The Business of Turning Music Royalties into Growth Capital

Jakob

Between you and me, then it downloads on your side and uploads at the same time. So if it gets laggy or if you're frozen for a moment, it doesn't affect the end product. So you should not focus on that. Also, if there's any noise in the background, we have noise suppression. So you're just present. Whatever happens technically, Riverside actually figures out itself. So that's just how it goes. Perfect. Great. Then I will start in five seconds, unless you have anything.

Michael Bizenov

No, more good.

Jakob

No. Actually let me just I pulled up my n notes in a different browser. Let me just get that up.

Jakob

How do I pronounce your second name?

Michael Bizenov

It's Bizanov. Yeah, nothing like how it's spelled, but yeah.

Jakob

Bizenov, Michael.

Jakob

Perfect. Makes it easy for me. Great. I will start in five seconds.

Jakob

Michael, welcome in the studio. I'm so honored to have you here.

Michael Bizenov

Hi, Jacob. It's really a great pleasure to be here. Thank you.

Jakob

I look forward to nerding out and understanding everything about music rights and financing. And Michael, who better than you to talk about this? You're the president of Sound Royalties, the largest financing two creators in the world within the music industry. So I'm sure you're the right person to talk to. But Michael, for the people who don't know you, who are you and what do you do?

Michael Bizenov

Well, so I am the managing partner and president of Sound Royalties. And as you said, I'm very proud to say we have grown to be the largest financial services company serving the music industry today. My background, I started a financial services company with my high school best friend in his living room. So I was an early entrepreneur. We brought that company, we became the fourth largest in New York State, really grew it. Mostly dependent on the people and the way that we provided service. We had taken that company as far as two kids from Queens, New York could take it, ended up selling the company to a bank in New York City. There I signed a five year handcuff to stay on, ended up staying for twenty.

Jakob

Wow. Okay, so the most obvious question to begin with, and it's not because I have any prejudice towards music, I am here myself. Like you've had a let's say more than brilliant career. Why music?

Michael Bizenov

Well, the interesting thing is that while we are obviously in the music space, we are at our core of financial services companies. So there's a consistency there. Why music? Well, first of all, music is a passion of mine. It has been since I was young. All different types have pretty eclectic taste on it. And as I learned a little bit more about the music economy and ecosystem, we felt that there was really a great opportunity to deliver stuff. Differently than it had been done in the past. My partner, Alex Heike, who is our founder, were based on his original vision. And fundamentally, to break it down simply, we wanted to be and strive to continue to always be the creative friendly financing option.

Jakob

Really interesting. And I think let's set a tiny bit of the basics of the talk today. So a lot of our listeners are entrepreneurs in this space, and their association to music is obviously music, and they know that it's a fundamental part of music is the rights and the income associated to it. But when you come from the financial world, and where of course music is a passion but not necessarily your occupation, you might think about music rights in different way than people who spent most of the careers in music. So how do you think about music rights? Like what is your dissection of what it is?

Michael Bizenov

Well, I think if you take a step before that, one of the things that we think is fundamental to what we do is I'm an awe of creatives because I am not one. I've been banging on drums since I'm seven years old, but note that I said banging, not playing. And so there are artists, but the thing that we have to try to help people get across and we work with the creatives, we work with their teams, is that they are running a business. And regardless of the different ways that they're earning their money, we try to help them understand that by approaching their art and their work and their career like it is a business, financing plays a f a very important part of that.

Jakob

Mm. But again, if you were, let's say, a mom and pop shop, you know, you would go to the bank to get a loan. And this is not ne necessarily how you do it. So how would you, in sort of normal terms that people can understand, compare yourself to ordinary financing?

Michael Bizenov

Well, that's a great question. So, no, we are not a bank, and what we do is not lending. We actually give advances against people's earnings and their royalty streams. If in the banking world we would call this receivable finance, where we're doing it off of that. Most banks, and I know this from my background, don't have the wherewithal or the ability to finance music as an asset class. It's a relatively esoteric asset class. And it really falls outside of the boundaries. Now, if you're one of the top, top artists and you know, you have teams and financials and all those kinds of things, sure, there's there are bank financing options and there are some good ones out there. And we actually work with a lot of the banks for that. But for the vast majority of the music creative industry, they're just not able to walk into a bank with what they have and say, Hey, you know, can I please have some financing? We also want to make sure that we do it in a way that always protects the creative. So fundamentally for us, we don't ever threaten the ownership of the masters or the copyrights. We don't ask for personal guarantees. We don't look for their credit history. We are looking strictly at the royalty streams that are coming in.

Jakob

Mm. So what is the directive of which you navigate this? Is that you need to, you know, have a return on investment on a fund or like how do you structure this and what is your goal financially?

Michael Bizenov

Well, we've reached the point where we actually have bank financing. So it's not like we're beholden to any private entities or anything like that. That allows us to go out and really focus on our mission of providing the best financing options we can for the creatives. We work hard to customize every option. It's not cookie-cutter. Every creative's music is different. We really deeply believe, therefore, that their financing solutions need to be customized as well.

Jakob

We'll nerd out a lot on this podcast to really dissect this and how you approach it. So but we'll take a step back in into sort of your career. So just walk us through the reasoning of joining this. So you were sort of president of consumer banking, a huge position, I would imagine, an amazing job. And you decide to transition as far as I could see into consulting and then ultimately into this. Can you walk me through that journey and the reasoning there?

