Interview: Sound Royalties Founder & CEO Alex Heiche
This week In the Hot Seat with Larry LeBlanc: Alex Heiche, founder and CEO, Sound Royalties.
Sound Royalties is a specialty finance firm based in West Palm Beach, Florida that offers financial support to musicians, songwriters, producers, and other music creatives.
Founded in 2014 by its CEO Alex Heiche, it enables qualified creatives to receive ongoing royalty advances over their advance term.
For creatives with as little as $5,000 in royalty income in the recent past, Sound Royalties can help leverage that into advance funding for their needs.
Sound Royalties is also leveraged to offer royalty advances up to tens of millions of dollars.
To serve its clients in 14 countries, Sound Royalties works with more than 130 payors and maintains an international network of representatives on three continents.
Sound Royalties’ model enables creators to retain full ownership of their copyrights while providing ongoing cash flow during the term of the advance. It works with varied royalty streams and helps find hidden royalties to increase their bottom line to maximize clients’ options.
It operates by advancing royalties paid through music labels, distributors, publishers, and PROs such as BMI, ASCAP, SESAC, SOCAN (in Canada), SoundExchange, and others.
It has collaborated with hundreds of creatives including such artists as Lil Wayne, Pitbull, Wyclef Jean, .and DJ Khaled; songwriters Steve Dorff, Larry Weiss, and Sonia Leigh; producer David Tickle; musician, producer, and composer Gilde Flores; and Too Lost, the American independent music, technology publishing, and distribution company.
Beyond not seeking ownership of copyrights, the company doesn’t even take a percentage of a creator’s future earnings. It offers fixed multiple pricing options over a fixed term.
Prior to founding Sound Royalties, Heiche who graduated in criminal justice from the University of Maryland, College Park, held executive positions in multiple high-tech software, and specialty finance firms.
Heiche has since had almost two decades of experience in providing cash and finance-raising strategies to large annuity recipients, and professional athletes as well as showing songwriters, artists, and producers how to make the music industry finance system work for them.
How much staff does Sound Royalties have?
We have about 50 full-time employees now based in West Palm Beach, Florida, and around the world.
Sound Royalties’ year-end results for 2022 showed that the company’s volume of fundings to music creatives grew by more than 90% as it serves its clients in 14 countries, working with over 130 different publishers, PROs, and labels through an international network of representatives.
Launched in 2014, the company started having significant growth by 2018, but obviously, 2022 was a pivotal year.
I think it was. We have been growing year over year, but it just took off in 2022, and we are seeing that not letting up at all in 2023.
Was the growth a result of the slowdown of touring due to COVID, coupled with recording revenues drying up? That creatives were looking at alternative revenue streams?
No. That would have come about in 2020 and 2021. What I think is that the company was founded in 2014, and at first, it was, “Never heard of you,” and “Don’t know what you do.” In 2015, and 2016, it was, “Oh, you are just one of those “pawn shops.” The black sheep of the music industry, a finance company probably, but I don’t know what you do.” Then 2017 and 2018, it was, “Well, this is too good to be true.”
That changed.
Yes, as more and more people started to adopt it, and understand what we were doing, it became, “Oh, it’s not too good to be true, It is true.” People are starting to realize that One: We are here to stay. Two: We are one of the good guys, and it isn’t too good to be true. And the (music) market is really starting to adopt it, and figure that out.
Sound Royalties offers financial support to musicians, songwriters, producers and others, and helps find hidden royalties to increase their bottom line without them having to sell away the rights to their works and catalogs.
If an artist has as little as $5,000 in royalty income in the recent past, the company will help them leverage that into advance money for their current needs.
Sound Royalties seems like a business manager crossed with a PRO.
I would say no. We don’t replace the PRO. We don’t replace the publisher, label, or distributor. Just think of us being that financial institution. All we do is allow you to advances on that (royalty) stream. So your business manager can still negotiate different deals with publishers, labels, and distributors, and we ensure that you are collecting from around the world in Neighboring Rights and whatever it may be.
When you are approached by artists, songwriters, producers, or whatever, your team does financial diligence of their catalog; in essence big picture with attention to sources of income that these creatives are currently collecting; to other income streams they may not realize they should be receiving; but also projecting what new income streams might be coming in for them, to help forecast their potential earnings year over year into the future
Your team looks at what a catalog has done, and what it will likely do, right?
What it has done, and what it will do in the future of the existing works. We are not assuming that they are going to create more hits and continue to grow. It is, “What are those existing works over the next 5 or 10 years based on genre.” There’s a dozen different factors, but one is genre. Some genres peak on the charts this week and will be gone next week. Other genres take a long time to peak on the charts, but they have a long tail of decline of income that goes on almost in perpetuity. The age of the music, where it is in the net growth curve, the size of the catalog, and the depth of the catalog are all factors. How much of it is sync or non-repeatable income; domestic or foreign income? There are so many factors. All of that, we can look at, and we look at it all to then determine what something is going to be earning in the future.
