Buying Spotify artist music rights with Tom Sarig, Antifragile Music

So music is like the gift that keeps going and giving. It's not just a one time record sale. People continue to stream and listen to the music that they like every week, week after week. And so we almost have sort of a dependable cash stream that can go for years and years. So it's a very bankable, predictable business in a way.

So the big question is this, how are entrepreneurs who aren't scaling tech startups or building lifestyle businesses from scratch doing it? How do acquisition entrepreneurs find businesses, buy them and then create generational wealth while taking on less risk?

Welcome to Search funded the Entrepreneurship to Acquisition podcast. I'm your host Nick Law and I have a really interesting guest here today. I'm here with Tom Sareg. Tom is the founder and CEO of Anti Fragile Equity Partners. Antifragile acquires mid tier music rights catalogs at value prices and then expands revenue and grows values for high multiple exits. Tom is a Grammy Award winning veteran of the music and brand partnerships business. Over Tom's 25 year career he has served as Senior VP Executive at Universal Records, Arist Records, MCA Records and A and M Records. And he's played a role growing acclaimed music artists selling over 200 million records including the Roots, Erica Badu, Kill Scott Heron and Annie Lennox. Tom received a Bachelor of Science degree in accounting from the University of Maryland and worked as an international tax consultant at Deloitte before entering the music business. So I think that last part is pretty interesting to me. I was thinking maybe we could start there. I'm just curious how someone goes from the tax business to music business and then how that journey ultimately led to Antifragile as well and where you got the idea for what you are doing now.

