disclaimer: may contain unintentionally confusing, inaccurate, comical transcription errors amongst others)
Steve: Music is still to me, the biggest upside down value proposition in entertainment, right? A movie costs you 25 bucks. Maybe you see your favorite movie two or three times. You can stream it on Netflix for $14.99 a month, or whatever your book you buy a book, maybe it's $20. You read it once or twice. It sits on the shelf.
Your favorite song. You probably listened to thousands of times. I have, and I could get it for free. If I do on Spotify, add ad version, cost me nothing. I can listen to that song. Forever literally, or any other song that I could even think of or imagine it's probably 70 million songs now on Spotify. Why is it free?
Laide: That was Steve Stewart. Steve is the CEO and co-founder of Vezt. Vezt provides a digital marketplace for artists and songwriters to share a percentage of the songs, royalties to fans and brands for royalty based financing. So process that Vezt calls, initial song offering or ISO. In this episode, Steve provides his insights on what's broken with the music industry, as well as where the industry needs to evolve for a more equitable experience for artists and music fans alike.
Steve also talks about how web three and blockchain play a role in that evolution. As well as what he and his team I'd inVezt or building, Steve's got decades of experience in the music industry and has a very clear understanding of the complexities within the industry. He was also very willing to address some controversy surrounding his company Vezt with regards to royalties disbursement as a music nerd.
This was a fun episode for me. I really enjoyed his insights and I'm sure you will too, without further ado. Here's Steve.
Laide: Hi, Steve. How are you doing? Good lady. How are you? I'm doing well. Welcome to the Onchain Medley podcast. I'm excited to talk all things, music with you today.
Steve: Happy to be here. Thanks for inviting me.
Laide: Awesome. Thank you for your time. Yeah, let's kick it off with your background and foray into blockchain. How did that happen?
Steve: So my background's in music. I was in a band. I was part of a band. I managed that band and then I got into professional management. The late eighties, I worked for Ice T's assistant.
As an assistant assistant manager back in the late eighties. And then I had a band that I grew up with, send me a cassette tape back and they, and they asked if there was a way I could help them get a record deal. And I shopped it for probably two years to all the majors and a bunch of independence, and finally got them a deal in 1992 with Atlantic records.
And that band went on to become stone, temple pilots record. Yeah, we sold, I don't know, 40 million units. I think they say now over 10 years, I was with them from 90 through 2000 and had another 20, 25 other artists signed to that period to major labels and publishers. So I got really familiar with how the industry was structured, how, uh, you know, the royalty collection methods that were, and still are inefficient or were out there and a bunch of the pain points that artists and creators had to work through to be part of the industry.
And, uh, from there, I always wanted to get an attack and I watched the.com boom happened in the late nineties. And I felt like I missed that. Let's start dabbling more in the tech space and startup space. Um, the two thousands or the early aughts, early two thousands, 2010, and then was at a company called circus, which my co-founder Robert Menendez I met at.
He was one of the co-founders of circus. And he started talking, we started talking about music and he's like, why does everything sound the same? I said, well, because most record labels are, are anti risk. They are very conservative. They're big corporations, big media companies. And they take very few chances.
So the needle moves very slowly in the major record label land. And the money follows, right? The money is basically risk adverse and it moves very slowly and. Uh, very few number of artists actually benefit from the system. I mean, I think there was a study done by city group last year that said about 12 cents of every dollar actually comes back to the creators.
Right. Which means 88 cents is going somewhere else. Right. It's going to middleman and record labels and publishers and collection agencies and all different sorts of entities, but it never really gets back to the people that actually make the music. So we wanted to start something. Was beneficial to the creators, but also involved their fans and also involve their audiences.
And I think that was the missing piece that we saw in the music publishing business and the music copyright business was all based on B2B transactions, where music publishers were given advanced to an artist. And then. They might license those songs to other media companies or other brands, but never really led in the public.
And I thought that was a part of the equation that was missing. And we started Vezt in blade 2016, incorporated in 2017, launched the platform in 18, wanted to bring the ability for fans to participate in the royalties of the songs and artists that they really liked. And it was a groundbreaking idea. No one had ever done that before.
Um, music royalties is still kind of a dark art. There's a lot of misunderstandings and inefficiencies in the structure. It's a global royalty collection structure. People don't know there are about 140, what we call PRS performance rights organizations, or in Europe, they call them CMOs, collective management organizations that collect music rights from the playing and use of music in public spaces.
In these territories. So in the U S that's ASCAP and BMI and CC back in England, it's PRS in Germany, it's schema and France, etc. I mean each, each major territory, again, about 140 of them had their own collection societies and those regions. Again, any type of public license monies that come in, and if you're a US-based writer and you collect through ASCAP, it comes through say the song gets played in South Korea.
The agency in South Korea is called Kanca. They received those warranties. They sit on them for about three or four or five or six months. They pay them to answer. How's caps, that's on them for another three or four or five or six or seven months. And then they pay them to the writer. And that's why sometimes royalties take a long time.
It's kind of a complex structure. It is in place. It does work to a large extent, but that's, I think where a lot of education has to come into play. And I think just like with NFTs, there's a level of misunderstanding to start. And then I think once you get down to what it really is about, there's a better understanding of how the system works.
I mean, it's not a get rich quick scheme. It's not about someone saying, Hey, I'm going to come in here and pump this and then get out of it. I think that crypto mentality tends to seep into certain things that are newer. And I see it in the NFT space. I see it in the royalty space a little bit, but th the royalty part of it is where we started more.
We remain. Valid stream of income. You're seeing a lot of major artists, royalties trading in the hundreds of millions of dollars. These days to big publishing companies and big institutional inVeztors. Now it's considered an uncorrelated asset class that doesn't move up or down with respect to the stock markets.
So it's becoming a place where people think, oh, this is a good inVeztment because it's a steady level of income over many, many years. And that's what we wanted to bring to the public and offer through Vezt. Thank you for
Laide: sharing. I have a lot of questions about the royalties and we'll get into that later, but I wanted to just kind of back up to one of the things you'd mentioned about NFTs.
Um, I do agree. I think the whole crypto NFD space, there's a lot of hype and bad actors, and I have a lot of concerns about that, but I am curious like what, what is your take on the NFTs? And then I keep hearing things like music and MTS is going to be the future of NFTs. 2022 is a year of music and MTS.
How do you think about all that? And what are your thoughts?
Steve: first I think the best thing about NFTs is it's opened up a huge awareness for the direct to consumer model, right? For the first time, if the artists are going, you know what? I don't necessarily need a label or a retail network. I can go directly to the consumer, or I could put up a piece of art piece of my music, a piece of liner, note, whatever, photograph, even a piece of royalties maybe, and I could touch the fan directly.