Michael Bizenov

Yeah, you know, I reached I ended up staying at the bank for twenty years. It was a great run. I was really the house entrepreneur for the bank. When we wanted to get into a new a new line of business, often I was the one that they would call on because of my background to take us into that. I was involved in mergers and acquisitions. We acquired banks, we acquired financial service companies, sometimes it was about the integration, sometimes it was about transitioning some of the existing groups, and it was a blast. I reached the point where we had taken that bank from 600 million in assets to 15 billion. I was part of a team that did that. And it was a great ride, but it was time to move on. I actually thought I was gonna take a year or two off as I transitioned out of the bank. But I ended up getting a call from the chairman of the board of UBS's bank. They asked if I had ever thought about doing any consulting. They needed a strategy scoped. In an area that I had a particular expertise. They said, hey, it would be about a five week thing. And I said, sure, why not? I ended up there for two years and did a bunch of different projects for the for the C suite over at UBS. Was having a blast with it and word got out I was consulting. I actually had started to build quite a practice was building more than four time full time hours on that was thinking about hiring people. And I actually got a call from somebody who had been a headhunter for me, bringing banking teams into the bank for us. She asked me, you know, hey, do you still like to build things? Do you still like to grow things? I was like, hey, you know, what are we talking about here? And she said, one more question, West Palm Beach, Florida. And sure, why not? I got a chance to meet who is now my partner, Alex Heike. We at the time our majority partner was a private equity firm in New York City, met with them as well. They're the ones who were recruiting me. Really fell in love with the mission of the company and it aligned with my values, frankly. I'll give you my secret career history. Before my financial services history, I actually have a master's in social. And I was a practicing social worker in New York for seven years as the first part of my career.

Michael Bizenov

So when I looked at the positioning that the company wanted to be in and looked at the way that we do it, I built all of the businesses that I built through delivering really just great service, building it through referrals. And that was exactly the vision that Sound Royalties had at that early stage. Based on that alignment and listen, let's face it, music's a lot more fun than some of the other types of findings that you could do. It really resonated for me and I accepted the position of managing partner and president.

Jakob

Hmm. So you know, this might be a private question about motivation, but was this something driven primarily for like something novel and exciting, or was it like the next sort of natural step in your career?

Michael Bizenov

You know, I think it's both. It's a great question, but I really do think that it's quite a mix of both. Definitely something a little interesting and in a different space. You know, I did a lot of due diligence. I didn't know anybody directly in the music space, but I was very lucky. Friends of friends did, and it turns out there were people in my community who were pretty significant players in the music industry. I spent a lot of time with them trying to understand where is the industry going? Where has financing been and where has it fit previously? Trying to see where we could then take it and how it fit with the vision that we were staking out, that Sound Royalties was staking out. And I and I learned a fascinating amount of information. I spoke to lawyers, I spoke to songwriters, I spoke to, turns out that I knew a head of a label, of a major label, didn't even know that's what they did for a living. So somebody in my community and really got to understand where the opportunity was. So from a business standpoint, that was the assessment. But also again, the music part of it and how we really could make an impact. My whole career has been based on trying to find places and ways that I can make an impact. And I really felt that we were going to be able to take music financing to a place that it hadn't been before.

Jakob

So with your entrepreneurial background and intrapreneurial background, I'm sure that you also driven by problem statements. What was it that you saw in this space that was interesting enough? Like what is the problem you wanted to focus on with surroundings?

Michael Bizenov

So I'd if you don't mind, I'll give you an example. One of the people that I ran into was a pretty, pretty substantial attorney in the space. And I went in to meet with him and I said, okay, so if you were a B, what would you do? And he gave us he gave me he gave me an answer that has kind of been part of our fundamental focus ever since then. He said, Well, of course, first of all, like any new business, you have to tell people who you are, what you're trying to accomplish, what you're trying to be. He said, But I would recommend that your starting point.

Jakob

Sure.

Michael Bizenov

is to let people know who you're not. The reality is, Jacob, that the people who are in this space, I'm not i in disparaging any human beings, they approached it in a way that really left something to be desired, was not creative friendly. So what we saw that the pro to answer your question, the problem to be solved was how can you create a company and deliver financial products that are creative friendly, that don't fit the previous way of doing things. So doing things like not threatening ownership, not taking 100% recruitment. So we allow for ongoing cash flow. For me as a banker, the idea that you would provide financing to somebody and then not let them make any income for the term of that financing, frankly, maybe because I had a good outsider's view, but I just couldn't reconcile that. We don't ever take a piece of somebody's profits. If we provide financing, just like you do in any other business financing that you do at a bank or anywhere else, if we provide financing and a creative uses that financing to triple their income, well, we don't deserve a percentage of that triple. What did we create? We already had a deal with them. Our products and programs are a fixed payment for a fixed term. If that financing takes them to where they want to go, which it often does, that's a win for everybody. But we don't deserve to be anybody's partner. And then we also don't try to keep anybody prisoner. And what I mean by that is the idea of tying somebody to a right-of-first refusal so that they can't leave you without your permission. I feel as a business person that it's our job to earn the loyalty of our of our customers. If we do a great job, if we treat them well, if our products deliver what we promise. Then they'll stay with us or they'll come back to us or they'll recommend people to come with us. That was our focus.