Well, thanks Nick. I would say that I was always a music person. I've always been very, very into music and it was kind of the only thing that I really loved from a very, very young age. And I mean I'm a lover of culture in general, film and tv, but music is what really moved my soul, so to speak, from a very early age. And I played a number of instruments pretty poorly, piano lessons and guitar and I played trombone for years in high school and I was in like the All State Band in Maryland where I'm from. And I went to University of Maryland and sang in the choir. So I have a background in terms of like music performance. But I never wanted to be a music performer per se. I had an idea that I wanted to be an A and R executive. I didn't really know exactly what that meant. But I, I was always the kid in my neighborhood turning people on to new music. I probably subscribed to 25 music magazines when I was 17 years old. I went to a lot of shows in my hometown. And I was very connected with popular music, alternative music, all sorts of music at a very young age. And so that was really sort of my first love. And so going to college, I was involved some in music, like at the radio station, at my college, the concert committee, things like that a bit. But music was not really available at that time, back many years ago when I was in college as a major course of study. And I don't think if it were. I know there are several schools now at my company, we tend to have interns from Belmont University in Nashville come up to New York, and we have a few Belmont kids every semester. And that school is strictly like music business. But when I went to University of Maryland many moons ago, there was no such thing as music business education. I don't think there was even one course in music business. And I don't think my parents would have allowed me to go to college to learn about the music business. So I was to make, to be practical. I was an accounting and finance major and I knew that I wanted to be in music and I knew I wanted to be in sort of the creative end of it. That sort of. I didn't know exactly what that meant, but sort of A and R, sort of finding, developing, shepherding artists through the creative process and trying to give them advice and assistance to create careers and make them bigger and more important culturally all the time. So I got a job out of college because I was an accounting finance major. I got a job with Deloitte, which was one of the big accounting firms at the time. I looked at it as kind of my ticket to New York. You know, they do like on campus recruiting at a lot of colleges still. They do. And I told Deloitte, like, I don't want to work in your Baltimore or Washington office. If you're going to hire me, I must work in your New York office. I really want to move to New York. So they went for it. And I moved to New York City the day after graduation and started working for Deloitte. And I worked in international taxation with international banks, which was interesting enough to me for about a year or so. And at some point I met, I met through a friend of a friend, someone who worked at a major label at the time, A and M Records, which was a major label at the time. Now it's part of Universal Music Group and Interscope Records. But at the time A and M had like Sting and Cheryl Crow and Janet Jackson and Barry White and a lot, a lot of really good act, Soundgarden in their early days. And so I started like in. In the mail room essentially, and grew to like be a sort of A and R assistant, intern. And then kind of grew my way through the A and R ranks by basically harassing the A and R staff, telling them what bands I had gone to see last night and how good they were, and trying to just help out and be sort of an assistant. As a scout in the A and R department and from A and M. I think I worked at A and M at that entry level spot for about six or seven months. And then I got a job at label across the street, Arista Records, which was another kind of standalone major label. This was the early 90s, of course, but a standalone major label in New York run by Clive Davis, legendary executive who I learned an awful lot from. And it was much more of a pop label than my tastes are. I mean, I love pop music, but I tend to like those artists that kind of make produce, write all of their own pop, whether it's Prince or George Michael or Adele or, you know, artists that have more of an organic feel as pop artists rather than the formulaic ones. And Arison most definitely was, you know, whether it was Whitney Houston or Milli Vanilli, things like that. It was definitely like matching the song with the singer, with the producer. They had to be three separate things. And there's an art to that too, that Clive Davis was incredible at. And Arista was an incredibly successful label, but they didn't really sign much in the way of alternative rock or hip hop things that I was into more sort of left of center culture music. It was very much a pop label which satisfied a part of what I was doing. And I certainly learned a lot about look. I helped search for songs, kept the song list because most of the artists on the label were singers like Whitney Houston or Expose or Dionne Warwick or Aretha Franklin. People that were amazing singers but didn't really write much of their own music. So we had to find songs for them. And that was a real job back in those days. Sort of meeting with music publishers, meeting with songwriters and trying to find songs for these artists to cut. That was sort of like an art in itself. So. And that's true A and R, in a way is really like finding songs for those who don't write songs to that fit their sort of personality and vibe and can really connect with an audience. So that was an extremely valuable experience. And then from there I was a little frustrated. Arista that they didn't really take too much of the alternative rock at the time, which was breaking through, some of which I tried to push towards. Arista. Like there was Smashing Pumpkins, Nirvana days back then that those acts in sort of like 92, 93 were breaking through. And so I went to work for an independent label because I felt like I would get more experience in what I wanted to do that way. And I went to work for sort of a larger independent label called TVT Records. And they were a label that was kind of most popular because they had just signed when I went to work there, Nine Inch Nails and they had a joint venture with Interscope and they had Marilyn Manson, but they also had done. I did a bunch of things there from help start a hip hop label which Ja Rule and Irv Gotti kind of were the start of and Lil Jon later, as well as a lot of like left of center culture music from. You mentioned Gil Scott Heron. We signed it TVT and groups like Seven Dust, like heavy rock acts. We. We signed acts that were sort of on the fringes. Whether it was electronic music like Underworld or heavy rock music like 7 Dust or. Or hip hop music. Music that wasn't really made for primetime radio, which radio was sort of king back in those mid-90s days. And. And so it was an extremely valuable experience. I kind of got to be the head of A and R because there was no A and R when I came to dbt. And I spent almost five years there and had a lot of success, had a bunch of records go really well. And after close to five years there I got many job offers from major labels and I decided to go to leave New York. I was a little tired of New York and I moved out to Los Angeles to work for MCA Records. At the time, which was Universal, used to be called MCA Inc. At some point they changed the name of MCA Inc. To Universal because that Universal Studios moniker had more brand recognition. So the MCA the Music Corporation of America moniker went bye bye. And I worked in Los Angeles for DMCA for about five or six years and that was great as well. Got to work like you mentioned, like the Roots. And I got to produce a soundtrack record for this movie, Brown Sugar, which featured a Grammy winning record by Erykah Badu. Love of My Life, which is still kind of her biggest hit record of her career, hasn't didn't appear in any of her own albums, appeared on the soundtrack, but got to work with all kinds of sort of alternative rock, hip hop, left of center stuff as well as. Like when you work at a major label, sometimes you're given. When you're a veteran A and R person and you have the skill to be able to sort of shepherd the record making process, you're given projects like I was given, things like Sammy Hagar to A and R or Tommy Lee had a project then. Those projects, though they may not be my favorite music, they were still instructive and fun to work on because, you know, I take every challenge as like, let's just try to make the best thing we can. No matter if it's an artist that I discovered or if it's an artist that's been handed to me to handle by the president of my label. I always just tried to make the best kind of record that we could with some perspective and trying to reach fans.

Yeah, it's all really interesting stuff. And hearing all those names, it brings me back to my childhood. I mean, those were the artists that were music basically back then. Whether Ja Rule or Nine Inch Nails, Sammy Hagar, those were the names that we used to hear back then. And shows that, you know, you really were involved with what music was then. And it's also interesting, I don't know if you've heard of Tony Fernandez. He is the CEO of AirAsia and he kind of followed a similar path. He studied accounting but was really passionate about music. Ended up working at Version Music as an accountant, but then ended up managing Southeast Asia, then ultimately started his own airline. So.

