Kobalt Tunes Into $60M Led By Google Ventures For Its Music Rights Collection Platform

Next Story

Grofers, An On-Demand Delivery Service For Indian Cities, Raises $10M From Sequoia And Tiger Global

The rise of digital music services has had some musicians up in arms over the way (and how much) they are paid. Now a startup that has built a better way to track this is stepping up its role in the game. Kobalt — which has developed platform to help music rights holders collect royalties more efficiently from across different digital music services — has raised a $60 million Series C round led by Google Ventures. Willard Ahdritz, Kobalt’s Swedish founder and CEO, says the funding will be used “to scale the organization, double the tech team to increase our speed”, as well as some “traditional expansion” — opening two new offices in Miami and Brazil to target Latin America, and opening an office in South East Asia.

Ahdritz tells me that Kobalt, which has offices in London and New York, has not been short of funding offers in the last year, pointing out that the company’s business mission has been getting easier to understand because of the many high-profile scuffles that we’ve seen in the industry.

On the artists’ side, musicians like Taylor Swift and Thom Yorke have been outspoken and active about how they feel about streaming services like Spotify. On the side of streaming companies, the agreements that they strike with labels also underscore the challenges that both parties have in working out the economics of these services, even as they continue to grow in popularity.

“I am pleased that artists like Taylor Swift really started the discussion asking where is the money and why are artists not getting paid, and what’s wrong with the system?” he says. “It’s a discussion I’ve been waiting for 14 years to happen.”

Along with Google Ventures, previous investors MSD Capital — the private investment firm of Michael Dell — is also participating. It brings the total of equity raised by Kobalt to $126 million, and this sits alongside a further $153 million that the company has raised to help finance a second strand of its business — label services where Kobalt either buys part or all of an artists’ rights to help collect royalties on their behalf. The company has invested some $100 million of that fund to date.

He says that this publishing side of the business is profitable. Overall, the company has been growing revenues at a rate of 40% annually for the last four years, and is projecting gross annual revenues of $260 million for the end of June 2015. “It’s really starting to kick in,” he says.

Kobalt’s funding comes at a key time for the digital music industry. As Apple revamps its own music services after the Beats acquisition, others like Google are moving aggressively into building out their own offerings. And standalone startups like Spotify continue to get bigger. But while there has been some consolidation, the number of places where a song may be streamed — from social media sites like Twitter through to other, smaller streaming services like Tidal (which is getting acquired by Jay-Z) — remains a wide and often messy field.

This is where Kobalt comes in: the company is basically a big-data music analytics play. It has built a platform and music tagging system that reaches across services like YouTube, Spotify, Soundcloud and thousands more to track when songs are played, using that data to figure out how much a particular artist or label is owed as a result. It provides the data on a dashboard along with other analytics, and then makes regular payouts to those rights holders based on those numbers. (We’ve covered the kind of data that Kobalt collects before — it has been very revealing of the shift to streaming services versus downloads.)

Kobalt says more than 8,000 songwriters and over 500 publishing companies use its platform today, with about 40% of the top 100 songs and albums in the U.S. and UK represented among them, with artists including Beck, Dr. Luke, Foo Fighters, Kelly Clarkson, Maroon 5, Max Martin, Paul McCartney, Pitbull, Ryan Tedder, Sam Smith and Skrillex.) It says its music tracking today covers 400 million people, and the aim is to expand that to additional streaming services to cover 1.5 billion people in the next six months.

The decision to go with Google Ventures as the lead investor here is an interesting one, given Google’s own skin in the music game. For its part, Google Ventures was attracted by the fact that Kobalt is not actually a spring chicken: it’s been building its business for a decade.

 “The music industry is going through dynamic changes all around the world, and Kobalt will be instrumental in shaping its future positively for all constituents, starting with artists,” said Bill Maris, Managing Partner at Google Ventures, in a statement. “The company’s solid execution over the past decade coupled with Willard’s unwavering passion and commitment made this an attractive investment for us. Kobalt’s commitment to trust, transparency and technology has positioned it as one of the most innovative brands in media today.”

For Michael Dell, this is about making a financial as well as strategic investment. “I am excited about MSD Capital’s investment into Kobalt and by the opportunity that Kobalt has ahead of it to make the music industry more transparent and efficient,” he said in a statement. “I am also pleased to have Dell Inc. continuing to support the company as its preferred technology partner, providing the hardware infrastructure and the knowledge, services and support that Kobalt needs to achieve its goals.”

Ahdritz is staying mum for now on Kobalt’s valuation, except to say that “it’s a step up” from the $250 million that the company was valued at in 2013.

Nor is he willing to talk about where Kobalt will cut deals in the future. Ahdritz mentions that there are close to 700,000 places where a track might get played today, so the field for potential targets is pretty big. “In the spring, we will announce more global integrations with different services,” he says, noting that the label deals with large streaming services is really only part of the battle won. “When people have sorted licensing they will hit a new brick wall: how will people get paid?”