Building a Unified System for Music Rights, Data, and Payments

Speaker A

A lot of the people when we're finding money for them, it's lots and lots of unmatched recordings that actually add up to thousands of dollars when you match them all. or every once in a while we get the gold mine of like an entire song is unregistered or certain things like that. which happens more at the higher levels than you would expect. and when we find like six figures and one royalty review, like that's generally the scenario. It's like it's a song with a lot of streams that For whatever reason, the publishing admins just haven't finished the job in these places.

Speaker B

This podcast is produced by Amplitude Ventures, your partner in early stage startups. Today on Sound Connections, Tim Luckow, founder of Notes.fm, joins us to explore the hidden problem of unclaimed music royalties, why fragmented metadata is costing musicians money, and how technology and open APIs could reshape music distribution and publishing. Tim, welcome to the podcast.

Speaker A

Thank you. Thank you for having me.

Speaker B

Tim, I'm I've been looking forward to this conversation. Notes FM and your previous work is something that I'm looking very much into these days. I told you before the puck has started. I'm studying a lot about metadata these days. Obviously I've known about issues in metadata for a long time in role to payments. but it's been a sort of personal obsession of mine the last few months. So I'm looking forward to this. Tim, but for the people who don't know you, and you have a very rich history, who are you and what do you do?

Speaker A

Yeah, so my name is Tim Luco and generally speaking I start music technology companies. And so I started my first when I was at Berkeley College of Music in Boston and eventually sold that to Sean Fanning from Napster and worked with him to start a company which became STEM, which recently sold to Concord as a distribution business. And worked on a few in between here and there. And ultimately my goal is always putting royalties in bank accounts for musicians. And you could do that in different ways and different times.

Speaker B

It's not often we have founders who've built multiple music tech companies and sold them well, multiple sales. so let's start with a with a very general and very hard question. What's your secret?

Speaker A

Work hard, focus. and importantly put money in bank accounts. I think that's really the key of it is in music tech, in my opinion, you know, in tech it's being in the flow of funds. But ultimately, I really care about actually moving money and, you know, helping people get money rather than just kind of pointing things out more passively.

Speaker B

Mm. Okay. So that's a great point. Put money in people's bank accounts. And I guess that sort of is a very natural leadover to you describe notes FM. So what do you do?

Speaker A

Yeah. So Notes FM makes it easy to collect all of your royalties as a musician or a music company. we started here in the US and so a lot of our focus to date has been on the MLC, the mechanical licensing collective and sound exchange, which does that on the recording side. And the MLC in particular has been really fascinating as a partner because they have so much data and so much data that wasn't previously available. from the songwriting composition side of the industry and a significant amount of funds that could be claimed and just are not. And there's a lot of reasons for that, which we'll get into. But to me, ultimately the disconnect is the data fragmentation. There's just too many places, too many parties, and not enough aggregators that are true aggregators. And so I think that's kind of the interesting opportunity right now is who can build a experience that is simple enough. for the masses, and sort of the right partnerships with people like the MLC where you can build trust and, you know, scale that trust to significant sums of royalties. Cause otherwise they're gonna get distributed to the largest parties and those royalties will go away, for those musicians.

Speaker B

Hmm. So before we go into the story, which I'm looking so much forward to sort of unfold, I think it's important to talk about sort of the basics the discrepancy between well the metadata and and RSSC, ISWCs. so if you were to d describe it a tiny bit deeper than the common understanding that there's some codes that we don't really know who belongs together, like what is what is the what is the problem here? What are you what what is the online problem?

Speaker A

Yeah, I think the problem as I like to explain it is complexity is the enemy. And so it's too complex for any single person or party. And that is not a good thing. so in particular, my view is becoming more and more that the recorded side and the songwriting side should probably not be two parallel industries and should probably be one service. and to give a direct example of that. You got ISRCs, which is the recording side, the distributors create them, et cetera, and ISW side coming ISWC coming from the publishers and the PROs. And a lot of the money that we find in the MLC is mismatches on those two codes. And so very often they're unmatched, so nobody has matched them. And surprisingly often they're incorrectly matched to the RON recording or work. And so if you don't do the basics, which in my view is build a catalog and get your catalog of songs in one place and then track that catalog across works and recordings, you're gonna miss a lot of money. and so we have a thing called credits.fm which works on this a little bit and it basically has all of the open ISRC codes, ISWC codes, and then also IPI, ISNI and UPC. And my view is basically those five codes kind of make up the public domain of music metadata. Outside of the credits fields and things like that.

Speaker B

Hm. Amazing. I started using the API earlier today actually. So so thank you for that.

Speaker A

I saw you sign up. Love to see it.

Speaker B

no no. So I was like before the episode I was just researching and and obviously I established playing Credits FM. I've read about it before. I also use MLC and I use a few others. So I was just let me sign up and try it. And so that's great. So so actually let's just talk about that because you know, MLC has done a huge impact in the industry of that initial work and we've also had them on the podcast. but but try to sort of explain why you're doing credit stuff. Like what what's the initiative you're doing?