One of the traditional direct ways to evaluate a catalog was by looking at the historical performance of the catalog, and then projecting out what you think the revenue might be into the future. Back when the industry wasn’t changing much that was a fairly simple exercise. What has changed is that there are so many new income streams that never existed even a few years ago.
Today, we’re still seeing growth in Interactive streaming services like Spotify, Apple, Amazon, Pandora, and Google, and also seeing growth in a lot of the new media platforms, whether it be gaming, or in-home fitness, or social media like FaceBook, TikTok, Peloton, Roblox, Twitch, and Instagram.
Therein lies one of the great music publishing challenges: Figuring out how to unlock the hidden income of songs.
You can do all this factoring with newer artists, songwriters, and producers with careers spread over a couple of years or with heritage talents owning extensive catalogs that may have been out of view for years, but still earn significant income verified by going, say, over back through three to five years of statements, agreements, and amendments.
Arguably, some catalogs have not been well-serviced over the years as labels haven’t wanted to know about and didn’t care about the heritage acts on their roster. They were then, and still are, more focused on emerging artists, and what can chart.
Also, there are unclaimed or unpaid royalties out there as affirmed by a NOI— which is a “Notice of Intention” to secure a compulsory license, and is a public notice identified in section 115(b) of title 17 of the United States Code.
When a digital provider streams music, it is obligated to secure a compulsory license from the work’s publisher. In instances where the digital provider cannot locate the publisher, they are allowed to a file Notice of Intentions, and these NOIs are allowed to be filed in bulk.
With global streaming revenues slowing, there is growing pressure on music rights holders to identify new growth drivers. In addition to music royalty income streams, there are wider rights, such as merchandise, name and likeness rights, as well as Neighboring Rights, and producer royalties.
Correct. And we do work on the composition and sound recordings. It could be an artist. It could be a producer. It could be a writer. It could be an independent publisher. We work on both sides.
Music publishing is a multi-billion-dollar industry, and while complex it is one of the more stable sides of the music business. Like every other sector of the music industry, music publishing has been transformed by the growing global network of digital platforms and streaming services. Digital revenues have become significant for music publishers and songwriters and now compete with traditional revenue streams.
In recent years, we’ve seen the rise and expansion of independent music publishers, and self-published songwriters and creators.
Decades ago, affiliated publishers were down the hallway or on another floor from the record company, and label executives didn’t quite understand what was happening in the publishing world.
Plus, the publishing rates for music use were so incredibly low that affiliated publishers at large labels were virtual ignored.
The sound recording was King, and distribution was King.
Gradually, that changed quite a bit.
For decades, it seemed that traditional major publishers were buying catalogs as add-ons to their portfolios without any increased exploitation; riding on the coattails of their record label partner, doing little more than trying to have a great operational backroom, and sending along a check to the songwriters and co-publishers involved.
At the same time, song publishing was often routinely assigned by a label to an affiliated publisher after an artist signed a recording contract. In some cases, songwriters would try to reclaim songs, but often their attitude about business, in general, had been “I don’t want to know.”
Over the years I’ve told many rights holders how they are leaving money on the table, and they mostly looked at me in disbelief
Today’s rights holders, however, seem far more knowledgeable about ownership and their copyrights.
Yeah, just over the long curve. Look at the deals. Publishing used to be not even a co-pub deal. Then it became more popular, and it became standard to be a co-pub, a 50/50 deal on the publishing side. Then over time admin (administration deals) started to creep into the mix, and are much more prevalent today than ever before. Co-pub deals are happening where you are getting that creative think-pitching for that extra help, but those deals are being negotiated for different rates than just straight 50/50. We have fewer and fewer writers that come to us saying, “I’m self-published. I am BMI or I am ASCAP, or I am SOCAN (in Canada) and therefore I am collecting all of my writing and publishing.”
Now you need to make sure that you are collecting your publishing side as well as well as your sync, and mechanicals. The Mechanical Licensing Collective (the nonprofit U.S. organization established under the Music Modernization Act of 2018) has done an amazing job of coming online, and educating those that are self-published. For those with songs that are self-published, they are seeing this, and understanding more of, “Okay what is the publishing side of my writer’s share? My writer’s share is really just more a performance writer’s share, and then the publishing side is the sync, mechanical ,and performance. What am I negotiating for that?” I think that they understand that better than before.
After your team begins working with a client, and have appraised the value of their catalog, and have a summary of their assets, do you suggest distributors or labels for future deals?
We do not. We do not want to interfere with the creative relationship with the publishers, labels, and distributors. So we are kind of like Switzerland. We stay neutral, but enable them to have the freedom to decide what they are going to retain, and who they are going to work with. A clear point in that is that we are not favoring anyone. We work with over 130 different publishers, PROs and labels right now. And that number is rapidly growing.
A business manager can explain to them what their obligations are, and what deals are risky or not risky.
Yep. And so our role is to provide the funding so they can negotiate the deals that they want to negotiate. They can come to us for financing, and then negotiate the best deal for themselves without having to focus on the advance portion.
In essence, you are a financing partner able to support their goals over the long term.
