Denis Ladegaillerie on AI, streaming royalty models, Believe’s game plan… and more
I think it’s going to take more time (for industry players) to align around the question of… how do we share the value?
In the various conversations we’re having with DSPs what we see globally is there’s alignment on three topics and then dis-alignment on (one other).
“We came into India and said, ‘No, there is also a different model (for artists). You can develop in a way where you retain your copyrights and you participate financially in your success.’”
So yes, we do think that we are now at the stage where an artist can build on their own, independent of major record labels, and that’s creating new opportunities that didn’t exist before.
As a company, we are committed, all over the world, to defending our artists and labels and our local teams. When the crisis came, basically our view… was articulated around four pillars.
“if you start making superfans contribute (more) financially, you need to ensure that you can deliver those benefits that are valuable to them.”
It’s the use of a computer, or the use of data, to enhance the creation of music, be it voice, music, or composition. We think (AI) creates an opportunity for all artists and it will also empower a new generation of artists to create better music.
I think you will see more and more examples like this, and that’s the direction that we’re taking as a company, for TuneCore and for Believe globally.
That’s essentially an artist at the beginning of their career, an aspiring artist, and 1,000 streams a month is probably 200 to 300 listeners listening to that artist on a regular basis.
(In the US) we’re looking for acquisition opportunities as well.
That gives us the time to properly adapt the legal framework globally in various countries in a way that doesn’t create a short-term threat to the music industry.
There’s been a lot of talk in the industry about the further monetization of ‘superfans’. What might a streaming service offer a superfan, in your view, which would be worth that individual paying more each month?
There’s also agreement generally around specific elements of ‘functional music’ (and moving it to non-music streaming destinations).
On top of this, segmentation – we spoke about one element, which is superfans – will help increase the average revenue per user for music.
How do you best share value between ‘actual’ artists?
All of these mechanics can be replicated in the digital world: you can imagine having subscriptions where the (superfan) gets access to live (events), gets access to a pre-listening party; gets recognized by the artist as a superfan through digital badges, things like that.
Since March Believe has also run its own global music publishing operation, housed under TuneCore, following Believe’s acquisition of the $51 million-valued Sentric Music.
(Believe reports its revenues in Euros.)
Ingham also asks Ladegaillerie for his thoughts on the ‘user-centric’ royalty payout model, while the Believe exec also volunteers his views on the idea of curbing royalties for artists with fewer than 1,000 monthly listeners on streaming platforms. (Clue: he’s really not a fan.)
That was in terms of market share on digital music services.
“Our mission as a company is to promote music and artists, and we think that is one of the vectors to create mutual understanding and peace.”
“Why would you not pay such an artist? It doesn’t make any sense. What signal as a music industry do you send to aspiring artists if you go in that direction?”
I traveled to India in February or March, I spent time with our team there and we also met with all of our local partners, Spotify, YouTube, TikTok… They confirmed to us that we were either No.1 or No.2, depending on the service, across all of the major services in the region.
A lot of the concern about AI, as you pointed out, is around: How does the business guard against its threats to copyright?
And there is a strong conflict of interest between major record labels and independent artists.
On a recent earnings call, Believe claimed it was the ‘number two’ player in India in Q1 2023, which would mean you were ahead of traditional labels and local ‘major’ labels. Could you explain the metrics behind that?
The first is that when you look at our geographic presence, we are positioned (well) in markets in Europe (as well as) emerging markets that are faster-growing markets (elsewhere). So naturally that positions us to drive faster-than-market growth in the years ahead.
Our view is that (these features) will take a little bit of time to put in place because if you start making superfans contribute (more) financially, you need to ensure that you can deliver those benefits that are valuable to them.
When you look at another hot industry topic – streaming fraud – is it not the case that a lot of that could be eradicated with the user-centric payment model?
When it comes to Believe I’m even more optimistic for a few reasons.
Listen to the full podcast above, or read an edited and abridged transcript of some of the highlights below…
Let’s start with artificial intelligence. What’s your overall view of the positive side of where AI could take the music industry? And how can the music business can best guard against the threats that AI obviously poses to copyright?
Then you will start to see in some of the markets with much lower penetration (today), that paid subscription is going to continue to build up with very strong growth rates.
Yes, there is no copyright framework globally (for AI today). But I would say most importantly, there’s (already) collaboration and cooperation between the various players in the industry.
On this podcast, MBW’s Ingham asks Ladegaillerie about a number of key topics including:
How the music industry should deal with streaming fraud;
The potential of ‘superfans’ for rightsholders, and how the music business can make the most of the opportunity;
Yep… Artificial Intelligence. (AI is a particularly timely subject at Believe and TuneCore, which recently partnered with Grimes to distribute music created by other artists using an AI replication of her voice.)
I think you can (adapt) some of these experiences to the digital world (in other markets).
I do think it’s an indicator of a trend – an indicator of the fact that you can make it as an independent artist, you can make it with the support of alternative platforms.
We’ve done a lot of surveys around this, and crunched data with various music services (and) what we see is when you move to user-centric, you have one (main) benefit, which is you have more diversity. The value is being spread better across various genres of music.
This is a very important topic. My own intuition from what we’ve seen is that user-centric is probably a good base to work from, but that (it) has to be adjusted with some mechanisms to take into account some of these elements I was just talking about.
When it comes to the discussion about changing the streaming payment model, does any of the talk that you’ve heard from the major music companies alarm you? or is everyone moving towards the same page?
We have been active in the (Indian) market since 2013. We have… hundreds of local labels, and (many more) artists that are trusting us in the development of (their music).
