Here at Observer Music, we’re fascinated with the increasing role that technology plays in transforming models of distribution and consumption. We believe that the internet should be open, with best practices toward using it as a tool for promotion and entrepreneurship clearly explained and available for anyone and everyone to understand.
When it comes to music, advocating for an open internet means understanding how algorithms work on social media platforms and how incentivized tiers of promotion all too often leave independent artists in the dust.
How to make this constantly evolving digital economy profitable seems even further out of reach, when payment percentages and revenue shares are far from transparent, and consistently disadvantage the creative class. It’s a problem the music industry has had, in some form or another, since its inception, and technology isn’t making it any easier.
That may be what fascinates me so much about Stem, a service that streamlines payment breakdowns so recording artists, writers producers, labels, publishers, and anyone else with a hand in the creation of a work can see the same report of who’s earning what, in an easy-to-read, digestible interface.
I met Stem co-founders Milana Rabkin and Jovin Cronin-Wilesmith in the lobby of The Bowery Hotel to learn how they got started, what Stem’s transparency looks like, and why they’re hellbent on giving artists the tools to make their own business decisions.
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Milana Rabkin: We’ll send you our names.
How did you know?
Milana: Because I can’t even spell Jovin’s name without confirming the spelling. [Laughs]
How did you guys meet?
Milana: On Tinder.
Really?
Milana: No! [Laughs]
“[W]hen you’re dealing with high-caliber talent, they all expect to be paid on the backend, and yet there was no easy way to share revenue with success on the internet.”—Milana Rabkin
Jovin Cronin-Wilesmith: So our other co-founder who’s not here, Tim [Luckow] and I were old college roommates, and we worked around the music scene in Boston. I went to Northeastern, he went to Berklee College of Music. We were all part of this tight-knit scene. He founded a company called GHouse and it had all these great rock-focused bands, some electronic as well, and we all used to get together at this huge house in Allston called Wadzilla [Mansion]. We would spend our weekends there and have these basement shows. Tim actually booked a show that was so big, all the local venues complained and the city had to shut the place down, obviously this place wasn’t permitted. He was putting several hundred people in this tiny basement.
Do you remember any of the bands?
Jovin: Bad Rabbits was the biggest one. We were doing that and we stayed friends, I was still in school and he’d moved to San Francisco to work on a project, and from there, it spun from this great vision he had of what he wanted to do in the music space. He wanted to provide analytics to the artist. While we were working together, one of his big frustrations was that he had a distribution deal through The Orchard, but they only gave him one login. And you obviously can’t share that with the artist.
So he moved to San Francisco, went to work with Shawn Fanning from Napster on that idea, that was called Destroyer. Meanwhile, Milana was doing her thing and they were introduced. But Tim had moved back to Brooklyn and I was here, working at a software company. He said he was working on this idea, and at the time I didn’t have any side projects. I’m kind of a serial entrepreneur, but I’d taken a break to join a big software company.
Milana: When I was at United Talent Agency the mandate they gave me was that technology is going to change this business, but it’s not going to replace the role of an agent. We wanted to help identify these new platforms for funding and distributing content, and make sure that our clients know how to use them so they can tell better stories more independently. So that was my mandate, and I helped oversee the growth of this department that became, I think it’s now 22 people, and oversaw the practice of managing online talent that emerged from YouTube and Soundcloud, helping them transition into other verticals, but also help to work with our existing big clients when they wanted to leave the traditional way of doing things and do things independently.
So for example, when Rob Thomas, the creator of that series Veronica Mars, decided he wanted to turn it into a movie, I worked with him to bring him together with Kickstarter to crowdfund it.
How did your interests merge into music?
Milana: So, my clients started coming to me saying, “I want to self-distribute this,” and the problem I started witnessing was that we know content is going to get distributed, there’s so many sources you can use across all verticals—music, video, film, et cetera—it’s gonna make money if you market it directly to fans. But when you’re dealing with high-caliber talent, they all expect to be paid on the backend, and yet there was no easy way to share revenue with success on the Internet.
So if you wanted to [work with] music, which I did—I had a lot of YouTube stars making original songs—and we used software to distribute the content. They were collaborating with other artists and producers for a rev share, because they couldn’t pay them for studio fees, they didn’t have record deals.
And this one scenario happened time and time over again where we’d release a song, get money three months later, about 20 thousand dollars, I call the parent and say, “Hey, money came in, how do we withdraw it? Can you call the lawyers and get a copy of this budget? I don’t remember what we agreed to pay everyone else. By the way, does this money come in every month and do I have to pay these people every month?” The answer was yes, yes, yes, let’s go figure this out.
