Scott Cohen on his optimism for the music industry – and JKBX’s ‘transformative’ launch

Joining Music Business Worldwide founder, Tim Ingham, on this MBW Podcast is Scott Cohen, the CEO of JKBX.

JKBX is a new platform that enables investors (including so-called ‘retail investors’) to acquire royalty shares in hit songs. It will, in future, also allow you to trade those royalty shares by selling them to others.

JKBX launched in September and according to Bloomberg had over $1.7 billion -worth of music assets secured.

Right now on the platform, JKBX is offering royalty shares in hit songs like Halo performed by Beyoncé, Rumour Has It performed by Adele, Welcome To New York performed by Taylor Swift, and many more.

However, as you read this, you can only reserve your acquisition of royalty shares on JKBX. Before it completes any transaction, the company is in the process of attempting to secure regulated approval from the US Securities and Exchange Commission (aka the SEC).

As well as its primary investor, Dundee Partners, JKBX has reportedly attracted strategic investors including Spotify, Live Nation, YouTube, Red Light Management, and others.

Things to know about Scott Cohen before we get into the podcast?

He is the co-founder of The Orchard – which he co-launched with Richard Gottehrer in the second half of the nineties, before selling it to Sony Music for a total of around $250 million, partly in 2012 and partly in 2015.

Before joining JKBX, Cohen was most recently Chief Innovation Officer at Warner Music Group, where he kept his ear close to the ground on tech such as artificial intelligence, the metaverse, and blockchain.

On this podcast, we ask Cohen about JKBX’s prospects, the changing nature of technology’s involvement in music, and the lessons he learned building the Orchard into a huge music company.

Listen above for the full interview, or read an abridged version of the discussion below…

Imagine that I’m the owner of a portfolio of music rights that’s worth $2 billion, $3 billion, $4 billion. What can JKBX do for me, and how does it actually work? 

Well, the first thing I can do is congratulate you on amassing an amazing catalog worth two, three or four billion dollars!

What [JKBX] can do is unlock some of the value of that, the same way [as] when companies IPO and become listed; oit’s a way of unlocking trapped value.

We take income streams from hit songs – so a rights holder has a song that generates $1 million a year, for instance, maybe we take 10% of that income, $100,000. We put some multiple on it, let’s say a 20x multiple, and that’s done through an issuing company, and that issuing company takes it to the SEC in America, the Securities and Exchange Commission, to get it qualified.

So essentially what we do is we take income streams and then convert them into regulated securities. And when I say “we,” it’s the issuer that does it, and then it’s listed on the JKBX platform.

Bloomberg reported earlier this year that there was $1.7 billion of music rights exclusively secured for JKBX. They also said that JKBX had a goal of raising that to $4 billion. How is that mission going?

Well, I’d like to congratulate Bloomberg on their optimism that we would go from $1.7 billion [in] music rights to $4 billion. That’s amazing.

With that said, I’m not gonna give you a number. But if I said they missed it, underreporting it by a factor of three, you can have some understanding, I think, without saying the number… $12 billion instead of $4 billion.

You need buy-in from the industry’s biggest rightsholders, and not just the three majors, but other organizations that hold billions of dollars of music in their portfolios. So how is that process going for you? How are you finding the level of interest from those organizations?

That is where we’re getting the buy-in, is from those large rights holders.

What we’re not doing is working with small unknown artists. I mean, there’s a place for that, but that’s not what we’re doing… We’re talking about songs recorded by Ed Sheeran, Adele and Beyonce – folks of that level – being listed on the platform. Those only come from those large rightsholders.

Is there any conflict or danger, in your mind, in bringing music fans into the risky game of investing in music catalogs? Some people might argue that fans and investors should be kept separate…

I don’t know who these people are [who are] positing this philosophical question. I don’t want to say it’s silly and I don’t want to be dismissive of it, but it doesn’t make sense to me.

In America alone, 63 million Americans have individual investment accounts. There’s a similar percentage in the UK and around Europe. So people are investing: they’re investing for their pensions; they’re investing because they’re trading.

“I am a huge customer, and actually a fan, of Apple – but I’m also an investor in Apple. I own stock in Apple. I don’t see these two things as mutually exclusive.”

The same people are also fans of music. It’s not like the people that invest their money are one group and fans of music are a different group. They’re the same group of people.

I’m a huge customer of Apple. I have two MacBooks, one personal, one business, I have an iPad, an iPhone. I am a huge customer, and actually a fan of Apple, but I’m also an investor in Apple. I own stock in Apple. I don’t see that these two things are mutually exclusive? I think they actually work really well together.

