As streaming enables more and more middle tier artists to make good money from music, the evolution of the distribution platforms that have traditionally served those who don’t fall into the major label megastar category is becoming very interesting.
One company that’s made a splash in this field in recent years is Stem, which has just bowed out of the lower-end distribution market after introducing a new paid tier designed for high-performing acts.
Then there’s Stockholm-based Amuse — a rival to CD Baby, Ditto and AWAL etc. — which offers its distribution service completely free in order to mine its own data for songs that are performing well. The artists behind these tracks are then offered licensing deals via Amuse’s in-house record label.
One such example was global smash Old Town Road by Lil Nas X, who was offered a $1m+ advance from Amuse CEO Diego Farias before signing the track to Columbia Records.
This figure, revealed by Farias earlier this month, sparked questions about how Amuse can operate a sustainable long-term business while offering eye-watering advances and a free service, and retaining no copyrights.
Amuse has raised two investment rounds to date, totalling $16m. Is the company’s strategy to spend big and make a splash in order to tempt an acquisition so investors can cash in quickly?
That’s simply not the case, says Farias in our exclusive interview below, while detailing his business model and ultimate ambitions, which centre on building a record label fully attuned to the needs of artists in the digital age.
Seven-time Grammy Award winner will.i.am. joined the team as co-founder in 2017, and board members include Edgar Berger, former Chairman and CEO of Sony Music International, and Jörg Mohaupt, former Warner Music Group board member.
The company has a team of 60 worldwide and is currently operating in 215 markets with hundreds of thousands of users.
Alongside its distribution arm and record label, Amuse rolled out data-automated feature Fast Forward earlier this year, which pays out advances based on a song’s listening history and expected future performance.
A 20% fee is added to the advance and artists start receiving royalties again once the total amount is recouped.
Can you explain your business model and how you are able to offer the service that you do for free?
The Amuse business model doesn’t differ so much from how the music industry has always worked. There has always been a cost associated with identifying talent; when you look at the IFPI report, for example, the majors always mention that they are reinvesting billions into finding talent. We do that in a digital way.
We were sitting down and looking at the distribution space and thought that not so much had happened in that space — the services looked the same, the price point was the same, despite a lot of technical improvements over the last 20 years. It was still, ‘Take your song, put it in the music service,’ that was it.
“record labels take on a lot of cost in identifying talent and then they make money out of the content that they actually sign. Our model is exactly the same.”
Diego Farias, amuse
So the idea was, why don’t we build a distribution service but monetize it in a different way. Music distribution was already showing signs of a price decline when we started the company; at some point a rally like that will take you to zero. It’s cheaper than it ever has been to do music distribution [so] we figured let’s do it for free.
There is a small cost that we have to take on [to distribute artists for no cost], but it gives us access to all of this incredible information that we can then use to inform our decisions into what talent we really want to spend money and time on, and that’s our revenue opportunity. That’s how record labels make money; they take on a lot of cost in identifying talent and then they make money out of the content that they actually sign. Our model is exactly the same.
But labels have got a lot of catalog that they are earning on because they hold the copyrights long term.
Yes, exactly, but they started somewhere – and we are starting somewhere. All record labels start with nothing and then they start to find talent and develop a catalog and that is exactly what we have been doing.
Up until a few weeks ago our only monetization path was being a record label, now we’ve added one more layer which is our Fast Forward product. We [have built] this tool that allows us to predict the future revenues for all of the artists in our service. We are able to offer six months of future royalties to all of our artists for a small fee.
We have a big number of artists [on] our service, and we are super excited about that, but it’s grown to such a large number, and we are not signing all of them to our label, so we wanted to see if we could expand the tech offering that we have on the label side and create a product that could benefit [them].
Once you sign artists to your label, what is the structure of those deals?