Jakob

It's interesting and we don't need to go too much into talking about the incumbents and what they might have done well and not so well in the past. But I think there's still a commentary to be made about the shift of nature of companies in this space. Let's, you know, take a lot of the major companies we might know in the past. They have both provided, you know, financing but also marketing and distribution, which they still do. But of course the world has changed a lot with what's possible for individual teams to do, which we also see the shift a lot, that you can have smaller teams with more ownership that might be able to do the actual distribution marketing and what is present there. But financing of course is still a major component to that. So it's really only as far as I see, the last fifteen years what we've had an opportunity to do something different than what Was in the past when it came to the incumbents. Can you comment a bit on that when it comes to the financing part and take it that outside of maybe just only the major companies?

Michael Bizenov

Yeah, I think that the democratization that we've seen in the industry over that time period that you're talking about really helped create an even greater opportunity for us. And again, we work alongside the labels and the distributors and the publishers. We have a lot of respect for the work that they do. You know, the companies I was talking about were more the independent finance companies and the reputation and the things that they were doing. But the this move towards independence.

Jakob

Sure, sure.

Michael Bizenov

It goes both ways. We work very well to support the independence and the people who have stepped away from the traditional model, but we also can work hand in hand with the people who are in the traditional model. But there's a reality. You know, when I'm speaking to somebody's attorney or one of our people are talking to their business manager, it's a very simple proposition. It's which way will you get a better negotiation going for your for your client? Hey. I'd like the best deal for my client. And by the way, give me a lot of money. Or B, I'd like the best deal for my customer. And I don't need your money. I'm gonna source my financing elsewhere. Obviously the answer is B. And that has been part of what has allowed us to grow.

Jakob

Hmm. I'm not too familiar with the sort of the macroeconomics of financing in music rights. So maybe you could help me understand what is the share of you know financing solutions like yourself versus traditional financing? How like how large has this gotten?

Michael Bizenov

Well, I don't have industry wide data on independent financing versus people who are still doing the traditional model. We haven't found it out there yet. But we can see the growth that we have had. I mean, our growth has been exponential. And just people we are as we talked about this eight years ago or nine years ago, it was what are you talking about? But it's amazing to me and both encouraging and exciting.

Jakob

Hm.

Michael Bizenov

That there are still people when we talk about what we do, they're like, Well, I didn't know we can do that. Now I know my marketing people do a good job, so I'm not going to get on them and say, well, wait, why doesn't the whole world know about this yet? But there's still evolution, which is why we believe we're in a blue sky opportunity. There are so much more. There are so many other areas in the industry to reach. That we just think that the education piece and that is the important, we focus a lot on financial literacy. You know, it goes back to what I said to you earlier about helping creatives and their teams, you know, know that they're running a business. Having people become more and more aware that these options are available so that they can make educated choices. And maybe they'll pick us, maybe they'll pick the traditional model, but people have to know that these options are out there.

Jakob

'Cause that's a good point, you know, as I mentioned before, I've had my own failured approach to this when I was way too young and dumb, which I guess I still am today, where I was trying to run a startup sort of with focus on music financing. And you know, nine years ago, eight years ago when I was doing this, obviously no one knew what I was talking about. I think only, you know, the people who are reading deep in the industry did. But most people, I guess, understand that they're all alternatives now. So what are the objections to using this type of model versus others?

Michael Bizenov

It's funny. Somebody once asked, we hired somebody new over in the U to cover the UK and when we brought her in, she said, Well, how do I know that when I'm meeting with somebody that I've connected with them? And I gave her a little bit of a flip answer, but it's true. I said, the minute somebody says to you it sounds too good to be true, that's when you've won. Because everything we say is true. So the ability to help continue to educate it I really think it's a matter of the industry associations, which we've worked closely with. It's a matter of taking i advantage of the team that we've assembled and getting them out there. Plus, the majority of our business comes from referrals. So, you know, years ago there was an old shampoo commercial in the US, you know, and I'll buy your shampoo and then I'll tell two friends and I'll tell two friends and you know it expanded across the whole screen. It really is a matter of just continuing to do the right thing. Get the word out there. And again, we're not the only one in this space. As it becomes more prevalent, as the what I call the key influencers, those attorneys, the managers, the business managers, and again, the industry associations become more and more aware and see that it works and that it's the right thing and that it isn't too good to be true, will continue to be able to get to get the word out about how many more opportunities there are to take alternative paths for financing.

Jakob

But what is the threshold of you guys providing the service? Again, if you read about your company, statements are made all the way down from five thousand dollars. Like what is the threshold of which the quality of data needs to be there, the time it's been in the market and the predictions you can do to it? Can you walk me through that?

Michael Bizenov

Yeah, sure. So we start with the fundamental thing. Somebody needs to be making $400 a month in order to access our services. We can go all the way up to, I don't know, $75 million. You know, we've done we've done the eight figure deals. We really believe that every creative should have the opportunity to have that. As far as what we look at. You know, it's a combination of probably about twelve, thirteen, fourteen different inputs that we take, things that you'd that you'd imagine. What are the quality of the earnings, right? Are we looking at a stream where 85% of the income is coming from three songs, or is it diversified across the catalog? What's the age of the song? New, what's the track record? What's the trend of that been? Genres perform differently. We see the perfor, you know, the curve of different genres. Some come out fast, come down and find kind of a steady state after that. Some come up a little bit like a parabola. They slowly hit a peak, slowly come down and again find their steady state from where that is. So we'll look at that. The payor is very important to us. We have we have worked so far in our 11 years, we've worked with over 250 payors. At all levels, obviously the majors and everybody that you would think of to a lot of the mid sizes, and in different countries, you know, both here in the US as well as internationally. So who that counterparty payor is very critical when we look at that. And then we look at each of them, we kind of put it into our little black box. We do income projections. We do it in a way that ensures that we're not setting the creative up to fail. We want to make sure that we're not putting anybody behind something that's going to be uncomfortable for them or not meet their needs. We'd rather give them a l you know, a little less upfront. I'll give you a live example. We had a producer in Miami here in South Florida. His dream was to open up a studio. So he came to us. You know, the thing that fascinates me, you talk about the difference between banking and the music industry. I'll digress for a second. I still can't wrap my head around the idea.

