Steve Stoute knows major record companies inside-out, literally.
Throughout the nineties, he held the position of President of Urban Music at both Sony Music and then Interscope, where he rose to Executive Vice President.
Subsequent to his time in Label Land – while managing the likes of Nas and Mary J Blige along the way – Stoute has established himself as a successful entrepreneur, not least with Translation, the New York-based marketing agency he established in 2004 to marry superstar artists together with blue-chip brands.
In 2017, Stoute shocked the global music business by announcing the formation of digital music distribution company UnitedMasters, which was backed by a $70 million funding round led by Alphabet (i.e. Google). Other investors in UnitedMasters include venture capital firm Andreessen Horowitz (a backer of Twitter and Airbnb) and 20th Century Fox.
These days, Stoute believes the writing might be on the wall for the dominance of major record labels. As he tells me in the must-listen latest episode of the Music Business Worldwide Podcast: “The need and the value that a record company offered in the past has diminished.
“This has happened to many, many, many industries – it’s not a phenomenon at this point in time. Technology will continue to disrupt the record industry, and the power will shift back into the hands of the artist.”
You can listen to the MBW Podcast with Steve Stoute through this link.
UnitedMasters, however, has experienced just how tempting a major record deal can still prove to be: last year, UM client, teenage rapper NLE Choppa, left Stoute’s firm after inking a deal with Warner Records worth an estimated $8 million.
Speaking on the Podcast, Stoute speaks of his “pride” in Choppa, but also isn’t shy about giving his damning opinion over big money major label tactics. He says: “When a new artist is getting $8 million, or $11 million for one fucking song, that’s not the record business, man – that’s the lottery business! They call it wildcatters in oil.
“That’s not what [the record] business was built on; it was built on somebody of extreme talent – Ahmet Ertegun, Jerry Wexler, David Geffen, Jimmy Iovine, Doug Morris, Clive Davis – finding an artist, grooming that artist, hand-crafting that artist to be a superstar. That took tremendous investment and time in the [A&R] hand-crafting piece, as well as manufacturing and distribution.
“Now, a record comes out on UnitedMasters, and then the record company gives [the artist] $8 million? That’s a different industry… the music already exists, and the fans already chose it.”
“When a new artist is getting $8m, or $11m for one fucking song, that’s not the record business, man – that’s the lottery business!”
Steve Stoute, UnitedMasters
I challenge Stoute on how it could be that the major record companies maintain such dominant global market share today if their power is actually lessening. He replies: “A lot of times when there’s going to be significant change, the incumbent always looks more successful than they really are. I think it’s hollow.”
He argues: “Why are [the majors] still doing well? Well, if they’re going to say, ‘You know what, forget all the hand-crafted stuff; let’s go over-pay, or pay an extreme amount of money when something is working because [now] it’s [bound] to work for us…’ that’s my point! The work is happening on its own. So the artist should maintain their rights, and if they need a loan, or some financing, they should get financing.”
Stoute vows that UnitedMasters, whose current business model is to retain 10% of a distributed artist’s royalties, is going to “solve the problem” of financing for independent artists. He also reveals that the firm is building a subscription product for launch in the coming months, which will presumably offer indie artists extra tools to get ahead.
He cites the example of Tory Lanez, the Canadian artist who recently exited a contract with Interscope Records and publicly vlogged a celebration of the fact.
“Look how happy this guy is being free,” says Stoute. “There was a time when people would be celebrating like that when they got a record deal; now they’re celebrating like that when they don’t have one.”
You can listen to the MBW Podcast with Steve Stoute through this link.
Speaking to Stoute today, amid the global COVID-19 pandemic, makes our conversation especially interesting: the number of independent artist releases have bounced in the past few weeks on an array of services, including UnitedMasters.
Speaking to MBW while holed up in Miami, Stoute says that despite the “super-unfortunate” worldwide picture caused by COVID, some parties are inadvertently having success, including Netflix, Amazon and, he argues, independent artists.
“This is a time for people to create,” says Stoute, noting that United Masters is seeing 5,000 artists a day coming to its platform to release songs. He adds: “This has been a boon for creativity; I’m a firm believer that some of the greatest creative moments happen in times of despair… this is obviously one of those times.”
“I’m a firm believer that some of the greatest creative moments happen in times of despair… this is obviously one of those times.”
Steve Stoute
Stoute’s advice for DIY artists right now? “Keep putting out music, keep creating. If you’re an independent artist, the world is yours: you have no boundaries between TikTok, Instagram, UnitedMasters… there’s a digital ecosystem that’s there for you, where the… only barrier of entry is your ability to create, and put as much music out as you can.
“Independent artists are free of any ties to any structure that a record company or any other company has [which] limits the amount of music you can put out… anything that limits your ability to create, that’s unfortunate because right now is when you should be creating the most.”
Stoute says that UnitedMasters is attempting to build the “record company of the future”, and that, in order for UnitedMasters to achieve the scale it believe it can, especially in regions such as Africa, China, India and South America, will require him raising more capital for the platform.
You can listen to the MBW Podcast with Steve Stoute through this link.
Stoute is clear in his view that, for indie artists, lifetime ownership and control of their masters should be a key goal.
However, for those indie artists who do decide to grab a big payday by signing a major deal, he has some particularly forthright advice.
“The fact Warner Records would pay a 16-year-old kid $8 million, seven months in the music business? God bless the kid. I’m glad for him,” says Stoute. “[So] for every artist, if you’re going to go to a record company… forgo owning your masters, do some arrangement with a record company where they have rights to your masters? Go get as much money from them as you can.
“I know the fact I’m saying it comes across as a little abrasive, but it doesn’t make it not the truth.”
“They don’t know what it costs; charge them $10 million, what difference does it make? They don’t know the price! All they know is: pay the most and get it, because we maintain market share. Record companies will spend anything to maintain market share; the executives are bonused off market share.
“I know the fact I’m saying it comes across as a little abrasive, but it doesn’t make it not the truth.”
Stoute admits that major record company deals for artists have gotten much more generous in terms of rights reversion terms and royalty splits, but argues this is only because said labels “have had to respond to the fact that the artists have gotten smarter, and they can’t take advantage of them like they used to”
“I have friends that work at record companies,” says Stoute. “They don’t own the record companies; they have a job in an industry that has legacy ways of conducting business – that’s all.
“Their business models are built on owning masters, and using the library of those masters to go to Spotify, Apple Music and TikTok and use their cumulative leverage to strike great deals for themselves.”
