Seated in their newly reopened West Hollywood office under a portrait of rock disruptor Frank Zappa, Kobalt Music Group founder/chairman Willard Ahdritz and CEO Laurent Hubert can’t help but laugh at the irony. The two are looking back on two decades of disruption of their own — a period when, to hear them tell it, Kobalt was the only company speaking about the merits of the digital revolution within the music business, as well as the only one actively pushing for it.
“There has been resistance — I joke that I was the guy who told the wife about her husband’s mistresses,” says Ahdritz with his trademark smirk. “That’s how popular I was among the old, cigar-smoking executives.”
For the past 20 years, Ahdritz has driven and defined Kobalt. A Swede with a love of language and a propensity to piss off those who prop up the status quo, his drive to create and maintain a transparent, fair, digital-first music industry has unsettled the traditional music publishing business. And his vision, forged in the early 2000s after years as a record and publishing executive in Europe, has evolved from the left-field ideas of an industry iconoclast to conventional wisdom as the music business has been buoyed back to a period of growth by streaming revenue.
Kobalt’s influence can be measured by considering its major-label competition. Companies like Sony/ATV Music Publishing, Universal Music Publishing Group and Warner/Chappell Music have adopted many of Ahdritz’s ideas and processes in recent years, most significantly with their respective Core, Window and music client portals that provide creators with real-time access to royalty information. “Back then, nobody wanted to talk about the transparency or the business’ digital transformation except for Willard,” says Hubert, a former BMG executive who joined Kobalt in 2016, rising to CEO last year. “It was truly revolutionary, and Willard had to fight that battle at every corner to make it happen.”
In the years since, the European-based music publisher has grown into a global behemoth, attracting top stars such as The Weeknd, Lorde, Childish Gambino, Roddy Ricch, Max Martin, FINNEAS, Karol G, Andrew Watt, Stevie Nicks, Phoebe Bridgers and Paul McCartney with a range of creative and label services, including synch and brand partnerships, A&R, global administration, YouTube monetization, record release management, and digital distribution and marketing. In 2011, the company expanded to include label- and artist-services company AWAL (Artists Without A Label), followed by its Neighboring Rights division, which tracks income from broadcast recordings for over 2,000 performers; and three separate investment funds that control or administer thousands of publishing copyrights on behalf of creators. (Kobalt itself does not own music copyrights; a foundational part of its ethos is that creators should own their own rights.)
After refuting rumors of a potential sale of the entire company (at a valuation between $750 million and $1 billion) last fall, Kobalt entered into an agreement with Sony Music Entertainment in February to sell just its recorded-music operations, including AWAL and Neighboring Rights, for $430 million. (The deal closed in May and is under review by U.K. regulator the Competition and Markets Authority, which examines deals for antitrust issues.) Moving forward, the company has invested in the infrastructure of its publishing business by quadrupling the headcount of its creative and synch teams and climbing to an average of third place on Billboard’s Publishers Quarterly ranking of the top Hot 100 songs this year, thanks to its share of hits like “Peaches” by Justin Bieber, Daniel Caesar and Giveon and “Levitating” by Dua Lipa and DaBaby.
Kobalt’s other main business is its global performing rights digital collection society, AMRA (formerly known as the American Mechanical Rights Agency), which it acquired in 2015 as a digital-first alternative to the country-by-country society payment structure that previously existed in many international markets. Today, AMRA collects in over 182 countries around the world. “It was the first time that a [performing rights organization] had challenged other PROs and the norm of how things should work. We took a lot of flack for it, but we increased value,” says AMRA CEO Tomas Ericsson. “Willard used to say that 20 years from now, everything is going to be licensed directly and digital. Kobalt is positioned now to grow for the next 10 years because we have a vehicle that drives all that value.”
Kobalt’s mission remains songwriter- and artist-centric, having led the industry toward “innovation and empowerment,” says president/COO Jeannette Perez, by making terms like “transparency,” “artist-first” and “portal” standard in today’s publishing market. The company also shepherded the concept of giving creators the opportunity to “retain their copyrights,” says Sas Metcalfe, chief creative officer and Ahdritz’s first-ever hire. “I really believe we’ve changed the publishing industry,” she says. “We’ve done everything we said we would do.”
To mark their two decades in the music business, Ahdritz and Hubert discuss their continued evolution as a music-tech giant and look ahead to a metaverse future.