Michael Bizenov

That everybody in the music industry is trained to take the biggest bag of cash that somebody's dumb enough to give you, regardless of whether or not you need it. So in this example, we had this producer. We asked him how much he needed for to build the studio of his dreams. And it was $250,000, is what he needed. So we went through the process and he said, Well, what do I qualify for? And we said, $500,000. Well, he said, I'll take it. And we said, why? You know, and that speaks to that mentality. So we said, look, take what you need now and you could always come back to us. Quite often our customers come back to us more than once because we encourage them to take what they need now. Let's feed it in there. Let's create the success or whatever it is that you're looking to accomplish with the financing. And then as it grows, you could always take more. You know, and we're not going anywhere. And that's you know, part of the education we try to do. We try you know, we try to build relationships. We're not looking to do transactions and that, you know, is where that customization that I spoke about earlier comes in.

Jakob

Mm. So this is a part where you're more than welcome to be as complicated as you as you need, because it is a complicated question. When you talk about rights and maybe as an asset class or how you value music, th the there's a big difference between the historical analysis and then projections.

Michael Bizenov

Okay.

Jakob

And for example if you take an exchange a traded fund, like it's falling the market, but over time you would see that something happens, right? That's not quite equipp equivalent to how you look at it. So how do you decide what something is worth? Like what is the nitty-gritty part of this?

Michael Bizenov

Well, that's a great question. So remember, we're not buying, right? We're not selling. So we're not looking at the valuation. For us, it's all about the income. And you said it, it's what is the projected income gonna be over the next X number of years? So we apply digesting all those different variables that we talked about, and then we apply different decay curves to that. And we'll look at a declination, we'll assume a declination.

Jakob

Mm-hmm.

Michael Bizenov

And the reason i is frankly what I said a few moments ago, we want to make sure that we're setting people up to succeed, not to fail. So we take that combination of factors. We look at that. I mean, we actually look song by song. You know, how is this song performing? Is the income being driven by a series of one-shot sync pops, synchronization pops, you know, maybe they got placed in a movie or in a TV show or they have a theme song you know for something. Is it being driven by that or is it really more steady state? And again, age plays a role. Is this something that's evergreen? We had a songwriter who was you know one of the most successful songwriters for one of the most successful country artists out there. There was a 30 year track record of this stuff performing. You know, that's almost it's almost easy for us to do. As opposed to some of the newer music. And we do newer music, but then we really have to get into and look at different ways to see how it's trending. Where is it being listened to? How is it being listened to? And put all of that into our, you know, I'll call it our secret sauce, you know, in terms of how we decide to do that projection and what we're then willing to find f the financing level that we're willing to provide based on.

Jakob

But so you know that there's different ways of looking at this. There's the individual deal perspective, and then there's you know overall performance. Like where is where's your primary focus? Is that you overall need to perform well? And then there's gonna be outliers to people that are gonna, you know, it's gonna tank you know, much lower than expected. And how do you think about these scenarios?

Michael Bizenov

I don't mean this to s overly simplify it, but we're looking at it deal by deal. We're gonna look at the merits of that individual deal. Sure, we're gonna look at our portfolio performance like any other, you know, company is gonna do and we're gonna see where it's performing. We're gonna learn, you know, where did we maybe overestimate, where did we underestimate? Are there any trends if somebody's coming up short? But we're fortunate we don't have a lot of those.

Jakob

Great.

Michael Bizenov

But when it does happen inevitably, we are going to take a look and see if we can find any patterns to it. And then we learn from that. And that's an important part of how we how we analyze and ingest information. But we to go back to your underlying question, we are gonna look at it based on that creative stream's performance.

Jakob

B I can imagine there must be a lot of technology because if you're doing deals down to five thousand, you're obviously not gonna have one manager that has full control of this. Like you must have a tech stack that helps you track on individual level and then I would a assume you have some more sort of white glove approach to bigger deals. Like how do you manage all of this?

Michael Bizenov

Well, yeah, it's exactly what you said. I think right now we have a very good balance between using the latest technology that we have to make sure that we can ingest and organize and help us analyze, do the initial analysis. But we are, and you use one of my favorite phrases, we are white gloves. We are gonna look at the deal. We are gonna make the decisions you know, with people in the end. So we use the tech, that's the science. But there's an art to what we do as well.

Jakob

I can only assume it's your banking background that makes you talk like this. You know, I've spoken with many founders in your space. I would probably say ten plus that's successful. And the approach that I hear a lot is very much from a tech perspective. What I hear you talk about is more from customer perspective. And do you think that's a differentiating factor on how you run the business?