Speaker A

Yeah, we tried pretty much every credits platform in the industry for notes and we just could not find the data that we needed to do our job. And so we kind of had a choice ahead of us of like, are we going to try to build a super closed source thing, which you might as well not be on the internet for? or should we try to do something more open that's kind of inspired by AWS and those types of platforms where we as notes use it, but then also other people with other platforms could use it as well. And the key in my view, there's been a lot of attempts at this over the years, a lot of people trying to build the one. I don't care about that as much as our attribution index having the most verified sources for those codes. And so that's really our view, is what credits enables us to do is look at a musician or an artist and basically enrich a catalog by searching all of those specific codes and then kind of accelerating the speed of finding the other codes because credits for scale, it's a couple hundred million codes in there already. And so we have a kind of constant process of like crosslinking and verifying match or no match and all these kinds of things. And it's only at like fourteen, fifteen percent done. So I mean it's very much an active work in progress, but it's been exciting to see the more adoption we get across the industry, the faster it goes. And at this point, The adoption is much wider than I ever would have expected this fast. because I think it's solving problems in new ways through APIs that I guess I would say a lot of the predecessors couldn't do because of deal restrictions. and you know, I think a key insight for us is this idea of an ISRC is kind of a public code at this point. That's not really like unique IP anymore, nor is an ISWC because of the MLC.

Speaker B

Yeah. So it it's quite interesting in in usual venture backed companies, which you raised recently five million. Well, I can't really call it venture backed, we'll we'll break that down in in in two seconds, but you know, you wouldn't necessarily have a side quest of, you know, open sourcing data. That's like a not usual behavior. So what's the motivation behind that?

Speaker A

we have large catalog owners that are paying us for catalog reviews and this makes us better at them. So ultimately it's kind of just that. And now we have customers of that API. And so you know, it's been helpful for us, honestly. And you know, if if what you were saying was true where we were only venture backed, that would be a true statement. but thankfully we have a lot of music people. on our cap table and they understand why we're doing it. And, you know, for most of them, it helped us buy more money for them. And so it's really clear, frankly, when you see a pre enrichment catalog review versus a post enrichment catalog review with this credits thing, it is night and day. and so that's been enough of a signal for us. Also, I'll say, I mean, built in like a month with all these tools. So it's not like it cost a ton of money to build. It's it's more just like you have to know certain things to be able to do certain deals. But It's not and now there's been many more months since then. but in terms of like idea to working prototype, it was overnight. So, you know, for me it's always nice when you get flashes of inspiration and you can move quickly on ideas. But ultimately, the key was the MLC infrastructure was already in place. Yeah.

Speaker B

Yeah, so there's no luggers that have gatekeeped and that that's for the better of the industry and now you're basically contributing to it, you have contributors into it to enrich tests so you can deliver your job better. But y you said fifteen percent coverage. Is that what you believe is done right now?

Speaker A

No, much more coverage than that, but fifteen percent in terms of the full credits graph being fully verified. Okay. And what that really means is have two or more sources verified that this matches this c other code or not. And so that can be as simple as like this ISRC is for this artist and this album and this song, or it could be that ISWC is matched to that ISRC. And is that correct? And so a lot of what we're doing with credits and with our approaches notes in general is we're using the wisdom of multiple platforms to verify is a thing real or not. And I think in this day and age, that's kind of the real challenge is like it's pretty easy to spoof and defraud people and things with AI. And it's much harder to trick music brains and discogs and all these other sources into like having false information. So We're actually very strict, like with notes, for example, we don't let people upload certain CSBs or do certain things that could give us bad information. we're very strict about our sources that we'll intake from and the ways that we clean the data on the way in.

Speaker B

Hmm. It's so interesting. And it I you know, right now we're going down the rapid hole of nerdiness, which I love, and we'll get back to it. but I think it's it's also important to sort of tell the story a tiny bit. So let's let's turn back time. you were in college, you were Berkeley, and you started your first company. Try to let me understand what happened there.

Speaker A

Yeah. So I was at Berkeley in Boston. I was surrounded by amazing musicians. I'm a musician myself. I play bass and I done a couple tours as a bassist and as a tour manager and pretty quickly realized touring was not really my long term life path. I had friends making it and they were still living with twelve people on a bus and stuff. And it was kinda like actually that's not really what I thought it might be. And I had an interesting opportunity because I was in Boston and not New York or Los Angeles or other places and parts of the world. And ultimately Boston was kind of underserved at the time from this distribution perspective. And Spotify had just launched in the US. So my timing was kind of good. And I basically started managing a lot of people. And so I Had a lot of friends that were making music that were starting to do well. And they were all looking for business help and structure. And I started a company with a couple other entrepreneurial friends that were trying to learn the same things to all learn together, hey, let's go make as much money for these musicians that we like as we can. Let's throw shows, let's put out records, let's do whatever. And that led to a deal with the Orchard and starting five different labels and managing about 20 artists or so. and then funny enough, I I got featured in a marketing campaign by Google because I had such crazy Google Sheets and things, sharing all the the transparent data with the artists, where we we had that happen and we won a little accelerator and I used that money to go to San Francisco. And so 10 days into my San Francisco trip, I ended up meeting Sean Fanning, who needed a bassist. And so All of this work had led to that point is how I viewed in retrospect, where we had a really good structure, but I had never really built like an actual technology platform that scaled before. It was all conceptual. And most of the ideas on my side that went into STEM were like five year ideas. Like they weren't new ideas for me. There were things I'd wanted to build for quite some time. And just it's hard. And so what Sean really enabled me with was knowledge. Sean, I think, is misunderstood by the industry, in my opinion. People really should look up Snow Cap and what he did after Napster. I think people would be surprised the direct to artist payments things that Napster actually was trying to do and Snow Cap was trying to do. And you know, there's a whole nother alternate history where like was the problem copyright infringement or was the problem paying artists directly? I don't know. But there are takes on that. And ultimately Sean surrounded me with amazing engineers for about a year and a half in San Francisco. Wow. people who went on to start many big tech companies and platforms and things. And I kind of learned how to build through that with with friends that I worked with. And that idea went through a bunch of twists and turns as all startups do. And, you know, ultimately became STEM. And STEM was a pretty simple idea from the start, which is, well, we want a distribution platform that works this way and can do split payments and has a nice app instead of like a kind of mediocre designed app. And you know, through fanning and Sean Parker, I was able to get a deal with Spotify right when it launched in the US. And that was kind of what we needed. and then, you know, with that we were able to prove the idea and put out some good releases and get deals with the other platforms and It was just early enough where there was some competition of distribution, but it wasn't the line that everybody says now about it being a commodity, which by the way, like water is a very valuable commodity. So I don't know. I think people people still to this day are underestimating the value of getting paid directly by the platforms. but that's a lot of what I have been interested in for a long time. And notes really for me is a continuation of my goals with that company. Where I really thought all the distribution platforms were going to go across the rights types and become like one stop shops for royalties as a whole. And it's kind of interesting. I mean, almost none of them did that. They almost all went into advances and services and owning content or licensing content. And I think that you can only do one of those things is kind of what it seems like in the sense of you can either be a really big tech platform. Or you can own content yourself. But I don't know if you can truly do both in music. I think it might be a little bit too small of an industry to really do it.

