Kobalt raises new $75m funding round led by Hearst Entertainment


Music company Kobalt has raised its biggest round of funding yet: $75m, in a round led by media firm Hearst Entertainment.

The new funding follows a $60m Series C round in February 2015 led by Google Ventures, as well as a Series B round of $40m in 2013 and a $16m Series A round in 2008. Kobalt has thus raised $191m in funding over the last nine years.

Previous investors Balderton Capital and MSD Capital also chipped in to the latest round, but Hearst is a new backer. Kobalt joins BuzzFeed, Vice Media and AwesomenessTV in the media giant’s investments. According to the Financial Times, the round values Kobalt at $775m.

“We are excited to welcome Hearst as a new investor in Kobalt. They share our passion for making sure creators are paid and fully informed,” said Kobalt CEO Willard Ahdritz in a statement.

“Hearst is a prominent content owner with exciting investments in new forms of entertainment for the next generation of consumers. We welcome them on the board of Kobalt.”

For its part, Hearst Entertainment’s president Neeraj Khemlani hailed Kobalt’s impact so far through its publishing, rights-management and label services arms.

“The music industry is growing revenue again and it’s due to the meteoric rise of music streaming on services like Spotify, Apple, Google, Amazon and Pandora,” he said. “Willard has brilliantly positioned Kobalt to be an important company at the centre of this booming industry.”

Google Ventures did not participate in the latest round. Its managing partner Bill Maris, who played a key role in leading the 2015 investment, left GV in August 2016, and is reportedly now focusing on a new fund to invest in biotech and healthcare startups.

The $191m of lifetime investment makes Kobalt one of the most well-funded independent companies in the music industry, although the injection of new funds is unlikely to stem grumblings from some of its rivals in the publishing sector about the company’s lack of profitability.

In the last five years, Kobalt has seen its annual revenues grow from $77.7m in the financial year ended 30 June 2012 to $259.9m in the year ended 30 June 2016.

However, it has remained in the red during that period, recording total net losses of $73.6m across those five years, peaking at a net loss of $27m in the year ended 30 June 2015, before narrowing to $19.5m the following year.

Kobalt financials

Kobalt has always maintained that it is as much a technology company as a music company, where sustained losses in the pursuit of growth are much less of a talking point – at least while the investment dollars are still flowing.

“We don’t see them as a music industry company. We look at them as a technology company – but it happens to be in the music industry,” Bill Maris told Music Ally in February 2015 at the time of that Series C investment.

“We are on target to double our revenue again in the next two years. I expect to be a half-billion dollar business in [FY 2017] in revenue terms,” Ahdritz told MBW in April 2016, while also claiming that Kobalt was on course to break even in the same time period.

As for what the company plans to do with its latest $75m of funding, Kobalt said in its announcement today that it will “use the new funding to further scale its unique royalty collections platform to meet the demands of the global surge in music streaming”.

However, the Financial Times claims that the funding will also “fuel its expansion into online video”, quoting Ahdritz as promising a dedicated product within a year as a “natural expansion” of Kobalt’s technology.

“Are we interested in video? Yes. YouTube, Vevo, Facebook even Spotify is looking at video content,” he told the FT.

Stuart Dredge

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