If you wanted to know why Sony Music bought AWAL… this is why

MBW Reacts is a series of analytical articles from Music Business Worldwide written in response to major recent entertainment events or news stories. 

On Friday (February 11), MBW broke the news that the UK’s competition watchdog – the Competition and Markets Authority – had provisionally cleared Sony Music‘s $430 million acquisition of AWAL from Kobalt Music Group.

Just three days later, on Monday (February 14), we were handed the perfect example of why Sony thinks AWAL is quite so valuable.

On that day, it was revealed (via Hits Daily Double) that long-time indie artist girl in red – aka Norwegian singer/songwriter/producer Marie Ringheim – had signed a frontline record deal with Ron Perry-led Columbia Records in New York.

Since releasing her debut EP in 2018, girl in red has developed a significant and passionate fanbase in multiple territories: at the time of publication, she has over 12.6 million monthly listeners on Spotify, and over 2.1 million subscribers to her YouTube channel.

The Scandinavian artist has built this fanbase, for four years, as a priority artist on AWAL.

Her debut album, If I Could Make It Go Quiet, was released via AWAL (in partnership with the artist’s own World in Red label) in April last year, just one month before Sony closed its buyout of AWAL (and Kobalt Neighbouring Rights).

If I Could Make It Go Quiet went Top 10 in the UK, Norway, Australia and the Netherlands, charted at No.67 on the Billboard 200 in the US, and contained the breakout single Serotonin – a Top 10 track on Billboard’s Rock Airplay chart.

Now, girl in red has signed with one of the world’s biggest frontline record companies.

In doing so, she’s become a prime case study for Sony Music’s hope to use AWAL to spread-bet its way to A&R supremacy.

AWAL runs a triple-tiered program of services for artists:

  1. AWAL Core: The basic AWAL offering for DIY artists who submit their music to AWAL and are then selected by the company as clients. (Less than 10% of artists who submit music to AWAL get the green light to sign with it.) This gated ‘ground floor’ level of AWAL provides these artists with basic distribution and analytics tools;
  2. AWAL+: The ‘second layer’ of AWAL’s service is for indie artists who develop a more significant fanbase/business than your typical AWAL Core act. As such, AWAL+ artists are given additional finances and services from AWAL to help accelerate their career. (AWAL itself defines AWAL+ artists as being “on the verge” of breaking.)
  3. AWAL Recordings: The top tier of AWAL, under which artists are given record label-like resources (and advances) under a licensing agreement.

As artists are elevated through these tiers, so they agree to split more of their earnings with AWAL.

MBW understands that AWAL Core artists are asked to hand over 15% of their royalties; if they then graduate to become AWAL+ artists, it’s 30%; and for AWAL Recordings artists, it’s likely to be a 50/50 or profit share agreement.

Across all three of AWAL’s tiers, the artist keeps their underlying copyrights, which is why girl in red’s music to date has been credited on the likes of Spotify as “World in Red under exclusive license to AWAL Recordings Ltd.”.

The question mark around AWAL’s loss-making business model has always been this: Can it hold on to the most lucrative of artists once they graduate into the realm of AWAL Recordings?

The answer, in more than a few notable examples, has been no.

Indeed, Sony Music’s labels have poached (i.e. signed) some of the most commercially successful artists releasing music through AWAL Recordings in the past, including Rex Orange County (RCA) and Madison Beer (Epic Records).

As part of Kobalt Music Group, losing these artists for AWAL was a financial gut-punch: AWAL spent significant risk capital propelling these acts to commercial success and large audiences… and then, just when AWAL had the chance to make bank as a partner, said artists defected to major labels (and their major label budgets).

This is why AWAL prospectively makes a lot of sense as an in-house operation at Sony.

If an AWAL artist gains traction, and then becomes an AWAL Recordings artist, and then becomes a big AWAL Recordings artist, there is a further upstream option within Sony Music Group‘s walls: the company’s own major labels (and their major label budgets).

In this scenario, because AWAL is now Sony Music-owned, its wider parent group (unlike Kobalt, when it owned AWAL) doesn’t ‘lose’ the artist, or their audience… or the related income.

Think of AWAL’s A&R development model as an inverse triangle: it invests a little bit of money into a lot of indie artists each year (AWAL Core); then invests a bit more money in a select pool of these indie artists (AWAL+); before finally (via AWAL Recordings) investing the lion’s share of its resources to thrust just a handful of these artists towards mainstream momentum.

Right now, girl in red has mainstream momentum.

Her signing to Columbia Records demonstrates how the AWAL model (and the rich data it collects) can become a real asset within Sony Music, whose entire business is predicated on betting just the right amount of money, on just the right potential superstar, at just the right time in their career.Music Business Worldwide

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