Speaker B

Hmm. So so why did you believe Lacidov is a big enough problem to start notes? So you've had this career that's been quite impressive and last company, ultimate last year, was acquired by Concorde. So there's been some some successes. First of all, like weren't you tired by then? Like, you know, starting your third company and and and why was the problem big enough to motivate you to to start again?

Speaker A

the job's not done. So I mean ultimately I can't use it as a musician and nobody I know can use it as a musician in the sense of like there still is not one place to go and collect all those royalties. I still have to go do two, three, four different deals to do that. And that's frustrating. so for me that's a lot of where it comes from is this is just something that I think should exist and I want to see in the world. And the others don't seem to be building it. And so I am really inspired by the results that we're seeing so far as notes. And it has been really, frankly, like unbelievable to see the amount of money we're finding for these different artists of different sizes. And being able to find money and help get money for basically every single one of your favorite artists has been very exciting. I mean, my kind of favorite moment of the stem stuff was when we distributed blonde for Frank Ocean and I got to hit send on that for them. And it was a very exciting moment in time. And it was really interesting to see everything that came after where so many artists wanted to be like Frank Ocean that really led to the growth of STEM in many respects for a while. And with notes, it's been so interesting because that sort of mimetic theory kind of thing like I love this artist and they found money using this platform. If it wasn't so embarrassing, we would have so much of that. But the truth is, a lot of why we've gotten into more and more distribution and publishing and direct collections and our going away from pure review is because we just want to be able to fix the problems ourselves faster. And so it's really interesting. I mean, it's not a dissimilar lesson from starting STEM in the sense if I had a distribution deal already when I started STEM. It just took fifteen percent and didn't give me all my data. So it wasn't a good deal. And when I look around, I see a lot of distributors selling to private equity. I see a lot of distributors selling to major labels. I don't see a lot of independent APIs. And I think that's a really fascinating combination of opportunities when they really stack up together.

Speaker B

That's so interesting. We'll break this down a lot. this there's much to cover and it's I love it. And, the backers that you had, you raised five million dollars from, musicians, hardcore musicians and music industry people which not, see that often, very hot right now. Betty Blanco obviously everyone knows from from all the work he's done the last fifteen years, but YouTube now also a sensation and such. So it's it's everything from heavy hitter hitters, from big big companies to, very hot producers and musicians. So There must be recognition behind this is something worth pursuing it. But but let's break down s a cases so we understand it a bit. So let's say you've done an audit audit of of of a big artist and you find money somewhere. Like how does that look? What where was that money and and how do you find

Speaker A

Yeah, so generally speaking, it's right now for us in the MLC or Sound Exchange, the two US black boxes. And a large majority of the time it's in the MLC. and I think the reason for that is even if the song was registered perfectly on day one, there's sort of a YouTube content ID-like dynamic to it where there's new recordings coming out all the time that use that publishing work. And so There is an active ongoing job to be done to match those recordings to that work and verify they're correct and all that kind of stuff. And so a lot of the people, when we're finding money for them, it's lots and lots of unmatched recordings that actually add up to thousands of dollars when you match them all, because it's all the mechanical royalties in the US from those recordings. or every once in a while, we get the gold mine of like an entire song is unregistered or certain things like that. which happens. More at the higher levels than you would expect. and when we find like six figures and one royalty review, like that's generally the scenario. It's like it's a song with a lot of streams that for whatever reason the publishing admins just haven't kind of finished the job in these places. And I think a lot of that kind of comes down to I think that there is a pre-MLC and post-MLC in the music industry, in the US at least. And you would just I know firsthand now you would build a publisher differently today with all this data than you would have five, six years ago, ten years ago. And it's been really interesting to see like these are kind of new jobs to be done. And that's what's very interesting to me, also combined with our business model is very different than our competition. basically everybody is a percentage model and we're a subscription model. And so plus usage for the higher end. but you know, not a percentage importantly. And so That is by design, it helps us work with these pseudo government entities like the MLC and Sound Exchange who don't love those models. But it also lets us work with anybody who wants to work with us. And so what's really interesting now is anybody can pay for a catalog review and get it, you know, pretty much instantly. And then there's really two paths from there. You can either fix the issues through notes, where we become a published endowment for you and we go fix it all, claim the money, pay you through Stripe every month. That's kind of just how it goes from there. or if you have an active admin, you can download this very detailed catalog review CSV and has all the specific codes back to credits.fm like verified ISRCs, et cetera, for that admin to go and match and get you your money. And as you might imagine, customers don't love when the admins don't help them get their money. And so for us ultimately, we're just trying to make sure that they get that money one way or another. And we will never actively admin somebody who has one, but we will happily take the business if we can.

