Music royalty collector Kobalt nabs $75M led by Hearst Entertainment at $775M valuation – TechCrunch
As music streaming continues to grow in ubiquity, a companyÂ thatâs built a platform to collect royalties on music played across billions of streams is cashing in on the opportunity.
Kobalt, the European startup that has built technology and a platformÂ to collect music royalties by tracking whenÂ even aÂ sample of a song is playedÂ across multiple platforms, has raised another $75 million in funding.
Weâve confirmed with Kobaltâs CEO Willard Ahdritz thatÂ the investment was madeÂ at a post-money valuation of $775 million. ItÂ will be used toÂ continue expanding KobaltâsÂ platform to cover more streaming sources, and to add more artists and labels to the list it represents, he said in an interview.
Today that list is already pretty extensive. It coversÂ 25,000 songwriters, 600 publishers and 20,000 independent artists âÂ working out to about 40 percent of the top 100 songs and albums in the U.S. and U.K. at any given time. Big names onÂ the list includeÂ The Chainsmokers, Kelly Clarkson, Miles Davis, Dave Grohl, Dr Luke, Zayn Malik, Max Martin, Paul McCartney, Stevie Nicks, Pitbull, Elvis Presley, Skrillex and Sam Smith.
The funding round â a Series D â was led by Hearst Entertainment, with participation from previous investors Balderton and MSD, the investment firm for Michael Dell and his family. Prior to this, Kobalt had raised $60 million led by GV (formerly Google Ventures), and $140 millionÂ from a consortium of investors.
The $60 million was its last equity round; the $140 million was part of a total of $153 million that the company has raised to help finance the second strand of its business,Â label services where Kobalt either buys part or all of an artistsâ rights to help collect royalties on their behalf. (That licensing business was expanded in 2015 with Kobaltâs acquisition of AMRA, which works with the likes of Apple MusicÂ in licensing deals.)
This latest chapter in Kobaltâs development comes at the same time that the digital music business is becoming increasingly important to the music industry.
Figures published last month by the recording industry association the IFPI noted that digital music in 2016Â accounted for 50 percent of all music revenues globally, its highest proportion ever, working out to $7.8 billion of $15.7 billion in overall revenues (physical sales accounted for $5.4 billion). At the end of 2016, there were 112 million users of paid music streaming subscriptions, a figure thatÂ grew 60.4 percent and offset downloads, which declined by 20.5 percent, and physical revenues, which declined by 7.6 percent.
While services like Spotify, Pandora and SoundCloud have been developing their own analytics services for artists to monitor how their music is being consumed on those individual platforms, another unique selling point for Kobalt is that itâs providing this kind of tracking in real time across a number of proprietary services, and itâs doing so not just for full tracks, but for samples and other fragments that getÂ played.
Today, the company tracks music plays in twenty of the top digital streaming providing platforms globally, including services like Spotify, Apple Music and SoundCloud. The plan is to add another 20 sources in the next six months, Ahdritz said.
âA big hit today has 4 billion micro-transactions,â he said. âNow that we are connecting the rest of the world in streaming, we will be able to trackÂ 10 billion transactions.â
Kobalt does not disclose just how much an artist â be it a blockbuster name or a smaller player â can make using its platform, but it notes that it provides revenue uplifts ofÂ 25 percent compared to industry standards, simply from being able to track when a something is played.
While one clear endpoint to that tracking is to be able to collect royalties, it also provides a big data play, where Kobalt is able to monitor how and when and where particular tracks are played to help artists figure out, for example, how to better plan live performances and to figure out where would be the place place for exclusive releases. One factoid Ahdritz mentioned to me: someÂ 30 percent to 40 percent of publishing revenues today are coming not from audio streaming sites, but from YouTube.
For Hearst, interestingly this is not an investment being made by Hearst Ventures â the strategic investment division that has funded the likes of Buzzfeed, the car service Via, and enterprise communication platform Zinc.
Rather, it comes from Hearst Entertainment, the division that oversees the media giantâs interest in cable network and TV channels like ESPN, A&E, and Vice Media, but also a growing interest inÂ B2B services. President Neeraj Khemlani said in an interview that itÂ is a progression on a bigger plan for the company to investingÂ into other kinds of publishing opportunities and the business models behind them, particularly in B2B. (Another example is Hearstâs 2016 acquisition of Camp Systems, which provides SaaS-based solutions to manage and track jet and other aviation maintenance.)
âPartÂ of what Iâve been trying to do is looking at investmentsÂ in entertainÂ for the next generation, and that focus has been entertainmentÂ for millennials and and Gen Z,â he said. âMusic is growing [right now] all because of streaming. As we looked at music and wondered, what is the ideal B2BÂ opportunity, we met Willard and loved what Kobalt wasÂ doing.â
Going forward, Kobalt will continue with R&D to expand the places where it might collect music plays as well as ways to use that data. The company launched the first Apple TV app for an artist, for the group Placebo, at the end of 2015. âWe are looking at how to service ourÂ clients more in video,â said Ahdritz. That could include doing more with virtual reality and the other places where music and video are appearing, he added. (Notably, that could tap into a number of companies in Googleâs portfolio, including Magic Leap.)