance with the value-added component. It could be international opportunities where we are looking at companies that could help us fully brand some of these artists in areas outside of their home country.
What kind of return does Brookfield expect to earn?
We have a 20-year history of compounding at 20%-plus in our public top company. We think returns for this asset class can be at that level and for a very long duration.
Where do you see opportunities for growth?
There are so many ways to monetize music. Think about movies, video games. Music is going to be like the Marvel and DC comic catalogs. We started with Batman and Superman. Then Justice League and Wonder Woman and Black Panther. You think about Rocket Man, Bohemian Rhapsody, Elvis. Now Larry is bringing Whitney Houston to Hollywood. I look at our portfolio of musicians and say we’re going to have movies made on each of them. Prince, Whitney, Bob Marley.
The ability to scale streaming penetration globally is enormous, and the number of vectors that are going to occur with YouTube, TikTok, Peloton are not going to only drive music penetration and pricing, but growth in areas that we haven’t begun to realize.
Angelo Ruffino’s “Fugazi” bell is “a fun way to call out analysis, accounting or anything that doesn’t make sense as we review investment opportunities.”
Krista Schlueter
If there was one biopic you want Primary Wave to make, what would it be?
Prince. I’m a big Prince fan.
What other music do you like?
Classic rock. I love all things ’60s, ’70s and ’80s. I’m a massive Talking Heads fan. I’ve always been into music and sang a cappella at Skidmore College and for many years in New York, including in a group called The Invisible Men. We disbanded when we all started having kids. My two sons, who are 3 and 4, love Tom Petty. We don’t own that catalog. Larry’s going to have to buy it.