I could be involved with them. They can interact with me. They can purchase from me directly. Just the mindset of. There's a shift away from how it used to be. I get calls still to this day. Probably every couple of weeks, I got a call saying, Hey, can you help me get a record deal? And my first question is, why do you want a record deal?
Right? But there's still a mentality out there that the record labels control everything and that you are not successful as you run through a label. Oh,
Laide: isn't that true? Like if you're a small artist and you have not discovered online, either record liberal to push you through
Steve: right now, you've heard a little NAS X you've learned.
You've heard of Justin Bieber, right? You've heard of these artists.
Laide: People who could be that needed work a little bit to push them through. What didn't you agree
Steve: with that? I agree that if you're looking at large scale success, record labels and publishers tend to be involved now, is it necessary from this point forward? I think less and less, right? Because today, any of the services that labels provide with maybe one exception, which would be radio, you can purchase all a cart, right?
You can say, I need a publicist, boom. I'll pay that person. Oh, I need someone to help me produce a record and your record producer, boom. You can pay that person. I need a distributor. How do we get my records? My songs out to Spotify and apple music and Amazon boom, there's a distribution network. All those things to be had.
And a lot of them at a far, far reduced rate production costs are almost down to nothing. Right? I could literally make a record on my phone through garage, banner or logic or pro tools or any number of digital workspaces that allow you to make a professional quality recording in your house, in your bedroom for pennies compared to what.
You know, 20 years ago. So production costs, labels, fronted. Most of that. And that's one reason they were the gatekeepers because most artists confront a hundred thousand dollar recording budget, right? That's a lot of money and no one had that. So when you take that a hundred thousand dollars and now it becomes a thousand dollars that opens up that to a lot more people without having to worry about a gatekeeper on the distribution side, Spotify, apple music, Amazon music, those are free platforms that distribute to for a few dollars.
If that even I could put a song through to core or district kid or CD baby, and have it on Spotify within 24, 48 hours cost me almost nothing. Right back in the day to get a record in a store or a CD in a store, it was almost impossible unless you just went to a little indie record store and say, Hey, can you put my record on the corner over there please?
Which I've done. But, um, today that cost is almost zero, right? So production distribution costs have been minimized to almost nothing. What does that leave marketing? Right. And the biggest part today is discerning the noise from the stuff that you really want to hear. Who's curating. How do I know what music is?
Good or bad music I'm going to like, so people rely on playlist. So they rely on Pitchfork or some website or some other personality to help them navigate and cure. What they're listening to and labels. Yes. They have a lot of money, but can you buy marketing outside? Of course, right? There's there's no limit to what you can purchase or partner with influencers on social media.
No, one's gatekeeping that. Right. You can make those connections and put the money up and make deals. So I would argue that, you know, outside of terrestrial radio, Which labels have traditionally had a lock-on, but it's getting less and less important. You could have a hit and you could have a career and you can make more money based on the income that you're not giving away to a label or a publisher like that.
And labels more specifically, the analogy to me is like Amazon, what that did to the publishing business on books, you can either make $10 a book on Amazon, or you can go to Simon and Schuster and get an advance. And they'll give you 10 cents a book until you recoup that advance. Right? And there's no guarantee they'd promote you properly or market you for any length of time or anything.
So it is riskier. You're not going to get that little cachet that comes along with having assignment and Schuster publishing your book. It may be harder to get into bookstores, but I don't know who goes to a bookstore anymore or else, or even where they are. But yes, if you write a book and say, I've got an audience, cause I have a YouTube channel or a Ted talk channel, and I want to direct by people there, they will go on Amazon.
They'll make the click, they'll purchase the book. And guess what? You sold a thousand books at $10 each or whatever the number is. So. There's an opportunity today to do it yourself. Like there never has been before at a high quality you're playing in the same sandbox as the major label call it. Right.
You're on Spotify. They're on Spotify, right? You're on iTunes. They're on iTunes. It's like the field has been leveled a lot, but what's been different is like you said, you can't figure out what's good. And, and how to get to the songs. I really like. So I just see NFTs is a way to shift a little bit.
There's still very nascent technology. It is so new. We have what's called ISO's initial song offerings, which are specific to music royalties. And if T's can mean anything, and if he could be a piece of art, that could be a piece of video clip, that can be a piece of music. It means like saying blue. Well, the sky is blue.
The ocean might be blue. My shoes might be blue. I mean, you know, what does that mean? Blue could mean anything. So NFTs is very generic and very. But when you say ISO, you're talking specifically about music royalties and I think the value, the real value to music, and yes, some creators are great artists on the visual sense and they have great photographs or great artwork or great album covers.
That's amazing. But the reason most people listen to music isn't for the artwork or the photographs or listening for the song. And the underlying value of the song is the copyright and the royalties that come along with the use and popularity of that music. And I think that's where we're focused. Yeah.
Laide: I agree with that. I think know are broad. And I get that. I think a lot of people, at least from what I'm hearing, they just tie and FTS with the royalty piece of it. They see it when he's talk about music, they're really thinking, well, NFT that I can now have on the chain. And then I can track royalty collections and payments and see how it's moving through the network.
And so what you're saying now is like, you're doing the same thing through ISO's or, oh, you think those two things can be decoupled. They don't have to be one of the same or how the dues to play in this space. I'm just saying
Steve: I, those are, are specific to music royalties, whether it's done through an NFT type structure of watching touch structure or it's done through Fiat off the chain.
But the other part of it, I have to mention it is, and I've read through many of these NFT projects and platforms. And as you probably are aware when open sea first dropped, there were some issues, right? People could not get their money out because they didn't really do their homework. They didn't do any kind of KYC, AML where, you know, you know, your customer there's, there's a lot of us banking regulations.
That were all, just put them in quotes, being violated or not adhered to, because there was no regulation or guideline in many respects. But when they start to see tens of thousands or hundreds of thousands, or even millions of dollars being transacted, the U S government doesn't like that, they don't know who's involved.
Right. So they're like, well, where'd that money come from? And who is it? And are they a U S citizen? Are they offshore? You know, is it, is it legitimate money? So open things at a hold, a lot of those monies back because they didn't know who the customer, they just had a wallet address. Someone came in with a wallet address and bought something that was it.
They don't know who that person was. They don't know where they live. They don't know where the, where the funds came from. And there's still a lot of dark corners in that area where even with the royalties themselves, most people have zero information on what royalties are. Right. They think they know the song got played X amount of times.
That means I get. Okay. Is that master royalties? Are those publishing royalties? Are those songwriters shares or publisher shares? Is that a performance royalty or a featured performance royalty? I mean, most people have no idea how that is even registered or collected upon. And I will tell you that very, very, very few of the things I've read through identify any of that.
