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Foreign.
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I'm Dan Runcy and you're listening to trapital. One of the hardest things to do in music today for an artist is to build a true business around their music. Everyone talks about doing it, Everyone wants to be an entrepreneur. Everyone wants to be like Jay Z. I'm not a businessman. I'm a businessman. But how many people are actually doing it at that level? The list is few and far between, but that's exactly the opportunity and that you're going to hear us talk about. In today's episode at the trapital Summit, I sat down with the co founder and CEO of Firebird Music Holdings, Nathan Hubbard. Nathan is an executive in the music industry that was formerly the CEO of Ticketmaster, the CEO of Rival, the head of music at Twitter, and Nathan is now leading Firebird, a holding company that has raised hundreds of millions of dollars to invest in a wide range of music assets, including management companies, record labels, and investing alongside artists to help them build businesses around their talent. Nathan's team at Firebird has worked closely with Youngblood, where they work together to create a new company, YB Inc. That's been the launchpad for Youngblood and Firebird and the team to launch new business ventures, product media, and more. And the goal is to do this with different artists that match the criteria that that Firebird and Nathan are looking for. So in this conversation, you hear us get into what it takes on the artist side and on Nathan's side to make this a success. We also talk about what the diligence process looks like when they're evaluating record labels, management companies, and other music assets. Nathan's also the host of a podcast named Every Single Album. And in this conversation, you'll hear us get into one of the common topics on that podcast, Taylor Swift and how she's built a business around her talent. It was a really fun conversation, so I hope you enjoy it. Let's dive in. This episode of Trapital is brought to you by Splice, which is excited to announce Splice soundcheck, a new beta program available exclusively to Splice customers, including an experimental suite of generative AI capabilities designed to spark inspiration, unlock new creative possibilities, and ensure artists remain in complete control of their work. Splice Soundtrack has been proven with creators because the company has spent the last year collaborating with more than 50 artists and producers to push boundaries of what's possible, even with more creative control. Splice's AI tools were built on the foundation of sound first philosophy, not with prompts or predefined parameters. Every sound created with Splice soundcheck begins with a human made splice sample and and each use triggers a licensing event that credits and compensates the original creators. You can learn more@splice.com innovation or you can click the link in our show notes. If you enjoy listening to Trapital and want to stay up on the latest about how technology is shaping our culture, then make sure you tap that star button and tap that follow button so you can listen to us and get the latest episodes and on Spotify, Apple Podcast or wherever you get your podcast. You just came out to a new song from the Sabrina Carpenter album.
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It's the best song on the album. Yeah, it's the best song on the number one album in the country.
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B
So you work with their team a little bit, right?
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Yeah, we're, we just are super fortunate to work with her management, her manager. That whole team is doing an incredible job.
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I haven't listened to the album yet, but I will give it a listen. But what we did want to talk about today is this topic around building businesses around talent has come up so much. Every artist wants to push their entrepreneurial focus forward. It's something that's now more critical in the business than ever. And this is a big reason for why you started Firebird Music. So if you could just give us first a high level on what the business is and what you wanted to achieve the Firebird.
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At the core, our mission is to help artists build longer lasting, more impactful, ultimately more profitable careers. And I think the thesis of the company that we founded it on, really the observation was that artists are these massive direct to consumer facing brands that are not fully capturing the value of that brand. And we chalk that up to really two things. It is an infrastructure problem and it is an incentive problem. And so everything that we've done at Firebird has been to try to solve those two things from an infrastructure perspective. We just think that what it means to be a multi hyphenate, multifaceted creator in music has evolved what they need to actually manage a brand. If you look at Apple and the way that they manage their brand, it's very different than the way we manage these what are ostensibly large direct to consumer facing brands. And so as we have made investments into management companies, made investments into record labels, that's all in service of building up infrastructure, pairing that with a rich investment in data science, in digital marketing and finance and label services, all designed to help artists achieve and capture the full value of their brand. So that's really how we've addressed the Infrastructure problem. And then the incentive problem is I look around and see consolidated companies in recorded music. I see consolidated companies in technology to distribute that music. I see consolidated companies in live. I don't see a large scaled consolidated company on the side of the artist. And I think that fragmentation has a second third order effect that effectively move rights to a bunch of different partners and create an incentive challenge where those partners are understandably interested in how do I extract as much value. Steve just talked about it like, how do I extract as much value from the arena tonight? How do I get as many streams today when the album is released versus thinking long term about how do I build a longer lasting, more impactful, more profitable career for this artist? And the incentive thing for us is we think we have found a way to structure a relationship with an artist that thinks about equity value and thinks about long term decision making. And when you structure a relationship that way, you actually make decisions differently. And so that's what Firebird is. At the end of the day, we earn trust and access from the artist based on our proxy and the execution that we do in working to build up their brand. And then we deploy capital into the things that they make in a way that we think creates incentives that build long term value.