Correct without taking any assets. So there are investors and financiers. An investor becomes a partner, and they want a percentage. So if they are expecting to earn $100,000, and you earmark $10 million, then they get a percentage of that $10 million. If we say “Here’s $8, pay us back $10,” you can make a billion dollars, but you are still only pay us back $10.
Sound Royalties offers multiple pricing options starting off at a 4% rate?
It’s in the single digits. It all depends on what it is, and the risk. What I saw in the industry was the need for a partner or a financial company that was working with creatives. Not against them. I want to be a partner or part of something with them. That is what the vision (of the company) was initially, and it created something that is much bigger, and it kept growing and growing.
Sound Royalties will work with people facing IRS liens?
Yes.
Why? That would seem considerably risky. They could lose most everything, and Sound Royalties would be out of pocket as well.
Well, that it is just it. So if a creative has a lien, we will analyze and look at it, and quite often still provide them with funding. It enables them to either get on a payment plan, pay the IRS, or do what they need to do. But we do not put them at risk.
We still hold true that risk.
If the IRS seizes that (revenue) stream, we are taking that risk.
We are not going against them. So we are price basis on risk. So the higher the risk, the higher the cost. So for every 10 deals that we do that are IRS liens, we assume that 7 will not get seized, and three will. So the 7 have to pay for the principal and the interest for the 10. But the creative is able to get money, and if the IRS seizes the stream, we’re taking that risk.
The IRS rarely forgives tax debts, but one thing about an IRS lien is that it forces people to be realistic about their situation, and realize that they can’t ignore the fact that something needs to be done. IRS plans typically allow debtors to pay off the balance owed plus penalties and interest over a 36-month period.
Yes.
What did you see before launching Sound Royalties in 2014 that led you to identify the gaping need for funding options for music professionals? What led you to believe that there was a business there?
You must have seen something. That artists, songwriters, producers, and others were being screwed whenever taking on loans and that there was a better way to address this?
I basically made the decision that I wanted to come into the music industry. I jumped off a cliff and decided to build the airplane on the way down. And that airplane would be a music company. The first thing that I knew was that I didn’t know enough about royalties, publishing, or labels to buy one of those or to go that route. But I knew finance. So the first thing that I did was that I visited every specialty finance company, and every bank that had an entertainment division, and talked to them. For the private financial companies, I asked, “What are you guys doing? Who are you turning away? Can I partner with you? Can I buy you?”
What was their response to you showing up and asking insider-type finance questions?
They all opened their doors, and they were all very welcoming.
Was this in Nashville?
No. L.A., San Francisco, and Nashville.
How did they view that side of their business at the time? As you know, there’s always been an uneasy relationship in general between the financial community, and the music business.
So in visiting all of them, I realized that the music business was songwriters, producers, labels, distributors, publishers, and entertainment lawyers, but not finance. The finance companies were considered outsiders. Either there was an entertainment banker from a major bank that the banker themselves were considered part of the industry or the rest were considered outsiders because they were “the pawnshops.” They were buying people’s copyrights for pennies on the dollar, preying on them when they were in desperate need, or they were giving them (music industry people) usurious loans, overextending them, and then seizing (assets) in default.
That is when I said, “I don’t want to buy in and be part of that.” I said “I will create my own, and it will operate more like a bank. We won’t buy, and we won’t even take in default.” Some of the entertainment banks, one in particular here in Nashville where I had become friends with, and is a long-time friend now, said, “Listen, you will never make money if you operate in that sense because there’s not enough deal volume.”
What was your immediate reaction?
My thought process was, “Well, if I build this company, Sound Royalties, as long as we don’t lose money, and we are small niche company serving those who understand what we do, it’ll be great.”
As I recall, word got around quickly about Sound Royalties in industry circles.
Yes, it took off, but at first, it was considered too good to be true. As the attorneys started to look at it, and the industry started to see it, and we started to have longevity in the industry, people started to realize, “This is different than what was offered before. They are more part of the music industry.” We have been accepted as part of the industry and as a music finance company.
With your background in holding executive jobs in high-tech software and specialty finance firms, you had enough training to know to keep your eye on where the money was coming from in the music industry.
You quickly learned to navigate complex copyright and royalty issues because you knew to follow the money.
You discovered the considerable lag time in payments from recordings and music publishing. Anywhere from 6 to 12 months or more in the past to attain royalties owed. Today, in the period of computers and digital distribution, creators are being paid in a more timely fashion.
If you look over the past few years the publishers have gone from once a year (royalty payments), and then it was twice a year, then quarterly, and some are even paying monthly now to keep pace with the admin, and the digital alignment companies. Or on the distribution side, it used to be twice a year for some labels, and then it was quarterly, and now it’s monthly. And it is picking up as things are going digital. But that was part of the understanding even before I created Sound Royalties. I saw that there was a huge lag time. People had hit songs, and they didn’t have money to self-promote, get on the road or do whatever they wanted to do, and that there was a need in this industry. But even as that process has sped up, there’s still a need for fair funding that doesn’t give up everything and doesn’t put at risk their creations.
