Kobalt: We’ll grow YouTube revenues by 50% for AMRA clients

Kobalt is cross.

The company’s charismatic founder, Willard Ahdritz, makes no bones about the fact that he’s been left fuming by what he sees as “glaring inefficiencies” in the traditional collection of his clients’ digital royalties.

It’s for this reason Kobalt has set up – via an acquisition – its very own collection society for publishers and songwriters, AMRA.

Run as a separate business to Kobalt, AMRA is a mechanical and performance rights CMO with one crucial difference: rather than collecting through myriad bodies in individual territories around the world – all of whom take a cut to pay their overheads – AMRA collects worldwide at a single source.

Ahdritz claims this makes the entire process more transparent, cheaper and efficient for rights-holders.

What does he believe that will mean for songwriter royalty statements?

Hold on to your hats.

This week, AMRA signed its second worldwide licensing deal with a digital service (outside the US).

In August, it inked an agreement with Apple Music. The newest major streaming service was on board.

Now Kobalt’s turned its attention to the biggest.

If Ahdritz was looking to show up those ‘glaring inefficiencies’ on a global stage, he couldn’t have picked a better test case.

YouTube‘s content ID system has already helped labels and publishers to collect far more accurately on ad revenue generated by their approved videos. (How much value YouTube’s 55% payout offers to these rights-holder – not to mention its CPM rates – is a debate for a different day.)

However, even the most progressive CMO would admit that the world of user-generated content is a different ballgame.

Popular songs often spawn thousands of covers and tributes scattered throughout YouTube, all recorded at differing speeds, qualities and styles.

Some rumour that certain regional CMOs struggle to capture data from more than half of these uploads, and therefore, to collect masses of due ad money for their clients.

This is where Ahdritz thinks AMRA’s trump card really lies.

AMRA will rely on two strands of existing Kobalt’s technology to root out its clients’ music on YouTube: its KORE digital collection tool, plus its user-generated-content matching suit ProKlaim.

So confident is Ahdritz in the power of this combination (plus a little bit of human legwork), he’s already making some very bold claims.

“In the audits we’ve done, we’re coming up to matching 99% of videos [for a song],” he tells MBW in our interview below.

Add in the savings made when this money is being collected by a single CMO, rather than multiple regional bodies, argues Ahdritz, and the difference between AMRA and the traditional way of doing things will be night and day.

Here comes the bombshell.

“I expect there’s going to be a 50% uplift in streaming revenue from YouTube for AMRA clients.”

This wasn’t a slip-up. He said it twice.

No wonder Ahdritz and AMRA boss Tomas Ericsson believe they have “written history” with the AMRA/YouTube deal.

Those first few royalty cheques are going to make for fascinating reading…

I don’t think there’s a platform on earth which is criticised more by songwriters than YouTube. How can this deal change that relationship?

Ahdritz: Kobalt [publishing] clients are very happy with what they are being paid out of YouTube’s user-generated content.

When we integrated [Kobalt tech with the YouTube database] in the US, I was shocked. We have always been told there is no money in YouTube.

But when we integrated and monetised 2bn streams per month [with Proklaim], we suddenly saw a lot of money.

“We have always been told there is no money in YouTube. But when we monetised 2bn streams per month, we suddenly saw a lot of money.”

Willard Ahdritz

In my opinion, YouTube CPMs are actually pretty good rates when it comes to user-generated videos. I don’t think you can expect the same rates from a cat jumping up and down [as you can from premium music videos].

We know that Taylor Swift, for example, endorsed that sheriff who singing Shake It Off.

My view is that when you do the proper integration and actually see the money, YouTube [UGC] offers great additional revenue for what is not premium videos. It’s also marketing.

With this deal, AMRA will be a fundamental game-changer when it comes to the money people see on a global scale.

We are writing history with this announcement.

Is there any indication of what AMRA clients can now expect in terms of an uplift of income?

Ahdritz: When we built our first test for a case study using this technology [for Kobalt publishing clients], when we had a partnership in Europe [with STIM called K-Star] we saw a 130% uplift from Spotify.

In this case [AMRA on YouTube], I expect there’s going to be a 50% uplift in streaming revenue – minimum.

Ericsson: Ask any major publisher or artist whether they have actually seen any money at all from YouTube coming out of territories like India. The answer will interest you.

“There is substantial money in streaming. Anything that says otherwise is probably propaganda.”

Willard Ahdritz

YouTube is the No.1 streaming music platform in the world [in terms of size]. We’ll now get all the global data directly from YouTube and we’ll be able to monetise much of it for the first time.

Ahdritz: We expect we’re going to lift the global streaming money by 50%. That is backed up by facts. It’s exciting and it’s the future.

This message needs to come out. The fact is there is substantial money in streaming.  Anything that says otherwise else is propaganda.

I’ve heard it said that there’s a big issue matching songs on YouTube if they’ve been slowed down or reworked in a UGC video. You’re saying your technology overcomes that?

Ahdritz: Yes. We have the capacity in AMRA to match user files with our entire database.