We only do license deals. We’ve never had the ambition to, nor would we ever want to, acquire music rights. We don’t believe that artists want to sell their music rights; we think they want to be in control of that forever. My brother is an artist and a lot of our friends are artists, so it feels personal, and it feels like something we wanted to stand up for from the beginning.
“the deals that we do are license deals only. We’ve never had the ambition to, nor would we ever want to, acquire music rights.”
Over a duration of the license period that we agree on with the artist, we will make 50% of the royalties after we have recovered our marketing investments, and our royalty advances. We just split the profit on the project 50/50.
I can tell you that for a lot of the artists that we’ve met and signed, who have perhaps been offered label deals where they are getting a 15% or 17% royalty, getting 50% on the first deal they sign has been fantastic for them.
When we sign a license project, we invest in marketing, royalty advances, videos, put together a team, both locally but also internationally to run the marketing, the promotion, all the stuff that is needed. It’s a full label setup; it’s not something in-between running a label and distributor, it’s one distribution part and one full label part.
How does the nature of your 50/50 licensing deals tie into your long term plans for profitability when you are not going to be owning any catalog?
While we are not owning catalogue, we think that we can build a long-term catalog where we have these licenses and earn money over the license period. We think we can build a sustainable business on that, together with Fast Forward, and additional revenue flows that we are going to introduce.
“No one is trying to do this to disrupt the space with venture capital money and mess things up for people… The long-term plan is definitely to generate enough revenues from all of the different activities that we do to sustain our business.”
We think that we are on a path to create a sustainable business model. No-one is trying to do this to [just] disrupt the space with venture capital money and mess things up for people. The long-term plan is definitely to generate enough revenues from all of the different activities that we do to sustain our business.
Do you think you might charge for distribution in future?
What do you make of Stem’s decision to quit DIY distribution and up its fees?
I can’t speak for what Stem’s reasoning behind all of this is, but distribution is a fairly complicated business, it requires a lot of staff, it’s a pretty intense process so I think maybe [that] could be a margins conversation. Maybe it could just be a strategic decision to focus on something else.
Stem’s business has always seemed to be more around the higher level of artist, so perhaps that is making a lot of revenue… so maybe it’s not as surprising as some people make it out to be, maybe it’s more of a natural evolution for Stem.
We’ve seen a pretty big spike in interest in what we are doing as a result of Stem’s communication to their artists, so we are happy about that, of course. But I don’t have any specific thoughts about why [Stem CEO] Milana and the team decided to pivot and do something else.
Am I right in assuming that you’re running everything on investment right now? At what point do you think Amuse will be profitable?
Of course we are running the business on [Venture Capital] to some extent, but we are already generating a serious amount of revenue, so it’s a combination of the money that we are earning and VC – it’s not just that we are straight out burning money.
We have been investing in rights for more than two years, we already have a lot of commercial success with Gold and Platinum selling acts that we have taken from nothing to becoming serious contenders. We’ve already started sending out a very large amount of these Fast Forward deals that we are doing [too].
“If we just stopped our growth and decided to focus on what we are already doing, we could be profitable in a fairly short amount of time.”
What we are trying to do is to build something, and because we feel like we have a lot of momentum, we want to capitalize on that and accelerate our growth, so that to a large extent is what we are using VC for.
If we just stopped our growth and decided to focus on what we are already doing, we could be profitable in a fairly short amount of time. But because we are continuing to go we might need some additional VC to continue on that journey. I just want to reiterate, the idea with this is to build a profitable and sustainable long-term business.
Can you give us any hint as to how much revenue you are currently able to generate annually?
No, I’m not sharing that information right now. But it’s important to understand that the label business is the right side of the music industry in terms of margins and stuff like that. It’s not like running a Spotify or Deezer or Tidal where you are on the receiving end of music rights that you have to license.
There is a lot of interest in Amuse right now, a lot of artists are coming to us, we are growing at an absolutely ridiculous pace, so we are generating substantial revenues already.