And ultimately for. Ultimately for me too. Like when I worked for about, I think 11 years at major labels and A and R. After leaving my one year in accounting and sort of early 2000s, the major label business was crumbling. You may be too young to remember, but Napster, File Share File stealing. The major labels were in a panic. They all felt like their businesses might go to zero. And it was a real sort of time of consolidation. A lot of, like I was saying, A and M merging into Interscope, all the major labels, they went from like 25 major labels to 8 major labels in the period of a few years in the early 2000s, which was a very low point. So at some point I left Universal. After six or seven years working there, I was back in New York working for Universal. I left Universal. I very much had the itch in the midst of all the chaos of file sharing and streaming had not come along yet. So the future of major labels was really scary and uncertain. I always had the entrepreneurial itch. I wanted to be my own boss. I never loved working for big companies. So when I left Universal, I started my own artist management company. And you know, in the music business, an artist manager is really, I see it as the most important job in the entire music business. Because artist managers are sort of the CEOs of their artist clients business. They are in charge of spearheading and handling all business in terms of touring, recording, music, publishing, merchandising, everything. And when I got into artist management and left major label world, I wanted to work with artists that I felt were really credible, important culture artists. I want to make money and have hits like the Next Guy who, but I wanted to work with music that was going to be remembered for years to come. So I started with just two indie bands. Two indie bands had pretty big live followings. A band called Latigra, Kathleen Hannah's band, like electronic female, feminist, kind of punk, as well as this band called Blonde Redhead, which is another very popular indie rock band. Both of which could, you know, sell a couple thousand tickets in most cities and that are really solid businesses. And I just grew my business out from there. I managed the band Cake for about eight years and helped grow them along when they just signed to Sony, I believe. And I started working with, in addition to a bunch of contemporary acts, I managed a bunch of veteran acts. I managed Lou Reed for the last 11 years of his life. I managed Brian Ferry for probably seven or eight years. I'm still in touch with him. Violent Femmes, I managed for several years, Ricky Lee Jones and working with some of these kind of rock and roll hall of fame old fart artists. Excuse the euphemism. It's not, it's not respectful, I know, but they're all amazing artists. It really helped me become a better manager for my younger artists. Like I developed a few younger artists from very small levels that I met. I started managing that became much, much bigger artists. This band from New Jersey called the Gaslight Anthem that were sort of like a Springsteen meets the Clash kind of band that were really wonderful band. And they went from playing small coffee shops in New Brunswick, New Jersey to selling out arenas size ven around the world. And they kind of broke up at their peak. Got them a, a big deal with island, which is part of Universal. They broke up at their peak and they've since, in the years since got back together to sort of, I guess tour and make some money. But they broke up right as they were about to pierce through and become the next Kings of Leon size band. But they went really far as well as another band called Against Me, which was a really great sort of punk alternative band that was very political and interesting social commentary. And so those young acts were really. That was really fulfilling to me. Not that working managing Brian Ferrier, Lou Reed or the Violent Films wasn't. I did great with them, made a lot of money, did a lot of those artists, all of those artists, the older artists work really hard. I learned a lot about what it takes to sustain greatness. There's a lot of ups and downs in careers. So managing artists that were like my dad's age was very instructive to me and helped me become a much better manager and strategic person, strategic businessman for the younger acts that I was developing. I. I also had like another side that I did. I had a lawyer friend who was a lawyer, a lot of those sort of Nickelodeon and Disney kids that had music careers also. So I. I managed like if you know who Miranda Cosgrove is from iCarly and Drake and Josh, she was a big Nickelodeon star for several years. And I managed her, both her music career and acting career for a while. So I did a bit of that, managed some kit which was know, kind of not where I wanted to get started. You know, I set out to really get involved with culturally important artists. And a lot of these kids artists were most certainly not that. But I felt it would also be like kind of interesting and fun. So I had on the one side of my, you know, I grew from zero to a staff of eight or 10 people working for me in my management company and from zero revenues to several million dollars of revenues a year. And you know, it was kind of fun for me working with old legends like Lou Reed and Brian Ferry and then working with like teenage kids who doing Disney shows and things like that. So I like that sort of span of activity. And so running a management company was great. And that was sort of like my second decade in the business was running my management company. And then around 2000, I'd say 17, after about 10 years starting and building and running my management company, I was growing a little tired