Why did you start Kobalt?
Ahdritz: When I started Telegram Records and Publishing [in 1986], I had global hits on the recording side, and on the publishing side, I saw how the traditional local and regional opaque systems worked, where you had no power. They were sitting on all your revenue, all your data, all your money and, sometimes, with your lawyer, too. That is how it worked. I realized that Sweden was too small of a home market for me to build a big business, so I took my MBA, I went to London, and I strategized. Online came — online banking, then Kazaa and Napster happened and the whole internet boom. When I saw that, I realized there is an opportunity now to go back and actually build [the industry] how it should be done.
And how should it be done?
Ahdritz: No. 1, by putting creators first and delivering services. They are the power in the system. I played saxophone in a band, so I knew that side and what digital and tech could do. No. 2: We needed tech to solve the issue of high-volume, low-transaction values for efficiency and to drive the costs out of the system. No. 3: I realized it needed to be centralized. You needed to have big tech that could match the big telecoms and the big [digital service providers]. You couldn’t have these local societies or local structures, because it would never work. So we had this centralized organization, supported by a technological platform to run it. Music crosses borders. That’s why at Kobalt, we all work as a team. It’s not “my artist” and “my signing.” We are here to service our global clients.
Another innovation was transparency.
Ahdritz: Today we call it “music as a service” — we introduced that, having a full stack [of services] to maximize cash flow. And that means, after we have an agreement upfront, which is very straight and clear, that we are partners. We are here to maximize your cash flow, and our interests are aligned. Today I say that we get hugs from our clients, not litigation. And that means that you keep your copyrights, and we’ve created $10 billion in value.
How did the industry first react to your business model?
Ahdritz: People thought this wouldn’t work. At the time, songwriters waited up to two years for their money and up to 50% was lost in royalty systems. If you’re a writer, that made it quite tough to become an entrepreneur and a creator. I joke that I had a revolutionary concept: “I am paying artists.” (Laughs.)
It was the beginning of the industry grappling with the digital age. Was that challenging?
Ahdritz: At that time, they didn’t even grapple with it. Up until 2015, they did everything to try to stop it, to chop off their hands and not utilize it, because they saw it as a threat to the control they had. I was the only one saying, “This is the biggest opportunity the music industry has to transform.” We had 600 million consumers buying music at the top of the CD era, and I said, “With all the technology that is rolling out in the world — we had 90% piracy at the time in Asia — if we can monetize this in a global data environment, it’s a significant opportunity to lower costs. So your rights will be worth much more in this industry.”
Hubert: What has been accelerating, especially in the past 10 years, is a shift from the major gatekeepers to the talent. That power structure has changed, and it’s continually changing — we don’t believe that we’re at the end of that transformation. When I look at music today, I compare it to water: You can’t stop it. The key is how to monetize it in a way that’s fair to all stakeholders. It hasn’t always been easy, but 20 years later, nobody’s arguing whether there should be transparency or not.
When did you realize you were making a real difference for creators?
Ahdritz: Billboard did a cover story about us in 2012 when we had 15% [of the Hot 100 chart], so sometimes you say, “Wow, this is the moment.”
In the first half of the last decade, you expanded with AMRA, AWAL and Neighboring Rights. Why was that the right move at the time?
Ahdritz: We started in publishing, because it was the most complex. It took longer than I thought because it didn’t have industry support. I tested recordings, and then we introduced label services and added AWAL. It has been very controlled. Like with artists, when people say it was a success overnight, we all know it was a success after 10,000 hours behind it, and it was the same thing with Kobalt: We needed to work and prepare and develop.
We have a half-billion-dollar publishing business and growing, AMRA is rolling out, we have 13 offices globally for creative and support, and we have one global roster. You can come from London or Berlin or Stockholm or L.A., and at any of our offices you have support. Clients love it, because you’re not signed to one guy in one office somewhere and everyone else doesn’t bother.
How did AMRA come into play?
Hubert: AMRA was, for us, fundamental. In 2015, we acquired a small mechanical collection society based in Florida and said, “We’re going to transform this to repair collections in the digital environments and bypass the collection societies.” That’s a fundamental rethinking of how the collection framework could evolve, and, again, we were the first.
Ahdritz: We introduced technology by having a centralized data system that, if you push one button, payments get sent out to over 200 societies. So by using different technologies we could improve tracking to show clients how many units were being collected on their album, which was impossible to understand on traditional publishing statements.