Michael Bizenov

Do. I and again without taking anything away from all the fine people that are in our space out in the industry, we are very, very end user focused. I'll give you an example. So we will have somebody, our royalty specialist, consult with their customers. We try to bring their team into every conversation because we want to make sure we're very obsessed with transparency. So they'll take them all the way to the end and we're getting ready to fund. And before we'll fund the deal we actually have a separate department. That meets with the end user and hopefully as many of their team members, significant others as we can, you know, get them to bring forward to us. And they walk them through the deal again. They walk them through the mechanics, the way it's going to work, the dollars and the numbers involved. And they're actually trained that if they sense any hesitation or any lack of full understanding, they have the authority to hold the funding. We'd rather take the time, pull back, make sure they're clear. And we do everything in writing. So they have already gotten a disclosure in writing that, you know, that they've signed and acknowledged. But if we want to make sure, you know, losing a deal, that's business. The worst thing for us is somebody coming off of that experience with us saying, they didn't tell me or I didn't know. So yes, the end user experience is where everything starts and we work backwards from there.

Jakob

But can imag imagination this is some sort of self imposed compliance you do. I'm not too familiar with banking or financing in general and what's required and I guess that changes from country to country. But what are the regulations in your space? Like how transparent do you need to be from a from a legal perspective?

Michael Bizenov

Well, i to your point i and I appreciate the question, we go a lot further than anybody would need or expect or require of us to do. The type of disclosures that we're doing, the process that I just described to you, the way we go about it would exceed any measure you know, of anything that would be required.

Jakob

Not to try to steal too much value from your sec secret sauce, but you know, I was a bit curious when you talked about these cases where you learn, where there might have been something that, you know, did not go as expected. Doesn't need to be recent, but like w what are some of the learnings you had where you assumed something or your models assumed something where something happened and then it performed less than expected?

Michael Bizenov

So that's a great question. So look, we're in our 11th year. So I'll tell you that when we started, I mentioned earlier we're working with 250 different payors. When we started, the base premise was is that we were going to work with ASCAP and BMI. And that was it. And we started with just those two. So a lot of the learning curve has to do with how the different payors work, their payment systems, what you have to go through to get acknowledgements from them. There are some payoers that in the end, you know, that don't pay as regularly or in a way that you would expect. You know, there are two reasons that somebody isn't paying according to how we how it was planned. The first would be somebody who did a bad act, right? So I think a lot of our lessons came from seeing different ways that people could try to game the system. And try to manipulate that. We tried to anticipate it as well as we could, but there are some very clever people out there. So a lot of the learning really came from, you know, more of from that side of it. As far as learning, it's a it's a matter of look, we w it's a matter of good, better, or best. You know, it's a matter of making sure that we haven't trended things the wrong way. There's no really one great example that I can give you other than the bad acts, which I prefer not to teach anybody how to do. But when it comes to that, and again, some of it's pay or to pay or and it's learning the way the payors work. A lot of it has to do with drilling into. I'll tell you that a lot of it has to early on, we learned that you really in some cases, when you have some of these complicated deals between creatives and labels or creatives and distributors, you really need to even get the label and distributor involved. And make sure that you understand that you see the contract that they have and really understand the mechanics of their relationship. Make sure that you understand the split. Early on we learned that not every creative really understands their splits well. And that's why we like to work with their teams. That's why we'll bring it we'll drill down into the contracts that they have.

Jakob

I'll ask a hard question, and you'll probably answer as polite as you can. But as far as I've understood, you know, the creative space which I have been to some degree a part of most of my adult life, obviously there's a lot of creators that are not necessarily too well educated or exposed to the finances inside of music and what the rights are worth. But then also representation, has also maybe not been always the sharpest, the most educated or the most well read. And again, I'm not trying to generalize, and obviously that's not the truth of all. But have you experienced that the education of whole teams would be necessary in order to you know make this happen with the deal or is it mostly individuals and creators?

Michael Bizenov

I tell you most of the key influencers, those attorneys and business managers and managers that we've come across for the most part are knowledgeable and well-intended. Yes, there are gaps in that. So part of the reason that we really want to make sure that we're not only being transparent with the creative, but also with their team, is to make sure that they understand exactly how the mechanics of our financing works, what it what the implications are. How it works and how we execute that. And we try to bring everybody along on that. You know, look, there's a lot of income streams out there. We actually, our team actually has out there we've published the 50 different income streams that you can have out there. And as well educated as you can be, there's always a few that people are like, I didn't know that. We did an educational seminar with the Recording Academy in New York. And there were two pretty, pretty high up there creative adjacent people who were talking about, well, you know, this wasn't I didn't register for that. Did you know you could register for that? There's just such a depth and it's fairly complicated. So to try to help everybody do that, we did publish that out there and we try to do what we can. But yeah, there's always gonna be some gaps. With certain players on the team. Look, again, there are a lot of well-intended family members who take over management. And especially for up-and-coming artists, our big thing is that we encourage people to surround themselves with as experienced a team as they can have. Now you can imagine somebody who's starting out and is looking for a $5,000 advance is not going to be able to afford a large experienced team. And that's why we're pretty meticulous in our disclosures. We're pretty meticulous in our education process because we want to be part of a solution for people like that.

Jakob

Hmm. Very interesting answer, thanks. You mentioned yourself you know, fifty different revenue streams, and we talked about this around fifteen minutes ago, where as an entrepreneur you are inherently sort of lenient and curious about problems. You must have seen a lot of problems in the current infrastructure. You know, just having fifty different revenue streams that might be so disjointed that, you know, professionals in the space might not even think about this as an income stream must pose a, you know, problem and an issue for financiers like yourself. So what do you think about solving those issues?