Speaker B

That makes sense. so so let's go a time bit back to data so you understand it. So how detailed is this data? Is it writer splits as well? try to explain to me how this is laid out.

Speaker A

Yeah, it's about as detailed as you can get. like it has every metadata point and every code for every song, pretty much. And then what we're kind of getting that is not public and we wouldn't accept the public data for is the split per musician. and one of the key things for our system, and I think it's a little bit different in how it's architected, is I really have a strong take on this idea that like it should be musician and not just songwriter. because the songwriting is one role that that musician did on that track. They often probably also performed it, they did other things on it, produced it. And so I think a lot of the money goes missing because of that distinction, where like somebody is being registered only as one of those types, and then the other types are kind of like totally uncorrelated. but so ultimately, you know, what we are trying to do is once we've identified there's money missing, we're trying to do everything we can to validate. That that musician, would have claims to a song like that from other data, from other songs, from that artist, things like that. And then we are having that person legally validate, their split and saying yes, go get the money. And similar to distribution, like that's a user action. and so the users have to be truthful. If they're not truthful, you know, there are legal processes for that that go outside of us, in the sense of like the MLC as a process, sound exchange is a process. And so but if the user is telling us the truth and they are that musician and they wrote that song that has unclaimed royalties, you know, our ideal scenario is we go do that registration, we match those recordings, we basically, you know, fix the issues. and then the money starts flowing and we can kind of pay out based on those contracts every month.

Speaker B

So so try to walk me through the how that happens. Again, if if you had a something unclaimed, you would go to an you know, a CMO or PO or other sort of types of organizations and I I would assume a lot of that is semi manual. Like it's you know, organizations that are famous for not being too modern.

Speaker A

Well, that's actually what's interesting about the MLC focus is we can do all this in the MLC ourselves. So, we have to be the publishing admin to do that, which is kind of the point earlier of like admin versus not. But you know, in the MLC we do not need other approvals for anything that we represent to claim. And so that is really key. and you know, what you're saying is not wrong. But we're excited at the opportunity to work with PROs more in the coming years and we've built a product just for them that, you know, would help verify data for the network. And so I think we're gonna see some deals start to come through on that from pretty soon.

Speaker B

So what's the sort of try to sort of explain the coverage of MLC versus Europe, Asia and and sort of America so people sort of understand the solution MLC has and and how that might not necessarily count the rest of the world?

Speaker A

Yeah. Well, and I think it's important to say at the start that non US musicians can claim money from the NLC. So it's US royalties going in there, but generally speaking, there's a lot of US streaming listeners. So the average artist does have a decent amount of royalties if they have a decent number of royalties going into this MLC source. but you know, it is only one source and one country, to your point. And so it's just the start. ultimately it is more of an international PRO, CMO deals thing. we are taking the harder path, I guess I would say, in the sense that we are not going through a sub publisher who's gonna take 15% of our users' money. you know, we are working with our cap table and our users to get the deals that we need to get. And we're doing the deals in structures that we believe in. and so what that mostly means is we are intending to work with the various international PROs to further verify things are real. That's kind of our main interest in how we work with them. and, you know, I would say like having a song with royalty runnings in a PRO statement is a pretty good signal that that musician worked on that song. And better than most, I would say. and so I'm not expecting to get flashy APIs back or anything like that. But I think if we have users on notes that work with PROs that are members of PROs, and we have technology to enable certain connections and more and more PROs are using them, I think there's an opportunity for kind of a new product dynamic with how they work. And so it's definitely not a job I'm interested in taking on in the sense of trying to collect from all the sources that PROs do. I think there's a reason they're a hundred years old plus many times. but APIs are useful. And so I think there's a technology opportunity and how do you bring that data to the users, to the musicians.

Speaker B

So even though this is outside your, current scope, obviously going outside of US seems like a natural choice over time, or at least the data as you say. So do you believe there will be a modernization of the approach to work with these PRs?

Speaker A

Absolutely. Yeah. And our view is basically we are going country by country and we are starting to do deals per country. And so it's different than doing a deal with like Spotify or Apple or those kinds of groups. but I think what's important is that trust factor and who else do you have deals with? How do you work with them? Who are the artists that you're coming to the meeting with or through? you know, if you're introduced to an international PRO by their biggest customer or member, that helps. And so luckily for us, we have a lot of people we work with with hundreds of millions of dollars of rights. And so that is a lot of how we are trying to prove legitimacy, I would say, is by pointing at real things that we've done and real solutions that we provided and trying to get them to take part in that. because I think it is a collective thing. And I think it is something where like To be a network that actually works, you need to get the whole network. And that's the really hard part. But I think there's interesting opportunities when you're not a percentage model and when you're kind of building for internet scale from the start and these kinds of things. you have to do it differently. But I do think the opportunity exists in the market today.