“Nobody else cares about protecting the integrity or the interests of the artist. All other services exist to service the labels or service distributors, and no one’s created financial tools that are artist first. That’s what we want to be.”—Milana Rabkin
After doing this a couple of times I wondered, “why isn’t there an app for this, that can plug into all major platforms, collect revenue from them, and pay out all the rights holders based on their pre-determined splits?” And as I was thinking about this I started conversations with my contacts at Spotify, Soundcloud and YouTube, and every time I would pitch them this idea they would say, “Have you heard of Tim Luckow?”
So for about a year, Tim and I had heard about each other through mutual friends who kept saying we should meet. When we finally connected on email ,we went out to New York, had a six-hour brunch and I knew that he was the one. Then a couple of days later he introduced me to Jovin who locked it in, we just locked arms and started putting the pieces together.
The main concern that I have is a question of how it works to protect this vulnerable information. You’re not selling this data, right? How do you protect the client experience?
Milana: We really don’t have an interest in doing that right now, it’s something that comes up in every conversation with every big client. We have two legal teams that represent Stem. One is our traditional tech legal firm that handles all of our fundraising, company formation, and they take the first stab at drafting up our Terms of Service. And then we have another legal team, which is a traditional music legal firm, and we send over the Terms of Service to them, then they mark it up from the point of view of the artist. They also represent everyone from Gwen Stefani to will.i.am. In the most recent version, when we started working with Deadmau5, his lawyer said he needed to see our Terms of Service because privacy was the most important thing to Joel. So they looked at it, gave us some really good feedback, and amended it to account for their needs.
Everything we do comes from the point of view of, “What’s the best thing for the artists we work with?” And that’s the most important thing for us. Nobody else cares about protecting the integrity or the interests of the artist. All other services exist to service the labels or service distributors, and no one’s created financial tools that are artist first. That’s what we want to be.
My whole thing about being a freelance journalist is that I’m still a “content creator” in the large scheme of things. So there’s this empathy that happens when I talk to independent bands who are working with all their own shit, signing their own contracts, booking their own shows. The content creator is often at the bottom of the totem pole, and we’re also the expendable ones when the floodwaters rise, we’re the first to drown. Transparency doesn’t benefit that hierarchy.
So on the one hand, I see the benefit to an app like Stem for a platform like Spotify or Soundcloud to where they can say, “Hey look, everything is spelled out right here and on the level.” But it can hurt them too, because it creates a sense of competition. If I have everything laid out cleanly in front of me and I can see some rates are shittier than others, or that there is some hiccup they’re accountable for, all of a sudden it’s all out in the open. There’s a culpability the platform has to take on if they use your service.
“A producer sees all the same data as the featured artist, and if there’s a label involved, everyone sees who’s taking what out of the pie. Therefore they can make more informed decisions [as to] whether or not relationships make sense.”—Milana Rabkin
Milana: Yeah, the platforms are all competing in different ways, right? So yes, everyone’s trying to compete to offer the best rate, and today artists have no idea what that looks like because there’s so much of the pie taken out before they even see the data. Most of the time, they don’t get that data directly, and that data isn’t given to them in a digestible manner.
So that’s our first focus, to make the data digestible. What we’ve seen that’s really interesting is, different types of artists perform better on certain platforms than others. So that data actually looks different depending on the type of artist you are and they type of content you’re producing. The most important thing for us is to create a leveled playing ground where everyone has the ability to look at the same data if they’re working on the same project, and make their decisions from there.
So a producer sees all the same data as the featured artist, and if there’s a label involved, everyone sees who’s taking what out of the pie. Therefore they can make more informed decisions [as to] whether or not relationships make sense.
[Milana leads me through a demo of Stem]
Milana: So this is the “At A Glance” view—they see earnings on the platform, and see last month’s gross earnings, this is actually what we receive from all the services in aggregate. This is net, so after we take our 5 percent fee, and that’s all we’re taking right now, we show them [their] share based on their percentage of ownership or participation on the content they’re associated with.
Who on the service platform end of the spectrum is accountable for submitting all of this?
Milana: We actually do that. They send us massive CSV reports on a monthly basis.
Jovin: Yeah, we basically created this whole transactional layer that normalizes all the information into our unique format, which is very revenue specific.
So it’s an algorithm that takes these spreadsheets and normalizes them.
Jovin: Yeah. We have our own unique view, which makes up the pieces of all the platforms.
