“You can choose to grow one copyright at a time. That’s going to take a really, really long time. We went to look for solutions that would help us scale more quickly. And what drove that was really find likeminded people, find people with whom you have shared values… with whom you have a vision that really comes together as far as the growth and what you want to see. And do partnerships that way.”
Golnar Khosrowshahi is the founder and CEO of Reservoir, one of the most interesting companies sitting at the intersection of previously-siloed music industry sectors like publishing, management and master recordings.
She was also the keynote for the publishing and rights track at NY:LON Connect, the music industry conference that Music Ally co-runs with the Music Business Association (Music Biz), in New York. Khosrowshahi was interviewed on-stage by Helena Kosinski, VP of global, Nielsen Music / MRC Data.
The conversation began by looking back at Reservoir’s acquisition of the music publishing assets of TVT Music Enterprises a decade ago, in 2010. “Catalogues filled not with album cuts so much, but with great songs. It confirmed for us that we had to go after assets like that,” she said.
The deal took place at a time of “doom and gloom” within the music industry. “We were buying things in that state, and the reason for that was it was really to mitigate our risk, in the sense that if this industry was really going to go belly-up, at least we would be holding a bag of great music, as opposed to not-so-great music!”
Two years later, Reservoir acquired British publisher Reverb Music, which gave it a European footprint, more than 30,000 copyrights, and a larger stable of active songwriters. “To put these things together separately would have been a huge effort with a ton of risk,” she said.
A similar logic underpinned Reservoir’s decision to acquire a stake in British management firm Big Life Management in 2017, rather than to hire managers and take on artist clients one at a time. “This was a way for us to get into the business with high-quality people and likeminded people, so that worked out,” she said. Opening an office in Nashville and acquiring Chrysalis Records and Blue Raincoat – its entry into the recordings business – have since followed.
Much of Khosrowshahi’s keynote involved looking to the future, in an industry where Reservoir is collecting money every day from more than 450 different sources.
“Hopefully technology will make that process a lot more efficient, and I really do think that over the course of probably the next 3-5 years, that those systems will be a lot more efficient,” she said.
“I think people think it’s going to happen sooner. The challenge there is that in our business, everybody needs to play ball in order for this tech to work. A song has so many different rightsholders, so in order for information to be perfect, everybody needs to participate. That’s certainly a challenge that needs to be overcome, and hopefully when it is overcome it can accelerate this process a little bit.”
Khosrowshahi was keen to analyse Reservoir’s growth not just in terms of catalogue and rights, but in terms of its creative services.
“Tech can replace a lot of things. It can help you create licensing opportunities. sync opportunities. Tech can help you collect better. Tech cannot tell you as a songwriter what room you should be in, the trajectory of your career and with whom you should be working,” she said.
“We’ve been really focused on building our creative service team, and I think the test there is writer retention. You don’t ever want your writers to leave.”
Kosinski asked whether, in an industry of ever-blurry boundaries, whether traditional music publishers are a thing of the past. Khosrowshahi demurred.
“I don’t think it’s a thing of the past. We’ve focused on becoming a music company. That’s been our direction. The reason for that is that if you’re in any business you want to have some kind of diversification that helps you with the risk factors, especially if you’re in a business that’s been as volatile as this one has been,” she said.
What are songwriters’ expectations of a music company now, and how have they changed? “I think the expectations vary. It really varies depending on a songwriter’s infrastructure: management, label support,” she said.
“We certainly have writers who are more distant and others who are very very close, for whom we have managed all aspects of their life. If I had to generalise [about] the expectations: sync is always a huge expectation.”
“We have a team of sync people based in London, New York and LA that’s led by Scott Cresto, and we’ve come to the conclusion the more people you put in sync, the more you’re able to get out of it. We’ve run those numbers… now, every year, sync is between 25% and 30% of our total revenue.”
Khosrowshahi also talked about wider industry trends. “You’re seeing a slowdown in streaming growth in more saturated markets, and you’re going to now watch these developing markets grow at a pace that is more representative of what was happening here two or three years ago,” she said.
Latin music’s growth is firmly on her radar. “We are currently weak in Latin, but it hasn’t been for a lack of the desire or a lack of respect for the genre, or a lack of understanding of the growth. We just have to find the right people,” she added.
Khosrowshahi also talked about some of the issues that worry her, in her day-to-day job. Podcasts is one, as Spotify continues its aggressive expansion into non-music content.
“It’s an uncertain future there. You hear that the royalty pie for publishers and master rightsholders isn’t going to change. How can it not if… 20% of what you’ll be listening to won’t be music? I worry about that,” she said.
“I [also] worry about companies that are not historically labels or publishers getting into our business, and I think that there’s just a lot more convergence in how digital platform are staffed and what kind of A&R services they can provide, so I think about that a lot.”