It’s an interesting time in the music rights business. Streaming growth is maintaining its healthy pace and price rises are helping, but everyone kind of recognizes that things are slowing down from the explosive growth we’ve seen over the last five to seven years. Are you confident in the long-term future value of music itself?

When I think about the future of music, I look at it through a couple of different lenses. One, music as an asset class is an uncorrelated asset. That means that regardless of the macroeconomic conditions, regardless of [whether] there’s a pandemic or a recession, if music is played, somebody’s getting paid. It doesn’t matter what’s happening with the economy if a song is streamed… That’s the beauty of an uncorrelated asset.

When I think about the music industry, it’s always been subject to format changes and new revenue sources. It’s been this way for nearly 100 years. [In the early 20th century] there were 78s and then in the 1950s, it was all about the 45 singles, and then in the 1960s we get albums, in the 1970s we get cassettes, in the 80s it was CDs and then we moved into downloads and streams.

“if you look at the history of music, and [understand] there’s always new formats, always new revenue sources, and you believe that trend will continue into the future, then you would make decisions based on that.”

My point being that, if we just look at streaming and say, ‘Oh my god, streaming is slowing,’ it [implies] that’s the end of the line. There will be nothing else coming after that to generate revenue. If you believe that, then, well, make your decisions based on that.

But if you look at the history of music, and [understand] there’s always new formats, always new revenue sources, and you believe that trend will continue into the future, then you would make decisions based on that.

In your previous role with Warner Music Group, a big part of your responsibilities was keeping your eye on forthcoming technological trends. As you know, generative AI has exploded as a topic of discussion in the music industry in the past six to 12 months, both in terms of music making, and what we could call ‘music aping’ platforms, for instance the recent “fake Drake” track that replicated the voices of superstars. Where do you sit, generally, on the commercial threat versus the commercial opportunity spectrum of generative AI?

If you know me at all, you know that I’m an eternal optimist, which also means I think all of this is a massive opportunity. I was chatting with Mark Mulligan… a couple of weeks ago, and I think we see eye to eye on this. He talks about [how] the music industry has historically been based on a consumption model. We make money by monetizing consumption – radio, CDs, downloads, streaming.

But if you look at what’s happening in the world since the web, we [now] have a creator economy. [In pre-internet times] there were people that wrote books or articles in magazines, or they wrote for newspapers, and that was a small number of people and the rest of the population consumed those things. But once people had access to the web, they started writing themselves… everyone was now creating something.

There used to be photographers and… now everyone expresses themselves through photography. And then you get things like YouTube and TikTok, and now we’re in a world where people aren’t just consuming video content through TV, film and – in today’s world – things like Netflix. They’re also creating just as much as they’re consuming.

“Could AI assist us to express ourselves through music? When I take a photo on my iPhone, I just merely switch to portrait mode and the technology behind it takes over and makes this amazing photograph. I don’t really have to know anything about F-stops and aperture… Could this happen with music? And the answer is yes With AI.”

So people have been expressing themselves using words, photos, and video. But what is next? Could AI assist us to express ourselves through music?

When I take a photo on my iPhone, I just merely switch to portrait mode and the technology behind it takes over and makes this amazing photograph. I don’t really have to know anything about F-stops and aperture and you know, I don’t know any of that terminology or how to use a 35-millimeter camera. I just put up my iPhone, flip to portrait mode and take an amazing photograph. Could this happen with music? And the answer is yes. With AI.

And so now, instead of just having the music industry be based on a consumption model, we can also generate money from creation. If lots of people, millions of people globally, tens of millions, hundreds of millions of people, are taking pieces of existing music that’s licensed, applying some AI to create what they want… if that part can be monetized, imagine the size of the music business in the future.

Let’s jump five years into the future. What does the ideal scenario look like for JKBX, and how big can it become? 

What I’d like to see is a future where music, as an asset class where regular people buy it, is completely normalized. That this is no different than investing in real estate, or investing in shares of Apple or Tesla or Microsoft… That’s kind of my future. When we started The Orchard… we were telling people not only will people be consuming all their music digitally, [they will be] creating digitally, and and this was just a mind-blowing thought for people.

“What I’d like to see is a future where music, as an asset class where regular people buy it, is completely normalized. That this is no different than investing in real estate, or investing in shares of Apple or Tesla or Microsoft.”

We started a few years before Napster, but even when Napster came along, people in the industry viewed it as piracy, but they were dismissive of it because ultimately, why would you want some crappy mp3 download? People want the CD, they want the liner notes, they like to hold it in their hand, the tactile experience, and they love going to the record store and all that. And they could never imagine that the industry would flip to what it is today.

So that’s what I’m saying about music investing. We’re investing in music, and I want this to be as normalized as digital music became. I just hope the timeline isn’t as long.