Music publishing: Kobalt banks on broadening revenue streams for artists

updated

There are five arms to the music industry: The record label, publisher (sometimes combined), managers, artists, and fans. While we’ve previously examined labels, and surveyed numerous sites that help fans in their attempt to get music, companies that focus on getting profits to artists (who struggle to manage copyrights and track down royalties globally) are a bit harder to find. But one such company — Kobalt Music Group — is starting to make some noise.

The London-based company, whose clients already include such notables such as Eminem, Gwen Stefani, Barry Manilow, and Hillary Duff, provides music publishing services for songwriters and copyright holders. It offers its clients an array of services from a royalty collection service, using technology to track royalties globally, a song placement service (getting songs into films and on television), and an advance program.

And it raised a $16 million from Balderton Capital in a second round of funding last Wednesday.

Kobalt claims to deliver payments to clients up to 12 months faster than traditional methods, while also allowing for better accuracy in registration of copyrights and automatic checking of copyright data. The information is also available in real-time online, giving the songwriter/artist or copyright holder the ability to manage copyrights on the fly.

Kobalt’s revenues come from royalties it collects on the music sold. It also has technology that monitors the artists’ copyrights digitally on the web to ensure minimal copyright infringement.

Kobalt was founded in 2000 and says it’s had more than 100 percent growth in the last three years. The company generates new business by word of mouth from its clients and has over 50 staff in six offices around the world. And while it does do extensive work directly with artists and songwriters, as well as copyright holders, it claims not compete against labels.

Typically, record labels act as a convertible-debt issuing VC, because their advances to artists are nothing more than loans that give the label exclusive rights to the artist’s or songwriter’s work for a certain time period. Kobalt steps in by giving artists advances but allowing them to keep ownership rights, something rarely seen in the industry.

The company says it collects royalties from over 250,000 “modes of revenue streams.” (We tried to find out exactly what that means, but no one at the company’s been available for comment for a few days. Update: A PR spokesperson for the company tells us the 250,000 number refers to all of the music products on an album over 50 territories for all of the licensees who make the music available. ) It makes these collections using a backbone system it created that synchs digital and traditional technologies, although it won’t share exactly what kind of system that is. The company also provides artist and repertoire services, as well as songwriter collaborations, and song plugging (pitching songs to its artist clients).

From all appearances, we’ve seen this idea before –and it fell flat on its face when Shawn Fanning’s post-Napster company cut 60 percent of its workforce, but not before taking in $25 million in funding. Snocap, who we last wrote about in October, changed its business model radically: It started out helping artists to set licensing terms, packaged with a music download trafficking software and has turned into a music store widget on MySpace that can also be embedded on other sites.

There is, however, a big difference between what these companies did and what Kobalt is doing. Snocap just allowed its artists to set licensing terms for music downloads on the internet and now white labels a music storefront for artists. But Kobalt wants to do more than license music for downloads — it actually publishes the music too, and it gives artists advances and grants copyrights, which Snocap never did.

These differences seem a necessary step toward getting financial benefits back to artists, who are often lost in the fray as record labels, internet companies, and fans bicker over how accessible music should be, and what it should cost.

The amount of Kobalt’s prior round of funding remains undisclosed, but initial seed investor Spark Ventures participated again in this round of funding, and Balderton Capital led the investing, adding one if its partners to the board of directors.

Kobalt has offices in major music hubs: New York, Nashville, and Los Angeles, as well as Berlin and Stockholm. The company manages more than 100,000 copyrights for 700 clients.  

David Adewumi, a contributing writer with VentureBeat, is the founder & CEO of http://heekya.com a social storytelling platform billed “The Wikipedia of Stories.”