of management because first of all it's the best job in the business, like I said. And it's kind of the most important job of the business. Great managers really determine what happens with a lot of artists. If an artist has a great manager, that can be all the difference between failure and success. So I was getting a little tired of the constant travel that management entailed. I had young kids at the time and I was traveling all over the world more than I wanted to, like every week to Europe or la. And I wanted to do something that I felt would be a little bit more stable. Not that we did great enough. I made a lot of money in management, was a great job. But, you know, I managed Lou Reed for 11 years and he passed away. So obviously couldn't do anything else after. You couldn't make commissions anymore after an artist dies. But. And there are other artists I mentioned, the Gaslight Anthem kind of broke up at their peak. So things can happen that are out of your control that can change your business quite a bit in management. And I wanted to do something more close to where I come from, sort of A and R for labels. So rather than go back into a major label, I was managing and I. And streaming was really starting to rise at the time. I think streaming launched like 2011 with Spotify and Apple in America and certain other parts of, you know, Western Europe, North America. But by 2015, 16, the numbers were started kind of slow, but by 2015 or 16 the numbers really started to accelerate as far as subscriber number growth. And so I was noticing acts on Spotify where you can see the streaming numbers, right? That's the one DSP platform where you can follow the streaming numbers. I was noticing these artists that were streaming tens of millions of streams that I'd never heard of, which was very, very unusual for me. I usually knew like every act that was out there. So I thought, why don't I start my own label, you know, go back to doing A and R, start my own label and sign some acts without some of the money I'd made from management, which I started doing. And it was much easier to do because the record business had changed so much in 10 years. You didn't have to have like a manufacturing department like you did back when I was at Arison A and M, when most of the business was CDs and vinyl. Now we were getting into a business where the large majority, and today it's by far the large majority of the business is in streaming. So it's a. It's a less expensive endeavor to start up. And so I started signing acts to like very artist friendly deals about seven, eight years ago for Anti to start antifragile. And I think within a year we did like a million dollars in streaming income, which was really wonderful for me. And it felt I kind of repurposed my staff from Being a management artist management company to being a marketing company, which wasn't that drastic of a change because managers do a lot of marketing anyway, management companies. So doing as well as we did in our first year with streaming was the telltale sign for me to sort of start segwaying out of management. As I started to let go of some management clients and double down on the label. And simultaneously, I had a music publishing company also, which I had started back when I was a manager through Cobalt. I'd met the guy, Willard Aldritz, who founded Cobalt, and he encouraged me to start a publishing administration company to work with some artists that maybe I didn't have time to work with. And that was really some great advice. And so I was growing a label and a management company at that time. And that's what I've been doing sort of the last seven or eight years, growing it to the point where in the last year or so we decided, as the streaming model has slightly shifted and. And social media has become much more important for driving streams, we decided to get into raising a fund and starting a company that would invest in catalogs for artists, grow the catalogs, and reward the artists for what they really needed. I was finding a lot of artists that were at a certain level, like they were making really good money. Maybe they're making half a million dollars as a band, right? But half a million dollars after you pay your manager and your lawyer and your accountant and pay taxes. They're not exactly wealthy. They're. They're kind of. I. I felt like a lot of these acts were doing really well in that they were professional musicians. They didn't have to have waiter jobs at night or anything. But they were also simultaneously sort of stuck at first base. They were kind of in between. They had successful music careers because of social media, because of touring, which is something that couldn't have been done pre social media and streaming. The streaming and social media world has enabled a lot more artists to become sort of medium successful, you know, and so I was seeing a lot of acts out there who were kind of stuck at this level. So I thought, what if we were to invest in artists, catalog some of these younger artists that were really ascending in a really positive way, invest in some of their catalog, pay them a bunch of money for it so they could have a lot of cash to then put into their careers to grow to the level that they wanted to grow. A lot of these, most of the, all of these artists are independent artists. We'll be able to buy or invest in some of their catalog, they'd have money to get to the next level. And because they were totally independent artists, I have a marketing team that we'd be able to help market their catalog which would in then turn help market their current music. So it was a win win all the way around. And so I just started that, you know, fairly recently and it's been going really well so far.