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Can we talk more about the incentives, specifically about how it helps artists make decisions differently? Because as you mentioned, it can be so tough now. Artists can be so focused on first week numbers, streaks, how did I place on Spotify, where am I buzzing right now? How do you not just shift the incentives, but shift the mindset to not be so focused on that?
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I think artists are doing that themselves right now. I mean, I think it's really hard to see a future where an artist who is a multifaceted, multi hyphenate creator in any way that they are involved in music, are not entrepreneurial in some capacity. So we have a deal with Youngblood that is public, one of a number that are behind it at Fire. But, but that to us is sort of the north star of, of the kind of structure and relationship between a company and an artist that is trying to build long term equity value. And what that deal effectively does is he's put all of his revenue, all of his intellectual property into a company. We've invested in that business. There's some primary capital that's come off that goes into the business. There's some secondary capital that comes off the table for the artist, but then we're long term partners in building up what he does. And the reason that matters is if You've watched what happened to Youngblood. I don't know if you saw the VMAs, but he has like a huge moment where he's sort of taking the torch from the old rocker generation and leading rock forward. And he's had this vision for how to do that for a long time. But that's not something that you can do with just one album. And so the way that we've structured this deal, it's allowed us to make some upfront investments that are now paying off as he's had an incredible moment when Ozzy passed Ozzy's last concert, he had a sort of Freddie Mercury Live Aid 1985 moment where he led the crowd in an acapella song. And Ozzy really sort of passed the torch to Youngblood. Before he died, we invested in a documentary together that opened in 1300 screens across 35 countries. We opened a physical fan club space on in London where the fan club members can come and congregate. Also doubles as a retail store for his merch line. We're not going to make money in year one on either of those things. We are making a lot of money on a go forward basis because of the world building that's doing but also the ways in which we're touching fans out where they live. And we're seeing it just in the data from his label. Interscope does an incredible job. Streams are up two and a half times this year. The size of the audience just from the start of this year is up 40%. We've increased the number of direct fan relationships that we have by almost 2x this year. And so those are things that you don't do when you are just focused on as you just said, hey, how do I sell as many tickets in Omaha tonight? Or hey how do I drive Friday streams? But you step back and say this is an artist who is going to be creating for a long time. How do we make choices and decisions and investments in service of long term value value?
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And I assume another part of this too is likely the deal structure. Because we're in this era where these artists want to own as much as possible. And if they're making deals with labels or they're making deals with event promoters, they want that top line number to be as large as possible. You're running a business with them. Obviously equity operates different than advances or royalties. But how do you convince them to partner up with Firebird and split? What are those deal terms normally look like?
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Yeah, these things are. Every deal has its own nuance. Around the edge cases, they're not that complicated. At the core, the foundational part of it is the same, which is, hey, let's create a company around you, the artist in which all of your revenue runs through and the intellectual property and the assets that you create run through that company. And there's also cost, there's people who work for that and there's things that we spend money on to go support that. And at the end of the day you've got a P and L and what's the value of that business today and on a go forward basis. And we're will come in as an investor today with some upside for growth. And I think one of the things that we've thought about because you just mentioned it is yeah, artists really do care about ownership. But this discussion is almost a forcing function for them to think about themselves as those brands and to think about themselves as a business and as a P and L and then make choices based on how much do they want to own today. Do they feel like they need help to grow in the future? And look, we structure these deals so that if the artist wants to fully buy out their intellectual property that we create together, there's sort of predictability determine multiples for them to do that at what we think are super fair and friendly ways for the artists to do that. But I think what we're showing is that as a partner, artists can't do this alone. They are the chief creative officer of their business. For sure. There are some artists who are also the CEOs of their business. But you need support and infrastructure to do this right in the same way that any large consumer facing brand needs that help. And in all of those other businesses there are partners who have equity ownership in what gets created. Now they have to earn it. They can be fired, they can lose that equity if they don't do a good job. But I think that way of thinking and the structure of a deal like that helps drive again choices that you wouldn't otherwise make.
