Let’s not put a label on it
An important music industry deal made headlines this past month: Sony Music is acquiring AWAL from Kobalt for $430M. Kobalt is a rights management company long seen as the leading independent alternative to the major labels (Universal, Sony, Warner). AWAL, “Artists Without A Label”, is Kobalt’s subsidiary specifically focused on distribution of recorded music. The business is largely targeted to the ‘middle market’ of the artist population — a large, yet curated subset — and provides a la carte tools and services ranging from basic collections to promotion and, on occasion, funding. The company’s core selling point has always been: “unlike the big guys, we won’t touch your copyright”.
One of the common themes of our writing (and our business overall) has been observing the strive for independence across the industry: creators holding onto rights, buying back rights, negotiating deals that give them more control. As a result, the AWAL promise always resonated with us and we’ve provided capital to individual AWAL-distributed artists in the past.
What does it mean for the industry when an organization with “…Without A Label” in its name is now owned by one the three major music labels? From Sony’s perspective, the deal is shrewd, as it delivers to them a grasp on the middle market, which is likely to gradually gain share. At the same time, the deal enhances Sony’s existing indie-friendly offering The Orchard, which has gone through several restructurings in recent years.
From the perspective of the artists in the middle market, the story is less obvious. An optimist would support the corporate party line: “same, but better”. Artists distributing their music through AWAL will continue owning their copyrights and have access to existing tools, but will now have better touchpoints with Sony’s traditional labels in case the legacy model (large cash advances in exchange for rights give-up) is ever of interest.
The pessimist, on the other hand, would forecast a reduced focus on the middle- and long tails with most of Sony’s attention flowing to the top ~10–20% of AWAL’s roster. Artists in the 80–90% don’t get their calls returned, promotional services don’t get spread as widely, and the small advances that were given in the past start to dry up as the focus shifts upmarket, where it rightfully moves the needle more for the corporate parent.
The answer will not be obvious for some time and we do not think this deal is a harbinger of organizations supporting the middle market as their core sole objective throwing in the towel. However, it is hard to see how incentives and resource allocation don’t shift when an entrepreneurial $100m revenue company solely focused on the indie artist gets integrated into a $8.5bn revenue conglomerate.