Amazing. It makes total sense. And as you mentioned, streaming and just the Internet has totally changed the game and the barriers to entry are much lower. But then also getting pass first.

Yes.

Is also pretty hard.

A lot of artists complain that, you know, Spotify doesn't pay enough or Apple doesn't pay much. I mean the amount per stream is not much. Right. But you know, that being said, there are a lot more artists making livable wage now than were pre streaming. Right. I mean Spotify, I think I saw that Spotify published that in 2023, over 9,500 artists made over $100,000 on Spotify alone. And so that's very serious business. I mean that did not exist, you know, before streaming, before streaming's first five years even. It's only a very recent thing that some artists are really able to make a considerable amount of money. Not necessarily get rich, but make more than a livable wage, make a living just by their combination of streaming, touring. As long as they're good at social media and building their touring following, the streaming will come along with that.

Absolutely. I was wondering if you could talk a little bit more about some of the artists you help. Any success stories that you might have and what are the levers that you've pulled other than just contributing capital and marketing to help the artists get to that next level.

Yeah, we've in the last few years we've had several artists that in all different genres really, because my taste is really eclectic and it's unusual for most indie labels, stick to one sort of genre. It's more typically how it's done, sort of. But I've always been very eclectic in my taste. So one of the earlier records we put out was from this amazing kind of Americana band from North Carolina called Mipso M I P S O. And we did like you know, several hundred million streams for them, worked really hard, spent a lot of money marketing them. And you know, as it was, all my record deals in those days were essentially one record deals, no futures to be very artist friendly. And they were licenses. We only had the record for a period of time. So, you know, had I owned that Record, I'd be a lot, a lot wealthier. But we did a very artist friendly deal. But in turn we had a number one Billboard Americana folk chart record. We contributed a lot to this artist growing and I think when the artist went on after our record did really well. I think they signed with Rounder, which is a much more established. Rounder's a folk blues label in Massachusetts. It's been around for 75 years. Their next record with Rounder did like one tenth of the streaming that we did. So we really added a lot, I think, to help the band grow in terms of we got a lot of their music in film and tv. We're very good at, I think, sync synchronization, which means placing our music in film, television and video games, which earns the artists and us money as well as a platform of popularity. We've had several lucky breaks in that world and so, yeah, that's one that I'm really proud of. Speaking of sync, another one that we were very fortunate with was this band Cannons from Los Angeles. Really fantastic sort of electro pop, alternative rock band. And we signed them and when we signed them in la, I thought they were incredible, amazing band. But they, they had a very small following and I think they could sell 50 tickets in their hometown of LA, you know. But their music was fantastic. And we put out the record and then the record was going okay. This is sort of four or five years ago, the record was going okay. And then we got a sink in a show on Netflix that I didn't know was going to be a big show at the time, but it was in, you know, Mindy Cowling, who is the Indian American actress from the Office, she wrote a show for Netflix called Never have I Ever, which is about her sort of awkward Indian American teenage years, about her life story growing up as a teenager. And this song by Cannons is called Fire for you. And we got that in an episode of this show. And it wasn't an expensive sync, I think we cleared it for. We had the publishing and the master. We cleared it for like $3,000 a side or something. So it wasn't a big sink on the front end. But what ended up happening was that show, it was sort of like middle to the end of Pandemic, right? And that show ended up becoming like a gigantic show for Netflix. It was like a top five show for Netflix around the world for a good six months or so because it was really well done. And so our song, this canon song, Fire for you was in like the eighth episode. It Was like a key scene where Mindy Cowling's teenage character is kissing the boy or something like that. It just propelled the song. And the song went from like, I think it was like at a half million streams on Spotify when we got placed in that show. And within three months we were at 40 or 50 million streams, you know. And so it was a top five. Spotify has the viral charts in every country, and it was a top five viral song in about 32 countries. And not just the US or UK. We're talking like a Pakistan, India, Ireland, Mexico, Korea, like really a disparate number of countries. And I saw firsthand the power of Netflix, the power of Amazon. You know, if you get on a big TV show that is really ubiquitous around the world, which Netflix is, you get. And you're in a key music scene. You're in a music driven project. As the series was like a teenage series. Like, My daughter was 14 at the time. Loved this series. It was really well done. So it moved that song from like 500,000 streams on Spotify to like 40 or 50 million. All the major labels ended up chasing after us to do a deal. The band really wanted to, you know, take the next step. So I ended up selling our rights to Columbia, to Sony Music, and we did really well from it. But I was really proud of. And now the band, I. I'd say they've had three or four, like, big alternative rockets. They played Coachella, they played Lollapalooza. They've entered the sort of sphere of trust for alternative rock, if you. If you will, you know, and the singer is like a total star. This blonde woman. Michelle's like a total special star from it. So that's one where, you know, marketing really determined the band. And even if you see the band, like perform at Lollapalooza or. Or at Coachella, they'll say from the stage, like, having this song in this TV show, never have I ever on Netflix really got us here in a way. They were always great, but they just needed, like a lot of bands. You need that, that one sort of step, you know, so those are a couple that were really, really meaningful to us, you know, but we've worked with a lot of really, I think, really special acts. There's this black singer songwriter from England called Jake Isaac, who I think is fantastic that we've done a couple albums with. There's this amazing singer songwriter in California called Jamie Drake. She's done two albums with us and we're, you know, she's sort of in the Joni Mitchell sort of world and. But even better, I think. And so we've had a lot of records that have been very fortunate in terms of streaming, finding an audience and taking the artist to the next level.

You know, that's so cool. And it shows how helpful marketing and its knowledge really is.

Yeah, you know, you never know where it's going to come from. You need to get the music in front of people. Right. And that's as much as I'm like sometimes not a fan of social media. Social media does enable you to do that. And now we're able to use any number. One of our tricks is we're able to use any number of AI video tools. There are all these text prompt AI tools and I make my staff take prompting courses because if you're a good prompter, you can make a really great music video clip for an artist that you can use on Instagram, TikTok, Facebook, YouTube, that can help find an audience for that artist. And then if that content, that audio, visual content clip does well, you can then pay, put advertising dollars behind it, whether it's on TikTok or Instagram or YouTube and really help it find its audience even more.

Yeah, it's super interesting and shows that you're using AI in the right way. I think with every industry there can help.

