Silicon Valley has routed the pockets of musicians, allowing consumers to illegally download music for free or stream it for pennies. Now artists are getting a leg up on the tech industry as Google and Michael Dell are investing $60 million in Kobalt, a startup that helps musicians chase royalties owed to them around the globe.
Music streaming services like Spotify and Deezer are often criticized for paltry royalty fees they pay to artists. Big name musicians have survived by touring more and increasing concert prices, but the changes in technology have made it more difficult for new artists to make money from their music.
Thom Yorke has been one of the biggest critics of streaming services and pulled all his music from Spotify in 2013. But the former Radiohead frontman is among Kobalt's impressive list of clients that also includes Beck, Foo Fighters, Kelly Clarkson, Paul McCartney and Trent Reznor. Kobalt's sophisticated software scours payment systems around the globe to ensure that musicians actually receive all the royalties they're owed.
Kobalt is unlike any publishing company the music industry has seen. The company doesn't take a percentage of earnings from artists, but instead, for a flat fee, finds when and where their music is being played and how much they should be paid.
One of the problems with the global proliferation of digital music is that it is very difficult to track the billions of songs that are downloaded and streamed every day. Kobalt claims it can solve this problem and as a result put more cash in musicians pockets.
Swedish CEO and founder Willard Ahdritz said that "in the next six to 12 months, we are going to connect the pipes that are broken on a global scale." He says that by fixing inefficiencies in the industry's global payment systems he can double the value of the music. Kobalt can connect artists directly with the people who owe them royalties, bypassing all the intermediaries that have traditionally sucked money out of the industry.
The $60 million from Google Ventures will be used to help Kobalt grow its technology team which is headquartered in London, but has 250 people in ten offices around the world. Google Ventures Managing Partner Bill Maris called Kobalt a real company with a real engine behind it. "When you have an industry where it can take upward of a year to get paid for something that you've created, that doesn't seem like the way it should operate," Maris said.
Founded in 2000, Kobalt represents more than 5,000 songwriters and says that on average it represents the owners of 40 percent of the top 100 songs in the U.S. and the U.K. The company raised $66 million in a previous funding round and received $153 million to buy music rights for its label arm Neighbouring Rights. Michael Dell's ACM Capital has been involved in all three financing deals.
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