Presently, private equity and other investment groups have discovered the value of recorded music, and music publishing catalogs. Of late there have been ongoing rounds of catalog acquisitions with catalogs being valued for triple or quadruple what they might have sold for a few years ago.
Music assets are attractive to investors because they’re relatively safe and stable, and there have been increased applications on how to exploit songs if they still bringing in income. So there are a myriad of deals on the table these days, and so many different variations available.
Why is Sound Royalties’ emphasis on retaining copyrights? Not everybody should retain their copyrights.
Sure, there is a reason when you may want to give them up, or it’s time to let them go. But the reason we are seeing is the high dollar being paid, which is then further creating the interest, and an increase in the volume of creators letting go of their copyrights is the fact that in a streaming world, in a digital age, copyright is King.
Ownership is King.
It used to be in publishing that the works could be created, and be more valuable over time, but in a streaming world, you are getting six to one for the royalties for the sound recording versus the composition. So ownership is King, and it makes a huge difference, and there is a need to own. You hear someone selling for a 17 or 20 multiple, I saw a 33 multiple late last year. Nobody is waiting 17 or 20 years or 33 years to collect a principal, never mind any interest back. What they see is what we see which is this wall of money coming as the world switches to streaming that is legitimizing the consumption of music.
Streaming is still set up for the old style music business model. Despite the majority of music on streaming services being sourced from independents, indie artists have it tough because content from the three majors dominates the top tiers of popular tracks.
The majors still have the digital muscle.
Yeah.
As Music Business Worldwide founder Tim Ingram has argued (Oct. 6th, 2022 issue), “With 100,000 tracks uploaded to streaming services daily, cutting through the noise with niche music, that often fits best in an albums market, rather than the singles-focused world of 2023, is arguably incredibly difficult. At the same time, short-form content that powers platforms like TikTok isn’t always the best opportunity for deep engagement with an artist that might be the antithesis of a one-hit-wonder.”
Ingham further explains that, according to Spotify’s Loud & Clear data, just over 14,700 DIY artists generated more than $10,000 from both recorded music and music publishing combined on Spotify in 2022. And that figure actually fell year-on-year.
In terms of profitability, Spotify still lost half a billion dollars In 2022 though it reportedly added 10 million net Premium subscribers in the final quarter of the year. It added another 5 million net Premium subscribers to its user base in Q1 2023 (the three months to end of March), taking its total global paying subs audience to 210 million.
Spotify forecasts that it will end Q2 of 2023, at the end of June with 217 million Premium subscribers with the addition of 7 million net new subscribers additions in the quarter.
Warner Music Group CEO, Robert Kyncl believes that music is “undervalued,” that music from certain types of artists—especially those high-value artists and songwriters who attract subscribers to streaming services—should be paid more than other types of music.
Meanwhile, SoundCloud recently teamed up with Merlin, the digital music licensing agency for independent labels, on a global licensing deal, allowing Merlin members and their artists to participate in SoundCloud’s Fan-Powered Royalties (FPR) model, a user-centric model that allocates a share of each listener’s subscription and advertising revenues only to the artists/tracks they individually listen to.
What Spotify needs to do is revamp its pro-rata “one big pot” streaming model.
Yes. But the whole digitalization of the content is legitimizing the consumption of music. Listen, we have 339 million people in America that listen to music (in fact 82 million Americans pay an average of $10 a month for on-demand music streaming services), and there are 43 million in Latin America.
There’s 55 million monthly active users in India (with 10 billion tracks streamed monthly), and in China, there’s another 684 million. Those people may not pay 10 yuan or 10 rupees. They are watching through YouTube ads, their eyes, they pay for that consumption of music, and it’s tracked and that is creating a wall of money.
Also, sync was up 15% last year. We had these platforms licenses coming online, whether it’s TikTok or Facebook, that are starting to generate revenue for creatives that weren’t before. So pay to the creative is on the upswing, and that is why you are seeing these high dollar amounts (in selling catalog). Even as the interest rate went up, and some of the investors that were more financial investors, not industry players, had stepped aside. The multiples aren’t necessarily coming down because the wall of money is coming closer, and people are seeing these increases.
Despite indications of a slowdown in some territories, the global music subscriber streaming market continues to stand strong.
While synchs have been a remarkably consistent revenue stream for the recording industry over the past 5 years, however, there are warning clouds as Netflix, HBO, Disney, The CW, and others have indicated they will shortly slash their budgets for TV and movie content. The result, if there are fewer shows, will be fewer places to place music. The music industry would be affected as labels and publishers generally split revenue from synch licenses 50-50.
Forbes has posted that Netflix reportedly plans to cut its spending costs by $300 million in 2023 largely because the company had to postpone its initiative to limit password and account sharing, which was expected to generate new revenue. The powerful streamer had initially planned to restrict password sharing in the first quarter.
One positive thing is that while global streaming is slowing, the industry is more practiced in aggressively retrieving revenue from foreign markets.