What’s the long-term strategy for AMRA?
Ahdritz: You’re going to read a lot about the global data society. It is brilliant. Instead of sending your terabytes of data to 200 societies, we send one global invoice from London to Stockholm, from London to Cupertino for Apple, from London to San Bruno for YouTube, from London to Shenzhen for Tencent, centrally. We cut off all those middlemen. That’s a silver bullet for global digital music consumption with full control, full matching and we are running it.
What was wrong with the old system?
Ahdritz: I couldn’t do an audit on a big collection society in Europe to find out what they were charging and what was going on under the hood. If your son came home and you asked him what he got on his math test and he said, “I’m not going to tell you,” you would assume he doesn’t have an A-plus. (Laughs.) Here, with AMRA, we have full transparency, but even our clients have the right to audit us. Transparency is a win-win. One hit today has 60 billion microtransactions globally. Before, you had 4 million radio spins, 2 million singles, 10 million albums at best. Now, you have 5,000 revenue sources, billions of transactions, and they all need to match with each unit. So it is really big data.
Hubert: That has rendered the environment far more complex, so it’s important that you have the infrastructure to harness that complexity. We’ve made sure that people see us as a destination, not only because of our core values and global infrastructure, but also because of our creative team. The message to the marketplace is, “You don’t have to compromise on anything when you come to Kobalt.” And if you look at our recognition in the marketplace, we were the 2020 music publisher of the year for ASCAP. Last week, we won the 2021 BMI award for best hip-hop/R&B publisher. So we really have an amazing creative staff and that service is on par, if not better, than our competitors.
You are in the process of selling AWAL to Sony. How do you think about music as an investment?
Hubert: AWAL’s business grew over sevenfold from early 2016 to 2020, so it made sense from a commercial, shareholder standpoint to say, “Hey, we’ve created a lot of value, now is the time to take advantage of that.”
Ahdritz: Today it’s called an “impact investment” [which is concerned with generating social and environmental returns, as well as financial]. So we were a commercial operation and I raised commercial money, because like wind, power and everything else, if you’re able to make big changes, it needs to be at a commercial level. Working in London in the ’90s, I was brought up in stakeholder rapport — that clients, employees and shareholders should benefit from everything. So we were a stakeholder company from day one. The deal was the best way to move forward, to recoup the business and also to maximize what we can do. We are in a very good place. We are profitable, we have a lot of cash, and we have a lot of interest in Kobalt. I have extremely patient long-term investors.
What other business sectors are you exploring?
Ahdritz: There’s a lot of innovation around new wellness and fitness sectors, which could be 10% of total income for us in three or four years and will be very important for the music industry. There’s also the metaverse [the concept of a future iteration of the internet comprising shared, 3D virtual spaces]. I told a guy yesterday: “Even if you’re in the metaverse, if you stand on Mother Earth, you will still need to license The Weeknd’s copyrights from us.” (Laughs.) You can’t claim that you’re somewhere else, because I see you!
Publishing and song catalog sales have been music’s hottest topic in recent years. What opportunities do you see in that sector?
Hubert: We see significant growth in the business. Three years ago, digital was 35% of publishing revenue, and now it’s at 57.5%.
Ahdritz: When you think of songwriters and producers and the marriage of sharing and [non-fungible tokens] and the relationship between music and gaming, it’s very exciting on a global level. We collect everywhere, so now we need to have our virtual metaverse, our avatar, of Kobalt saying, “We are here to collect.” (Laughs.)
What other music trends are you keeping an eye on looking ahead?
Hubert: There’s an opportunity to build more of our business around creating a marketplace, to engage more intensely with our writers. That’s what [cloud-based music creation and collaboration platform] Splice is doing. We watch a lot of companies in the technology space. Another one is mood music or meditation music. Music is no longer just for your entertainment. It can be there for your health or prescribed as a therapy.
Ahdritz: Before, the music industry had 2,000 artists and maybe 500 writers on average, and today we have a middle class, and what I’ve talked about before as the democratization of music, not the long tail of where grandma is my only fan, but the real middle. You have an industry of a million professional producers, bands and musicians that needs to be served. And in the digital environment it’s significantly easier to monetize music, rather than with CDs and the radio. It’s inside of Fortnite or your health app or Peloton subscription model. It will be easier to monetize music, because it’s suddenly bundled together with something you do. Before, you went to the gym and they played a CD. Now, music is bundled in your bicycle at home. And we are here to support that. It’s an exciting time for music. It’s clear now how important it is to go to a local gig with your friends, enjoy music and be alive. I’m happy for the fans to be able to get more and better music. I’m pleased for the whole ecosystem.