Speaker B

So th there's a lot of startups in this space that are sort of taking a swing at it. some very established companies and ex established founders like yourself, some from you know, early beginnings. Obviously, this is a pursuit that people will see because of data AI, ingestion is easier, connections is easier. Like this is a a huge problem in the past that, you know, was just wasn't publ plausible to to to solve really with the capital needed to build something like this, where now it's more viable. You'll probably see a lot of people coming for this and and with your collaborative model and mindset, to some degree you're also, opening the market for other people to to take take a piece of the pie, which is natural. But what's your reflections and thoughts on this?

Speaker A

Feels a lot distribution ten years ago to me. like actually exactly the same. I had so many people tell me, don't bother starting STEM because DistroKit already exists. And it's just not the same thing at all. and so you know, I think a lot of companies are starting around this MLC data and as they should. The MLC needs even more of them to start to actually get this money claimed. so I don't think that's bad. a lot of our API positioning and sort of usage positioning a lot of these things is because of what you are saying. I think a lot of these founders probably don't want to have to do all the compliance work to move money worldwide or to build smart contract systems that move money or these kinds of things, which is the kind of stuff that we like to do. so you know if we can serve markets and make it easier for people to launch these apps faster that help more musicians, that's a win in my view, as long as we're getting paid. you know, and I think that is the trick. And so Right now, there is definitely more and more like royalty review, catalog review type tools launching. you know, our hit rate is ninety five percent. So it's not that much of a surprise. like there's just so much money to claim. But the big question for me and where notes is going strategically and where I think it will be harder to follow in some respects is collections. so like we haven't necessarily announced it in like its own press release or anything, but we do have a direct deal with Spotify now. We do have more and more direct deals with the source of the royalties. And that means for a user of notes, I can collect a recording royalty directly from Spotify as well as the mechanical royalty from Spotify from the NLC. And so these deals are hard to earn the trust to get and require a lot of kind of previous experience moving money with those partners. And so that's exciting to me from the perspective of we're building something unique at Notes that I don't see a lot of the others doing. and I would also say the the focus for simplicity is really intense at our company. And I mean, we're about to launch a new version in the coming weeks that is even more simple than the current one. And that's exciting to us because it still is too complicated, like as a whole. and so we're trying to make it so there's kind of less and less data entry. needed by people. and it's more about verification of things that are already there. And so that's that's really where I think it's all going.

Speaker B

That's so interesting. tr try to explain a tiny bit more about your sort of your API approach and sort of opening up your your data, your processes to other companies to build on.

Speaker A

Yeah. So there is a European company I was a really big fan of called Fuga, which powered a lot of the distribution infrastructure for the industry. that, you know, recently sold to downtown and then to UNG. And so it's kind an interesting thing because I have nothing against UMG. but a lot of those independent companies don't really want all of their most valuable data going to a competitor for deals. And there is a dynamic there worth watching when Revelator just sold to Warner Bros or Warner Records or Warner Music Group. And so ultimately, I think API infrastructure is greatly overlooked by the music industry and kind of always has been. otherwise, you would have more shared APIs and more companies that were building off of like the jobs to be done framework and these kinds of things. And just to explain that in software, there's a concept of jobs to be done where There's, different user types, and those user types have different jobs that they need done. Say a musician that wants to find their royalties that are unclaimed. And you've got to build ways where you can do that job, you know, with margin. and so I think what's really interesting about the API side of the industry is I actually know exactly how much it costs to deliver a song or to register a song or to s you know process a statement. these are not guesses. And it has nothing to do with the earnings of the song. And that's the powerful part. And so there's a lot of groups out there, more and more of them, with, you know, a large accumulation of rights and decision kind of rights around those. And so it's pretty fascinating to be going up against a fifteen percent model at a hundred million dollars AUM and offer something different. and that's a lot of what we're really interested in, is Very much inspired by Claude and Anthropic and Cursor and these models that we paid too much money to of

Speaker B

Pay a lot, yes, that's true.

Speaker A

Yeah. they're they're amazing tools. Sometimes I wish they were a little bit clearer in their communication around that stuff. But it's it's helpful to have this model of like, okay, I'm paying for a certain amount of this thing. If I go over, I have to pay an overage rate, but I can keep going. I they're not gonna stop me from using the thing. So I don't wanna stop from buddy somebody from distributing a hundred thousand songs through an API. I just need to make sure that they understand the cost associated with that. And for us, you know, what's kind of interesting is it all kind of works the same to the platforms if our quality control is working correctly and some of the other things we're doing. And the platforms like us because we deliver in full credits. So credits.fm is mostly about the codes, but we also can deliver to the platforms like with Spotify, for example, we deliver into Son DNA, that credits platform. So we're trying to have the richest experience kind of across the board. And more and more, what I think I'm realizing that looks like is what is the best distribution experience? because there's kind of a world where it still is too complicated. The second you say the words neighboring rights are mechanical, you've lost. And so people really understand delivery and distribution and these kind of core basic concepts I'm gonna make money from that. And I'm I'm very interested in like how do you make that easier? But the API just enables scale. It enables us to work with partners that have. thousands to hundreds of thousands of users already and provide that kind of infrastructure to them from the start. And you know, that helps us scale faster.

Speaker B

It's great. It and when I've been doing my homework the last few months on on metadata, I've been surprised about how closed everything has seen seemed. it's it's been really difficult to find good sources. It's been really good to difficult to find open source technology. and you know, when I've been experimenting myself I've taken so much like weird open source technology from from places that doesn't make sense. Like it's not it's clearly not an industry pursuit. and sort of high bits and pieces the readership belong together. So so why do you believe it is such? why, if you look at the technology community at large, there's been a very open source approach to many things. Obviously, it's it's it's exploding nowadays. but why has the music industry not been doing that, in your opinion?