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Let's take a break for our chart metric stat of the week. Billboard recently reported that in October they had the first week in over 35 years that there was not one rap song that was in the top 40 of the Billboard Hot 100 weekly chart. It's the type of headline that unfortunately can lead to sweeping narratives and investment decisions from record labels, partners and anyone that is partnering with music and the underlying talent. But the important thing to remember is this. There are a number of reasons and factors that go into the Billboard charts and they often change the rules. And some of those rules may not always reflect what what you and I may be listening to on our streaming platforms, may be hearing outside, or may be listening to on the radio. As of Wednesday, November 5th on Spotify's Daily Top 50 in the US Don Toliver has a song that is in the top 30 on those charts. On YouTube, there are several songs by NBA YoungBoy that are in the top 20 on those charts. Specifically in the US on Apple Music, Kendrick Lamar is not like us and his songs with SZA and others are still in the top 40 on that platform. On TikTok. The number one weekly song in the US on TikTok is Nicki Minaj's Bees in the Trap, a song that is more than 10 years old. Amazon Music is the one major music streaming platform that did not have a single rap song in its top 40 in the US specifically. But it just goes to show that so much of this is platform dependent. Billboard has its own rubric, as does many of these streaming platforms as well. So it's really important to make sure you have a full, full picture on what's going on in the landscape and not just focusing on one or two sources to get a true idea for what's happening with a particular genre. Let's get back to the episode. If you enjoy the show and want to stay ahead on the latest in this industry, then make sure that you're signed up for the weekly trapital newsletter. That's where it all started. We share weekly insights for tens of thousands of executives, investors and founders that are working across media, entertainment and technology. We have a link to the newsletter in our show notes, so tap the link, enter your email, and we'll send you the next memo in your inbox. And this, of course, is one type of deal that Firebird holdings invest in. You've also invested in management companies. You've invested on the label side too. So maybe walk us through from a high level. I know you've raised money in order to do this. What does that look like? And then additionally, how do you think about dispersing that capital between the different types of investments?
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A
Yeah, I think the first couple years of our existence we were deploying capital into infrastructure, right? And that meant bringing in managers who we felt like with the sort of layer of data science, the layer of digital marketing, and some of the other things that we've built up at Firebird could accelerate and escalate the quality of service of an artist to help them build out their brand. We did the same thing. The labels that we've invested in and partnered with the brand starts with the music. We've got to be able to look an artist in the eye and say, if it's right for you, we can help you distribute your music across genres and geographies around the world. So that was really the first phase of investment that we made. And I think people looked at it and some people said, oh, are they rolling up managers? Are they rolling? No, we're building up infrastructure to help artists build out their brand. And so the second phase of capital deployment for us now is we've got years of PowerPoint slides with results that show the ways in which we drive artist revenue and other key metrics up and to the right. And so I think what we've been able to do with that is earn that trust and earn the access. Then when artists create things that need capital, we're already partner there and able to deploy capital into assets and the things that they create. So that's really the phase that we've shifted into. That's not to say that we don't still look at ways to build out our infrastructure and make it larger. And so to your question, I think a lot of people talk about the money that they raise, and there's a lot of bullshit in this industry, as people know. I'm happy to be sort of clear about it. I'd say to date, we've deployed probably about $400 million into the things that we've gone after. I would say by the fourth quarter, we'll have another 500 million in dry powder to deploy into both infrastructure and solving that incentive problem by investing in artist assets. But our investors, and we did this by design, my partner Nat Zylka, ran a big chunk of KKR for a long time, understood the value of the LPs and the investors that you have in your fund. Our investors are in this because they want to deploy bigger checks than they have. And so there isn't an asset in the music business today that under the right circumstances and if the math worked and the strategy and the rationale and the culture and all those fits that we look at to integrate somebody into our ecosystem worked that we wouldn't have the capital to go do.