The best I could see is we'll give you X percentage of your master streaming royalties. Okay. Even that is a very broad term. It doesn't specify Spotify, doesn't specify apple music. It doesn't specify which master rights doesn't even talk about advances or recoupment or anything like that whatsoever. A lot of it's disclosure and there, and there are issues with disclosure, a lot of.
And, and record companies, structural entities are not transparent and it's a problem I have with them as well. I mean, it's, we haven't evolved to the point where people are opening their books and saying, Hey, here's what this earn. And here's how you can participate in this. It's a very opaque industry in many respects.
I think it's getting better. I hope it's getting better and we're working to try to make it better. But when you have to identify what those royalty rights are, and then you have to make sure that the songs are registered properly on a global basis with those 140 different collection organizations, which you can do through certain choke points, but you also then have to see, is it, is this something where it's collectible are these song rights, earning money?
And many of those, the ones I've read through say there is no promise of any. There is no way to audit. There's no, there's nothing. It's, it's a little early, right? And, and I'm not saying it won't work. It will work. Actually. I think it'll work very well, but this is like YouTube, right? When YouTube first came out in 2005, it was fraught with copyright infringement, right?
Every video on their head music that was not licensed properly, pretty much all of them and YouTube or Google bought it for $5 billion. I think even with those issues, right? They knew that, wow, this site is a bunch of people that have the right intent, right? They're using music for good reasons, but they weren't using it legally.
They didn't even know they had to license it properly, but they knew that eventually it would work itself out. And they did when, when they got to the DCMA, which allowed take down notices to be to work. Now you see a functioning platform called YouTube that earns some creators, hundreds of millions of dollars, and has billions of videos on it is become a repository for video collectors.
The same thing will happen with regard to music rights. We're just very, very early days.
Laide: Yeah, I agree. It's very opaque. And sometimes I wonder if it's intentional, but it sounds like rather than the technology adopting to that opaque industry, the opaque industry needs to sort of adapt to become more transparent.
Right? Do you think that's ever going to happen? It will
Steve: happen. It's like what goes up must come down. The sun will come up tomorrow. There's a bunch of cliches you can mention, but it's going to be driven by the creators. Right? Most of these record deals have seven year limits on them in the first place.
And that's why someone asked me today. Well, why you just scoop up a Dell and scoop up a number of artists? Well, they're under contract, right? This is some of the didn't understand the music industry. So I just go get them, just go sign them up. Like, no, they're already signed to a contract to Sony music, right?
You can't just go in there and violate the contract. It's a little harder than people think. Eventually they will come around. And I think you're going to see the labels. I just saw Warner today. They signed a deal with a company to start doing NFTs internally for their artists, but they will seek to play in this space.
The space will dictate more transparency. And I think at the end of the day for me, and I've always been on the artist side, it's really about compensating these creators in a fair manner. And I got to say, music is still to me, the biggest upside down value proposition in entertainment, right? A movie costs you 25 bucks, maybe see your favorite movie two or three times.
You can stream it on Netflix for $14.99 a month or whatever your book, you know, you buy a book, maybe it's $20. You read it once or twice. It sits on the shelf. Your favorite song. You've probably listened to thousands of times. I have, and I could get it for free. If I go on Spotify ad ad version cost me nothing.
I can listen to that song. Forever literally, or any other song that I could even think of or imagine it's probably 70 million songs now on Spotify. Why is it free? Somebody created that song, somebody recorded it, somebody distributed it and market it and got it out to me. Somebody needs to be compensated.
Right. I mean, I feel like someone does, but it's odd that there's a generation, I guess that's skipped that and thinks that just floats through the air and, uh, you know, we don't need to compensate the artists. Well, I think you do need to compensate the artists and some of that 12 cents of every dollar.
How about them making the 88 cents? Everybody else getting 12 cents.
Laide: I'm a big music fan. And I believe in supporting artists like before COVID right. I'd go to shows. That's how I, the supporting the artists. But now that's no longer the case. Right? Eventually, hopefully we'll come back. But the fact that the artist is getting 12 cents, I understand like the fans expect it now for that amount of money, but like, it's not, they didn't create the rules.
Like it just so happened and people are capitalized enough of it because they, when, before we add Spotify, there was all this, like people streaming on Napster and all the other, like torrent downloads to get their favorite music. Cause they didn't want to have to pay for it. So why do you think that there's such a mindset when it comes to music around people just feeling entitled to it, as opposed to what.
Pay, whatever that would cost. Well, it's
Steve: interesting. I mean, I think there is an entire generation that I'll call them Napster generation because you're right. People were sharing hard drives of literally tens of thousands of songs. Like, Hey, here's 10,000 songs go for it. Or here's files download through Bitcoin or whatever.
There's a number of ways to get the new what's. What's interesting is there's always been demand, right? I've never seen a lack of demand for music and songs that people love. So people would go through these weird, I mean, using BitTorrent is not easy. Right? You have to find the song, you have to find the servers that it links to.
You have to take server risks, cause maybe it's corrupted or it's malware or what have you. So people took all these risks and spell this time trying to get to these songs. And I think what happened was, you know, Steve jobs eventually said, look, I'm just going to call every song worth nine United sense.
Right. And he told the labels, you guys been beaten up by Napster. You, you lost, you lost it. I mean, they Napster. I sat with Sean Fanny and. We wanted to partner with the labels. We sat them all down and said, let's work out a partnership. And they all said, we're going to Sue you. So at that point, all the songs were on CDs, which are digital masters, right?
The horses were out of the barn and running anybody that had a CD, you could replicate that in the best quality, infinite number of times. Right. And give it away. So they were chasing after something that they should have partnered with at that point, but they didn't and they were stubborn and they said, no, we're going to Sue you.
And that didn't work out too well for them. It really decimated the industry. But I think because there was a let's call it eight years, 10 years, or a lot of kids just saw music as coming through the airwaves on someone's computer. Plus radio radio is kind of a weird different TV, right? Radio is ad supported, like telephone.
You get re you get your songs there. You're like, ah, it's just in the air. It's free. I heard it on the radio. Somehow there was a disconnect between that end user and the person creating songs, right? The guy that's in the studio, the woman that's in the studio with her friends, singing, writing, playing whatever, and getting it out.
And then, then again, giving that 12 cents. So I think there's still something that says music's a loss leader. Yeah. Music was the basis for YouTube, the basis for myspace. Friendster, Facebook, your name, Tik Tok name, any social platform. You'll see music plays a huge component of that. So people have taken advantage of it for many years.
The label, you know, the labels have made money off of it, obviously, but they haven't even enforced the rights as they probably could or should have. Right. Tik Tok, for instance, there's so much music on Tik Tok. That's on property license. I know they're working towards, they're getting there, but they take advantage of this.
