Believe Digital is confident that it will increasingly beat the major labels to artist deals in future – as the acquisition of Tunecore transforms it into a US $250m+ annual business.
France-born digital distribution and label services company Believe announced its buyout of rival Tunecore last week.
Believe intends to allow both companies to retain their own unique operations and staff, but has formed a new corporate entity: Tunecore & Believe Digital Services.
Speaking to MBW, Believe Founder & President Denis Ladegaillerie (pictured) said that in terms of industry revenues from digital platforms, Believe already enjoys a strong distribution market share in key territories – around 12% to 15% in France and Italy, and around 5% in the UK and Germany.
This foothold, plus the added leverage from Tunecore, will help Believe “extract very competitive market terms” for its artists in future from the likes of Spotify and Deezer, he commented.
“We fully intend to leverage our market share, both to strengthen our service relationship [with digital services] and further improve our terms – whether logistic, financial or promotional,” he said.
Ladegaillerie forecast that the combined force of Believe and Tunecore would generate a 2015 turnover in excess of US $250m (€232m), which he estimated was “bigger than any player in the market outside of the three major labels”.
When asked if Believe could now press on to challenge the major labels on a digital distribution market share basis, Ladegaillerie said: “We already are, and we will continue to do so.
“Depending on the territory, Warner’s market share is not that significantly higher than ours – and they have been helped by the acquisition of Parlophone.”
“We are now bigger than any player in the market outside of the major labels. We fully intend to leverage our market share to improve digital terms.”
DeniS Ladegaillerie, Believe Digital
He added: “Every day that passes we become a more and more attractive alternative to the majors for artists. The No.1 driver of artist attraction to Believe today is how much digital represents in their overall revenues.
“Four years ago we might have struggled to sign platinum artists; they told us ‘we like you but CD sales represent 70% of my revenue and that’s what I need to focus on, so I’ll stay with UMG, Sony or Warner’.
“Now, particularly in genres like EDM and urban music, digital can represent as much as two-thirds of an artist’s [recorded income]. Then, you see that the logic switches.
“Who do you want to be aligned with: someone with real digital expertise offering transparency, or someone who’s really good at physical sales? We are only now getting to the point where we can start competing with the major labels on an equal footing. The next five years are going to be really interesting.”
Ladegaillerie claimed that Believe had signed the back catalogue of one anonymous major label artist 18 months ago, when the act was receiving just €100,000 in annual revenues. By 2014, he said, Believe had improved this annual haul to €600,000.
“We see this improvement in a number of artists we work on in distribution, marketing and promotion,” he said.
“Believe does not deduct fees when the revenues from a catalogue are passed back from one territory’s office to another – there are no hidden costs like that here.
“We still see major contracts with strange deductions on digital [royalties] that look like they belong in the world of physical sales.”
Believe, which works with both artists and labels, runs offices in 29 countries with a staff of over 250 music industry and digital marketing execs.
Ladegaillerie told MBW that the Tunecore acquisition would give Believe a significant foothold in the US for the first time.
“We can now offer different solutions to different artist needs,” he said, explaining that Tunecore’s digitial distribution offering would be targeted more at casual artists.
“Believe is a perfect fit for mid-level or top artists, as well as niche labels and others,” he added. “We’re going to leverage all [Believe] staff in countries we’re in to expand Tunecore with localised websites and localised service.
“And with Tunecore, now we have a significant base on which to build the Believe Digital brand in America.”
Ladegaillerie confirmed there was no current plan to alter the existing pricing structure for artists at both Believe and Tunecore.
He clarified that Tunecore’s publishing administration service would continue to operate but was not a core reason for the acquisition.Music Business Worldwide