Inside Steve Stoute's New Artist-First Music Startup

Soon to be housed in a new downtown Brooklyn headquarters for his ventures (including an in-house sneaker store, STASHED), UnitedMasters is intended to be an alternative to the major-label system, providing digital distribution along with tools to help artists identify their superfans and market higher-margin products to them. It will cater to independent acts that, like trailblazers Chance the Rapper and J. Cole, are willing to forgo hefty label advances in exchange for retaining ownership of their music. (In an early test of the tools UnitedMasters will offer, 2 Chainz reported a 60 percent jump in his merch sales within two weeks, says Stoute, earning about $500,000.)

It’s not an entirely new concept, but as streaming revenue balloons and major labels see their old-school contracts with big artists expire, the model is riper than ever for success, especially with a marketing guru like Stoute, who signed Enrique Iglesias to Interscope, conceived of and partnered on JAY-Z’s Made in America festival and updated the McDonald’s brand with the Justin Timberlake jingle “I’m Lovin’ It.” Starting out as the road manager for Kid ’N Play, Stoute later signed the Men in Black soundtrack at Sony Music, clocking “how many glasses Ray-Ban sold as a result of the music’s success -- and [how] we didn't share in those profits.”

“Nobody in this culture doesn't know who Steve is -- there are no other Steves,” says Dapper Dan. Whenever Naomi Campbell brings Stoute an idea, she says, “He’ll make it happen.”

In his 2011 book, The Tanning of America: How Hip-Hop Created a Culture That Rewrote the Rules of the New Economy, Stoute quoted a General Motors marketing executive who predicted -- accurately, it now seems -- that “digital culture is going to be the next phase of urban culture,” particularly through social media. UnitedMasters will be geared to exploit that evolutionary phase. Artists will share a cut of their revenue that will be based on the services they want. Playlisting, PR, radio promotion and consultation with Stoute will be part of a basic package, but he says these services will cost less than anything comparable on the market. Currently, about 10,000 artists have access to a beta version of UnitedMasters that offers advice on maximizing social media engagement with fans. A new iteration will roll out around September, but Stoute says the company isn't yet at full scale.

Finance-world and Etsy veteran Kristina Salen is overseeing both Translation and the 58-person UnitedMasters team as CFO/COO while Stoute looks for a president of his startup. The diverse staff contrasts with an old-school music business still largely controlled by white men, even as hip-hop dominates the streaming services that are driving the industry’s growth. (Motown Records president Ethiopia Habtemariam and Epic Records president Sylvia Rhone are rare black female executives at the top of major labels -- and Rhone doesn't have the CEO title of Antonio “L.A.” Reid, who left in 2017.)

“The idea is really good -- if he executes, he’ll have something extraordinary,” says Apple Music’s Jimmy Iovine.

Stoute is one of many innovators circling the music biz as streaming drives the industry’s first double-digit growth in 18 years. Milana Rabkin, who left her job as a UTA agent several years ago to co-found and run Stem, a digital distributor and revenue-collection startup for artists and managers, says, “For a long time, music was blacklisted by venture capital, but that has started to change.”

Still, investors played it relatively safe last year: Out of the nearly $2 billion in music-tech funding during 2017, 68 percent went to Kobalt, Pandora and SoundCloud, according to publicly available information, the latter two of which have deals with the major labels.

“Once you end up in business with the labels, it’s very hard to disrupt the labels,” says Stoute. “You have to do it from the outside.”

“You have to be willing to leave -- that’s what I recommend to these young kids in the record business who want to move the needle,” says Iovine.

Ultimately, Stoute believes the problem runs deeper than the lack of label entrepreneurship: “Artists and the traditional record company model are at odds,” he says. “The music business has -notoriously taken from the artist. That shouldn't be the narrative.”

Nas, who’s signed to Def Jam, says that he hopes to join forces with Stoute when he can. “It’s a long story many artists tell about experiences with record companies. I know he wants to make that different for artists and for the fans,” says the rapper, who is Stoute’s former management client. “He wants to bring us together in a way that no record company has ever done. It’s 2018 -- he’s right on time.” 

This article originally appeared in the Mar. 3 issue of Billboard.