You operate at the intersection of music and technology. What has your relationship been like with Silicon Valley?
Ahdritz: We were, and are, the only trusted brand both in San Francisco and in Hollywood. When I went out there, I said, “You can’t demand $2 per YouTube stream. I’m making more money monetizing content, and it doesn’t cannibalize my product.” I had a lot of bad calls after that. But I said, “We need to embrace them,” and that meant building a relationship that made it easier to collaborate and for AMRA to collect the Kobalt catalog. We’re a trusted brand sitting with the biggest tech players in the world who see us as a tech company because we talk the same language and can handle big data. We understand where they are coming from and, at the same time, can sit and talk with the biggest creators in the world and help them with their creative work. I am very proud that we have that position. It’s extremely powerful that we can sit at that table, for our clients and for Kobalt.
Something To Talk About
Kobalt’s music creator clients share what makes the publisher stand out most.
Madison Beer, artist: “Kobalt is so passionate and aligned with my vision as an artist and my creative process.”
Gary Go, artist-songwriter-producer (Rihanna, Skrillex): “As a songwriter and independent publisher, the Kobalt app is a dream utility. If I could only have one app on my phone it would be email, but if I could have two, the second would be the Kobalt app.”
Dean Lewis, artist-songwriter: “Kobalt has been such a massive supporter of mine since the very start. From the early synchs on ‘Waves,’ the team has been so instrumental in helping get my music out to the world.”
Paul McCartney, artist-songwriter: “Three big cheers to Kobalt on being the best publisher in the business.”
Issa Rae, actress-writer-producer; Owner, Raedio Publishing: “Kobalt is the perfect partner to work for Raedio’s publishing division. Their transparency with songwriters, producers and artists is helpful as we build out our music library and work with emerging talent across all platforms where music exists.”
Roddy Ricch, rapper-singer-songwriter-producer: “I respect everything Kobalt has been doing with their artists that they’ve signed. Most importantly they had a genuine interest and support of me as an artist and my vision, which made the decision easy.”
Teddy Walton, songwriter-producer-DJ: “You can’t stand out by trying to fit in and that’s why I love Kobalt. I have the freedom to do whatever I want creatively, and they are supportive of it. Because my business is taken care of, mentally, I am free, too. I want my music to be a breath of fresh air and show my vision for the future. Kobalt understands that.”
A Timeline Of Industry Firsts
Behind the groundbreaking moves that helped push the industry toward the future.
2001: Kobalt offered the first full-service deals — encompassing categories of A&R, synch and administration — for its music creator clients. To further differentiate itself, the company also offered writers the ability to keep 100% ownership of their songs.
2002: Kobalt became the first platform to collect and register directly in all major markets on behalf of its music creator clients, eliminating intercompany subpublisher charges.
2002: Kobalt launched the first-ever online portal giving statements and royalty analysis for every writer, allowing clients to track and access their individual incomes and manage their rights and royalties directly.
2008: The publisher’s portal evolved to become the first to offer online advances, show global registration status and counterclaim data, flexible royalty analysis and a live pipeline of synch activity.
2010: Kobalt became the first (and still only, a decade later) nonmajor publisher to have greater than 10% of the market share in the United States and the United Kingdom.
2011: Kobalt created the first regulated music fund with Kobalt Music Capital, which has gone on to invest over $1 billion.
2013: The company developed the first portal to show an activity feed of global catalog events, YouTube user-generated-content video earnings and viewing data, global chart positions and videos of global licensed synch commercials.
2013: Kobalt’s Neighboring Rights service became the first to directly collect in all major markets.
2013: Kobalt is named the inaugural winner of the publisher administrator of the year honor at ASCAP’s annual Pop Awards.
2015: Kobalt launched the first mobile app showing all portal data, giving creators quick access to financial and consumption information.
2015: Kobalt became the first publisher to offer global direct collection from digital sources with the relaunch of AMRA, which today operates in China, Brazil and Japan, among other markets.
2017: Kobalt developed the first recordings app to visualize streaming data and revenue for AWAL artists.