Yeah, without a doubt. So the money is flowing. You are seeing more Neighboring Rights coming through and coming online. There are increases in what someone was earning 5 years ago to today, and it is dramatic, and it is going to continue to rise.
With Sound Royalties now operating in Canada after the recent hiring of Vanessa Thomas (as Regional Director of Business Development and Artist Relations), joining other international representatives in London and South America, you have had to learn about the scale of the specific challenges confronting the Canadian publishing and recording communities, and some of the intricacies of other potential revenue sources.
Canada does an amazing job with grants and other things supporting creatives that I wish we would see more of that domestically here in the United States, and even around the world in other countries. We are growing with Latin America and Europe. But yeah, there’s a lot more opportunities given to the artist there (in Canada).
Sound Royalties could well be a lifeline for those artists, writers, and producers when in a dispute with a label or with a publisher. Instead of their careers being stalled, they could move on to further projects with financial support1 and a partnership with Sound Royalties.
I remember that Sound Royalties teamed up with Lil Wayne in 2016 to help finance a number of his projects while he was locked in legal disputes. First in 2015 with Cash Money Records, as well as its co-founders Bryan “Birdman” Williams and Ronald “Slim” Williams. Wayne. Then, in 2016 slapping Cash Money’s distributor, Universal Music Group (UMG) with another lawsuit, claiming unpaid royalties from both his music, and from the artists his Young Money label helped foster, including Drake and Nicki Minaj.
Lil Wayne was appreciative of Sound Royalties’ support saying, “Sound Royalties understands the music world and is helping me utilize my past successes to fund and propel new projects and to continue creatively evolving.”
(Lil Wayne’s legal team had filed a federal lawsuit against UMG seeking over $40 million in damages, claiming that UMG was repaying its own debts with Young Money royalties following the $100 million advance it reportedly gave Cash Money. Two years later, Lil Wayne settled the two lawsuits with Cash Money Records and UMG, which paved the way for the release of, “Tha Carter V.” In June 2020, Lil Wayne sold Young Money’s entire catalog of masters for a reported $100 million to UMG.)
Those types of disputes are fairly common. So do artists, songwriters, and producers come to you for bridge funding in those cases as the only revenue an artist would be earning would be by touring?
Correct. If something raises a question about the royalty payout, they are frozen until that can be settled which squeezes the creative because it just stops their payment, and the money sits. So we regularly do get creatives coming to us looking for financing to bridge the gap.
Many hold the view that it was producer Norman Petty withholding royalties that led Buddy Holly to reluctantly join the lineup of the “Winter Dance Party” a tour of small towns in the frozen upper Midwest in 1959, where he died in a small plane crash along with J. P. “The Big Bopper” Richardson, and Ritchie Valens, near Clear Lake, Iowa on February 3rd, 1959.
That’s just terrible.
Norman Petty was an independent producer who owned the Clovis, New Mexico studio where Buddy Holly and the Crickets recorded most of their tunes between 1956 and 1958. In addition to taking control of Holly’s career and finances, Petty added his name to songwriting credits — a dubious, but not uncommon practice in those days.
Holly’s royalty rate on records sold was quite favorable for the time-5% 90% of the retail price of records sold.
However, as a co-writer with Jerry Allison and Petty, Holly only received 16 2/3rd% of the songwriter royalties from the Crickets’ first hit, “That’ll Be the Day.”
The other 50% of the royalties went to music publishing companies Peer Southern Music, and Nor-Va-Jak Music-then owned by Norman and Vi Petty.
A cash-strapped Holly eventually grew resentful of Petty’s control, and he and his new wife, Maria Elena, visited Petty to end their partnership and seek his unpaid royalties.
In an interview with Reuters, Maria Elena Holly, recounted that Petty told his young protégé, “You know what, Buddy? I’m gonna say this to you. I’d rather see you dead than to give you the money now.”
In 1976, Paul McCartney, purchased the entire Holly song catalog—some 40 songs– from Petty. McCartney never shied away from talking about the influence of Buddy Holly and the Crickets on the Beatles, even pointing out that a version of “That’ll Be the Day” was the first song that he and John Lennon would record in a small Liverpool studio.
After Holly’s death, his family chased alleged unpaid royalties from Universal Music Group label for decades.
Tell me about providing significant funding to Too Lost, the rapidly growing independent music, technology publishing, and distribution company that serves more than 185,000 artists and labels. As of August 2022, Sound Royalties has funded the company for a combined total of $5.3 million enabling Too Lost to retain full equity of their firm while it continued building its catalog and operations.
What was the attraction to you working with Too Lost?
For Too Lost, the attraction was they are an organization similar to ours with a mission to empower and protect artists, songwriters, producers, and performers. Working with us enabled them to raise capital, and retain full equity in their company. Like with what we do with artists, we don’t take ownership, and we didn’t with them. That became a waterfall effect in what they were doing with the creative, and that was very attractive to us. To be able to provide the funding like we normally do without taking ownership of a company that is protecting and empowering artists, performers, producers and songwriters.
That was quite a chunk of money to advance to a company.
