Businessmodel of Kobalt Music Group

Customer Segments

Kobalt provides services to musicians, composers, songwriters and music publishers across the world. In 2015 the Company was reported to be the leading independent music publisher in the UK and the second largest in the US, trailing only to music giant Sony. Its catalogue is reported to comprise approximately 600,000 songs from around 8,000 artists. This includes relatively unknown musicians and composers, as well as high-profile artists such as Busta Rhymes, Bon Iver, Dave Grohl, Lionel Richie, Paul McCartney and Richard Ashcroft.

Value Propositions

Kobalt’s greatest value to musicians and artists is that it has simplified the process of tracking and collecting royalty payments. A process that traditionally could take months can now be completed in a matter of minutes. Through the Company’s online portal, artists can track all of their track royalties from a range of sources, including streaming services like Spotify and traditional sources such as radio plays, and can view where and when their music has been played. This platform is all available from one platform, accessible from anywhere using the Company’s website or mobile app.

In addition to being a simpler and more efficient method of tracking and collecting royalties, the Company also claims that using its technology artists can generate 20% to 30% more revenue. The Company additionally allows artists to retain a greater proportion of royalties as it takes a smaller commission.

Channels

The Kobalt online portal is accessible via the Company’s mobile and desktop websites at www.kobaltmusic.com. It can also be accessed through the Company’s mobile app, which is currently only available on the iOS operating system. Kobalt’s individual business divisions can also be contacted directly via email.

Customer Relationships

Artists can make enquiries, submissions and licensing requests by contacting Kobalt representatives directly via email. Artists can also register to use the Company’s online portal by contacting the Company directly, as the process requires discussion and interaction with the Company’s music licensing and collection professionals.

Once set up, the Kobalt platform can be accessed by users from through the Kobalt homepage or through the mobile app, with users able to track royalties and accept payments without interaction with members of the Kobalt team.

Artists registered with Kobalt are provided ongoing personal assistance and can follow developments at the the Company through its blog and press releases, as well as through its Facebook, Twitter, Instagram, Spotify, YouTube, Pinterest, LinkedIn and Google+ accounts.

Key Activities

Kobalt provides music publishing services, label services, and neighbouring rights services to musicians and publishers. The Company’s Music Publishing Division, its principal business segment, provides online copyright administration, royalty tracking services, and digital royalty collections.

It collects information from various sources, including directly from societies, from streaming services like iTunes, Spotify, Pandora, and YouTube, as well as from the majority of major global distributors.

The company’s label services comprise reporting, global administration, distribution, manufacturing, worldwide marketing, and YouTube maximization services, agreed with artists under flexible contracts, while Kobalt’s Neighbouring Rights Division provides gap analysis of society databases and song fingerprinting services.

Key Partners

Kobalt partners with a range of companies operating within the music industry, primarily royalty collection agencies, licensing agencies and music publishers. As part of its Label Services activities it also partners with physical distribution companies. The Company has partnered with a number of collection agencies in order to comprehensively generate royalty revenue for its customers, including AMCOS and APRA in Australia, SOCAN in Canada, PRS in the UK and ASCAP and BMI in the US.

Kobalt has also agreed a range of administration partnerships with music publishers, including IM Global Music, Little Fireball Music and Adam Anders Music (owned by couple Adam and Nikki Anders), Blue Raincoat Songs and Cherrytree Records, which launched Cherrytree Music Publishing with Kobalt in 2015.

Additionally, Kobalt has agreed partnerships with music anti-piracy company AudioLock and in 2014 launched a partnership with Berklee College of Music, funding its Rethink Music initiative and a student-led project into global music licensing issues.

Key Resources

Kobalt’s key resources are its technology and software platform, its collection and licensing partnerships, its personnel and its IT infrastructure. Kobalt has one patent application filed with the US Patent and Trademark Office, entitled ‘Analysis and display of a precis of global licensing activities’, which relates to the tracking of ongoing usage of music owned by its customers.

Cost Structure

Kobalt incurs costs in relation to research and development of its platform, maintenance of its IT infrastructure, retention of its personnel and management of its partnerships. Kobalt operates a network of offices across London, Berlin, Atlanta, Sydney, Stockholm, New York, Nashville, Miami and Los Angles, accruing costs in the form of rent and utilities.

Revenue Streams

Kobalt’s revenue is generated through four principal operating divisions: Publishing, Neighbouring Rights, Label Services and AMRA.

• The majority of the Company’s revenue is generated by its Publishing Division, which in 2015 accounted for $194.2 million of the Company’s total $245 million in annual revenue.
• Kobalt collects a commission on all royalties collected via its online portal, typically between 6% and 15%. Kobalt’s Neighbouring Rights Division, which accounted for $20.9 million in revenue in 2015, also generates revenue by collecting commissions on royalties, as well as through the provision of ancillary services.
• Kobalt’s Label Services Division provides a range of services, including marketing and distribution and licensing, using flexible contracts. This division generate $29.1 million in 2015.
• Kobalt’s collection agency AMRA (the American Music Rights Agency) revenue stream accounted for the remainder of the Company’s annual revenue.