Milana: So we get this big, massive CSV reports that represent the consumption of all the various services across the world, how the content’s performed, and we built a data ingestion tool that can put them into this format.
“We want to be a financial solution for the whole entire creative class.”—Milana Rabkin
How is this profitable? Since you’re working with artists much of the time, do you charge a monthly service?
Milana: No, we believe that distribution should be free, and what we’re providing is a service at the administration layer. So with splitting of the revenue we think of ourselves as a payment solution, which is really what we are. We want to be a financial solution for the whole entire creative class, so thinking further down the line, what we’d love to do is integrate with the major publications.
We’re in this age of accelerating media consumption, and tech plays a large part in that. There’s plenty of people advocating for more open internet, for more open systems of technological exchange, which this falls right in lockstep with. I hear you when you say that streaming can be profitable, but I also think a service like this will clearly illustrate the disproportionate rates of revenue Spotify accrues from an artist deal compared to the artist themselves.
Milana: Well, let’s move down and see what that looks like? It’s bucketed into ad-supported, subscription-based and digital sales, and you can see revenue compared to units moved. So you can see it’s roughly the same amount of units, and you can see the gap in the revenue here between all the ad-supported models compared to all the subscription services. But every service has all of these business models, right?
So it’s not broken down by services?
Milana: Down here it is. Here we show you again, the aggregated streams versus downloads, month over month. But you can click over and see it based on platforms as well. So you can see the difference between iTunes, iTunes Match, Apple (AAPL) Music and Beats, even. They’re all differently color-coated. You can also compare it to Tidal and Spotify.
So this view is net revenue, not revenue specific to the payout of the individual?
Milana: In this view, it is.
Jovin: After about a year of feedback people said, “Thanks for showing us gross, but really we just care about what we made.” If you drill into detailed views of those specific pieces of content you’ll be able to access your gross earnings.
Milana: So this is across all content, across all platforms. We show you by pieces of content, so you can see the trend views based on when you release the content, see at what moment in time what performed better. You can sort it by earnings, by streams or by downloads. And then down here is more of a list view. We separate the revenue from the master recording, which is the sound recording, from the publishing, which is the composition.
There’s this evergreen conflict between publishers and performers about terrestrial radio royalties in our country, how a singer like Aretha Franklin will make nothing when “Respect” comes on the radio.
Milana: My hypothesis is that back in the day, it would be nearly impossible to track plays on the radio, and you couldn’t trust those people to report because they didn’t have an incentive to. Their incentive was to report less because they were getting paid under the table through payola to play certain music. Today, there’s a digital footprint of everything, and so I think if they wanted to change the law it would be much easier to do it today, because you can actually track the amounts on things that are being broadcasted. I think performance rights associations have enough data points, too many to digest to account more accurately, and that’s one of the things that we want to build.
We want to make our technology available for everyone to use. Really, what we’ve done is built a massive data processing system and an easy way to make it digestible, legible and actionable. So here you can see the splits, who’s taking what percentage. The manager is acting as producer here.
And there’s no way to make this invisible? You mentioned leveling the playing field earlier.
Milana: Nope. When you add content—
I’ve gotta interrupt you, because “content” is a stigmatized word around artists. When the word gets applied to the creative work, it’s a neutralizer. And this is something that comes up often when I talk to writers. They’re worried—worried that their work is becoming content slurry. And in the last few years, the top media companies have become the top tech companies—Google, Apple and Amazon have strong platforms that are decimating old markets. So there need to be tools for artists to ride that wave and not get lost in the noise.
“Artists have this perception that they’re crazy people who shouldn’t be thinking about money, right? They’re totally capable of making business decisions when you give them the information.”—Milana Rabkin
Milana: Or just have a more direct feed to the data so they can be informed, and make smarter decisions about who they partner with and how. In my belief, not all labels are bad and not all artists can do it on their own. What we want to do is facilitate the ability for artists to walk into a relationship informed, and stay informed throughout the course of their relationship.
What does educating an artist with the data look like?
Milana: A great part of it is making yourself available when they have questions, right? So they can chat us live in the app, and at this point, they know us by name.
A single point of contact.
Milana: A single point of contact, and they ask us questions. We’ve built a relationship with them to where they say, “Hey, can you help me interpret this data? I’m trying to decide which platform to promote my content on next. What’s the best next step for me?” Sometimes we get introduced to artists because they start working with a label, or do a single with them, and the next record they put out on their own.