People have told me, oh, AI is going to destroy the record business. And it's, you know, AI music's going to replace all contemporary artists. And I just think people who say that are completely out of their minds. You know, I think AI is a plus for our music. I think AI is growing our business. And I think, first of all, I don't think there's going to be replace. I think artists that have great personalities, write great melodies, great lyrics, have something really interesting about them. AI cannot replace that. Know what I mean? That that's a human element of the day. What AI is replacing musically is sort of the background music, elevator music, Muzak, sort of. That's music that's sort of like background incidental music that can be easily replaced by AI. So a lot of the sort of like jingle houses, so to speak, that are a lot of them are having a lot of trouble now. But that's not the music world. I live in the world of like really great, important, special, groundbreaking artists. And those artists will never be replaced. In fact, AI is only helping us because, like I said, it's helping us make video clips for promotion. Sometimes we'll take a version of our song that we put out, put it through one of the AI music tools which exist today. There's so many of them and make like a different version of the song which we can then use and put out again, you know, have like a, a mariachi version of a certain song by a singer, songwriter. And that is a huge plus also in terms of finding artists and advertising. And you know, AI is embedded in so much of the marketing processes of what we do to make us do it better, you know, and I think that's only going to get better. So I'm not so fearful about AI because I think there always has to be humans directing AI and I think eventually, you know, I may need less staff because there will be AI agents maybe who could post social media, come up with posts. I mean that's here already, you know. So I think AI, if done right is only a positive trout being exposed. Really great and special music, you know.

Yeah, I mean, I guess with any technological advancement, just like when music went to streaming, there's going to be disruption but also opportunity for people.

Yeah, I mean I saw an article the other this week that Deezer, you know, which is one of the, it's a French dsp, but they're worldwide. They, they publish that like a hundred thousand tracks are being uploaded every day to Deezer. It's probably similar or more on Spotify. And like 18% of those tracks are AI track, which is like 18,000 tracks a day uploaded to Deezer that are AI, which is unbelievable. But most of those tracks are not having any streams. Yeah, I mean just by putting up more music doesn't mean that your music, you still have to find an audience for your music. So the creation of AI artists, theoretically it can work, but you have to really manage that. You know, you have to create a Persona, you know, tour, publish, you know, publish your messages to social media platforms every day. It's a lot of work also and it's not easily done by non humans, you know.

Yeah, definitely. I think there is some human connection element to why people enjoy music as well. Part of the reason that I was interested in having you on the podcast was that in your deck you described what you're doing is more similar to buying a cash flowing business rather than a risky bet on a potential hit. So to me it's like a parallel between doing a search fund, buying an existing business versus startup investing. And was wondering if you could explain a little bit more about why you would equate your approach to investing in a cash flowing business.

Yeah, well, first of all, I should say that Music is and has always been immune from recessions. Even in the old days of CDs and vinyl before streaming, in times of economic trouble, people never decrease their spend on music. And now whatever's happening now in the economy and trump and whatever there's. People are not canceling their Spotify or their Apple subscriptions because there's a recession. Also, music is a non correlated investment, so it's different from anything else. But to answer your question directly, there was a time before streaming where if you were the consumer and you went to your local Tower Records, you heard a song on the radio, you liked it, you went to your local Tower records or whatever record store, you bought the CD. So you would spend your 12 or $15 or whatever the CD cost at the time 15 years ago. And at that point the relationship between you, the consumer and me, the record label would be finished, right? You would pay your 12 or $14 or whatever. You know, Tower records takes a piece of that, pays the rest back to the distributor, pays the label, et cetera, et cetera, and the relationship is over. Now though, if you're a fan of an artist, you pay your subscription for Spotify or Apple or Amazon or YouTube, whichever you have for to prefer and you will continue to listen to that music for years, years and years and years. And so the monetization of music, I think especially for artists who really build audiences and maintain audiences, is much bigger than it ever was. And so I think of music as the gift that keeps giving because people are streaming the same music over and over again. And the nature of streaming is that we are as a label, as a repertoire owner, we're paid every month by our distributors. So we have distributors that when we load up our music to be put out and a release date, one press of the button and it goes simultaneously on Spotify and Apple and Amazon and YouTube and literally people don't know it, but there's like 120 DSPs out there in the world. There's like tencent music in China and Melon Melon in North Korea and there's Geo Savin in India. There's all these DSPs that people don't even know about. I mean, Spotify is kind of the 800 pound gorilla. It's a really big and flat world out there. So music has recurring revenue every month and we watch it sort of week to week how songs are doing. That's one reason that this is sort of a cash flow business that's dependable over time. The other thing is that catalog, meaning music that's been. Billboard used to define catalog as music that was 18 months or more old. And so now I think it's maybe a little bit longer than that. But the catalog music, music that's been out for more than a couple years a lot of times coming out of nowhere has like a, a viral thing on TikTok and it'll stream way more than an artist's current record, you know, that they just put out that's happening over and over again. So the lifetime of music is never over. Like if you can figure out an angle and a marketing angle for a song that's six years old and you execute that, whether it's on Instagram or TikTok or what have you, or something else happens, there's a magical sync like the one I explained to you with canons. Like anything can happen with a music that's out for a while and the streaming will rise. I mean, look at a song like Kate Bush's song running up that hill in the TV show, like that song. I bought that record when it came out in 1982, I'm afraid to say, and I'm a huge Kate Bush fan. But that song being 40 some years old or 50, what, however old it is, it had a whole new life and made a lot more money in its sort of, you know, 50th incarnation because of this one sync on this TV show. So music is like the gift that keeps going and giving. It's not just a one time record sale. People continue to stream and listen to the music that they like every week, week after week. And so we almost have sort of a dependable cash stream that once you establish sort of a plateau of consumption or streaming that can go for years and years. So it's a very bankable, predictable business in a way, you know, that makes.

