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Troy Carter talks music disruption: ‘I’d still be in a panic if I were a major label…’


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Troy Carter was the closing keynote at Music Ally and Music Biz’s NY:LON Connect conference in New York on Friday. The former Atom Factory boss (where he managed Lady Gaga during her rise to fame) and Spotify exec is now running Q&A, a company blending artist development, distribution and technology.

I interviewed Troy on-stage at the event, and it’s fair to say the session sparked a lot of discussion among attendees. Topics included Q&A’s structure (it’s a holding company for three individual companies: a management firm; label service and distribution; and a previously-unannounced software company); the discipline of developing artists in the streaming era; and partnerships with major labels.

It was the topic of the majors that sparked most debate later though. Carter suggested that major labels have missed a trick by not following the Disney+ template of pulling their content off existing streaming services in order to build their own platforms; suggested that the music industry may follow basketball league the NBA in becoming an artist-driven world of short contracts and label-hopping; and predicted that private-equity firms might be willing to buy out the rights of stars like Drake for hundreds of millions of dollars.

Oh, and he pointed to surveillance-technology company Palantir as inspiration for the predictive-analytics strategies around music marketing, too. The full transcript of the keynote is below, to ensure you get the full context around these and other thoughts.

Music Ally: Tell us about Q&A and how you’re operating?

Troy Carter: “I went in to Spotify for almost three years, and Daniel and I were pretty close and I worked on some projects with him. But when I went in, the whole reason why I was really figuring out this intersection between real technology and real music. It was almost like a masterclass, in two ways.

One: it was really a masterclass in understanding what the future could hold for music. But also, it was a masterclass in understanding the dysfunction of the relationship between music and technology. And still how far we had to come.

So as I started thinking about what was next, I just kinda took of six months, and ended up going to spend time with the Bytedance team in China. I went over to Africa seeing some of the emerging market things there. I ended up spending a ton of time with entrepreneurs. And it kinda led to this space of okay, where’s the white space? And how does enterprise technology fold in to music now?

It took me back to seeing when you look at venture capital, and the lack of capital that had gone into technology companies focused on music, it was very minimal when you look at the entire ecosystem. With that being said, it was not a lot of companies out there that was building products specifically for the business of music. So that was the focus on it.

The centrepiece of what we’re doing at Q&A is software. So software sits in the centrepiece, and there’s three distinctive companies within Q&A. So Q&A’s actually the holding company. We have a software company that we’ll be announcing soon. People know about Human Re Sources which does records, distribution, label services. And then a management company as well. So Q&A’s the holding company for those three individual companies.”

Music Ally: Distributors are becoming other kinds of companies, management companies are acting like labels, everyone’s doing analytics… there’s this blurring of the boundaries?

Troy Carter: “Yeah, even with my own management company, Atom Factory, we ended up… Interestingly enough, I think I launched Atom Factory around 2006-2007, and this was when the industry was just in a freefall, and record labels were kinda pulling back, and laying people off, so we couldn’t get services for our clients in a robust way. So I ended up having to hire people to actually do things.

We actually were functioning as a label at that point, and this was when labels were doing 360 grabs and just trying to grab everything that they could. But we were offering real services because we had to. So when you look at the companies from that time. You look at what Guy [O’Seary] put together with Maverick; you look at what Irving and Jeffrey [Azoff] ended up building with their new variation of their business; you look at what Scooter did with his business; and Roc Nation with their business. Everybody had to had those services.

So now that you add those services, okay, well, we don’t need you as much except for banking, distribution – looking at the partnership with the labels. So we’re seeing everybody evolve and having these little competitive overlaps now.”

Music Ally: How has it gone so far? You’ve been operating for about nine months? What have you learned?

Troy Carter: “Yes, May of last year. I think the biggest thing is just patience, because you can’t skip steps in the process. With breaking artists, it’s a natural gestation period to break an artist. As much as you want to accelerate it, you can’t bake a cake in a microwave! It’s a process.

Building a company with real culture and where you’re hiring smart. It’s 32 of us right now, and you want to be deliberate with that process, and be deliberate with building a culture within the company. So all of those things. Really between May of last year and December of last year, it’s just really been building, building, building. Building software, building a team, building processes. But I’m ready to get started. I’m chomping at the bit now!”