Oh, we can grab it. Yeah. We'll get sued or, yeah, they'll spank us. But at some point they'll have critical mass by then. Oh, we got 40 million subscribers last month, so we're fine. Right. They can afford to pay their way out of it and work through it. YouTube did that with the DCMA, which said, look, if you, as long as you do a take-down, you'd allow people to do take down issues.
You're fine. So you can violate as long as you tell people that if they notify you, take down the song. Okay. So there's solutions to work around, but I think eventually people are just going to feel that it's the right thing to do to compensate these writers and performers. And I had a conversation with a Forbes writer and she was talking about, you know, kind of the same thing.
I said, look in Japan, which is the second largest music market in the world. People don't know, people are still buying CDs, vinyl and tape. I mean, 87% of the market is physical product. Spotify. Jessica started there. They have very little market penetration in Japan. She said why? I said, well, I think.
Actually respect the creators of this art and they kind of want to pay them and they don't know how to pay them directly. So they buy a $20 CD. They know they can go three minutes, Spotify or some other streaming service for free, but they would prefer to do it the right way and show some value going back to the people that brought them, that song and that joy and that experience.
So I think everyone's heart. They realize there's deep value to their spirit songs. And I think most people would like to give back and make sure the creator gets their whole. So I think it's going to shift. I think once you see big artists coming out of their contracts, once you see fans start to participate at a large scale, because I think the other side of this again, is the fan involvement which has been lacking.
It's been a one-way street for decades and decades and decades in the music business. Same with TV. You watch the TV flows over your, your, your air as you watch it. Now you can interact, right? Imagine if you could interact with those TV stars or that shows. Right. You can interact with these artists as a participant.
And that's a very strong connection that I think bodes well for both the consumer and the
Laide: creator. No, thanks for sharing and providing that history. So then switching gears now to ISO, which is what you're doing over inVezt, and that brings the founds into the equation. Why do you think that's significant?
How has that been taken by the artists and fans alike? Just walk me through why you think that's a better model than what we have today.
Steve: Well, again, it's a direct to consumer model, so, so it allows artists to go directly to their fans and instead of just a donation. So instead of just putting a handout and saying, Hey, can you please help me out?
Which is fair, but it's also puts them in a weird social position. Um, we always thought, instead of just asking for a donation, how about providing some value back, right? So that make them a partner, let them participate in your songs in a meaningful way, not just a put you on my credits or I'll do a shout out to you on Tik Tok.
It's no, you're actually going to benefit. Whenever money comes into my royalty account, you will get a piece of it. Right? That's the stronger connection is skin in the game. It lets them take the risks right. Alongside the artist. Right. And we saw it early on Bowie was an inspiration when they did the Bowie bonds back in the late nineties, where they basically made a bond issue out of Bowie's music, they did a $55 million securitization of 50% of his catalog pre 2000, I believe because it was early nineties and they were able to go out at an 8% coupon and sell that to the bond market, which was an inVeztible vehicle.
Right. It was done through STC because it was regulated properly, but it was. And people bought into, it was one of the first times I think institutional inVeztors started to look at music rights as a uncorrelated asset class. Didn't move along with the stock market. Wasn't as volatile. Once you had a song that was seasoned or a catalog, it was seasoned over many years.
So. We chose to focus on royalties. We chose to let our fans partner with artists. Death is a marketplace. It's a peer to peer marketplace where artists comes to us and said, I'd like to put these rights up on your marketplace and a fan or a consumer comes out on the other side and says, I'd like to buy into those rights.
So we don't buy the catalog or own the catalog. It's not our rights to sell. These are rights of these performers and creators. And then the public part of it comes in and says, we'd like to come in and participate at some fraction, that ownership. So, uh, it's been an interesting model. It's very new, many people don't understand how it works exactly.
But I think the future bodes well for independent artists that are working their way up as well as for some established artists that have maybe gotten out of the record deals or stopped touring or what have you, but still have a strong, recognizable fan base that they just haven't had any way to get in touch with.
There's plenty of artists from the seventies and eighties that don't have record deals anymore. That don't have a label. Don't have a publisher, don't have a manager. And those songs do very well. The royalties keep coming in, but no one is actually working it. No one is actually getting them in touch or trying to make those rights more valuable.
So that's where we saw inVeztors.
Laide: And so just walk me through the artist side. Cause you had mentioned earlier about, you know, 12 cents of every dollar goes back to the artists. And so with the Vezt modal, if I'm only making 12 cents and I have to give the fence about other royalties, like where does that come from?
I'm assuming that because the fans are inVezted in me and putting their money down, I'm just trying to pull my head around around it. All right. Because it doesn't seem like an artist. They want to give out more royalties to fans, but I'm only getting a fraction of it to begin with.
Steve: Yeah. First of all, they're not giving out anything, right.
This is a proposition where the fan is supporting the artists and the artist is giving them a part of the royalty stream for a period of time. Right? So again, it's not a handout on either side, it's not the artists giving somebody something or a consumer buyer say, Hey, I'm just going to give you $5.
There is a benefit to both parties, right? So, um, the way that it works on best is we allow buyers to come in for as little as $5 and they can participate in a royalty stream. Each particular royalty stream can be different. Like I mentioned earlier, royalties can be master side, which is on the recording itself.
That can be on the publishing side, which is the composition of the underlying song copyrights themselves. Or they could be performance warranties. There's any number of royalty. If we break it down in the master songwriting and publishers, those are the three main pools of royalties. So what we had to do is chunk it down from the artist side, so that artists that they have no relabel dealer published and you lay on a hundred percent of everything.
Some of them have publishing deals. So they can't really give up their publishing royalties or offer their publishing worthless. So they maybe can offer their master royalties or their songwriting royalties, which are different than publishing royalties. So anything that they have that is not encumbered in other words, not subject to an advance.
So like a label like Sony hasn't given them a million dollars and then. Not pay that art as anything else until that million dollars was recouped. And then they would start paying them after that advance was paid back. So anything that has an advance or loan against it, we can't work with, it has to be clear and free.
And then we have to see, you know, royalty earnings. We're not selling anything in the future around saying, oh, here's some money, go make a record, put it out. Let's see what happens to get on our platform. It has to be something that's already in distribution. That's already generating a royalty somewhere.
So from that point, you know, they say, look, I I've got this song. I'd like to put up 10% of the song. I'm just, this is an example. You know, the song earns a thousand dollars a year. I want to do a five-year deals. That's $5,000. Can you do it? And we go, we look at it. We verify the royalty information and say, yeah, it looks like that's where you're getting.
If you want to put that up for $5,000. So we don't set the pricing day, set the pricing. We can disapprove as something's ridiculous. If a guy wants a million dollars in the song earns a hundred, we're not going to say yes to that. On the fan side, you can come in for as little as $5 and on up, and that will get you a pro-rata percentage of the royalties that are offered.