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And I know a big piece of this has also been management companies specifically. I know you've invested in a few of them there. Talk about what is it about management companies specifically? And I asked that because we're seeing people invest in catalog, people are investing in live venues and not that this is unique. Obviously, you know, Azoff Group and others invest in major companies as well. But what is it about that asset that interests you and what are you looking for when you're evaluating those kinds of people?
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Well, I mean, you mentioned Irving and I had the privilege to study under Irving for a long time and watch what he did. Same thing with Corin Capshaw, who you know, we're partners with. Those are two guys who understand the power of proximity to the artist and understand how to build artist friendly businesses around the artist that serves the artist well. And so that's something that we really admired from afar. But we're not buying managers again, not to just roll them up for like a manager who really wants to sell is a manager who's about to be fired, to be honest. And so as we talk to managers about joining our ecosystem, there's a whole bunch of different deals and structures that we look at for how they can do that. But at the end of the day, I think a lot of managers are coming to understand that the old model of guy with cell phone isn't how you manage a giant direct to consumer facing brand. You need a whole lot of capital and you need data and you need resources that I think the traditional management model doesn't necessarily have. So for us, as we talk to managers and artists, we're looking at, first of all, what's their proximity to artists? Do they have a broad portfolio of artists who they're working with that we think could benefit from being a part of our ecosystem? Not every artist is going to be an entrepreneur. Our bent and our bias is for those artists who are thinking about themselves as direct to consumer brands, brands who are multifaceted, multi hyphenate creators and who are entrepreneurs and can benefit then from the infrastructure that we have to do that. And so that's really what it is. First and foremost, it's culture. Is this a human being who we think can step into the next generation role of management? Is this somebody who can think about building businesses versus just, you know, coordinating the logistics of getting to Omaha?
- [19:13]
B
And when I thought about your business, it also seemed like there was an attraction because management and managers specifically capture all forms of revenue that the artist is tied to. Because we obviously share the stats in the beginning about some of the recorded music trends, especially on the major label side. But if you're a manager of that cut, it's the touring, it's the merchandise, it's everything. I mean, we're talking about superfans and all this other stuff. The Artists themselves are still capturing this stuff, even if certain parts of the business are trying to do it. So I assume that's also part of the strategy.
- [19:44]
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Yeah, the manager is the CEO of the artist business usually. And so he asked me, what are the criteria that we look at? Is this person a CEO of the business? And that proximity to the artist, when done well, earns incredible trust and incredible access with the artist. Just look at Irving and Jeffrey. Look at Corn Capshaw. Look at some of the other really great strong managers and how well they do that. What seems unfair and actually I think drives suboptimal decision making is if the CEO of a business doesn't have ownership in the business, because if the CEO of the business doesn't and can be fired tomorrow and is just on a salary or even worse, makes a percentage of revenue, that CEO is going to make decisions that are inherently short term and not in service of a longer lasting, more impactful, more profitable career. Now, Irving and Corn are examples of guys who have understood that long term vision and made those decisions in that way. But we think that the general incentive structure in the industry has been broken. That fragmentation has created a lot of short term decision making. That again, even in just these early stages of some of these Artist Inc. Deals that we've done, I think we've demonstrated that you can make better decisions for long term equity value when you're partnered with the artist in that way.
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B
Another piece of this is discovering talent in general and making sure that you're finding the best out there. You've talked before about how you've questioned whether TikTok specifically is surfacing the best talent because of algorithms and their own incentives. How do you sift through that to help find the best talent?
