Brian Rose of London Real sits down with Audius CEO Roneil Rumburg to discuss the landscape of music and crypto.
Brian: You mentioned someone like Blink182, is this an important thing for Audius to do in the future, is to start signing these big artists or get their content on your platform? Is this important? Or is that the old school record label web 2.0 mentality where we’re thinking we got to sign the big ones like title did back in the day in order to give it credibility or is that still important for Audius?
Roneil: It’s a really good question. The idea of of content rights more broadly are becoming far more liquid than they ever used to be. And what I mean by that is everything from these big fat catalog deals you’ve probably seen where folks like Bruce Springsteen and others are selling rights to their catalog, in exchange for these massive sums of money.
But ownership of catalog and catalog assets. By that I mean the copyrights associated with the content is decentralizing right now, and that has nothing to do with crypto. It’s just there’s this gold rush of folks being able to underwrite debt against catalog and then being able to structure deals to buy it out, because catalog has this very predictable revenue stream created by streaming, you can underwrite debt against it very easily. So you see these deals levered up sixty to seventy percent debt and thirty to forty percent equity to buy out catalog and then service the debt.
It’s the typical private equity model, but the way that filters all the way down to the individual artist is that they too have more liquidity associated with their catalog rights than they used to, and it used to be that there was only one source of liquidity around that which was a label. So if I am going to make a new album I could pre-sell ownership or effectively like my copyrights in that album to a label, in exchange for an advance that lets me actually make the album. And the labels are taking on a ton of risk, and the vast majority of these deals do not recoup. The ones that do recoup, recoup so many times over that they pay for the rest. It’s actually very similar to venture as a business model, where they’re making these very broad bets and recouping them.
I share all that to say with respect to Audius I think there is certainly an opportunity to, via helping artists make more money from their content, reduce the necessity for advances and these types of things. I actually think the music industry is aware of that, not just with respect to Audius but this broader shift around catalog liquidity, and saying we’re not going to be dependent as we once were, and similarly to what I had previously described around touring these other pieces of revenue, becoming a larger share of the pie.
There’s been this evolution towards the so-called 360 deal in recorded music where rather than a record label just owning rights to the music and then trying to monetize them as best they can and with the artist earning a small small share of that Monetization. They’re saying ‘why don’t we capture a percentage holistically across everything you do as an artist and be more full service as your partner’, so they handle marketing, they handle all kinds of stuff, so I actually think that relationship’s pretty symbiotic and probably not going away.
But I think we’re in this period of refragmentation both around ownership of rights and around how these folks are able work with partners. And that’s a really interesting kind of thing so the music industry has spent the last 20 years consolidating into three major players. And I think now we’re re-fragmenting that through folks buying up catalog and then finding new ways to monetize that catalog, and then competing against one another around how well they can monetize these catalog assets. Combined with folks who are offering more and more services to the artist, the labels have been really quite smart and clever through this whole transition staying on top of it.
so I don’t think they’re going away, I think it’s more like the market is expanding and that’s creating space for more players to be playing around this same arena. Audius I think as a community, you know I can’t speak about what they’ll do in the future because I don’t you know I honestly don’t know, but my opinion is that our focus should remain on monetizing rights and monetizing artist-fan relationships.
To the extent that Audius is useful for artists to make more money and be less dependent on advances, that’s cool and good right? But I think there’s a different segment of the market that’s going to start to target that, or directly. Audius should remain neutral because if the network we’re starting to sign artists and do things like that. Now there’s an incentive to boost those artists over the folks who aren’t signed and then you fall into the same ‘playing favorites mess’ that has played out everywhere else, so I think to maintain neutrality it’s important not to head down that path, but web 3 more generally is going to have a significant impact on how deals like that are structured and organized.
You can view the full conversation between Roneil Rumburg and Brian Rose at the link below