Michael Bizenov

Well, again, I think it's about financial literacy and education. It's about recommending and connecting people with the right teams. We encourage people to register for as much as they can to make sure that they've properly registered their things. You know, I think it's been heartbreaking to see some legacy artists you know, from a long time ago who didn't register properly and lost out on a lot of income. You know, there are a lot of groups out there that are trying to rectify that, the work of the MLC and the work of a of a lot of the industry associations, and we do refer people to the industry associations as well.

Jakob

Hmm. You know, I think an interesting guest we've had on the podcast is Bjorn Lindwall that had previously been CFO of Hypnosis. And you know, he started a new company called Music Infra. And his takeaway was basically being exposed to this industry and the large scale of, you know, the infrastructure issues. That's sort of what he wanted to address next. Are you guys curious about addressing those head on or are you primarily sticking to education right now?

Michael Bizenov

Well, for us we're sticking to education. You know, as I think I said it earlier, we stick to financing. There are a lot of great organizations out there. There are a lot of great companies that are out there. Our ability to work alongside two hundred and fifty different payors means, you know, we're not looking to become somebody's distributor, we're not looking to become their label, we're not looking to become their manager, we're not looking to become their accountant. Or their advisors because it's you know that's just in conflict with what we do. But we want to try to make sure that we encourage people to connect with those resources and learn what they do. There's so much more room for education, particularly around financial literacy in the industry.

Jakob

How much of you know your position in market being the largest sort of financier here is because of that stance you take of not, you know, being a part of everything else where you have this traditional almost banking mentality? Like is that a big reason for why you've been able to grow so big?

Michael Bizenov

I think it's a big part of it. You know, look, if we're a finance company that, you know, has buried in our contract a clause that we could take over somebody's distribution, well then why would a distributor, all the distributors that we work with, want us, you know, work alongside us with their with their c with their existing clients? We'd be a threat to them. Same thing if we tried to become a label or a publisher. By the same token, we're not going to go to the other side, even on the artist side, and we're not going to become a management company. We're not going to become a business accounting management company for the same reason. We're kind of neutral. We do what we do, we've carved out our niche in financing. We've expanded the product line that we've done in terms of both size over the years as well as expanding into now doing content creators and TV and film. So there's a lot of room for us to grow still within the financing space and keep that neutrality. So yeah, I think it has been an important part of what we've done in order to just become experts in our space, not try to be everything to all people, but also to be trusted. We can be trusted because we're really here to do one thing.

Jakob

Yeah, because you know, one of the natural choices for financing institutions and companies are obviously owning a fund and yourself sort of betting against catalogs. As I hear you say that's not your path. But you are mentioning also a path that is beyond music. Like oftentimes when I hear these journeys, when it comes to you hit a certain plateau of growth maybe or you know the market is starting to be saturated what's a available. If you want to continue to grow, you need to grow into larger markets. What's been your sort of reasoning of going into other spaces than music?

Michael Bizenov

Part of it has been demand from our customer base. You know, they the crossover between music artists and creatives who are doing content creation on YouTube, there's a tremendous amount of overlap. When we saw what was going on, when we heard from the customer base, when we did the research that we were gonna do on that, we saw that once again there was a tremendous opportunity in that space for companies like us, a company like ours to come in, do it the way that we do things. Again. Allowing for ongoing cash flow and not taking 100% recruitment. All of those functions of our product that I talked about a little earlier translate very well over into the YouTube space. On the film and TV space, we do this we do streaming financing for production companies. There, the issue is that most of the financing that's available in that space is only for large numbers, you know, eight figures enough. So the opportunity to come in and fill that niche, y you know, you mentioned earlier, like any good entrepreneurial company, we are looking what is the problem that we can solve. In that space, it was a matter of bringing it down market a little bit and dealing with those smaller and mid-sized companies. You know, one of the one of the underlying foundations of our thought process and in the music space and now in the YouTube and the film and TV, is to grow with our customers. I'll give you again an example. We had a young man who came to us. He had an idea to build a company. He had a miner, manager and producer stream coming in. We were able to get him $12,000 in seed money. A year and a half later, he came back to us for $150,000. Another year and a half, he came back for $500. Two years after that, he came back for $3.7 million. And at that time, he credited us. With the fact that he still owned a hundred percent of the equity in his company. He didn't have to give away equity in order to fuel his growth. Those are the kinds of things that light us up, frankly.

Jakob

That's really interesting and amazing to hear and obviously when I started dabbling in this space nine years ago, that was not anything I heard of. So credits to you and other players in the space that's made that possible. When you talk about the industries you going into now, and you sort of answered this question a tiny bit, but what is the majority of those spaces? Like maturity of those spaces? Like how prevalent are these solutions in the Korea economy and film and TV?

Michael Bizenov

Thank you.

Michael Bizenov

So I think I think in the creator economy, you know, it's both got some legs under it now and some solid things, but I also think it's early stage, if that's not too contradictory. I think it fits both, both categories. And I think the opportunity to provide financing and fuel the growth of the tremendous number of creators that are doing some really solid work out there and have created some great income streams for themselves and really are looking to grow, but don't have that financial wherewithal to grow. I think that's a well also a blue sky opportunity. I don't think there's a ceiling on that at this point. Not one that we can see. Film and TV production, well, that's a much more mature space, but in terms of the financing that's available for that, especially in the what I'll call the lower end of the market that we discussed earlier, we also see it's a pretty wide open field there. And we think that there's great opportunity there. Now, is that as deep as YouTube? No, that YouTube has hundreds of thousands of, you know, creators doing new content all the time, you know, every year there. That's one of the biggest growing industries out there and we're pretty excited about it.