Music Ally: Patience can be difficult in the industry as it stands now. An artist now can put a track out, get 10m streams quite quickly, but they’re not ready to perform live, they’re not ready for being a hit. But they have a hit! So how do you hold back?

Troy Carter: “It’s a discipline! I have a lot of friends within major labels who still practise that discipline. They’re working with younger managers who want to take every dollar off the table, or younger members of your team who are just ready to go. If you talk to Julie Greenwald, she’s VERY very methodical about how she’s setting up artists. If you talk to Sylvia Rhone, she’s very methodical. Steve Berman’s the same exact way.

If you’re playing long, and you want this artist to have a really healthy career? The last thing that you wanna do is to have an artist who has never performed live, for their first show to be Coachella! Or for their first TV appearance to be SNL [Saturday Night Live]… you wanna build that confidence.

Just because you have a hit does not mean that you’re ready for showtime. And sometimes you’ve got to be truthful with the artist about that, because they’re ready to go as well, and they think they’re ready.”

Music Ally: In the bigger picture, there’s Q&A. There’s Platoon. There’s UnitedMasters. These hybrid software / services companies, set up by music people. Is there a pattern or a trend here that we should be talking about more?

Troy Carter: “Denzyl [Feigelson, CEO of Platoon] I’ve known forever, Steve Stoute [CEO of UnitedMasters] I’ve known forever, and both of them are really good friends. Denzyl has exquisite music taste! And Denzyl cares about artists in a real, meaningful way. And Steve has great taste, passion, knows artist development.

I want people like that on the front line of this revolution, because one of the bigger problems was you had people came purely from technology that was approaching the space, and that was the disconnect when I went into Spotify. That was the first problem that I was looking to fix: okay, how can we put artists first? How can we really invest alongside managers and labels in the careers of these artists?

Technology is just a means to an end! But you had people who are approaching the business and thinking artists and songs are a means to an end! They’re using music and artists as a customer acquisition tool for other things. So I’d rather have Denzyl and Stoute in it, where they’re approaching it thinking about is this artist going to be an iconic artist that’s going to be around for the next 30 years?”

Music Ally: An easy headline is to position these companies as competing with labels. But you’re working with Warner Music, in a partnership. Is that something we’re going to see more?

Troy Carter: “Human Re Sources has an upstream deal with Warner. For us it was no secret that… There was some data that said almost 80% of artists want to be signed to a major label. That’s their dream. That kinda legitimises it: ‘Mom! I really got a job now!’

And then some artists just wanna be independent and try things, and experiment, and need that time. So Human Re Sources already had six or seven artists that had started on the platform, and then graduated themselves to go on to major labels. And Human Re Sources had no tagalong with that.

So basically it was okay, if artists are going to want to move on to a major label, why don’t we have that capability to help them with that partnership? And also, labels are looking to do risk-mitigation. They want to come in later in the cycle now.

When you look at Human Re Sources, that’s almost like a farm-club R&D proof-of-concept to mitigate the risk for labels. So they don’t mind paying a little bit more, knowing that something worked. So far, so good. They’ve been doing an incredible job at A&R and developing these acts, and giving them the option: Stay independent, you’re on the road now and selling merchandise now. Or if they wanna do major label they can do that.

I’m not of the mindset of… I don’t think major labels are gonna go away. I think there’s still an important value proposition, because you have a very very high level of expertise around the world, whether it’s marketing, whether it’s promotion, whether it’s publicity. It’s all of these different things that I know some of the people inside the labels are just incredible at, and I’ve had a lot of success in those partnerships. But I think it’s just one alternative.”

Music Ally: That idea of justifying their value proposition seems to be talked about more: ‘Here’s what we can do for you’. And artists have more agency…

Troy Carter: “I think they [majors] are in trouble, by the way. I think they’re kinda celebrating at the one-yard line. I’d still be in a panic if I were a major label. Just because the business is shifting so quickly, and the industry has done such a poor job of self-innovation.

When you look at Bob Iger and Disney, and Bob saying ‘Okay, I can’t build long-term enterprise value for Disney if I keep licensing to Netflix. So I need to own my own data, I need to know how well my programmes are performing, I need to have monthly recurring revenue from subscription, so I’m gonna build this thing myself. And now I’m a technology company, and I’m pulling all of my shit off your platform!’