A lot of sense. How do you select the artists that you do decide to work with? I mean, I'm sure there's a minimum audience count that you look for, but are there any other characteristics when it comes to artists that decide to be part of your portfolio?

So I can't really sign artists that are just like a genius in a room in their hometown, you know, but they have no following, you know, they have no story going on. They have. Because I wouldn't be that good for that artist anyway. Starting from zero is very difficult and unfortunately it's always been this way. It's incumbent on artists or their manager, their teams to sort of figure out how to kickstart things on their own. Where we come in and major labels don't invest until something's already really successful. But where we come in, we want to develop artists. We usually are looking for artists that are hitting sort of a certain threshold of streams per month or monthly listeners or that sort of thing that we know are doing a certain amount of business. And that we, after a lot of analyzation of their streaming Trends on various DSPs, on social media numbers, engagement, views, followers, etc. Increases and decreases, we can ascertain if an artist is on the ascent or on the descent. So we look for artists that are on the ascent pretty strongly, but artists that have been around for three or four or five years, that have some experience behind them, maybe they put out two or three albums already, they've been around for five years, they're earning a, a certain amount of income on their music already. And so we're looking to invest, hoping that their trajectory and our efforts will add up to a lot more. You know, so first, the first judgment is that it has to kind of hit the mark economically. They need to be a certain size of artist in terms of their business. And then from there I need to drill down and use the skills that I've been developing and honing for 27 years, which are sort of sussing out, you know, what is an artist's potential for the future? Is this an artist that's going to take their place in the pantheon of culture and be something really important in the future? Do they have what it takes? And you can kind of suss that out, not always correctly, but you can kind of suss that out by looking at an artist's social media, whether it's their TikTok or their Instagram or their YouTube or whatever, and sort of looking at their discourse and their relationship with their fan base, how they communicate. It used to be that it acts be concerned only about two things. One was recordings and all of the decisions and, you know, what songs are we going to record and what producer and what studio. That recording was the one tent pole of their career and the other tent pole was live performance, whether it was touring or what, who, their booking agent, what tour are we going to go on, all the sort of strategy that goes behind that. Now there's a third tent pole that's just as important as the first two that I tell artists. And that's the artist's ability to communicate, engage and actually entertain on social media. And I'm not saying it has to be Facebook or Instagram or TikTok or YouTube. It could be all of those or one of those. But an artist has an incumbent responsibility to have some kind of discourse and dialogue with their fans and entertain their fans over social media. Or I mean, I could say that artists that are sort of 8 to 10 years old or older are grandfathered in and don't have to do that, that there is truth to that. But artists coming up nowadays, the last five or six years especially, you need to have some prowess in communicating and selling your wares, so to speak, in the most classy way over social media. So I drill down on that and I look for artists that are not only doing well, already making money, have a lot of upward trajectory in their natural career, but I also look for artists that are really doing things that I think will show that they have staying power, that will show that they will ascend to become bigger and more important with every passing record and that. So I not only do research into their social media, I interview artists. You know, we have meetings with them, whether on Zoom or in person or what have you. We really drill down pretty hard to figure out what our best bets are. And then from every sort of 30 artists that we are seriously looking at, maybe we'll sign one, you know.

Sure makes a lot of sense. It's similar, I think, in some ways, to search for an investing track record of success. Yeah, goes for concentration.

Stuff is hard, you know, you have to. You have to be really careful with your picks, you know, Definitely.

And speaking to social media, you've had quite a bit of success on TikTok. I was wondering if you talk a little bit about that and ways that you have helped your artists on social media.