Speaker A

Well, I think it's connected to something that you said earlier, which is these companies seem to go away every three to five years. And I think that has something to do with their backing. And so, I mean, how are the incentives aligned is an important question. And if a company has to exit in the next five years, they're not going to build any of this stuff. And so I do think that's a really big part of it is like whether it's companies going out of business or companies being acquired, almost all of this infrastructure has been bought at this point. and you know, the ones that are independent are only independent because private equity bought them. So it's tricky and difficult. And, you know, I think there's not enough technology first people trying to make a run at this versus people that already have the capital to buy funds or do things like that. And, you know, they're really doing it to arbitrage catalogs. And there's nothing wrong with that. in fact, there's a great opportunity for that right now in the market. But I think it's something where You do need a certain conviction to go all in on the tech. And I think we have that. And, you know, I think it's interesting to see a lot of our competition is already kind of moving towards, well, we'll help you sell your catalog or you know that these kinds of things, which I am just completely fucking against. Like if you want to use the tool to get an estimate and sell your catalog, go ahead. But I'm not gonna give you give you a pop-up to do it. Like I want you to own your rights and monetize those rights to you long term. And that's really my goal of why it's a platform is it's the classic Bill Gates line of like, well, a real platform is gonna provide more value to its users than itself. And that's true G V.

Speaker B

Hm. I I think it's quite interesting when you look at your cap table and the investors you have and then also what you've explained about the dynamics of independent companies being bought. Was that a very conscious choice of you? Because I can imagine, through your successes that you were able to get capital from many different places.

Speaker A

Yeah, in my view, my past successes were one tenth the size that they should have been. but ultimately None of the prior attempts got all the way there. And it was usually non-music people that had the different opinion. And so it was very much by design for notes to go pretty much all in with music folks. We do have one fund that we're we like a lot, Better Tomorrow Ventures, a FinTech fund. and they were an early investor in ours, but I mean it was large majority music industry folks, strategics, big artists, management companies. And We really just went around with catalog review and found money for everybody that we knew and sort of created a model where that was like the sales process essentially was we'll go find money for like he was in the press release, like Zach Bryan, and then we will work with his team in different ways. And they bring all this amazing experience and expertise and ideas on how to reach more artists and ways that the tech could be better. And like it's just it's fascinating to have that kind of input. And really importantly to have them want us to get better at what we do versus just sell. and that's not to say that we don't plan to have some kind of, you know, liquidity event in the future. We'd certainly do. but I think it is to be determined on which type of event. And, you know, I think for us, like we are much more interested in the stripe type of path where we are creating real revenue and real, you know, impact on the industry and control our own fate. And that's the thing that in many ways I care about the most as a founder this time around with all my prior experiences is essentially us finishing the job and doing what we said we were gonna do, regardless of how hard it is.

Speaker B

the word hard is interesting because you know, building a venture no matter what is hard. I I would assume that it at least your sort of your stability in life would be tiny bit different now than it would be ten, fifteen years ago. Maybe that's also what giv gives you some sort of the the mentality of of patience that this will take time. And it's okay because like, you know, I'm not completely broke, I've I've still I've I've made some stuff and and now I can just focus in the next many years it takes. Is that a part of the mentality?

Speaker A

It's definitely a part of the mentality. And it does feel good to have seen some of that value realized into liquid form. and you know, I think both from the perspective of like seeing that things of that scale can be built, and now have been built. But then also, yeah, I I think there's something around this idea that there are loud large outcomes to be had. So like distro kit is a really good example to me. I knew Philip pretty well. I was a actually a large distro kid user before I started STEM and I pitched him to split stuff. I pitched him all those things. He said he didn't want to do it and that's when it became its own thing. but you know, he sold for supposedly two billion dollars recently and had millions of users that he was able to help with those jobs. whereas STEM was kind of a fraction of that. And so it is exciting to see the outcomes and it's exciting to know that things can be done. But it's certainly is still unrealized in the grander ambitions. And, you know, for me personally, I'm glad to not be broke. I'm glad to not be like the starving entrepreneur. 'cause I've been that in the past and it's not easy. I've been that many times in the past. But I think right now, you know, it's it's really all about the customers and it's all about like how do we serve these customers that we are growing. Because every single one that we work with is recommending it to others. And, you know, we're we're very interested in less like I I call it internally like the venture hamster wheel. But basically I I have certain takes around like once you go beyond the Series A, you only have so many paths, especially in music, with the kinds of outcomes that are needed. And so I mean as a as a venture studio, you know this well. It's it's not easy and I think the scale, interestingly, is out there. That's not actually what I worry about because I look at Band Lab, I look at Suno, I look at the user counts of these platforms, I look at the 10 million people paying for independent distribution. there's a lot of people paying for these services already out there. but I don't think anybody's really built that music fintech platform that they could. I think that's really the big opportunity is like how do you get to that? And you know, I think our deal with Stripe is kind of interesting for that.

Speaker B

So you you talk about rounds and you talk about the control there, but y you've raised this, let's call it initial five million dollars. Do you believe you can build a revenue in the business that can sort of fuel that growth the rest of the journey, or do you think in order to grow to the level that you're sort of talking about, you need to raise more capital in the future?