During a panel at Midem, you said that you offered Lil Nas X incredible terms, one of which was that $1m+ advance. Was the license deal 50/50?
I’m not going to get into the exact deal terms that we offer artists, but that [50/50 split reflects] the general terms that we would offer.
So a $1m+ advance and 50/50 royalty split is something you might offer a superstar act?
Yes, somewhere around there, but the terms could always be individualized for the project. There is no fixed format that we follow.
Talk us through the terms of the Fast Forward advances.
The approach that Amuse takes is always to have very generous, very open and transparent terms. It’s entirely in our DNA to do that. So the terms for the Fast Forward deals are the following: the music has to be on our Amuse distribution platform so that we have enough intelligence to be able to make the advances.
We provide a royalty advance for the coming six payments of royalties, and we charge around a 20% one time fee for that. As you recoup the total amount you are free to do whatever you want, but during the time that you are recouping the song is locked down to Amuse.
Right now, a lot of artists have been recouping exactly on six months or a little bit sooner, so its been functioning super well and we are proud about that. Now we are just excited to be able to roll that out to more people.
“Usually when you sign a royalty advance it comes with being locked down for a longer period of time, it comes with commitment to future releases, a bunch of stuff. We have nothing of that.”
[Aside from the period of recoupment], there are no locked down mechanisms anywhere on Amuse. If you are starting to amp up on our distribution service and another label finds you and signs you, we don’t have any rights of first refusal or anything like that. We’d never build anything into our terms that would ever be predatory in any way at all.
The terms of this are incredibly generous as far as royalty advances goes. Usually when you sign a royalty advance it comes with being locked down for a longer period of time, it comes with commitment to future releases, a bunch of stuff. We have nothing of that.
If you don’t recoup this, it’s on us, it’s not on you; we are not going to come knocking on your door and ask you where the money is! It is, as far as I’m concerned, the most generous and the best offer as far as royalty advances go anywhere in the market.
So if artists don’t recoup it gets written off?
How do you determine the level of advance?
Amuse is focused on the future part of your royalties; we are actually predicting where your music is going royalty wise. You don’t have to have been on our service for three years and have $5k or $50k minimum monthly revenues to be eligible for Fast Forward. It’s important for us that all of this is available to as many people as possible.
So we are doing royalty advances that are like $250, and I think in the beginning people were like, ‘What the hell are you doing paying out $250 advances? That doesn’t make any sense.’ But we’ve heard stories of people who used the $250 advance to pay for an hour in a studio or turn on the electricity in their apartment.
“We need to get our heads out of the sand a little bit and realize that for a lot of artists, the struggle is very real.”
So we need to get our heads out of the sand a little bit and realize that for a lot of artists, the struggle is very real. They are not making enough money and this lag in how royalties are reported… even if you start getting a little bit of momentum you don’t see that money until months later.
[This service] is part of what type of a company we are trying to build and what values we are building this company on. Which are very inclusive, open and generous to all of our artists. We think that in the longer term that is going to benefit us.
So if someone criticises our business model, because they [think we] sound crazy or whatever, it is rooted in a real love for the music industry and for the artists that populate it.
How many artists are licensed to your label?
We try to sign tracks, perhaps with an option to follow the artist on their journey, so we think of them as individual projects; we’ve signed probably around 200 projects and somewhere around 500 songs. That’s after running the licensing business for around a year and a half.
We’ve found a lot of fantastic stuff so far, we’ve picked up many things at very early stages. I think when people listen to what we do, they think, ‘Oh are you guys looking at the viral top 50 and just picking someone from there.’ No, that’s not what we do.
We’ve signed artists when they were doing 3,000 streams a day and now they are Platinum-selling artists doing 400,000 streams a day. It’s about picking artists at an early stage and investing in them and working with them until they reach the success that they had envisioned.
Are you mainly focused on signing tracks, or do you want to develop and launch superstar artists. Could Amuse, in theory, launch a Billie Eilish, for example?