So if, uh, artists would say offering 1% of the royalties for a thousand dollars, and you came in with a thousand dollars, you would get 1% of those royalties. If you came in with $500, you'd get half a percent of those royalties and so on. So you're buying in just like people buy into Bitcoin, right? You don't have to buy five Bitcoin.
You can buy $5 a Bitcoin and you would get 0.0 0, 0, 0, 0 5% of a Bitcoin or whatever it is. So we let the creator side chunk down to as little as 1% of their rights in any side, any, any bucket of rights. And on the consumer, the buyer side, we let them come in for as little as $5. So it helps both sides come to a point where there can be a real market for them.
Laide: Gotcha. So then as a fan, I put, let's see he's in that example, I put in $5, how does that money get distributed to the artists and to Vezts? What's that take rate for you all?
Steve: We have a transaction fee of 5% on the buy-side. So if you put in $5, we would take 5% of that as a transaction fee on top of the five.
So I think it ends up being like $5 and 60 cents or 80 cents, whatever it is that 80 cents or 60 cents comes to us, it helps us cover the credit card transaction. And the handling costs, but the $5 itself goes directly to the artists. So they're getting 100% of the purchase price, the fees being paid by the buyer, but the purchase price itself a hundred percent goes to the
Gotcha. And then as the fan using the example use earlier 10%, uh, five years or whatever, uh, you then get those royalties for a period of five years. Is that correct? Right.
Steve: So we use what's called reversion structure in the exact same structure, that major publishing companies, in fact, all publishing companies, I know use Sony, universal Warner, brothers, BMG, et cetera.
If Sony music, if you were a writer and Sony said, Hey, well, I'll give you $250,000 as an advance. There would be a term of generally be a three-year five-year deal. And you say, okay. And they would cut you a check for two 50 and then they would start to collect your royalties for that period of time. Now they also try to exploit and try to get people to use the licensed songs.
Vezt does not do that. We're not a publisher acting as a publisher in that respect. If at your say, it's a three to five-year deal with Sonia, your five they'd only recouped 200,000 of that 250,000 a dollar advance they gave you. They would stay in those rights until they became fully recouped. In other words, Sony would stay in the rights until that $250,000 was recouped.
And then if there were coupe that it's active, that five-year point, those rights would go back to you. The writer, you could also buy your way out of those rights at the five-year point, even if you're unrecouped, but you'd have to pay Sony feet. They'd want, you know, the difference. If it was 200,000 against two 50, you'd have to pay them $50,000.
And then most publishers charge you a 25% fee on top of that, which I don't understand the logic, but they do it. We don't do that, but you could pay $250,000 or probably 50 plus the 25% more and get out of those rights and be free and clear up after that. Five-year window's closed. So it's called the reversion period.
It's exactly the same model of the publisher too. So in our case, if a buyer put in say $10. And it was a three-year reversion at year three. They only have $8 come back to their account. That $2 would stay open until it was paid off till the actual rights holder collects and pays through that additional $2.
Those fans stay in those rights. So that's just to get them even. So the worst case you were in those rights for time, right? It could be another quarter, three quarters a year, 10 years, five years. Who knows how long to recoup those moneys. There's no guarantee that royalty. We'll come in just as there's no guarantee in the stock market.
Oh, I bought this stock for a hundred dollars and now it's that $50. Why? Well, there's no guarantee that stock will, will vary based on demand and royalties the same way. Except once warranties start to come in, they tend to be level over many years. So if you're dealing with a song which we called seasoned, they have big hit that came out.
I don't know, 10 years ago. Um, my guess would be that that world stream is much more stable than a hit. The came out last year that no one knows right. Last year song comes up the label pumps at boom. It does really great for the first six months. And then it falls down and no one knows that what the average earnings are going to be until maybe two or three years later, when it bounces back and you realize here's what it's going to earn with no promotion, no one working at no one hyping it.
And it starts to flatline. That's why catalogs like Bowie and older catalogs tend to have more value because you can see what the earnings are over a long period of time versus a song that came out last month or a year ago.
Laide: Makes sense. Thanks for explaining that. So then on the fan side, then how do you and the royalties, maybe even for the artists too, what's the period with which to receive the royalties?
Is there a periodic payout to this or is it until the end of the term? Or how does that work?
Steve: It depends. Well, okay. So it depends again on the source of royalties on most PRS, like I mentioned, ASCAP, BMI, see sack in the U S pay quarterly. And when I say quarterly, hang on, we're talking about the music industry.
So it doesn't just mean every three months. It means quarterly plus typically in 60 or 90 days, Per their contracts. Uh, if you think of the end of the first quarter is March 31st, right? That means January will be March three months. That's a quarter end of that quarter is March 31st. I should get a statement on March 31st.
You may think you're doing the first quarter royalty check by March 31st, which is technically the end of the first quarter in record industry land. And not just recognize a lot of other industries work this way. They they're due to pay you within 60 or 90 days after the end of the first. Right. So you may not get that check March 31st.
You might get it June 30th. They have up to 90 days after the quarter to pay you some other platforms, like some labels and some publishers pay you semi-annually. So you get paid twice a year, right? So every six months, again, not on June 30th or January 1st, but 60 or 90 days. In fact, Sonia I think used to be 120 days after that semi-annual period.
So you would get the money, not June 30th by July, August, September, October, maybe as late as October for what should have been in June 30, what we call first half payment. Right. So it depends on the source of the royalties. So, uh, if your source pays semi-annual, you're going to see that twice a year. If it pays quarterly you're and see four times a year, just when in the year on schedule is going to be different from source to source.
Laide: Okay. Thank you. Now, switching gears a little bit more to that specifically, uh, I believe you were funded in 2017 through the ICO. Boom. It seems like you're no longer using the blockchain. Is that fair? What I'm hearing or reading.
Steve: No, it's this weird. Somebody wrote something that said we weren't using, or they quoted me that way, which is not accurate.
Again, welcome to the media and welcome to journalism. Because even when someone says, you said something in a reputable, and this was, I think a marketplace articles also, it was also an audio. So you will not hear me say that on audio, but the writers said something like, oh yeah, we're looking at getting into blockchain.
We initially employed blockchain as a, in a very light way. Right? We saw it. This is against 16, 17. When we were 18, we were building it. We realized things are going to become digital. Everything's going to be on digital ledger at some point. Right? Rights management is a perfect use for blockchain. We also saw was that no one really had built a proper rights management platform on blockchain.
There wasn't one single chain that was going to handle all rights everywhere, globally. So we said, look, let's just draw transaction hashes for every transaction. Into the chain as it happens. So at least there's a record of it going down. So that's about the extent we did. We didn't do any kind of tokenization where, you know, you're going to get a token that goes with NFT that goes with it.