Speaker A

My goal is to be default alive the next time I raise capital. so it's not about never raising again. but it is about not needing to raise again. you know, I I very much am influenced by the way that DistroKid did it, where he did his seed round and then did a growth round. And I think those dynamics seem to be pretty good. and you know, we We like to talk to those kinds of folks and we like to think about what that kind of future could look like if we did it right. but we n would need to make sure that we did it right, you know, and that's really the key is I think right now we feel really good about the track that we're on and we're like seeing results. We're obviously working hard to grow faster and all the classic startup things. But yeah, I mean, you know, to serve millions of customers, which is my goal with notes. it would be amazing if we got there on only the five million raise, but I I wouldn't be bold enough to say that that's probably how it's gonna go.

Speaker B

No, it makes sense. And it's especially you need the the very best people at the build of everybody's product and, infrastructure costs, that's gonna be something quite interesting. Yeah. Do do you believe there is a timeline in the nearish future where this would be solved at scale? And and when I say sort of solve at scale, I mean that it's more of a standard that, you know, things are in place, that people get their money. Is that sort of a decade thing or what do you think?

Speaker A

Yeah.

Speaker B

yeah.

Speaker A

Yeah, I think it's a three to five year thing. maybe faster. Yeah. I mean what I can say with the Rails that we're building, kinda what I'm seeing firsthand, is like these problems don't need to exist in this way and is a structural thing in the sense of we right now can deliver a song to streaming platforms and then go register that same song in the MLC and you know, more and more places. And so like just that and then running this weekly job where you're matching things and doing that kind of stuff, like There are technology solutions to do this today. the worldwide aspect is the hardest. But our view is to kind of, you know, get there over time. And so we're focused on doing it perfectly in the US first and then kind of proving it out from there.

Speaker B

What what will what would the industry look like at that time? Like who who were the winners? What would the dynamics be? Like how will things change based on that?

Speaker A

My far out theory that I'll share is I question if distribution and publishing are still two different things in that situation.

Speaker B

Yep. You mentioned that. That's really interesting. I just

Speaker A

I just wonder because I see this clear data gap between the two. And I'm hearing from all these people like, well, the distributors didn't give us the ISRC, the publisher didn't give us this. Like it's always the other side did something wrong. And seems like a perfect opportunity for a new technology to come along and do both jobs and you know, price it differently. And so I am interested in that because there's enough large tranches that could be converted. with certain deals that like at a certain point that fifteen percent is just really expensive. So I mean I'm really interested in those dynamics and I do think publishing is the sector that's gonna change the most in the next five years.

Speaker B

So t try to explain hypothetically what that could be when you say a technology consolidating the two or w whatever you're getting at. How how does that look when you imagine it?

Speaker A

I think it looks a lot more a la carte. And so, you know, when I think about it, I think a musician is gonna have their full list of songs, their catalog and their credits. And they're gonna have different deals for different songs. And maybe some of those deals they go do a deal with a catalog fund or they go to a deal with a label or publisher that's not all in. Maybe it is always all in, but I don't know if it will be. like we see certain groups working in the space like Duetti that are already changing those dynamics. In the sense that they're doing single song deals and that kind of stuff. And so, when I look at even some of our users today on notes, they are reviewing every song in their catalog every month. They're publishing some of those songs and they're distributing some of those songs, and they're publishing and distributing, a smaller number of those songs. And so our job is like how do we get more and more songs to be both and then prove that the collections are that much better because of it. And that would prove the thesis, basically. but I can say there's enough royalties missing from very, very large songs that you would assume are the priority for those groups that there's clearly like a structural change at hand. I'm not, you know, just to be really clear, like I'm not saying any of the major groups changed how they're doing business or like there are things that are working for a lot of folks in the industry. But when I look at like How would you build it from scratch today? I can speak to my own solution and my team's solution. And, you know, our view is like that's all generated from the same code base. And so the choice to structure the deals in fragmented ways is purely a choice. And it doesn't have to work that way.

Speaker B

So do you believe there's a world where sort of let's say publishers would merge more into distribution and sort of these independent companies would either not exist s as much at scale and just be more consolidated or like practically what do you think the dynamic will be there?

Speaker A

it's interesting, having an API that can register songs and match recordings and stuff. we we talk to a lot about independent publishers adopting our technology. that's a path that's interesting to us because again, like we don't want to own rights or necessarily represent rights in that sort of way. We're representing rights for the admin musicians or companies that we work with. but yeah, I mean, do wonder in particular about a lot of the advanced dynamics. And the services provided for those advances and what I hear from folks about the calculus they are changing. and so a lot of what I find interesting in the conversations that we have with different people is we're kind of selling like savings versus debt, basically. in the sense of like you can use notes and claim these MLC royalties and not pay us a percentage, or you can like hold out. on us doing that in hopes that it will get you a bigger advance from a label or publisher deal. And I'm always trying to get people to take the cash. I just think it makes more sense and then you can do whatever deal you want to do after, but at least you have that money in your pocket. and so yeah, I find those dynamics fascinating. And I just think publishing in general, it was always the side that you couldn't really see. It was always the side that like from a data perspective, you just it was really hard to understand. Yeah, and I think the MLC has been really interesting in just illuminating it and illuminating it in a way where a new platform like us can come in as like a pseudo equal of a publishing admin that exists today and do the same job to be done, which is claim royalties.