They ask us to help them think through the pros and cons, and we want to be totally agnostic, but, at the same time, these artists see the data and understand the label’s providing them great value. They think that’s a fair exchange because they’re providing them promotional power, helping them to fund some of the content around it like music videos, and that relationship makes sense. When it doesn’t make sense, we try not to get involved in any capacity, but we don’t have to because the data’s right there. They’re all looking at the same data. It’s amazing how highly functional a relationship can be between all the parties when they’re looking at the same dashboard.
Artists have this perception that they’re crazy people who shouldn’t be thinking about money, right? They’re totally capable of making business decisions when you give them the information.
Also, they need to. The economy has changed, and in the same vein, I have to know how to promote my own work once its published.
Milana: But if you tell an artist to come up with a music video idea, they’ll come up with something that’s a $50,000 budget, and as the manager you have to talk them down to something they can actually afford to make. But when you show them their music’s only making four or five thousand a month, they’re not gonna wanna spend $10,000 on a music video.
Jovin: The insights from the data dictate the decisions. The data itself is cumbersome and tells you absolutely nothing, because a good artist will have millions of data points each month. But when someone extracts the insights from it and tells you your data is trending in this direction or you’re doing this on this platform, then you’re like, “I can take action!” It’s really interesting to see how decision making can occur faster.
Milana: Because the feedback loop is faster, too.
Frank Ocean’s your bellwether, because he one-upped the man with the rollout strategy for his last two albums. When we talk about new models, we can all agree that stuff’s broken, and it’s an evergreen I’m sick of reading.
Milana: The most exciting thing we’ve witnessed with someone like Frank is the freedom he feels to create content and release it at his own cadence. So he waited four years to release Blonde and last week released “Chanel”…we don’t know for sure, but my hypothesis is there’ll be a lot more singles coming out from him.
He doesn’t have to wait for all the ducks to fall into a row, and can master the rollout more independently.
Milana: Exactly, and smaller, developing artists also have the freedom to make more money if they choose, because they know what a song can make them based on their existing audience. If I’m low on money, [I can] go make more music. Or take the money I’ve made from that content, produce a music video on my own, and create more content to promote yourself.
Up until this point, that data’s always been based on instinct and emotion, not on actual data, because it hasn’t been presented to them in a way they can understand. And that’s the most interesting shift that we’re seeing in the user behavior. One of the most frustrating things during my time as an agent was asking an artist to tweet about their content to make more sales, and they hated doing it because they felt like they were over-saturating their fanbase by self-promoting.
But now they can actually see what the [return on investment] looks like from a tweet. If I tweet about my single on iTunes, here’s how many downloads it will drive, here’s how much money it makes me. Artists are becoming smarter about how they point their fans to certain platforms, and how they use their social capital.
“All of us are doing this because we’ve watched our friends struggle, and each of us at the company have a person and a reason in mind for why we’re building this. It makes us much closer to the problem.”—Milana Rabkin
You take care of everything, I upload a track through you?
Jovin: Distribution is the vehicle to get financial data.
Milana: So we handle it end to end.
Your “why” for doing this checks out.
Milana: All of us are doing this because we’ve watched our friends struggle, and each of us at the company have a person and a reason in mind for why we’re building this. It makes us much closer to the problem.
Jovin: My goal, in the very short term, was that by the end of the year, I wanted to pay my best friend’s rent. Now I’m doing it. It was a clear, tangible goal, they make the great content, and pay their rent.
What’s proprietary about this? How do you protect it and keep it special?
Milana: The platforms have a limited number of partners that they’re willing to give access to. I think our ability to stay ahead of the curve and anticipate the user experience on behalf of the artist gives us a huge competitive advantage. We’re uniquely positioned to build a better product for the user because we’re so close to it. It’s this rare combination of understanding the business that we’re in and the users while having the technical chops and the right team to be able to put it together.
Do you have any competitors?
Milana: Not on the consensus-based model. There are a number of tools you can use to distribute your content, but you can’t pick the platforms, change the release date…
Kind of a scheduling tool.
Milana: Exactly.
Are you working to target the kid with the tracks who’s recording in his parent’s basement?
Milana: We’re not really targeting the longtail. We’re looking to work with people who have more infrastructure in place, and the big problem we solve is because a lot the young artists we work with are actually collaborating with more established writers and producers, and they have to pay them.
The reason someone like Chance The Rapper doesn’t sell downloads is not because he doesn’t want to, it’s probably because if he sells downloads, it will be on him to pay the mechanical royalty to all the writers, producers and their publishers. For him it would just be burdensome to handle. But with Stem, we’d handle that for him, if he were to use it.