Earlier you mentioned the $5,000 as being the minimum (of our involvement). That may have to go up just because of the amount of volume of deals that are coming through. But our goal is to help as many as possible, and that is why we put the bar so low but on the top end, we will advance $10 million for an income stream. So a creative could come with multiple incomes and get tens of millions dollars.
C’mon, you set the entry level at $5,000 initially to have bait in the water to attract as many creatives as possible and also to proclaim that Sound Royalties was destined to be a significant player win entertainment. You knew you were going to attract a lot of people with that minimum amount.
Absolutely, and it’s a great service to as many writers that we can work with but as that volume has gone up the cost of processing a transaction tends to be more.
Back to your initial comment, I think that it was Quincy Jones who said that “publishing is a penny business, but there’s a whole lot of pennies.” Now that it’s streaming it has become a micro penny business but there’s even more micro pennies, right?
There’s so much more revenue flowing through now.
Prior to the music business becoming the first industry to have a physical commodity that could be digitized, uploaded to the web, and easily pirated, music publishing was referred to as “the widget business” as deals were often being made on a song-by-song basis.
I hadn’t heard that one.
Old-time publishers would say, “We sell widgets, but we sell a lot of widgets.”
Yes.
Traditionally, music publishers balanced working their catalogs while nurturing new writers. A music publisher used to walk a songwriter/artist to a label to find that money.
Labels being king had all of the money.
The unbundling of the album by Napster, iTunes, and Spotify led to the music industry being downsized from a dollars business to a dime business. Publishers had to first grow their businesses by acquisitions, and moving further into foreign markets.
Also, following downsizing, major labels jettisoned certain services, as songwriters pushed for more than synchronizations and writer collaboration opportunities as well as marketing plans, and brand marketing from their music publisher. Songwriters pushed their publishers to get proper compensation from new media for music usage. Publishers continued to further develop their songwriters by walking them to a label, but numerous music publishers also tipped their toes into the label pond.
So the identity of the music publishing sector began to change.
Music being consumed via streaming rather than being purchased has brought about profound industry shifts; from the value of music to the management of rights. Certainly, major labels continue to seek to participate in publishing. and many of the smaller independent labels now need publishing revenue streams to exist.
At the same time, more and more companies like BMG Rights Management have become music rights companies handling publishing and master rights as well as other ancillary rights.
Plus, with digital, the industry, thus your own business, became increasingly more global.
Correct.
Securing investment from international sources, especially in Europe, can be daunting.
Well yeah if you use a bank in Europe their rates are similar to banks in North America, right? But if you go to Latin America and you are highly credit worthy and low risk, they are still in the upper teens from a traditional bank. So it’s not just hard, it’s expensive.
Major labels segregated music for decades by having Urban and Latin departments. The internet has done what radio wasn’t fully able to do; that is fully desegregate music. Radio formats were a form of segregation. The internet broadens the scope of the market. I find many of the Latin and hip hop and rap stars to be the smartest people in the marketplace.
Urban and Latin communities were the first to understand that the artist is the product and one that could be developed into other forms of entertainment and merchandise.
American banks, being then almost lily white, were not about to open their doors to the Latin and Urban worlds. So many artists established full-service production companies as well as artist management affiliates and film and television production affiliates with the attitude, “We make music, but we are also a product.”
Yep.
At one time, hip hop and rap didn’t travel outside North America but artists like 50 Cent, Jay-Z, Snoop Dogg, Puffy Daddy, Eminem, LL Cool J, Cardi B, Nicki Minaj, Ludacris, and Drake today have worldwide followings with consumers of American pop culture.
The 2017 success of “Despacito,” performed by Luis Fonsi, Daddy Yankee, and later in a bilingual version with Justin Bieber, kickstarted a new wave of Latin music mainstream success for the likes of J Balvin, Rosalía, Cardi B, Bad Bunny, and others.
“Despacito” transformed the way Latin music is viewed and listened to today. You couldn’t avoid the song if you tried.
Streaming has made it easier for listeners to discover music scenes such as reggaeton and Latin trap without those artists needing the marketing machine of a major label. In other words, audiences around the world are crossing over into Latin music.
Yes. It’s incredible. It’s a worldwide market. As the money starts to grow and creatives are smart in terms of turning to the world market “Despacito” was the simplest example. Or the clearest early example. The numbers that they are doing in Latin America are incredible.
In 2017 “Despacito” soared to the top of the Billboard Hot 100, and stayed there for a then-record 16 weeks, “Despacito” broke all sorts of records, including most weeks at No. 1 on Billboard’s Hot Latin Songs chart, and is the most-viewed music video on YouTube with 8.13 billion views as of Apr 17th, 2023.
As Leila Cobo, author of “Decoding ‘Despacito’: An Oral History of Latin Music.” wrote in Billboard in 2022, “But half a decade later, the starkest legacy left by Despacito’ is how it changed the world’s perception of Latin music, and how it changed the way the industry itself regarded and marketed music in Spanish.”