Speaker B

I I think it's it'd be really interesting and you know I'll I'll ask you a few a few the last questions soon. but I had this had this episode a couple of days ago. So I used to have a music company, a small independent music company that sort of was tight satgeist youth in this part of Norway. Ended up not working out for many different reasons, as these companies do. but we were at one point, you know, a lot of hands trying to sort of build this company. and I had one of those artists who turned out to s become fairly popular, come to Hey, do wanna help me with a tour? I'm doing this tour coming up with digital advertising, which I I do a lot. I think is quite interesting. I also think that's you know one of the benefits of AI. And I do this for our startups all the time and we have scale is what I do it for, and you know, I've build these systems for it. So we set up the tour, do the ads, push it out, sold out. Like freaking I you know, I knew my my stuff Because I've been doing this for the last couple of years, but I have these systems and I just like all these small details I can do with server side and on a normal tour and just it works so effectively. And I was like, maybe I should go back into music. Obviously, I'm not gonna do that. I I'm on the path. But the interesting thing for me is okay, what I tried to build six, seven years ago ended up not not working. If I were to do it to now, I would basically run a music company as a tech company, more or less. because everything is so accessible. And I think that's gonna change so many dynamics where technical people would basically run a traditional music company as a tech company and all these problems that you talk about would be possible to solve with s simple code and and sort of implementations with something you build custom.

Speaker A

Yeah. I think it's really interesting because I think that is true and representing the human service side correctly is becoming more important at the same time. Yeah. In the sense of one of my jokes with some of my friends that we all started distributors 10 years ago is that I think the distributors really made their job a lot harder than they had to because when I was doing it, we got hit paid to hit scent. You upload a release and you distribute it and that's the job. And now there's this expectation of like, well, you were supposed to get me New Music Friday and you were supposed to get me XYZ playlist and all these promises that are being made. And I think it's really interesting because a lot of the independent companies that didn't get all the way there, I mean, they were competing with the best in the business at services that they had no chance at being better at. And so I do think technology is something that independence can do as well or better than the large groups. And a lot of that comes down to like what can you do? Who controls your decisions, like all that kind of stuff. And it is exciting being a free player in the space in that respect. We're like we don't have we have a lot of strategic investors, but we don't have like anyone with veto power over our roadmap or anything. And so, you know, it's really about like how do we serve these folks the best. And I think the technology thing, I've always been surprised and confused why there weren't more API first businesses in the space because every platform and app is running on an API anyways. So why not open it to others and try to sell it to others? I I really never understood that. but I do think the time is now. And I do think, you know, using an example, we did a deal, or not really deal, we worked with Anthropic to get credits.fm into the Cloud connector store. And It's been cool to see the adoption through that. And, you know, now doing it with some of others. And now we're going in with all this payment stuff that we're launching. And all those are accessible through tools as well. And so I just think there's a lot coming and happening right now because of these AI advancements. And it is really interesting. And exercise I used to do that I always enjoyed that now is kind of more important was I would always try to like rethink and rebuild the apps I was working on without a user interface every year and just try to figure out well what's the flow of data and what's the flow of funds and how would it work for a user without what's there already. And like AI, you know, the the most exciting take I've heard on these AI things, even though I'm not totally convinced it's gonna happen in the mainstream way yet, is this personal software concept where everybody is going to have their own app and I mean every company and fund I talk to is doing this with one of the tools. And so, our view is well, how do we be a part of that stack? And I do think APIs are the way to do that or MCP, but they're kind of the same thing. And so yeah, it's really it's kind of interesting. It's like you can go out there and try to sell fully white labeled platform solutions, kind of old school style, or you can just give somebody some docs and say, give this to your agent and have them build it and we'll just bill you. And, you know, I'm much more interested in that feature.

Speaker B

Makes sense that, one of the companies that we've invested in and and we're also building, you know, it it's so interesting to see under the hood when we took over like a year ago on the tech side and to see like it's it's so many API connections. It's very smart, but it's so many API connections and the business is basically just API connections and p API connections, external APIs. And when you look at the complexity and the the how in depth some of these companies build their APIs and what work they were like, no way in hell I would build this. Like it I'll I'll pay you a few dollars for a few thousand calls, that's fine. And then I'll do it at scale. But and I think that's interesting and like these these parts you can play and also how valuable an API can be. and that's definitely things that I'm looking into now. Tim, this has been incredibly inspiring. sort of I I got to scratch a few of my my scratch bots in in this space and and there's so much to unfold here and I hope we can talk more in the future as well because I think this is a a part of the industry that's working well, it's progressing incredibly fast. I think there's a there's a lot of opportunity. I think your take on it is is quite interesting. And I ha don't hear as many people have that take. for me it seems incredibly compelling and also very much the mentality of the tech industry at large that's maybe detached to music. And I I don't know why music has its own lane so many times. But but that seems very sensible. Tim, for the listeners out there, this is your third journey. if you were to give yourself some advice ten years ago of where not to put your energy or maybe how to think about doing this, what would that be?

Speaker A

Yeah, I would say it would be all about focusing on what you can change. And so not worrying too much about the macro, not worrying too much about competition, only worrying about revenue and customers. And I think that's really the key in so much of it, because it's so easy to try to like externally validate ideas and kind of like get the chorus of yeses, this is a good idea kind of thing. But in the end, like none of it matters. the only thing that matters is can you self sustain and can you grow? And so I think with music in particular, it's so fun and exciting because you get to pay your favorite artists. You get to pay people that you want to work with. You get to do all these different things. And you know, I just think it's a much better and kind of like less stressful experience when it's more about what's directly in front of you and what you can actually impact through your own decisions. versus be like, our competitor just raised fifty million. What are we gonna do? It usually they're out of business in two years anyways.

Speaker B

No, that that makes a lot of sense. Tim, it's been a pleasure. Thanks so much for spending your time here.

Speaker A

Thank you, really appreciate it. It's great to speak with you.