And technically it isn't NFT, but no one called them NFTs. In 2017 or 18, it was a ledger entry, a transaction hashtag. Um, which is on hexadecimal character string that goes in and say, this is the transaction on this chain. We started with Ethereum. We built on ERC 20 is that was the first smart contract platform.
As you will call, there wasn't any other game in town. And then we saw gas costs and transaction velocities go through the roof and it became almost untenable. We saw CryptoKitties crash a theory at one point and realized, man, this is not a high volume transaction platform. That's going to work like that.
So we shifted to stellar stellar protocol, which I know everybody loves decentralization, but I'm telling you, don't have to tell you, you, you and your audience probably are aware that there's really very few truly decentralized platforms. There's there a couple, but most have some governance in place and someone is running it because we're not quite there.
Especially with music rights, someone has to govern it in some fashion and otherwise everybody was there. I wrote that fire, what that's like and what all these songs are. All my songs. Right. And then you've got this big fight and then nothing ever happened. So we went to stellar, stellar had real offices in San Francisco.
There's real people there. We can sit with them and we tweeted, shifted our protocol to stellar. But yeah, we, we involved it on a light basis. I think eventually like, you know, what does not market starting to happen? Now, people are going to start tracking individual assets much more readily. My hope is that we start tracking things down to the stem level.
Stems are pieces of songs. I think anybody that's made music after maybe 2007, familiar with stems back in the day we call them tracks. And any music that was done on analog recording doesn't have that ability. But, uh, there are a couple of platforms that we're talking to that can actually take each song and split it down to the stem level very accurately.
And then we can assign a token to each stem. And as that stem is used throughout the world, Payments and compensation can come back to the creators, which I think is the holy grail. Once you can say, Hey, I wrote this baseline, it gets this rate and put that on a smart contract. And then, then you're not afraid.
And then anybody can use it anywhere. In fact, you want people to use it everywhere. I call this the paper use long tail where every time it's used somewhere, you're getting a little piece of something for it. And I made this argument to another journalist where he's like on YouTube. I said, that's the long tail, right?
Most people cannot use music on YouTube because it's illegal. There's no license. So a sixth grader that's graduating from elementary school. Maybe he wants to do a video about his graduation. He wants to use a, a little NAS song, right. But he can't do it because it's illegal. YouTube will flag it, shut it down, et cetera.
Although his classmates might enjoy it. He might enjoy it. A little Mazda actually might enjoy the fact that as long as getting used to celebrate a graduation, but there's no physical legal way to do it. Now, if you could identify that song by each stem and he'd say, okay, there's 24 tracks in that song.
Each one of those has a separate owner creator that baseline or that mix or that vocal, or what have you. And even though it's a sixth graders graduation video that got viewed 30 times, it's worth 0.0, 2 cents. The creator would pay that or YouTube quite frankly, would pay because they're getting ad revenue against it.
They send that 0.02 cents to the owners of those stems. Right. And it's in proportionate sense. And now everybody's had. And guess what that's song now get played. Do another 30 people probably played it to another a hundred people. And so the creators give, getting the benefit of full exploitation of their songs.
The kid that's making the video loves it because he could pick from any song out there without restriction. And the system likes it because it's fair. And it's like, if you're, if you're Jake, Paul, and you got 20 million YouTube subscribers and that gets played on your channel, yeah. You're going to have to pay $2,000 for that song or what have you, Jake.
Paul has no problem. Cutting a check for $2,000 nor does YouTube. Right? But as long as you're being compensated at the rate that your art or work is being used, that's fair. And then you won't be afraid. You won't go. I don't want anybody to use my site. You want everybody to use my site? I don't care if it's at a mashup from some kid in the Philippines, chopping it up in 50 different ways.
You can't even think of every time it gets played. I'm seeing that little tiny piece of warranty come in to me. Right? I think when we get there, people are going to be in a much better. Yeah, I
Laide: think that's powerful. And I like that example. It definitely crystallizes things for me. So thank you for that couple of things I need to touch back on.
You'd mentioned earlier, you want to hear or see 20. Now you switched to stellar. Is there any bridge between ERC 20 and seller? And I'm asking this because I want to know if I were a fan who supported you when you were in ERC 20 and then you moved to stellar. What does that mean
Steve: for me? We had a widget and we, I think we put up, it was like 180 days.
Right? I think there was some time period on it, but we're happy to accommodate anybody. And I think we got the gist of anybody that was interested or there's a lot of people that came in for very your issue, tokens or dollars early on. And I don't think they even cared, but yeah, we provided a widget that was, you literally put in your wallet address.
It would convert that to a stellar and then your tokens would be there. So it was a pretty typical transfer protocol
Laide: back then and, and sticking over the fence to a little bit here. I know a lot of people would seem like thought it was a good idea with bus seems like a lot of people supported the company.
Upfront. And I think I've been seeing comments of people not getting their royalties as expected. Do you just have any comments or words for those funds who supporting the artists a
Steve: hundred percent? Number one, I appreciate your support. I mean, we, we totally appreciate you jumping in on a trailblazing platform because no one else had done this before.
Uh, number two, I wish I had done a better job educating on how royalties themselves work. And you know, we, if you go through our FAQ, you'll see deepen there. You know, it could be 12 to 18 months. What have you, but people don't understand that. And I think the crypto space specifically, people are looking to 10, 2000 X, their, their stuff like tomorrow.
Right. I put in X, I bought this, you know, I bought some new whatever, and I'm going to sell it on Thursday and I'm going to four X, well, that's not how this works. Right. And I, I probably, I should, I'm trying to do a better job educating as to how royalties are collected and, and it is a. Part of the music business.
I mean, it's literally like watching paint dry and it does take months and months and months, if not years, plus months to receive royalties. And they aren't always, you know, what people think and people think, oh, I put in five bucks, how come I got a 14 cent check? Well, that was the first split of that royalties.
And you own 0.0 0, 0, 0 5 cents or 5% of that royalty. And that's what it equates to. They don't know they're in the royalties for three years or five years or 10 years. So you're going to get a bunch of those checks. And at one point, if the royalty doesn't meet your $5, so you, again, you recouped your $3 and 50 cents came in against the five.
You stay in the royalties until you're fully recouped, right? So the worst part is you time, if you have to wait for those payments to get up to where you were, the best part is, if something happens in that timeframe, you benefit, right? If something like a dreams, we saw that what happened on Tik Tok or that guys, you know, with the ocean spray and the skateboard, he's just broken out of his truck and he's riding into.
That song went through the roof. I heard Mick Fleetwood said it was a hundred times more valuable after that Tik Tok video, which was completely unscripted, unplanned. It was a viral occurrence, which I think is going to happen more and more as social media platforms become more expanded and people start using them in different ways.