Jakob

In most sort of business models, when you approach a market with addressing the small, the revenue associated to that might not be the highest and sort of very disproportionate with the amount of effort you would put into it compared to bigger deals. But also, again, I'm not an expert in banking, but what I know of banking is when you, for example, provide these, you know good solutions to young companies, SMEs, SMBs, startups, you do it also with the expectation and hope that some of these will grow to be large customers in the future. Is that one of your angles to not necessarily justify, but y you need to come in, take a space, now you say, okay, the smaller production sizes, the ones who are not served by the incumbents. Is that a part of the mentality when you grow into the greater space, for example?

Michael Bizenov

It's two things, right? And I and just to make sure that I'm clear, you know, just because somebody doesn't need ten million dollars doesn't mean that they're a s you know a bootstrapping startup, right? There are good there are companies out there who are doing some great work, have been in place, are creating some really good income streams, it's just not that large you know, yet. Which leads to your underlying point, and yes, part of the premises is that we work with some of these more early stage, even though they're solid, they've got the earnings history. And then we can really grow with them. Think about the example that I gave you a couple of moments ago to really ride up with them. And you know, look as a banker and as a as a company that's providing financing, you know, one of the greatest things that you can do is help see that the capital you provided, you did it smartly, you did it safely, you guided them, you worked with their team, and now they've reinvested that and that has continued to help them grow. As a as a banker or as a finance a provider of financing, it really is tremendously gratifying to be a part of that.

Jakob

Not because we need to have a negative spin on anything, but I'm still curious, like what are the scenarios we you see where someone would take financing where, you know, things take a turn for the worse? Like what maybe scenarios in the past we've seen, okay, this has been a good scenario, it's been a good way thing to finance, but then you see, okay, this is not for the actually the betterment of who's getting the financing. What are scenarios and repetitions you see there?

Michael Bizenov

Yeah, well, you know, there's an old adage in financing, right? Nobody's ever written a bad deal, but occasionally they turn out to not be great deals, right? There are a lot of reasons, you know, y you hope that you're not setting somebody up and that's get part of, you know, the due diligence process. You hope you're not setting somebody up, especially if you look at YouTube, right, where it's constant need for the continuous creation. Of content in order for the income to come in. Right. That's different than music where you have a stream that you, you know, like I said, it could be thirty years old, it could be five years old, it could be two and a half years old, and it has a track record. Here you need to constantly be creating content. So choosing who and how you go about that is important. And you don't want to have somebody, you know, the running thing is, look, we don't want to give somebody money and they're like, okay, I've made it now. I'm going to the beach. I don't have to I don't have to create anymore. So being able to identify that, being able to create safeguards against that is an important part of the underwriting process in the in the content creation space. And that's where it could go wrong. The other thing that you yeah that you can't underwrite for is what if, you know, it's dependent on two or three partners and one or two of them they have a falling out, and they break up, or worse, you have family working together and that breaks up. That's where you can see some negative outcomes for that because that just blows the whole thing up.

Jakob

Yeah, because now we talk about concepts that are sort of discernment in traditional investor mentality. Like how big a part of that is a part of your due diligence where you need to think about the scenarios where this could go wrong.

Michael Bizenov

Well, we stick to the numbers first and foremost. The vast majority of our decision making, our underwriting is gonna be based on the underlying metrics, not just the income, but some of the other the other metrics that go into making these assessments. And we touched on that you know in a conversation earlier. So we're gonna mostly be driven by the numbers, and then the rest of it is gonna be, you know, look, you're gonna you're gonna look at the content, you're gonna try to understand. You know, the audience, you're gonna try to understand who, you know, to the best that you can, who's looking at it, how often are they looking at it, are they dependent on one and done's? Is it something that they're getting repeat business, you know, repeat visitors? Do they have subscribers? What's the relationship of the subscription income to the as you go income? Those are all different factors that you're gonna look at to try to underwrite as best you can.

Jakob

One thing we haven't covered and something I'm curious about is you're talking about the long term growth of the company and you talk about sort of the way you want to run the company and being a stable neutral partner. Usually when you go ahead and build a company and ultimately sell it like you guys did to Go Digital Media Group, there's often like an underlying objective of those owners. You know, in many instances where it's a PE company that might be to, you know, get the margins up, being able to squeeze out profits and maybe sell it again. So what are the intentions of ownership when you speak the way you do by owning

Michael Bizenov

So those of us who are who are our partners here in the business as well as our external partners, everybody is aligned. We're looking to see the company grow. We all buy into the way that we've been doing it. We work together, it's very collaborative. And the goal is to continue to grow the company as best we can. It you know, and by doing it the right way. So we're not gonna look to puff up any numbers and stuff some things in. We really believe in the long view of things and we run the company. Now, if while we're building it for the long view we decide to that you know there's an event or some type of financial event, that would more be an offshoot of that. It's not that we're sitting here saying, okay, how can we, you know, jam up this number or jam up that number in order to it to create a you know a one view or more myopic type of thing to happen. So we're looking at all the metrics. We look at to grow steady, we look to grow safely. Safety and soundness when you're running a financial services company is very important. So that's your risk management, it's your reputation risk, which we believe is critical. You know, it's easy in financial services. There are all different and I'm not talking about just in the music business. If you look at all different aspects of financial services, there are always two paths. There are companies who can churn and burn, puff up their numbers. It's relatively easy to make a lot of money in a very short term as long as you don't want to have a, you know, a an ongoing thing. But those companies end up falling out and burning out very quickly. We take the opposite view. We think that if we do things within our mission, If we do things smartly, if we run the numbers properly, we advise people properly, you know, the future the future growth has continued to come and what we end up doing with that is something that, you know, we'll take as it comes.