As you know, Kobalt’s technolgy, which AMRA uses, was designed for relationship database managing – for transactions with nine decimals.

“In the audits we’ve done, we’re coming up to matching 99% [of videos].”

Willard Ahdritz

On top of the integration and the content ID, for the identifier, we have ProKlaim which uses different algorithm to add another 15-20% match.

In the audits we have done [with AMRA and YouTube], we’re coming up to matching 99% [of videos].

We also do some manual [tracking] too, just to make sure we capture the last half a percent.

I’ve heard it said that some collection societies aren’t capable of processing more than 50% of the UGC song data on YouTube, with the rumour that it can be as low as 30%.

Ericsson: I’ve heard those rumours, and I’ve heard who those societies may be. That number is nowhere near what we can achieve at AMRA. The technology we’re fortunate to use here at AMRA is fantastic. Proklaim is will distinguish us a lot in the market.

Ahdritz: As I said, in a number of big audits we have done, we have been at a 99% value – with significantly lower costs [than publishers are currently paying].

Kobalt clients are going to see a single-digit cost [to income percentage] level through AMRA. And we will transparently show people [how it’s been paid]. That’s a revolution in itself.

Even Kobalt, representing our big catalouge don’t have transparency [of PRO costs] right now. Even we don’t know what’s going through the pipes.

“Kobalt clients going through Amra are going to see a single-digit cost-to-income percentage with our society. That’s a revolution in itself.”

Willard Ahdritz

We hear all of this bad-mouthing of Spotify and YouTube, all of this talk of collection societies ‘fighting for artists and writers’ – and that apparently no money’s coming out. Hmm.

Let’s talk facts. For the first time I really feel big support from the senior management of the biggest tech companies.

They want people to see they’re transparent; they want [artists and songwriters] to be paid and see the money they’re paying out. These companies are proud of telling the world what they’ve paid music rights-holders.

Isn’t it interesting that the opposite is true of those organisations who don’t want to tell us their [cost] rates?

Those who don’t want to be transparent?

They seem less proud [than YouTube] of showing us what the facts are.

With this announcement, I’m sure some of the parties you’ve just alluded to will point to your Google Ventures stake. I’ve been told that’s a 5% stake – not that I expect you to confirm it! Whatever the size of the holding, does that give you any unfair advantage with YouTube vs. other CMOs – and does it compromise Kobalt as a business at all?

Ahdritz: I just don’t see that in any way.

No.1. They are completely separate business events [the AMRA/YouTube deal and Google Ventures stake].

No.2: We are transparent with our rates and what we are paying to all of our clients. The only advantage we have is that we have invested $120m in a technology platform.

No.3: This has been my mission for 15 years, Tim. This is personal.

I look at things another way: I am proud that probably the smartest tech investor in the world thought that Kobalt is exiting, important and a force for good.

“I am extremely proud that probably the smartest tech investor in the world [Google ventures] thought kobalt was exciting and a force for good.”

Willard Ahdritz

I am extremely proud of that.

In the end, none of this matters. All it comes down to is the service we deliver – and the money we deliver. Let the market judge.

Let the artists, writers and the 600 music publishers who are already Kobalt clients judge if it is a good or bad thing that Google Ventures has invested in us.

Remember that there are a number of other significant big tech investors who have also invested in Kobalt. I understand people love to wave that flag at us to try and stir up suspicion.

But, please, let’s look at facts. Let’s look at what results we achieve for rights-holders and creators.

Also, think about it. AMRA’s first deal was with Apple Music, not Google.

Last week we saw the Victory Records fallout: they accused Spotify of not being licensed for their mechanical royalties. David Israelite, the CEO of the NMPA, said subsequently that he estimates 25% or more of the activity on interactive streaming services is not being matched properly. It’s an area of the music industry that’s very much broken. Can you fix it?

Ahdritz: We all know that there is a number of problems. If people put bad data into the system, they will get very bad outcomes back.

Where Kobalt [is allowed] to integrate with data, we are being paid on all our works.

When AMRA was announced, Willard, you suggested you wanted publishers of all sizes – including majors – to come on board. How’s your customer acquisition drive going?

Ericsson: I’m very pleased with the way we’re being approached by numerous writers. We currently have over 200 single publishing entity’s mechanical rights that we include in our license and obviously we have Kobalt too. We’re talking to everyone and there’s a lot of interest out there. Signing up a publishing entity to AMRA requires more work than a writer – we have to to get them properly [integrated] and consolidate the data.

Ahdritz: We will be back in the very near future to announce our first external client to AMRA. It will be substantial. It is truly exciting.

AMRA can’t sign with YouTube in the US just yet, but that’s where YouTube Red launched this week. What’s your impression of the new service?

Ahdritz: I haven’t used [Red] yet, but I am excited we have innovation coming into the market and the bundling of products.

I’m also excited by what we’re seeing in cable and telephone [industries] where services are being bundled, improving client satisfaction.

We all know subscription is a great business for music.Music Business Worldwide

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