One sector virtually ignored by mainstream media is EDM. It is a music genre that has experienced an unprecedented surge in popularity since 2010 starting with its iconic artists David Guetta, Deadmau5, Tiesto, Ritchie Hawtin, Armin van Buuren, Swedish House Mafia, Calvin Harris, and Skrillex since followed by Marshmello, Martin Garrix, ODESZA, EVAN GIIA, Louis the Child, TroyBoi, and Jai Wolf who each are now doing great live numbers.
Yeah, absolutely but they (EDM artists) sample a lot. I think that is what it is and it’s different. There are a lot of mixtapes and there’s a lot of sampling. I think that their revenue stream because of that is going to be live performances.
Sound Royalties is part of the GoDigital Media Group, a privately held multi-national, diversified conglomerate, headquartered in Marina Del Rey, California.
Founded in 2006 by Jason Peterson, GoDigital Media Group is focused on technology-enabled and vertically integrated intellectual property rights management.
Under GoDigital Media Group’s sizeable umbrella are also: Cinq Music Group, a pioneer in combining the services of distributor, record label, and financial institution; Latido Networks, a holding company for media companies, Mitú and Latido Networks that includes Latido Music, and NGL-mitú, the Latino media and video brand; VidaPromo, the multi-platform network for Latin Rhythm music; and AdShare, providing social media monetization services for music, film, television, and sports rights-holders online.
Also, there’s YogaWorks Inc., the world’s premier provider of yoga instruction.
Additionally, there’s also Eastern Mountain Sports, a leading outdoor apparel brand and retailer, and Bob’s Stores, a retailer of apparel, and footwear with a 68-year history in the Northeastern U.S. Both were purchased from U.K.-based Frasers Group for $70 million last year.
Where does Sound Royalties fit into GoDigital Media Group’s media and monetization mix?
When I founded Sound Royalties, and then moved it from Virginia to Florida, I had a friend and partner who had a company, Novation Ventures in Florida, that was a specialty finance company. So who do you hire? Do you want to hire two people? Do you hire an accountant? Do you hire a lawyer? Do you hire a researcher? Well, if you put it against this company (GoDigital Media Group), you can use half of a lawyer, and a quarter of an accountant, and two researchers.
Leverage the employees across those platforms, and that started a Petri dish for a startup, and it really helped Sound Royalties take off.
Is Novation Ventures still around?
Yes, but it’s not tied to Sound Royalties. They were owned by a private equity firm. When they came to us and said, “You guys are doing great, but we are 13 years into a 10 year fun, and we need to go to market with this.” So we looked at a bunch of companies that were interested in acquiring and becoming the new financial partner for Sound Royalties and GoDigital was the choice that we made from the various entities that came forward that were interested in acquiring Sound Royalties, and to this day I believe it was the best choice that we made. Jason and GoDigital are a great financial partner for helping Sound Royalties continue with our mission.
GoDigital’s leadership team consists of C-suite executives with in-depth retail expertise, hailing from widely recognized global brands such as BCBG, Gap, and Next. With these affiliated companies under the GoDigital corporate umbrella, there’s great potential for crossover synergy.
If you look at all of the (GoDigital-affiliated) companies, all of the companies-YogaWorks, Bob’s Stores, and Eastern Mountain Sports–they are all run independently and separately. Sound Royalties continues to be run independently and separately as it always has.
Are you still a co-owner of the boutique Studio Bank headquartered in Nashville, with retail branches in Franklin, and Clarksville, Tennessee?
That’s an FDIC (Federal Deposit Insurance Corporation) federally regulated and insured bank and it continues to grow and do well.
You are still co-owner?
Yes. There’s a group of us (investors, and bankers) invested in the foundation of that.
How long have you been living in Nashville?
Five or six years.
Over the years, Nashville has undergone a sizeable transformation. The city, and the surrounding region, experienced 16% population growth over the past decade, compared to 6% on average for the entire U.S., making it the 7th fastest growing large Metropolitan Statistical Area.
The current metro area population of Nashville is 1,315,000, a 1.62% increase from 2022.
A different town than it was.
There are 32 buildings going up right now that are 20 stories or more.
Downtown Nashville has seen an exceptional amount of public and private investment in the past decade including mixed-use luxury commercial and residential projects, retail towers, hotels, and residential units.
It’s incredible. It’s like Dubai or something.
As you were graduating from the University of Maryland, College Park what career did you have in mind?
(Laughing) I didn’t know. But while in college, I found software and that is were that path and pursuit happened. My degree is in criminal justice due to my interest in law. I first focused my interest in pre-law.
You became engaged with software early on, a decade before the market imploded.
It was taking off. It was in late ‘90s when the bubble burst on it. This was 8 or 10 years earlier as it was still growing. With software, if you go back to the ‘80s, there’s weren’t computer degrees per se. They weren’t as prevalent. So the computer companies were recruiting from music departments because the way the brain works for a musician is similar to the way of that as a programmer. They are writing songs, and they are writing code to create a story, to tell a story, to create an environment. And it is a similar mind-set.
