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This article was taken from the May 2015 issue of WIRED magazine. Be the first to read WIRED's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online.
On a winter's afternoon, in a 23rd-floor officeoverlooking midtown Manhattan, Willard Ahdritz flops on a low leather sofa and opens his Dell laptop. Ahdritz is a tall, pale fellow with ice-blue eyes -- a Scandinavian phenotype befitting his native Sweden. He keeps a metal Viking helmet and a sheathed sword on his window sill.
"Musicians say there is no money in streaming," says Ahdritz, the founder and CEO of Kobalt Music Group, the most important music company you’ve never heard of. Squatting mantis-like, arms between his knees, he reaches over to the coffee table and taps on his laptop. "That’s what you know, isn’t it?" he says. "Well, that’s wrong." He pauses, staring out from his frameless glasses. "You see, someone has lied to them." With that, Ahdritz brings up the most remarkable web portal in music-business history. It allows songwriters to view every single instance when their work is streamed on Deezer or Spotify, broadcast on radio, sold as a CD, featured in a film, played in a pub, pirated by a fan in a YouTube video, sampled in a TV show or included in a Champions League ad. That’s just about everywhere on the planet -- totalling 700,000 separate revenue streams for a single song. Ahdritz believes that such “transparency and accountability” will empower artists. This dashboard grants artists access to the notorious “black box” of record label revenues and shows them where their music is played, who is paying -- and how much.
"The portal is insane," says Sonny Moore, the 27-year-old DJ and producer better known as Skrillex. "The activity feed gives me awesome feedback -- I can see that in Scandinavia they love a hardcore sound of mine. Or 'Raise Your Weapon', a song I wrote with deadmau5 five years ago, is suddenly huge in Australia."
The portal also acts as a clearing house for synchronisation rights, a piece of music’s use in films, TV shows or ads. "The other day, there was a request for my song ‘Bangerang’ from a French movie producer," says Moore, who approved the usage in the time it takes to download a song. "It shows the money offered and I just okayed it right there. It’s happening in real time. You used to get this ugly PDF and it took months to okay."
Kobalt, founded in 2001 is the music industry's back office. Its publishing arm collects royalties -- sometimes in micro-payments of less than a fraction of a penny -- for 8,000 artists around the world, generating revenues from 600,000 songs and collecting in 100 territories. Its clients include Kelly Clarkson, Grimes, Nick Cave, Gwen Stefani and songwriter/producer Dr Luke. It does the same for other music publishers -- those holding copyrights to music and lyrics. Today, the company is the top independent music publisher in the UK and the second overall (to Sony/ATV) in the US.
Its spectacular track record and growth, plus Ahdritz’s infectious passion and belief, have attracted the attention of some of the world’s leading VCs. In February, Google Ventures’ London office made Kobalt its first investment, leading a $60 million (£39m) series C round. "We like investing in companies that transform traditional industries for the better," says Google Ventures president and founder Bill Maris. "Nest, Uber and Foundation Medicine are good examples of other companies we have invested in that are similarly disruptive in that they are tackling problems or inefficiencies which are not otherwise addressed. Kobalt and Willard are changing the way artists are treated in the music business, particularly when it comes to providing trust and transparency and compensating creators for their work."
Since launching the company, Ahdritz has been Viking-like in his assault on the big music labels, publishers and collection societies whose job -- after each taking its cut, of course -- is to gather and distribute royalties. He cheerfully tells songwriters how these entities have been ripping them off for decades. "The music industry is historically opaque. And it still is. There is a lot of fear among artists that they’re not getting paid. I tell them, 'You are right. You’re getting screwed.'"
Here’s why: songwriters signed to big music publishers often wait up to two years to get their money after it’s been collected. They end up paying out half their gross royalties to the middle men – collection societies. And if they ask to see the books, they’re handed computer printouts that list a bulk number and little else. It’s not the kind of thing that can easily be understood -- or even audited. "They are told, 'Don’t worry about it,'" says Ahdritz. "'You keep making music. We'll handle this.'"
Ahdritz says all this is not because the labels and publishers are devious -- it's because they are inept. Since its heyday in the early 2000s, when the music industry enjoyed $45 billion in sales, profits have plunged to a third of that. Initially, Napster took its huge, pirate bite. Then iTunes cannibalised the CD by selling individual tracks. Now, who needs to buy anything when it’s free on Spotify?
A generation of artists like Moore embrace the streaming model and, oddly, even the sharing of pirated downloads. "My philosophy is get the music out to as many people as possible," Moore says. "I spend a big part of my career onstage. That’s why I make records, to get people to shows, because I DJ. When people hear me, they want to be there."
In November 2014, Taylor Swift lashed out at the streaming model. She yanked her entire catalogue, including her newly released album 1989, from Spotify because of the platform's razor-thin payments. (It pays about £0.005 per stream.) "I’m not willing to contribute my life’s work to an experiment," Swift said.
A few days later, Ahdritz put out a press release saying Kobalt's Spotify revenue in Europe had overtaken income from iTunes downloads. Spotify's royalty payments to artists had outpaced the digital download service by 13 per cent in the first quarter last year -- suggesting there's real money in streaming.
"Of course there's money in streaming," says Mark Beaven, founder and CEO of Advanced Alternative Media. His clients include Dr Luke and songwriter Noel Zancanella, who co-produced Swift’s 1989 song "Welcome to New York". "The problem, is we don’t have an economy with transparency."
The way Ahdritz sees it, the music industry needs an entirely new structure, not merely to survive, but also to thrive. "The industry is suffering a slow death and in order to live it must change," he says. Kobalt’s technology and logic are airtight, and he has nothing less than world domination in his sights. "If you are going to track those billions of transactions on a global scale, with efficiency, you need new pipes,” he says. "And right now, the pipes are broken."
Music Management | Meeting The Stars Behind The Stars
The creator of ABBA's business. The creator of Elton John's business. The manager of Frank Sinatra. Who-Is-Who. Names. Addresses. Networks. Recording Studios. Music Production. Festivals. Bar jobs. Stages.Law. Court Cases. Points of view. Media. PR. TV. Radio programming. Internet. YouTube. Spotify. Finance. Stock Exchange. Accountancy.
The worlds most successful music managers gives inside information on their methods of branding, business, law, and more. Meet Frank Sinatra's manager. Meet Elton John's producer. Meet the Eurythmics manager. Etc.