Yes, and we are developing and launching superstar artists. Two of our cases where we have reached Platinum sales started off with a one track deal or a one track plus one option deal.
We want to prove our worth; we want to prove to someone that we are a partner that deserves to work with these artists over time. If you start by signing a long-term deal that you invest heavily in, it’s a hit or miss kind of approach. If you miss, you are going to have a very unhappy artist for a long period of time that wants to get out of the deal. It’s the most classic music industry situation there is.
“we want to prove to someone that we are a partner that deserves to work with artists over time. If you start by signing a long-term deal that you invest heavily in, it’s a hit or miss kind of approach.”
We set it up completely differently. The responsibility to succeed lies entirely on our shoulders, we need to perform to be able to earn the respect of the artist and to be able to work with them over longer periods of time and break them. We build a strong team from the beginning, we invest heavily in talent and we move them into star territory.
Amuse didn’t start with a superstar set up, we started in a basement and we’ve grown from where we were. We didn’t think that we were going to have Gold and Platinum selling artists in a year, we did, and the next step from there is probably to get someone who sells Gold and Platinum in multiple territories, and then we are off to the races.
We never expected to sign a superstar artist on day one but now it’s really in our sights. If we could do this with nothing, imagine what we could do with more resources, more brand awareness, more experience, more results in our bag, and that’s where we are getting right now. I definitely think it’s very possible that we’ll have a superstar artist very soon.
What does the Amuse record label team look like? Have you got A&Rs?
We have a teams in Sweden that handle a lot of European releases, a team in LA and a team in Bogotá for Latin America that work closely with the talent. We have in-house content creators and PR. We don’t think of A&R in the traditional sense; we don’t have people who only devote their time to talent discovery, nor do we have people who only work on repertoire building. We rely more on the management team and the people around the talent for that. But we will offer insight and expertise as well.
We have marketing teams, we might add third parties if we have traction in territories where we don’t have presence already, which is also a standard approach for the majors. I don’t think it’s about how much headcount you have on each project; it’s always going to be about how much you are dedicating to this project — [is the artist] getting the resources needed at the time you need them? That’s always going to be more crucial.
I hear a lot of stories where you could have 50 people on staff but the project could be completely forgotten in-house, and then it doesn’t matter how many people you had on your headcount. All that matters is: did you add people to this project and did you get that project going when it needed to get going, or didn’t you?
If you’d have signed Lil Nas X, do you think Old Town Road would have been as popular as it has been under Columbia?
Yes. It’s important to note that he was doing millions of streams per day, I mean millions, without a label. That’s a full stop on that. Columbia has done a bunch of really cool stuff to help him accelerate, and kudos to the team over there for the work that they’ve done, but in my opinion Lil Nas X is an unsung hero of reinventing how marketing works. This kid is an absolute genius.
“Lil nas x was doing millions of streams per day without a label. He is an unsung hero of reinventing how marketing works. This kid is an absolute genius.”
If you follow him on Instagram you’ll start to have the same level of admiration that our team has had for him from day one. This is a meme god, a kid who has completely understood the space in which he is operating – and he is operating in a space that I would challenge any label to fully understand.
I think that if we would have signed him he would have been able to continue on the journey that he is on now, which is that he is driving the narrative, he is working the fans, he is growing the fanbase. He is getting a lot of assistance from Columbia which is giving him more platforms to speak from, but the kid is the centerpiece to all of this and no one should forget that.
Are you interested in being acquired? You’ve taken on investment from VC sources which suggest that might be on the agenda long-term.
That is not something that anyone working here is talking or thinking about. And we have two investors, one of which is a private individual, who aren’t thinking about that either. We have had interest from labels, including major companies, and we’ve had conversations with streaming services too. But none of that is something we’ve wanted to pursue. We are very ambitious and our goal is to build a long-term sustainable company.
Music Business Worldwide