Jakob

Because is there a end goal? Is there like something specific you building towards when you build this company? Or is it more mission driven? Like what what is what is the focus here?

Michael Bizenov

That's a great question. No, we're mission driven. Our goal is l look, we are running a business. This is a private company. So we are looking to continue to drive the growth of the company smartly, safely, certainly profitably, but mission-driven I is a phrase that you just used that is something we talk about. Everything has to fit within the mission of the company. We really look to take a long view at this. We're building something that is durable, we're gonna build something that is made to last. You know, and what form that takes, you know, in five years from now. Look, I don't know what the industry's gonna look like five years from now. You know, if somebody fifty you brought up fifteen years ago, you know, if somebody fifteen years ago would have told you how music is being consumed today, they would have looked at you and said, What are you talking about? How music is gonna be consumed in five to ten years, I don't think anybody knows. What impact AI is gonna have and what changes that's gonna bring onto the industry, I don't think anybody d anybody knows. So For us to continue to build on our foundation, to continue to hit the growth. And look, you know, we try not to do it with smoke and mirrors at all. We d we talk about we issue releases about our numbers. We don't talk about money we've raised, we talk about money that we've put out there to creators. That's important to us. The rest of that stuff, you know, again, it's good PR, but we really just try to keep our head down, do the right thing. Let the numbers speak for themselves, let the work we do speak for themselves. And as I said before, majority of our business comes from referrals. So it's a really important aspect of what we do to make sure that by sticking with that mission, that people understand how we do business, what we do, because we depend on them and their goodwill to help fuel our growth.

Jakob

Michael, as we slowly sort of ending the episode, I have a few questions on behalf of the listeners that I think they would be very interested in. Going into financing of music rights is difficult. There's many startups that are approaching it, some are, you know, upwards of almost ten years and it's difficult to do without the scale. You guys have found a way to do that, which I applaud. But if you were to advise founders of where to Build companies in the space that you're sort of exposed to. What are the fields or the problems to be solved that you believe are relevant for founders to start now or focus on now?

Michael Bizenov

I y you know, I don't want to be trite about it, and try to oversimplify it. But the reality is do the right thing. You know, find out where the opportunities are, find out what the needs are, find out, as you said earlier, the problems that need to be solved. And then do it right. For us it's you know, as we've grown and you go back to our roots, we didn't try to be all things to all people. As I said, we started out, we had two payoffs that we were looking to do business with. Now we have 250, but it's something that grew gradually. We reinvested money, we reinvested our knowledge as we took our lumps or as we learned. We have a very experienced team of people here. You know, this is not a one or a two person show. We have an incredible management team, we have an incredible team of people, we do a lot of promoting from within. So my answer would be make sure you understand what you're doing. Don't try to be too broad. So bring in some a really terrific team. Be very specific about what it is that you want to accomplish and then go out and do it.

Jakob

You know, playing devil's advocate on that statement and I'm in this space myself and I hear this a lot is well the opportunity is too small. Like if you want to bring these amazing people, like you're not gonna find something that's worth all of them to stick around. What's your thought about that?

Michael Bizenov

I you know, I think you have to start reasonably, scale reasonably. I told you the story of how I started my first business. It was my high school b best friend and I in his living room. We did the underwriting, we did the photocopying, we did the selling, we dealt with the with the you know the financers, we dealt with the banks, we filled out the FedEx form. And then when we had gotten enough critical mass, we hired one person and then we hired a few more, and before we turned around we had fifty people. We you know, i there's that old movie Kevin Costner. I've never come from the build it and they will come school of things. You know, go out and you know, we heard about all these dot-com startups that were taking Super Bowl ads before they had any revenue and before they had any business. I'm not from that school. I think as an entrepreneur, especially when you have your own skin in the game, you want to make sure that you utilize it smartly. Don't get too far out ahead of yourself. Don't let it become about your ego. Yes, your image matters, but not as much as what you do. You know, there's a thought that you don't build an image and then grow into it. You do great work and that becomes your image. And yes, you have to make sure you get it out there.

Jakob

Cool. Thank you so much for being generous. Thank you so much for this advice and thank you so much for talking about how you guys approach this. I think it's a breath of fresh air in my ears. I get to talk with a lot of people and I and I love your Swiss approach to this, your neutral approach to being that part, because I think that's where I see a lot of conflicts of interest happening in companies because to the fact that I maybe addressed before. That it is hard to build a company of a certain scale, at least that's the assumption. Therefore you wanna be a lot. But having this very neutral approach for me is a breath of fresh air. Michael?

Michael Bizenov

Well thank you. Jacob, thank you for having me here. It's been a great pleasure.

Jakob

It's been amazing. Thank you.

Michael Bizenov

Thank you. Bye bye.

Jakob

Okay. I'm stopping the recording.