But I think part of it was the education on how royalties actually function. And if you talk to any artists, you know, I think one of the reasons artists like our platform is because they're getting money up front, right? They're taking three, five or 10 years of earnings into a upfront payment, which helps them.
Right. They don't have to wait five years to get that thousand dollars. They're getting it now. But on the other side, the fans like, well, I put in 10 bucks and I get 20 bucks. Like not necessarily, right. It depends on how that song. And the speed of which that returns is very slow. And again, I'll tell you why, because most of the monies are collected off shore us as a country, but we're not the only biggest country.
And we do have a lot of music usage here, but most of these songs earn more money overseas than they are in here. And when those monies come in, it takes again, either a quarterly or semi-annual collection period, and then 60 or 90 days after that period to cut a check to ASCAP or BMI, if it's a US-based writer and then they pay quarterly or semi-annually, and they have a 60 or 90 day period on the end of their checks.
So by the time the artists gets a check, it could be a year to 18 months after that royalty stream started. So there is a wait period. There is a period where nothing's happening. Um, some songs are going to perform much better than others. It's much like the stock market in that fashion. I can't make any Ford speaking promises on royalties and we never do, but it's, it's literally.
If someone uses that song a lot or gets screened a lot, or it's an, a commercial or a movie, boom, that those numbers go up pretty heavily, right? If it's not used and it's just flat, it stays relatively flat. No one can predict which songs are going to be used more in the future. So there's no way to know what that is.
But the bottom line is that if you put in $5, you will get your $5 back over some period of. Thank
Laide: you for explaining that. But I do think that as somebody who's running this company and who's pushing this new initial sung offering or ISO, I will say the burden of explanation is on you to explain to people because everyone's like, well, I'm being scammed.
I'm not getting my money back. And I think that there's gotta be some effort on your companies and to, to make that clearer and explain that for people. So they don't think of being scammed.
Steve: One of the reasons I'm speaking to you, I do as much of this as I can. And I want to get the word out. It's in our FAQ's.
I do medium articles. I do. I mean, I try to explain the royalty system is, but I got to tell you the truth is most people don't read. Most people don't even want to know the details you notice, right? When you go buy a car or buy a house who reads those contracts, anybody, you sign your name and all of a sudden you get an invoice for $290 a month.
Like, what's that? Well, that's your car. Well, I thought it was two 50. What did you read that agreement? No,
Laide: I agree. But I also say that a lot of these legal contracts that they're intentionally deceive you, right? Like it is annoying that I have to go read a bunch of fines.
Steve: I don't think I'm made to deceive you.
I, you know, I think they're made to inform you and, um, but you
Laide: mentioned it was going to read it. So how am I going to get informed if I'm not going to read it and you don't tell me, like, I know you said two 50, it's actually two 90 a month.
Steve: Not if you're telling me that people just don't need to read anything, then, then that's fine.
When someone, when someone says, Hey, you can T no, one's forcing you to take this car right here at the dealership. I want to get that new car. Great. Here's the contract. 99.9% of people sign the contract and walk out the door. Right? There's a few people that are geeks like me that I will actually read the contract.
Laide: I actually read my contracts and I'm very paranoid of being sort of taken advantage of you
Steve: sound like the kind of person that would do that. And I applaud you. I think that's, but you know, you're rare, right. You know, that's not everybody, you know, and that's not most people. Right.
Laide: But I'm a product person.
So I'm also a believer that like, I want to do the work for the consumer, so they wouldn't have to do the heavy lifting and not everyone thinks like that, but that's what I
Steve: believe a hundred percent you're in the path of where we're going. So when we built this platform, there's large discussions about how, how much time and effort should be put out to UX UI.
Right. You know what that is, user experience, user interface. If we had put an entire treaty on music royalties, it would have been about 55 pages long because we did it and then no one would ever go on the platform. No one would ever read it. No one ever this thing would be dead in the water. And it's just like Robin hood.
I'm not sure if you're familiar, throbbing. Robin had came off right after I think it was released right after we released, but we were watching them in beta. I was a beta member and I said, this is how it should be. Right. And here's my thinking behind it. I might be right. Might be wrong. Give people the opportunity if they want to learn more, there's always more information to learn and read and understand, but give them the opportunity.
First, if I want to buy a Tesla, I click here. I own a piece of Tesla now, is it my fault? If I don't read the prospectus, honestly, I'll tell you I haven't read Tesla's perspective. Right? And I would tell you this 99.9% of inVeztors in the stock market have not read the company's prospectuses that they're inVezting in.
They just haven't, they're very complex. And most people don't have the understanding of the. To get through them. Should they read them a hundred percent? They should read them. Do they read them? No. Now does that make them a good or bad inVeztor? I don't know. But what it does is it's allowed Robin has allowed them to play in this game that they couldn't play in before.
And I do this myself and if I'm putting $5 in somewhere, but I learn enough about it. Right. When I first got into crypto, for example, I'd say here's $5, right? I did it more to learn about how it worked then thinking I'm going to make 5 million off by $5 now, but I want to see how this process works. What happens, right?
Does it go up? Does it go down to, I have to open another wallet. Do I have to go through Metta? Massive. I mean, all the stuff that you learned in the process was worth five bucks to me just for that. Right? So what I'm saying is we made a decision to build something that was accessible. We put the FAQ's in and there's plenty of reading you could do in music royalties.
There's a hundred thousands of books on how they're collected. You can go to ASCAP, BMI, there's any number of sources of information. But if that's what you're selling, if I'm selling a book yeah, file up. I'll put it in a book and sell a book, but this was a transactional marketplace. So just as Robin hood makes available resources.
If you want to read Tesla's perspective, you could perspectives. You could do that. Or you could just click the button and buy Tesla. Now, is that bad or good? I happen to think Robin has probably benefited more people than it's hurt the number of younger inVeztors or inexperienced inVeztors. I should say that have now gained some kind of knowledge and understand the markets better than they did before.
Probably a good thing. Right. As it helped everybody know, I'm sure people have lost stuff in Robin hood. They didn't understand something. They had, you know, oh man. I thought if I did this, I was going to go to this. Well, not necessarily. Right. But that's also part of the experience. So yes, it, it royalties music royalties on there on the surface seem very simple.
But if you dig a little deeper, they are more complex. We model it exactly like a music publishers business structure is. And I thought that was simple enough and yes, for some people they've done well on that makes sense. For some people they don't understand it at all or upset because they don't see a royalty check, you know, a week later.
So yes, it's on me to help educate people. I'm trying to do my
Laide: best. Well, I appreciate you doing that. Thank you. And you've heard the guy, people go do your homework. All right, then now, just lastly, then just talk more about Vezting, where you guys are. Now you've mentioned some of the technological changes you're making to your platform.
What's next for you? How should people stay updated and keep informed?