Record companies have not made any moves in that direction, whether it was labels saying ‘Okay, we are gonna take the Hulu route and have a few of us come together and we are gonna put our content exclusively there’. Or whether somebody being that bold and saying ‘I’m just gonna do my own platform’. It’s gonna take bold moves like that.”

Music Ally: Are you saying that a Universal Music+ is a realistic prospect? The equivalent of Disney+ for a major label and its content?

Troy Carter: “Yeah! I think you have to think about it being more than… You have to think of yourself as more than a record label. You look at the value chain and the value that labels create, you name an artist – Khalid, Billie Eilish for instance – you become the R&D that breaks that act.

You de-risk the R&D for Michael Rapino at Live Nation now. Or Daniel Ek at Spotify now. Or whoever’s gonna capture value off of your initial investment. So you don’t capture that value along the way, essentially. The model has been the same model for the last 100 years.

Even talent agencies have now evolved to become way more than just ‘we book movies’ or ‘we sell TV shows’ or ‘we book acts on the road’. They’re in the content business, they’re in the sports business, they’re in the live events business. They’re in all these places, and the record companies are still record companies.”

Music Ally: Can we talk about the evolution of deal terms, in terms of what artists are expecting, and what they’re being offered? Taylor Swift is the obvious example in the media recently sparking discussion about contracts. How is it evolving?

Troy Carter: “If anybody follows sports and basketball specifically, basketball has now transitioned from an ownership power, with team owners, to there’s a player organisation now in the NBA, where players have all the power.

This last season you saw LeBron James say ‘We’re gonna recruit Anthony Davis’ and Anthony is saying ‘I want out of my contract’. So now they’re forcing owners to do things, and the players basically control the league.

I think music is becoming the same way, and I think music is going to be an artist-driven league, essentially, where artists are gonna say ‘Okay, Interscope, you have this album, but I’m forcing a trade, I’m going to Columbia for my next album, or I’m going independent for this album in between’. And you’re just doing one-off album deals.

I think we’re gonna see a lot of the deals getting shorter and shorter and shorter, and the artists having more power as they decide how they want to move around.”

Music Ally: What about ownership of masters? In a business where catalogue is so important, including for the value of the major labels, what will it mean if more artists are holding on to those rights, or regaining them?

Troy Carter: “I think we’re going to see a few different models play out in the masters game. Going back to Netflix, they completely innovated on the studio model, when they came along and said ‘The way we’re gonna do programmes, we’re gonna do all original programming, but we’re just going to buy you out completely. So there’s no royalty to anybody, but we’re gonna pay you on future value’. And in a lot of instances, a lot of people, big stars, are now selling. They know: you do a deal with Netflix, you’re selling all of your rights.

So I think in terms of future value of masters, it’s either gonna be the artists who basically say ‘Y’know what, this master’s gonna be a licence, and it’s gonna revert as soon as my deal is over, or as soon as I’m recouped plus 20%’ or whatever that figure is. ‘You make 20% off it and I’m taking the master with me’.

Or it’s gonna be: we’re seeing a lot of private equity money come in to play. You’re seeing what’s happening with Merck’s fund [Hipgnosis] that he built, what Primary Wave’s doing now… There’s so many funds that are popping up, they’re gonna look and say ‘Hey, Drake, we see you’re making $100m a year. Here’s $700m where we’re just gonna buy it out’ and that company is now playing long-term and taking all the royalties off the table. And how in the world is a record label going to compete with that?”

Music Ally: And can they compete with that?

Troy Carter: “I just don’t think, with the amount of money that’s out there, the predictability of revenue and streaming with certain artists and certain catalogues? That’s a dream to certain people with finance vehicles. That’s a dream, to have that level of predictability with data to go alongside of it.

So I think people are gonna pay for that. And the question’s going to be whether or not, if I’m one of those labels, I’m partnering with funds to be able to have additional war-chest of cash to be able to ward that off. But I’m also investing in other areas of my company that are gonna become way more attractive to artists, essentially.

I think it becomes more attractive. That’s the reason right now, if you did a poll of artists, and you said ‘Who’s your favourite partner?’ a lot – I’ve done a ton of stuff with Live Nation, and there’s a reason why Bono, Gaga, Jay-Z, all of these artists are in business with Michael Rapino. Because Michael is playing long. He’s playing long! He is basically there for the artist when they need him. It’s not that contentious type of relationship that artists typically have with their labels.”