Before the invention of the World Wide Web in 1993, most Internet access still was from personal computers and workstations directly connected to local area networks (LANs) or from dial-up connections using modems, and analog telephone lines.
By the mid-1990s, Netscape had about 80% of the browser market in the U.S. and Europe. Its only real competitor was Microsoft’s Internet Explorer which first launched with Windows 95.
It wasn’t until Apple purchased Steve Job’s NeXT to improve Mac OS, and he returned to Apple, delivering an inspirational speech in 1997 detailing the future of Mac OS, leading Microsoft to invest $150 million in the firm that things began to change.
By 1998, the Apple iMac and PowerBook G3 were popular, and Apple was a force to be reckoned with.
Apple’s first iPhone in 2007 had a 3.5-inch screen, a 2-megapixel camera, and topped out at just 16 GB of storage. It didn’t even support third-party apps.
The iPhone is only 16 years old.
Isn’t that amazing? What are we on now iPhone 15 generation?
The iPhone 15 series may still be several months away but leaks claim that Apple is planning to restrict the phone’s USB-C charging and data transfer speeds for all cables that are not certified through its Made for iPhone (MFi) program. In response, the European Union has threatened to ban the sale of iPhones in member countries.
Meanwhile, I’m looking to update my MacBook Pro, but I hesitate to get another. There are many reasons to want a MacBook Pro. They are highly lauded for their user-friendliness, performance, longevity, and having an enormous suite of high-quality software pre-installed. The issue is that MacBook Pros are extremely expensive, and it isn’t clear why.
I replaced mine three years ago after five years with the MacBook Pro, and I didn’t notice a change. It didn’t speed up, it didn’t slow down. I’m not sure I needed to switch it out. They seem to go on forever.
Where are you originally from?
I was born and raised in the Silver Sprin-Olney Maryland area. My father was a government worker, s chief scientist for the Navy. My mom taught French cooking. I have an older brother.
Were you a concertgoer growing up?
Absolutely. I loved music. I just wanted to ride my bike, and play music. I played half a dozen instruments. Those were the two things that I wanted to do. My dad was extremely bright. Two PhDs, and two Masters degrees, all in different languages from top schools. He was an aeronautical engineer, an electrical engineer, a mathematician, and a physicist. So to my parents, I was stupid. My dad was like, “Unless you straighten up, you are going to be a ditch digger for all your years.” I just wanted to ride my bike, and play music, and I eventually found my way back to music.
The Washington D.C./Baltimore Maryland corridor has been the traditional home for folk, jazz, and bluegrass, and due to the turnover of people in the cities from overseas, also worldbeat music as well. You don’t see such broad musical choices in many other American cities
The corridor houses The Birchmere, the legendary music hall in Old Town Alexandria, Virginia, heralded by many as one of the finest music venues in the world.
I don’t know if you know that club.
Of course, yeah.
Neko Case and Stewart Copeland were born in Alexandria, and it has also been the hometown of David Grohl, Jim Morrison, as well as Cass Elliot, and John Philips of the Mamas & the Papas,
Yeah, exactly. A lot of people don’t realize it but Old Town Alexandria, Virginia (a city along the western bank of the Potomac River, approx. 6 miles south of downtown Washington) Jim Morrison, and David Grohl, they were right off Walnut Street. I lived in Alexandria a bit near the end, but it was on the Maryland side is where I started, and then moved to Northern Virginia and from there to good ole Nashville.
Jim Morrison moved to Northern Virginia as a kid after his father, a rear admiral in the Navy, was assigned to the Pentagon. The family lived for a time in the 1950s in a colonial house on a large corner plot at 310 Woodland Terrace.in Alexandria’s North Ridge neighborhood.
In the spring of 1999, David Grohl moved from Seattle and bought a house on Nicholson Lane in the Del Ray North Ridge area of Alexandria. Fellow Foos Taylor Hawkins and Nate Mendel also moved in. Here, Grohl built a 24-track recording studio in the basement, and the trio recorded virtually their entire third album, “There is Nothing Left to Lose”
There’s the Wharf in DC which is pretty good. It is relatively new and has a lot of acts to see. Another great music venue is The Anthem (in the Southwest Waterfront neighborhood of Washington.)
(The Wharf is a multi-billion dollar development about 4-5 years old on the Potomac. There are several venues there. The big one is The Anthem, operated by IMP (It’s My Party/Seth Hurwitz) which seats up to 2,800, and 6,000 for standing. It is rented out to outside promoters. The other venues are Union Stage and Pearl Street Warehouse.)
Larry LeBlanc is widely recognized as one of the leading music industry journalists in the world. Before joining CelebrityAccess in 2008 as senior editor, he was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-80. He was also a co-founder of the late Canadian music trade, The Record.
He has been quoted on music industry issues in hundreds of publications including Time, Forbes, and the London Times. He is co-author of the book “Music From Far And Wide,” and a Lifetime Member of the Songwriters Hall of Fame.
He is the recipient of the 2013 Walt Grealis Special Achievement Award, recognizing individuals who have made an impact on the Canadian music industry.
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