Steve Stoute's new startup United Masters emerged from stealth with $70M raised from Alphabet, Andreessen Horowitz, 20th Century Fox, and Floodgate.
Andreessen Horowitz's investment seems a bit messy.
United Masters isn't the first startup taking aim at companies shielding artists from their fanbases
- Just as record labels emerged the disruption of Napster, another wave of disruptors are taking aim at the industry
Spell It Out
Steve "The Commissioner" Stoute made the media rounds this past week, casually announcing that he was getting back into the music business with his new platform United Masters. Honestly, when I heard him say this I didn't take it too serious. I was more interested in his stories about managing Nas, connecting Dapper Dan with Gucci, and reconciling with Diddy. Shame on me.
What I didn't know while watching his appearances was that he had raised $70M from Andreessen Horowitz and Alphabet, with personal involvement from Larry Page and Ben Horowitz joining his board. Further, United Masters has been running in stealth since last year building out a team and the platform. Bosses move in silence, right?
Who is Steve Stoute, again?
The manager turned music industry executive turned ad man started as the roadie for Kid n Play. He made his name managing Nas, though that did not come without some embarrassing controversy. Diddy notoriously went upside Stoute's head with a champagne bottle over Stoute not taking the crucifixion scene out of Nas' music video for Hate Me Now.
Stoute went on to becoming president of Interscope Records, then recreated himself after seeing the amount of money ad agencies were making on his artists. He eventually started ad agency Translation which has created some of the most hip-hop infused ad spots and established himself as a force in the industry with AdAge naming him executive of the year in 2013. Here's a quick rundown of work Translation is responsible for:
- Pusha T writing the jingle for McDonald's "I'm Loving It"
- Jay-Z's HP ad spot
- Reebok's ad spot featuring Jadakiss and Allen Iverson
- Jay-Z's Budweiser ad campaign
- Google's history of hip-hop doodle
In 2016, Stoute brought on a new CEO to takeover management of Translation so that he could focus on diversifying Translation into the media and analytics space. United Masters is the result of that move.
So, what is United Masters?
The company is set up to distribute an artists music across the range of music platforms out there. Think Spotify, Tidal, and Soundcloud. Then, United Masters collects the data on the artist's listeners that the artist can use for advertising things like concert and merchandise sales.
Andreessen Horowitz's involvement in United Masters is a bit confusing because the company invested $1.5M in Ryan Leslie's startup Disruptive Multimedia whose SuperPhone product enables artists to communicate directly with their artists to sell albums, concert tickets and merchandise. Why would Horowitz lead an investment in both?
- SuperPhone and United Masters are built on two different philosophies - SuperPhone is built on the belief that the conversation between the artist and the fan is where the gold is and a tool that helps artists speak directly to a small group of loyal fans is far more valuable than an artist reaching millions across multiple platforms. United Masters believes that artists should focus on being artists and that there should be an infrastructure around them that helps them reach the masses and make the money they deserve.
There's more to this story. I look forward to more details coming out on the relationship between these two deals.
Music Industry Context
- United Masters and Disruptive Multimedia are not the only players in this space. CDBaby has been supporting independent artists since 1998. OkayAfrica launched OkayMusic earlier this year to help African artists distribute their music more effectively.
- Streaming is driving the music industry to a position of strength, according to Billboard.
- The music industry saw double digit revenue growth for the first time in 20 years in 2016. Revenue growth of 11 percent took industry revenue to north of $7B.
- Streaming is carrying the lion share of the weight with its $3.93B in revenue totaling more than downloads, CDs, and vinyl combined ($3.51B).
- The speed of streaming growth won't be slowing down anytime soon with streaming seeing 68 percent growth last year.
While this is welcome news for the industry which has taken well over a decade to recover from the disruption brought on by Napster, revenues are still far below the industry's $14.6B peak in 1999. A company like United Masters leveraging analytics to holistically monetize fans could go a long way in uncovering new opportunities for revenue growth. Perhaps this is the vehicle the propels Stoute to billionaire-trajectory alongside the Carters, Dr. Dre, and former nemesis Diddy.