There’s alignment on fighting streaming fraud and eliminating streaming abuse. There’s also alignment around what we call ‘non-music’ content, noise or (non-music) sounds, to be excluded from the pool of music royalties, so that the pool of music royalties really goes to artists.
I’m very optimistic. You’re absolutely right that some of the markets – US, Australia, UK – will see slower growth on the streaming side. But I do think we’ll see further price increases, because the price of music today is undervalued compared to where it should be.
“I think the music industry should switch its stance and stop viewing AI as a threat. Generative AI creates opportunity for the music industry in two areas – creativity and discovery.”
AI also empowers discovery… (and in this respect) the use of AI in the industry is not new: AI, or machine learning, is what’s (behind) algorithm-based recommendations at YouTube or TikTok or Spotify Discovery.
On the latest MBW Podcast, MBW founder Tim Ingham is joined by Denis Ladegaillerie, founder and CEO of Believe.
One other important point about Believe: it’s no longer just a recorded music company.
(The answer) is collaboration between… companies such as Google or ByteDance or Meta, and the music industry itself.
Why would you not pay such an artist? It doesn’t make any sense. What signal as a music industry do you send to aspiring artists if you go in that direction?
What we ask is, what is the best way to control (that) and ensure that we will have a responsible development of AI?
Believe currently is valued at around $1 billion on the Paris Euronext stock exchange, having turned over around $450 million in revenue in the first half of 2023.
We as a company have been very engaged in conversations with all of these companies, and others, around how to harness generative AI; all of these conversations have been very positive.
We’ve done more than anyone else in supporting our local artists and local labels (in Ukraine) through marketing, promotion, financial support, training, and relocation support..
Third, with the acquisition of Sentric, we intend to foray into new services, bringing a new level of services for our artists and labels across regions.
Speaking of the US, is the Oliver Anthony phenomenon (whereby a DIY-distributed country artist shot to No.1 on the Billboard Hot 100 and STAYED THERE FOR A SECOND WEEK) indicative of any wider theme? and how does Believe’s plan to expand in the US fit into whether or not it’s an indicator of a trend?
(In India) historically Bollywood has been the dominant segment… where artists tended to sell their copyrights to movie production houses. We came into India and said, ‘No, there is also a different model. You can develop in a way where you retain your copyrights and you participate financially in your success.’
A lot of people come to me (during) my last trip and said ‘thank you very much,’ because that’s a transformation of the market that’s extremely positive; it’s fostering a new generation of artists and musicians in a way that they can make a living out of it.
You’ve received some heat from people close to the industry about your activities in Russia over the past 18 months. You’ve continued your operations in Russia following the invasion of Ukraine, an approach that differs from the other major recording companies. Can you give us your justification for this?
That’s the approach that we’ve been taking, to be able to work with these artists locally, regionally, in various genres of music and various segments, (which is what) has allowed us to build to that position.
We’ve seen proposals from some of the DSPs around ‘let’s not pay any royalty to any artists that generate less than 1,000 streams per month’.
We’ve had a number of discussions with the French government (and) other governments around these policies, making sure that (our policies) were aligned with what was expected from us from governments around the various regions.
There is evidence of an inevitable slowdown in streaming subscription growth in large territories. That slowdown is then slightly offset by streaming price rises. Are you confident and optimistic about the growth ahead for recorded music globally?
We are still present both in Russia and Ukraine. Our mission as a company is to promote music and artists, and we think that is one of the vectors to create mutual understanding and peace.
But you also have two other (negative) effects: (i) You concentrate more value on (large) global artists, and (ii) You also concentrate more value on catalog, which we think goes against making sure that you have local markets that are vibrant and (that enable you to) fund the development of new artists.
Superfans already monetize at (a) much higher level, when you look at it, in markets like Japan, as an example, or in China, through specific subscription (plans) or specific (physical) offerings that are (linked) to artists.
Where there’s dis-alignment is: What’s (the definition of) an actual artist? And what are the objectives (for different companies looking to change the payment model)?
“We do think that we are now at the stage where an artist can build on their own, independent of major record labels, and we do think that’s creating new opportunities that didn’t exist before.”
Two, there are a number of markets like the US, where we have not yet set foot on a large scale, which we’re going to be exploring, which for a company like us provides additional room for growth.
Paris-headquartered Believe is now well established as one of the largest recorded music companies outside of the majors, both via its Believe-branded artist and label services operation as well as its subsidiary, TuneCore, which announced at the close of last year that it had paid out over USD $3 billion to independent artists to date.
Welcome to the latest Music Business Worldwide Podcast. The MBW Podcast is supported by Voly Music.
Protecting the safety of our people both in Russia and Ukraine, that was priority No.1. Our priority No.2 was maintaining our operations locally, through a tragic time and hardship in both territories.
(Our conversation with Ladegaillerie on this podcast actually took place shortly before Universal Music Group and Deezer announced their plans for an ‘artist-centric’ model – something over which the Believe founder has now expressed his specific thoughts more fully.)
No.3 was to abide by all laws and regulations applicable to Believe’s activity. And our last pillar was to support – beyond the ordinary – artists, labels, and partners in Ukraine.
The superfan is interested, first, in unique experiences and unique engagement with the artist, whether that’s a meet-and-greet, having access to a listening party, or early album access.
AI generally creates an opportunity for the music industry; the music industry should switch its stance and stop viewing AI as a threat. Generative AI creates opportunities for the music industry in two areas – creativity and discovery.