Music Ally: Let’s talk innovation. What technologies or trends are exciting you in 2020?

Troy Carter: “From an industry perspective, I think as an industry we’re still data-dumb. There’s so much data, and everybody has analysts, but you might as well not even have it, because 99.9% of the people don’t know how to use it or know what to do with it. It’s useless, to be honest with you.

Versus when you look at how Facebook uses data, how Amazon uses data, and so the stuff I’m excited about is predictive analytics. I’m kinda looking at Palantir for instance. They basically figured out… I first saw that company maybe 10 years ago, and I went into their offices, and I’m looking at the screens like ‘Am I supposed to even see this?’

They basically help CIA, FBI, DEA, track terroristic algorithms on the internet. Basically they find bad guys through data, and figure out predictive analytics. So if you do this, you do this, and you do this, then that’s the behavioural pattern. In music we don’t have that!

There’s no way in the world politics should be more advanced than music! You know what I’m saying? In terms of being able to identify voters, or to get more value out of your marketing spend because you’ve targeted voters around specific messages. And you test it, test it, test it, and know it’s going to resonate in Tulsa, Oklahoma.

Donald Trump’s campaign shouldn’t be more advanced than a Taylor Swift campaign! We should be way, way, way more ahead. I’m just excited about getting more PhD level data scientists into the music industry.”

Music Ally: Is that an easy thing? I’m guessing if you’re a PhD level data scientist, you could earn shedloads at Google or Palantir. Can music compete for that talent?

Troy Carter: “I’m competing! We recruited well. Part of it is people love music. People really love music. You see on stage [at NY:LON Connect’s startup pitch, which preceded this interview] you’ve got really smart engineers. Everybody up here were super passionate about music. That’s what I find in general.

The problem before: I remember Paul Graham from Y Combinator basically told me ‘Music is so litigious that no investor wants to invest in music because there’s so many lawsuits’. And you’ve gotta deal with, he called them gangsters! ‘You gotta deal with gangsters in the music industry!’ That was the perception around people from technology taking this step into music.

The record business, we’ve done a really good job of putting these companies out of business, versus partnering with them and pulling them in. Now I’m starting to see a lot of smart people come in to music now.

I think Daniel Ek had a lot to do with it, with people seeing Spotify becoming a successful company. You look at Splice and the model that Splice built: there’s really smart people there. You look at what DistroKid is doing right now. You’ve got a lot of smart people – the Songtrust team [too] – that are approaching it.”

Music Ally: Final question: what more can the music industry do to foster innovation?

Troy Carter: “You guys specifically have a very high-quality network of music people. Even a convening like this, this is a group of people with influence, people with experience, people that are curious as well. If you guys can actually really… I don’t know if it’s Recode or one of the technology-journalism platforms, but almost if you did joint events.

You guys have a high quality, TechCrunch has high quality as well. But being able to bring joint meetups, and filter out those groups where you can put interesting people together to actually share those learnings. I think connection points will actually come out of it.

And this is just me, if I was one of the major labels, and especially when you have control over masters and publishing at the same time? I’m open API! If I have developers building on my API of these rights, I think you open up a ton of revenue at that point. Because now all of a sudden you have very smart people who don’t have to go through all the licensing restrictions, building products that we don’t even know exist, because they have access to the music.”

Music Ally: Isn’t publishing where that gets difficult?

Troy Carter: “But I was saying, there are catalogues. Let’s call it Universal and Warner, right? Or Sony now, because they have both sides. You can easily figure out: ‘These are all of the songs that we have 100% of the publishing and 100% of the master. We don’t have to talk to any other publishers or anything like that. We can figure out the revenue share with the artists or writers’.

This is the clean catalogue for the API, essentially. And then you start thinking about: okay, this is great revenue opportunities, and we know writers within our rosters that can give us clean. They can start creating masters and publishing rights specifically for this API that we can build off of.”

Read our other NY:LON Connect coverage
The evolution of labels: ‘What’s your value proposition?’
Global music streaming: ‘We are just on the tip of the iceberg of what this will become’
Publishing and rights: ‘Everybody needs to play ball in order for this tech to work’

Stuart Dredge

Read More: Analysis News
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