Kobalt wins big in building 'transparent' rights management service

(This story was originally published in One Movement for Music Issue 5)

by Emmanuel Legrand

When flat is the new growth, like it's been for many music companies for a while, those who can swim against the tide are a rare breed. For ten years now, London-based Kobalt has been bucking the trend, posting growth year on year. And 2012 has been a stellar year for Kobalt Music Group, according to founder and CEO Willard Ahdritz.

Speaking in Cannes during Midem, where he was a keynote speaker at the International Music Publishing Summit, Ahdritz boasted that for the first time in the 10-year history of the company, revenues exceeded $200 million for 12 months rolling. Kobalt's primary business is to administer music publishing catalogues on a global basis, but in recent years it has ventured into new areas such as management of neighboring rights – performance rights attached to performers or recordings – and label services.

Kobalt's Willard Ahdritz

“Publishing is profitable,” says Ahdritz, whose company has agreements with about 200 different publishers. “And we are now collecting neighboring rights in 26 territories,” explains Ahdritz, whose recent clients in this field include Bob Dylan, Dr. Luke, Gotye, Max Martin, Paul Simon, Ryan Tedder and Shellback, among others.

Kobalt now employs 180 people around the world and Ahdritz forecasts major growth in 2013, with the development of Kobalt Label Services, which handles digital and physical releases for independent artists. The  label services unit was launched in 2012 under the supervision of Paul Hitchman. “Paul started Playlouder when I started Kobalt. We met again at Midem 2011 and said that now was the time to work together,” says Ahdritz.

KLS recently inked a deal with Nick Cave and his company Bad Seed Ltd for the new album of  Nick Cave & The Bad Seeds 'Push The Sky Away', out on Feb 15. “I am pleased that such a great artist and a world leading management company [Brian Message of ATC] have chosen Kobalt,” says Ahdritz, who looks genuinely pleased and not sounding like he's telling some corporate lingo. 

While the new divisions are on a growing path, Kobalt continues to sign publishing deals, as exemplified by the recent signings of ex-Nirvana drummer and Foo Fighter frontman/guitarist Dave Grohl and Paul McCartney's MPL for a representation deal with Kobalt for the world excluding the US and the UK. 

“This is a great time for companies like Kobalt or mine,” says a New York-based publisher. “With all the consolidation taking place in the business, we now see artists coming to us that we could only dream of a few years ago.” 

Ahdritz accepts that he is now on the receiving end of all the top names who were previously signed with majors (publishers or labels) and who are looking for alternatives, but he adds that if Kobalt did not deliver on its promises, it would not work. “The business is becoming extremely complex: We are dealing with billions of transactions and you need to have the right systems in place,” explains Ahdritz.

And that's where Kobalt has a winning proposition. The secret to the company's success, says Ahdritz, lies in its rights management system and in its capacity to integrate digital management from the outset. For example, Kobalt can accurately match the use of music on user-generated content with the rights holders repertoire, and proceed to quick and accurate payments. “Clients must be able to access their money as soon as one month after the usage of their works,” says Ahdritz. To that effect, Kobalt has become a keen buyer of data from all sources about the usage of music. That way Kobalt can forecast revenues and pay clients before PROs make the payments.

A word that props extensively in Ahdritz's vocabulary is transparency. “The internet drives transparency. It is not acceptable that you do not provide full transparency when you are using other people's money,” says the Swedish executive. This is the reason why, he explains, he has built all the back office functions.

Transparency is also mentioned in the same sentence as the agreement announced at Midem with Swedish authors' society STIM. The two organizations will launch March 1 Kobalt STIM Aggregated Rights AB, a one-stop shop to license the rights to Kobalt catalogues in Europe to digital music services. 

“We are still investing,” says Ahdritz. “We are well funded and we have more capital than we need.” However,  Ahdritz admits that the company works on low margins, which has an impact on its operational profitability. In the same breadth, he adds, “We take a decent charge for the value that we bring to the table. We are a service company for rights owners. And we are here to maximize the copyrights of our clients, and that's why I am a very strong advocate of IP laws.”

[Typed while listening to The History of Apple Pie's 'Out Of View' (Marshall Teller Record) and Local Natives' 'Hummingbird' (French Kiss)]