Steve: So we're looking, we've got a partnership with a big artist finally, because to date, all of our stuff has been with big songs, but most of it through co-writers producers, publishers, independent artists, um, no one with a big reach. This person has a pretty big reach and social media, um, someone that I know personally.
Someone that is set up to go. We didn't want to release it prior to our tech structure being improved and, and confirm, which is now it looks like it's the case. Um, so we're setting that up now for the first quarter, I get three or four emails and or calls a day regarding NFTs and the NFT space, consomme consulting for other spaces that are NFT markets.
They have zero clue. Cause I think a lot of these are being built by amazing engineers and developers and tech guys that have zero knowledge about music royalties, curious, like they put a royalty out of two thirds of the song. Okay. Is the song registered? What, where do I register while there's like eight different places you have to register depending on what royalty pool you're looking for.
They haven't asked question one, right? There's no, they're just putting it out there and people are buying into it and reselling it without even knowing what it is or how to register or collect on these royalties. And it's something that we do, you know, we've got that figured out, but it's about now scaling up.
It's about marketing. We're still very much under the radar, our early users, I think. All right. You know, they're trailblazers, they're in a space that they know they were ahead of themselves, right? NFTs came after us. And if you start to look at where this was going to go with it, you're going to see NFT slash ISO's.
There they're strictly music royalty based. They're going to be handled in a much more clear manner, even clearer than, than we've done early with Vezt. And we're going to improve upon that. I want to make that much more transparent and I want to tie it in to let people see how each other's platforms are doing.
Are there others, like even a leaderboard, almost gamifying it to a certain extent. So I think that's powerful. And once you have networks of people working together or talking about something that becomes much more powerful, and I see a lot of stuff in discourse, see stuff on telegram. I mean, first of all, to get up to get a positive comment is, you know, most people trend negative, right?
If something happens, that's fine. No one tells you, Hey man, you did a great job or you met expectations or whatever you get nothing. If you go to the restaurant, they serve you great. You're going to standard tips. If the soup was cold or there was like a crack in the dish or the fork was bet on my God, this is the worst place I've ever been.
This fork was bent. They didn't notice it. I could've cut my lip. It's like, it's like a whole, you know, human nature. I'm just saying that's how it is. If you look at any stream of comments, the number of negative deposits is going to be probably five to one. Well, it
Laide: online too, right? He's a lot of keyboard ninjas who just say whatever they want to say because no one can see them.
So yeah. That's
Steve: exactly right. Come on ladies show and do a podcast like me. Come on. Let's do it.
Laide: Exactly. I appreciate that. No, thank you. I'm excited to hear about the new artists in general. There just any other artists you hope to work with, you know, what's on your wishlist before I let you go. Oh
Steve: man, any, any artists that's got a fan base, that's engaged.
Number one, it could be an Indian. We have stories of indie artists. Some of the stuff that doesn't get out there is, you know, we had guys that got in Julian extra at 3000 Facebook fans and he grew that audience. His first check from us. I think $8,700. He engaged every one of those 3000 fans and took him from driving a Lyft all day and making music at two in the morning to make music all day and maybe driving a Lyft at night, right?
It changed the trajectory of his career. I know that can happen multiple times for multiple artists that are on their way up. Instead of like we said earlier, at the beginning of the conversation, that label doesn't have to be the gatekeeper, right. There are ways to get around this and engaging and empowering your fan base is one of them, right?
Let them come on that journey with you and say, look, you it's risky. It's early. I don't have a big fan base. These aren't hit songs. But let's make them heads. Right? I'm going to write some stuff. You've already heard it. You like it? Tell your friends, tell your network when they start streaming it, we all benefit.
Right. That's where this goes. When you get that mass fan base behind something and they can participate in a real meaningful way that ownership, stake. That's powerful. I think we're going there.
Laide: Yeah. I can't wait to see that. And then last question for you. How's the music industry reacting to all this, not the artist or the fans, but you know, record labels.
Are they open to it? What are they thinking? Are you worried?
Steve: Somebody asked me this the other day. I said, there's, there's two answers. One. They're either shaking their boots or they're licking their chops. And I happen to think that's a little of both, but I think they're probably licking their chops more than shaking in the bruise because they see this as an opportunity they've been built on retail networks in the middle, right?
So back in the day of physical product with CDs and cassettes and vinyl Warner, for example, had to sell to best buy or had to sell the tower, had to sell to HMV or Virgin music. I mean, they had a network and that network charged retail, right. They could take that CD for $9 Warner and sell it for $18 to the.
What they also got was the consumer data, right. They knew who the customer was because they had the point of purchase. So more stuck the stuff in a box than an off in a truck. They didn't know where it went, or they had no connection with the end user at all. And that's going to change. You're seeing these bigger companies saying, why aren't we having a direct relationship with the end user, with the customer or the fan?
That's where the real money is. That's where the retail payment is. It would digital goods and digital delivery no longer do you have to rely on a trucking company or a warehousing company or a shipping company or breakage, or, you know, all that stuff that was issues with shipping, something across the country, across the world, those issues are gone, right?
So I think you're going to see people or the labels and the Renaissance. They're jumping into the NFT business. As we see today with. Um, they're going to try to figure out a way to benefit from this directly. But what I also see is the quaking in their boots side is a lot of big artists are going to see the same idea and go, why do I need Warner brothers when I can go do this on my own?
Right? And instead of that 10 cent book, I'm taking the $10 books. So my music goes, maybe it's streamed at 99 cents on iTunes or apple music for download, but maybe I can jump in and get a bigger piece of that. Maybe I do something like title and maybe title comes in with a different model or another company comes up with a different model where the streaming rates vary based on how popular a song it's right.
All songs can't be worth the same. That doesn't make sense. It's like every car is the same cost. The same, no, you got a Honda and you got a Mercedes, right? There's two different levels of quality and uses for those vehicles. And that's why one is priced higher than the other. So why are all the songs, the same price?
But things will change. You'll see new innovation come faster than you can shake a stick at. I think artists will see that 12 sentence starts to ease up to maybe 50 cents and further. Hopefully I think you'll see participation from consumers and fans. And I think fans will also be able to participate for the first time, connecting directly with the creators, supporting the creators, participating with the creators, helping them out.
I think once you see social media influencers start to connect with these artists in a new, meaningful way, all bets are off. I mean, things are going to go through the roof quickly. Yeah.
Laide: Yeah. Well said, no, this has been really great. Steve. I really enjoyed this conversation.
Steve: Same, same. I appreciate the questions.
It sounds like you understand the space very well. And I'm super happy that you asked and asked me to come on the show. I really appreciate it.
Laide: Thank you so much for listening. If you enjoyed this episode, please subscribe. Wherever you listen to podcast. I'm your host Laide until next time.