Kobalt, the London-based startup that has built big-data technology to track and collect digital music royalties from across multiple streaming platforms, is turning up the volume on its business. The company has quietly acquired and redesigned one of the main collection agencies in the U.S. — the American Mechanical Rights Agency.
The new organization — which was “small and profitable” prior to acquisition, CEO Will Ahdritz tells TechCrunch — will collect royalties directly on behalf of artists, now under a slightly new title — the American Music Rights Association. And despite its geographically specific name, the AMRA, using Kobalt’s “KORE” technology, will have a global remit to work across multiple markets to track plays across the disparate long tail of streaming platforms and other sources that may use digital music, which Kobalt (possibly generously) estimates to number at 900,000.
The exact terms of the acquisition, which Kobalt says closed last year, are not being disclosed. The acquisition makes use of some $116 million that the startup has raised in venture funding, most recently a $60 million round led by Google Ventures earlier this year — the first investment made out of GV’s new London-based outpost. Other investors include Michael Dell’s fund and Balderton Capital.
Kobalt says that there will be two parts to AMRA’s services going forward: licensing AMRA publisher members’ Anglo-American repertoire to streaming companies across multiple territories; and collecting the writers’ share of public performance monies on behalf of AMRA writer members.
While it’s expanding AMRA’s remit for licensing to cover multinational streaming operations (which include the likes of YouTube, Spotify, Deezer and many others that work in more than one country), Kobalt notes that single territory digital music services “will continue to be licensed by the local collection societies.”
Kobalt was created out of the observation that a lot of royalty collections on streaming platforms were being done in an inefficient way — money was being left on the table, and what was being tracked was too expensive and inaccurate, and took too long to process.
Kobalt collects royalties for some 8,000 of artists directly, including Paul McCartney, Dave Grohl, Maroon 5 and Skrillex, as well as some 500 larger publishing groups like Disney and this deal from last week covering TV and film projects from IM Global. Its IP ownership, through its own profitable publishing operation, includes artists like Steve Winwood. All together, today Kobalt oversees rights for hundreds of thousands of songs, including “45 of the world’s top 100 albums,” Ahdritz says.
The business has been growing at a rate of about 40 percent annually, the company says, and the AMRA acquisition will essentially boost that. Indeed, perhaps most significantly, tying up with the AMRA gives Kobalt a wider platform to implement its collection technology.
Like much of the digital music industry, Kobalt operates on economies of scale, and so the more data it can process and collect its collection-agency-busting 10% fee, the better its returns on its business. There is a need for that platform to scale up: the New York Times points out that in the year to June 2014, Kobalt had a net loss of $19 million on revenues of $203 million, with its publishing division profitable ($3.9 million for the year) but other operations losing money.
Ahdritz explains that the $19 million worked out to $9 million negative Ebitda, but substantial non-cash items like options, withholding tax, foreign exchange and depreciations grew that to a net $19 million loss. “We are very well capitalized,” he said in reference to the company’s own financial position now.”With AMRA, we are now able to fully execute our original Kobalt vision of trust and technology for creators and rights owners on a global scale,” Ahdritz said in a statement. “AMRA allows us to offer service unlike anything ever seen before in royalty collections. The industry can no longer afford to spend $5 collecting $1 – the efficiency and transparency of AMRA is the future.”
On the other side of the coin, the AMRA had a bedrock of business prior to Kobalt and so the pair are looking to make clear that there are no conflicts of interest between Kobalt as a publisher and the AMRA as a collection society, since the AMRA wants to continue to attract other publishers to work with, too. The group has called on PWC to audit the business and suggest ways of ringfencing certain operations to keep things transparent.