I wish I could say that I was like TikTok expert or something, but it's a black. It's impossible, you know, it's. It's just like we do the best we can to kind of coach artists to make the best content and to actually try and make the best sort of complimentary content that we can on TikTok and put advertising dollars on TikTok. However, as a lot of major label people would attest to, invariably a lot of times the success on TikTok comes by accident. Just come like we had this one act, Proxima Parada, who are these kind of like hippie soul pop guys, really great band from San Luis Obispo in California. And we put out the record a few years ago. It's done reasonably well. This speaks to catalog, which I was just talking about. Literally three and a half years into the record release, some guy who's like a record reviewer. You know, there's no more journalists anymore writing for Rolling Stone or anything. But this was a record reviewer on TikTok. I'm forgetting his name, but he's a great sort of reviewer. He does. He's like 30 second to a minute reviews of records and he did this review of Proxima Power does single Must have Been a Ghost and it was a really great review. But he did a lot of reviews that haven't taken off. But for some reason he did a great review and it just ignited this song. And the song went from like a million streams on Spotify to I think it's at 45 or 50 million streams on Spotify today. And that was the spark. And that spark led to, you know, a lot of other people seeing it, then other people creating videos about it. It became a whole thing and took on a life of its own. And that's. I mean we solicited just like we solicit the press. We send music to that record reviewer and a lot of other record reviewers. It's our job to. But there was no way we could have predicted or planned for that to happen. Right. So I admit that a certain amount of it is just dumb luck. But it's sort of like when good things happen, it's usually that, that preparation meets opportunity, you know.

Sure, yeah. It always is that way, I suppose. Just a couple more questions as I know we're running up on time. I was wondering if you could talk a little bit more about the exit strategy for your fund. I know that when we spoke previously you were telling me that there's quite a large delta in valuations between lesser known artists and more well known artists. So I was wondering if you could talk a little bit more about why that is and also just the opportunities for multiple expansion when you do.

Yeah.

Catalogs.

Well, I, I think, you know, the music IP investment space has been hot. I mean, I'm kind of late on it, I guess, but it's been hot for sort of five years or more. And there are all these, including major labels like, like Sony just bought the, the Queen catalog or the Springsteen catalog for half a billion dollars. So the major labels are investors also in buying catalog. But there are these firms out there that are multi billion dollar firms, some really great ones, Primary Wave and Round Hill and Harborview. And they've tended to go for the superstars, right, the household name artists. It's a big asset, it creates a big splash. It's sexy in a few cases though. And part of this is. It's pretty public by now. But the whole story of hypnosis crashing and burning and how and why that happened, I think that the business trended towards overpaying for the superstars. I mean, I'm not in that level, right. I'm in a level below that. But the fact that Hypnosis and some of these other companies may be so vastly overpaid in their multiples of what they should have been paying, that makes it seem like what we're paying for developing artists is much lower. In actuality, it's kind of where it should be. It's just that the superstar act should have not been at like 25x. They should have been more at like 17x or something like that, you know, of yearly earnings and also the economy. Now, I think there's been a correction because some of these big investment companies like Hypnosis have had really difficult times making their business work, you know, because they've gotten a bit over their skis by trying to sort of corner the market, get the most big star artist catalogs, whether it's publishing or masters. And they've overpaid. And so that creates a cash flow issue. And I'm not sure, I'm not really aware of how much of a marketing staff they have to really help grow the music. And so it's like pitching for syncs or getting more social media sort of happening for the catalogs. So I don't think it's as much as that we're buying things at a discount as much as the big investors were overpaying quite a bit, which is coming down, like I said. But we're overpaying for a while for the big star household name catalogs, you know, great.

I guess just one last question is if you talk about the fund that you're raising now, why are you raising and who would be a good investor for you if they were to be interested in investing in the fund that you are raising now?

I've run this label for my record label Antifragile, for seven, eight years now. And I'm doing it for the same reason. And this fund is an outgrowth of that. So I'm doing it for the same exact reason as I've ever done anytime in this business, the thing that I like to do that I think I'm good at, and that is my whole reason for being in this life is finding talent, genius talent at a young stage and helping coach and grow them to their biggest potential. And who was it? David Geffen or somebody that said my biggest strength is standing next to geniuses or what. I think David Geffen said that, but that's sort of it. And it's much more complicated than that, of course, but that's the whole fun of it for me. So I look at this fund as really an outgrowth of that. You know, it's a reflection on how streaming has grown and evolved. But I'm still looking for artists to invest in their catalogs that I believe are really great, but have much more greatness, bigger things ahead of them, and that I can do my part to put cash in their hands to help them get there and to really be some marketing infrastructure for them to help them get there too. And that's really it. And so yeah, we'd love to make a living as part of that as we go along as well, because there's value in that when we're providing that sort of cash advice services for artists. But it's the same idea as running a record label, as being a manager, as being an A and R person at a major label. It's finding those artists when they're sort of really amazing artists, when they're on their way up and have a long way to go, and have immense potential and being a part of helping them get there. That that's all of my fulfillment right there. Professionally.

Amazing. Super interesting stuff. How can people get in touch with you? If they want to learn more, invest.

In the fun, they can go to antifragilemusic.com and email me. There's a link to email me from there.

Amazing.

Thank you Tom.

Great stuff.

Thank you Nick. Great to talk to you. Have a good day.

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