But she ended on a positive note. “I am very excited about what our songwriters are going to do, and what great things are in store for them. That’s always what we are most excited about, because if you do that right, everything else will follow,” she said.
“We’re super-excited about what’s going to happen in the Middle East… I’m also really excited because my kids are going to graduate from high school, and I’m going to have my 20s back!”
Khosrowshahi’s keynote was followed by a session offering an update on the US’ Music Modernization Act (MMA), the Mechanical Licensing Collective (MLC) that it created, and its potential influence on the rest of the world. Alisa Coleman, chair of the MLC and COO at ABKCO and Regan Smith, general counsel and associate register of copyrights, were interviewed by Billboard industry editorial director Robert Levine.
Coleman outlined the key impact of the legislation and new body: that publishers will be able to collect their mechanical royalties directly through voluntary licences, or through the MLC via its blanket licence.
She pointed out that this has relevance well beyond the US. “We don’t just listen to music that was created and written by US writers. We listen to music that was created all over the world… We really need to take into consideration how songwriters are represented all over the world, what their rights are, and our ability to collect and pay to them, or their publishers, or sub-publishers, or societies that represent them,” she said.
“The rest of the world, there are multiple mechanical societies and ways for things to be collected… It’s the first time that one society, one collective, in one country is going to have the full breadth of the digital streaming mechanical royalties.”
Smith sees the MLC as enabling positive times for digital music services too. “Now that they have a blanket licence, they can play songs without the danger of statutory damages on a song-by-song basis, which was creating friction in the past,” she said. “The collective can now take the time they need to match the ownership information of the underlying musical works, and make sure the right party is being paid.”
Coleman was keen to stress the songwriter and publisher-centric approach of the MLC, from plans to launch a portal early in the second quarter of this year so that independent songwriters can register their works, to its strategy to deal with situations where ownership of a work is disputed by different entities.
“The MLC and the MMA provided for several committees that were set up. One of those committees is called the dispute resolution committee.. It’s something of a misnomer. They do not resolve disputes. They are determining the policy under which the MLC will operate,” she said.
“Those policies are being determined by a group of songwriters and publishers, and then they are being submitted and vetted by a legal team, and then they will be submitted to the board of the MLC, which is a group of songwriters and publishers. We are all very involved in the business of getting this right.”
Her pitch to the publishing world continued with a focus on the benefits of the new system.
“The real reality is that this costs songwriters and music publishers zero. You are paying no one a commission to handle this. The DSPs are paying for everything. They’re paying for startup, they’re paying for implementation, they’re paying for everything. So where now you pay societies a commission rate… now you are paying nothing to anyone,” she said.
“The blanket licences are available to all DSPs that come to the service, and they have to abide by the terms of the blanket agreement, and they have to report and account.”
Coleman also sees the potential for the MLC to facilitate new kinds of music service in the US. “Under a blanket rights agreement, a new DSP that forms tomorrow could go to the MLC and ask for a blanket licence, and get every piece of music in the world covered under that. We have no opt-out. We have no ability because of the compulsory licensing provision of the Copyright Act, everything is included.”
Smith chipped in: “That’s why the theory of why the DSPs are paying to fund the MLC, because overall it will reduce their transaction cost.”
The conversation also turned to the question of unclaimed royalties, and how the MLC will distribute those – a topic that has already sparked debate (and some criticism) in the US.
“There’s a lot of conversation about ‘Oh well, the major publishers are going to take the bulk of the money’. But it’s based on market share. So the incentive is to register your songs so you get a slice of that market share!” said Coleman.
Smith stressed that there’s a clear process in the works, and that the distribution of unmatched royalties will happen at a later date than those for works registered with the MLC – again, overseen by a committee.
Coleman said that 45 days after the MLC opens its door, the DSPs are required to deliver to it “all unclaimed funds and all unmatched funds and the reporting. We don’t know what’s that going to look like, we don’t know how much money it is, or what the statements will look like. And we’re going to have to wade through it.”
“The most important part of that process is getting the money and the statement and matching as much as we can, and putting that up in a space where people can go in and look at it and claim it, so we can clean up as much data as possible,” she continued.
“Then the unclaimed royalties committee, which is made up of songwriters and publishers, is going to determine how these distributions are going to be made and over what period of the time. Our goal is to get money out of the doors as quickly as possible. We don’t want to hold anybody’s money. But we want to make sure the data is as clean and as good as possible.”
Both Coleman and Smith see the MLC as an important new source of that clean data for the wider industry.
“It’s not just going to change the game for mechanicals. It’s going to change the game for all rights,” said Coleman. “It will provide an informed source for somebody to go and clear sync as well. It’s a great opportunity for us to create transparency into our business, and create more income and revenue because of it.”
