Can Kobalt Disrupt the Label Game With AWAL?

But the excitable and verbose Ahdritz, 54, believes his timing is perfect, and unlike his major-label competitors, he’s glad that some of his AWAL artists have been experimenting with Spotify’s direct-upload feature. “Kobalt was designed for this moment,” says Ahdritz, rattling off a series of predictions he has made over the past decade that have since come true, such as the dominance of streaming. “We are here to service creators -- it’s very simple.” (“If you’re humble, it’s difficult to blow your own trumpet,” he adds with a smile.)

Indeed, Ahdritz has been planning for this moment for years. In 2012, Kobalt purchased AWAL -- short for Artists Without a Label -- a Europe-based digital distributor that quickly became an incubator of sorts for Kobalt’s fledgling artist/label services division, separate from its primary publishing administration business. At the time, Spotify had been available in the United States for just six months, and streaming was still largely a foreign concept stateside. But Ahdritz saw how streaming’s growth could position Kobalt to help more performers make a living independently, just as the company was already doing on the publishing side for star songwriters like Thom Yorke and Rufus Wainwright.

The sales pitch to label clients, just like publishing clients, was simple: ownership. “As the artist, you keep ownership, and that’s the fundamental difference,” says Kobalt chief marketing officer Ryan Wright. “We invest in your vision. It’s just a different way of looking at it. It’s your music, and we’re investing in your music and your career. So you have freedom and control.”

AWAL is the anti-label in other ways, too: Its executives love YouTube (for turning music videos from loss leaders into revenue generators) and cater to what they call music’s “middle class.”

Kobalt’s artist-friendly deal structures have frustrated its major-label rivals, driving up the price of signing talent. The company won’t share specifics except to say that the splits are, “if not opposite, definitely close to it,” according to Wright.

That suggests AWAL is paying out as much as 80 percent of streaming revenue to its artists -- as Ahdritz estimates it, eight times more than the traditional record deal would allocate. Of the $150 million investment, Ahdritz says much of it went toward artist advances, which range from thousands to millions of dollars per signee, while Olinick says he was able to double his team, bringing in executives from the major-label system and digital streaming platforms.

In the year that ended June 30, 2017, Kobalt’s revenue grew 23.5 percent over the prior year, but its losses ballooned, too -- up nearly 70 percent, to $34.8 million. Kobalt's music divisions have raised $198 million through the years from the likes of Google Ventures and Hearst, while its Kobalt Capital investment fund has raised nearly $1 billion from private investors, leveraging its investments in publishing catalogs and other royalty streams to pay off its debts.

Ahdritz sees Kobalt playing the long game, sacrificing short-term payouts for eventual domination. It’s the same story Spotify is selling to its investors in the stock market: Once we take over, once we become indispensable, you’ll see your return on investment. As Ahdritz says, “You don’t build a global business overnight.”
 

Kobalt began offering label services to artists in 2013, but it wasn’t until January of this year when Ahdritz decided it was time to, in his words, “push the button,” promising 100 new hires to go all in.

“To me, AWAL is, if you were starting a recorded-music company from scratch today, what would you create?” asks Olinick, a former artist manager and major-label veteran who joined Kobalt in 2016 as chief of strategy. “For us, it’s about having the kind of capabilities that meet the needs of the best artists in the world who are looking for an alternative business model, who are looking to control their rights, who are looking for full transparency in their data, but who aren’t looking to trade down on the quality of the service that they’re getting.”

Already, AWAL has had success with artists like Lauv, whose song “I Like Me Better” was released through AWAL in May 2017 and, through a partnership with Spotify and a radio-promotion campaign with AWAL, reached No. 7 on Billboard’s Mainstream Top 40 chart and No. 27 on the Hot 100. And AWAL has attracted talent away from the major labels, signing deals with artists like deadmau5 and Laura Marling.

“To simultaneously trust an artist to make the record they want to make while also committing to supporting it is such a rare find in the music industry,” says Betty Who. Nine months ago, the dance-pop singer-songwriter signed with AWAL after a stint on RCA. “They are as equipped as any major label to support my career.”

AWAL is proud that some of its acts have taken part in Spotify’s direct-to-artist initiatives: Lauv, for example, received marketing and editorial support as part of Spotify’s RISE program; DJ-producer Michael Brun, meanwhile, took part in Spotify’s direct-upload beta program, with AWAL’s blessing. Olinick sees AWAL’s role as “complementary” to what Spotify is doing, rather than adversarial, adding that “it’s all about artist empowerment.”

“We see it not changing our role,” he says, “which is really to distribute across all platforms and generate insights across all platforms, to provide services on and off the platforms, to provide marketing services and radio services and physical distribution and synch licensing, to provide analytics across different platforms, to provide funding.”

After waxing philosophical for a stretch about the global opportunities for growth in the music business, Ahdritz stops himself. He had been out each of the past few nights -- the T.J. Martell Foundation dinner in Manhattan on Monday; Nine Inch Nails at Kings Theatre in Brooklyn on Tuesday; Robert Glasper at the Blue Note in the Village on Wednesday -- and hadn’t gotten much sleep. But sometimes, he explains, that’s the biggest reward. “What I’m proud of is that yesterday I got a hug from a great jazz musician,” he says of Glasper, his publishing client since 2015. “To be a true, trusted partner? That’s what I do it for.”

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