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Yeah, I think, you know, we spend a lot of money on data, but most of the money that we're spending on data is on things like getting access to credit card spend data and getting access to real time search query data and other things that we can collectively build out a fingerprint of an artist fan base, segment their fans, understand the lifetime value of each of those fans, which then helps you understand how much you would spend to go acquire a fan like that, understand where they spend their time online and offline so that you can go and reconnect with that audience, but also find people that look like them and build audience. I think we've gotten really good at that. So we spend a lot of money on data. There's no advantage we're ever going to have relative to anybody else looking at data on the A and R side, I don't think look island is great at this. Justin Ishak has done an awesome job of building up a data team there to go and find the next artist. We get access to some of that data and we use it. But I think part of the Trojan horse of our business, which has now managers across genres and geographies on the ground going into clubs, label folks going into, is we have a human A and R staff that is very profitable and pays for itself, but is finding those artists who are not just making moments on social media, but actually have a potential to become an artist. And I think that's the hardest thing that A and R execs, and I'm sure there's some here who can speak to it more eloquently than I can are having right now, which is, hey, there's a moment that's happening of virality around some kind of creator. Is this a moment or is this someone who can actually become an artist? Because if it's a moment, I should invest nothing in it. If it's somebody that can actually become an artist, here's an opportunity to really earn my way into being an owner and an equity partner in whatever this artist can be. So I think we solve that problem, yes, with data, but we solve the problem mostly with human beings who are on the ground making those gut judgments, informed by data, about how and whether to invest in an artist on an basis.
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B
Let's shift gears a bit. We have a few minutes left. You're the host of a very popular podcast called Every Single Album, and you often talk about the business of music at various points of that, you've talked a lot about Taylor Swift, specifically. And one of the lines that I've heard you say is, she's the best CEO in the music business. We'd love to hear why you think that is. And what is it that she does that you think makes stand above other CEOs in the industry?
- [24:01]
A
Yeah, I think if you look at what Taylor has done, and there are other artists behind her that do. Right? Sean Carter manages the Jay Z brand. That's like his superpower. And I think some of the most iconic artists understand that relationship between the human and the brand, and they manage it that way. And I think Taylor just has her finger on the pulse of that fan base and understands it. She is deeply embedded in listening. It runs through her. And so she makes really great creative and marketing choices as a result of that understanding. And when it's time for her to go Away she disappears. And when it's time for her to engage, she engages. And in the lanes and in the places where her fans exist. And so on top of that, from a business perspective, you've noticed she started to bring a lot of things in house slowly but surely. Right. All the parts, her live, her merchandise, her recorded music business are starting to be ring fenced. In addition to her just setting the model for artists owning their art and the way in which you go about doing that, I think she probably would have preferred to do that from the outset, but I think she's really charted a path for other artists. Those are the ways in which we admire very deeply what she does and try to replicate that with a lot of the artists that we work with.
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B
Yeah, I think the biggest thing that stands out is just the amount of artists you hear that just feel inspired, not just from the artist, but from the ownership perspective, the conversations there having with their record labels, their partners because of how they saw this whole situation play out.
- [25:28]
A
Yeah. You know, I think the most interesting thing about Taylor's business is that she hasn't actually started a consumer product. The thing about Taylor is she's a non scalable resource. Every artist is a non scalable resource. Chris Stapleton has built an incredibly successful whiskey brand called Traveler that is a brand that I bet he, if he wants to, can port to other categories of goods. Taylor hasn't actually done that yet. And as you think about what's next for her in her life, it'll be interesting to see if that is a place that she goes. But certainly other artists as they step back and think about how do I make money in my sleep as a non scalable resource that can't play 700 shows a year because there's only 365 days. Those are some of the ways in which we try to push our artists, entrepreneurs to think about ways to build businesses.
- [26:16]
B
Makes sense. Nathan Hubbard, thank you. And that is a wrap. Thanks again to Nathan Hubbard for joining us. Thank you to Sean T. Smith for capturing the video and audio at our trapital Summit. Thank you to G and Eric, our audio and video producers on this show for everything that you do. And thank you again to our trapital Summit sponsors who helped made the event happen. That includes the Rain Group, Splice, Warner Music Group, Beat Bread, Live Nation, Urban, Linktree, Luminate 2 Lost and Soundcloud. We couldn't have done it without you. But most importantly, thank you. Thank you for taking the time to listen to the episode. And if there's one person you know that would enjoy this episode about building businesses around talent or any of the conversations that we have on Drapital, send them a link to the show. Word of mouth is still the best way to grow. And if you have a few moments, if you're not already following us, please tap the Start button. Follow us on Apple Podcasts, Spotify, wherever you get podcasts. If you can rate the show, leave a review, leave a comment that helps the algorithm do its thing and make sure that Trapital reaches the right people. Thanks again. Talk to you next time.