“There’s definitely a lot of precision about what the data will represent and will not represent,” added Smith. “We have information about sound recordings, but it’s the SoundExchange database on that side for the digital usage of that. They’re separate databases.”
She also addressed the audit provisions of the MMA, not just for digital services, but for the MLC itself. “That was a big deal. There’s also an audit right to the MLC, and the MLC will publish an annual report to explain what it is doing,” said Smith.
NY:LON Connect’s publishing and rights track finished up with a forward-looking panel debating ‘the collecting society of 2030’, exploring how PROs could and should evolve in the coming years to serve their members.
The panelists were Mary Megan Peer, deputy CEO of peermusic; Kelli Turner, president and COO of SESAC; Eric Baptiste, CEO of SOCAN; and Ben Kihnel, VP of business development at AdRev. Molly Neuman, president at Songtrust, moderated.
The panel started off by talking about the changes that societies are trying to make already. “The world has changed dramatically with the growth of digital and how you license digital. There’s been significant investments in technology, data cleanup and so on. It’s a very different business,” said Turner.
Baptiste agreed, having joined SOCAN in 2010. “We realised we were an organisation at a bit of risk, managing one right – performance – in one country,” he said. “We needed to diversify to mitigate our exposure. We have invested a lot in technology to be able to offer services for many market needs, anywhere in the world… We have become a data technology company. You cannot manage those things these days without thinking of yourself as a tech company.”
Peer noted that “societies are competing outside national borders for the first time in a significant way” while Baptiste pointed to the globalisation of the business of music, and the demands that creates.
“It means anticipating the need. It means first recognising that we live in a world of efficiency. Everything is quick,” he said, while adding that transparency is also expected. “You need money, but you need data. Data is in many respects the new dollar.”
Kihnel talked about potential incremental improvements. “This business is a function. The inputs are data, and the outputs, if we do it right are hopefully very healthy royalty distributions to rightsholders,” he said.
“There are things we can tackle very easily. At the apex of that funnel, the most critical element from which everything in the value chain is dependent on, flowing downstream, is that the input is accurate. That you have a pristine input, and enough data to work with… We can be more stringent and diligent about doing that from the start.”
Peer said that peermusic has taken on that challenge on behalf of its clients, pointing out that data-entry skills are not necessarily part of the skillset of a songwriter.
“I think we’ve been collecting ISRC numbers for longer than most publishers, and frankly in today’s digital age if you can give that to a society, you have a much better chance of getting paid!” she said. Peer also stressed the importance of publishers investing not just in technology, but in the people – data experts – capable of making the most of that tech.
One challenge for collecting societies and publishers alike is getting to grips with new digital platforms that use music, although a reference to TikTok sparked some pointed comments from Kihnel.
“We see TikTok as a multiplier. Creators promulgating content that we can monetise on behalf of the copyright holders,” he said. “I do see some problems. I’ve grown weary just from an ethical point of view of companies emerging and becoming booming enterprises on the backs of rightsholders, and coming back later and saying ‘We’re sorry, here’s a big cheque, distribute it how you wish’.”
He questioned whether these payments are distributed using accurate enough methodologies, suggesting that often it’s based simply on pro-rate shares on existing platforms like Spotify or Apple Music.
Baptiste made a related point, which was to dampen down some of the assumptions about the capabilities of large technology companies to make sense of music usage (and the related rights ownership) on their platforms.
“Many people would be surprised to hear those tech giants, who are supposed to know everything about everybody, they’re struggling with music data. Because they don’t have it! It’s as simple as that,” he said, suggesting that this is where collecting societies have an important role to play.
“They are dealing with the garbage that has accumulated over the decades… They don’t know how to make sense of this, but we can.”
The panel shared their notes of optimism about the next 10 years for collecting societies, and royalty collections. “One thing for real optimism is seeing the fruits of all the labour of the last couple of years, the investments everybody’s making, the collaborations they’re doing,” said Turner.
“As much as it’s become incredibly complicated with the rise of digital, with the international growth of digital that’s going to happen over the next 10 years, there’s a lot of dollars that are going to come in the door.”
“Not only does the growth of those dollars really matter, but these investments in technology have allowed societies to become more efficient, and lower the rates they charge,” agreed Peer. “Frankly the rates that some societies around the world are absolutely out of control.”
Her point was that if the societies can become more efficient, and thus bring down their operating costs, it will mean more money flowing into the pockets of songwriters.
If that can be solved through technology, it will mean more money for songwriters.
“I’m very very optimistic about these investments panning out into more dollars for writers and rights owners,” said Kihnel. “We are very very excited about the improvements and proliferation of audio detection. I think that’s going to help us in the long run get closer to that seamless very efficient collection and distribution of royalties. If we can couple that with a new data standard, I’m very excited about that.”
Baptiste signed off with more positivity. “The growth of the music business is just at the beginning.”