Apple, the technology and consumer discretionary giant, has privately invested $50 million into Steve Stoute’s UnitedMasters music and distribution company. The company is not public, so the investment comes as a private placement in a Series B round. Other technology giants such as Alphabet also re-invested in the company. Apple’s acquisition was driven by the analytical approach taken by UnitedMasters to music distribution, and the investment, while small for Apple’s size, will provide the technology giant with some insights on where to bring Apple Music. From the UnitedMasters standpoint, having a partner like Apple to help take their product to a new global level is key to their strategic success.
Why Did Apple Make This Investment?
UnitedMasters uses analytics to monetize its fanbase, which could provide Apple with several new revenue streams. UnitedMasters wants to allow artists to build out their fanbase at a community level, similar to Spotify. The distribution operation works where artists give UnitedMasters 10% of their revenue in exchange for distribution support. Unlike a record label, UnitedMasters doesn’t own the artist’s masters. UnitedMasters allows you to stream your music instantly across multiple platforms. They say that you can upload your music to streaming platforms, including Youtube, Instagram, Spotify, and TikTok.
The Investments into UnitedMasters
The first rounds of investment into UnitedMasters came from Andreessen Horowitz and Alphabet in 2017 for $70 million. The company also has a personal involvement from Larry Page and Ben Horowitz joining the board at the same time. The UnitedMasters platform has 1 million artists, which provides a more equitable platform for artists.
The analytical approach is relatively straightforward. UnitedMasters collects listening information from the users across the artist’s platform and can use it for advertising and merchandising sales. The data can be streams of music and what someone likes to hear. They can provide a customized target marketing approach similar to how Facebook uses target marketing based on clicks.
The artists benefit as they only give up 10% of their revenue in exchange for distribution support. Additionally, UnitedMasters doesn’t own the artist’s original recorded masters; the artists themselves get to keep them.
UnitedMasters Success
UnitedMasters has dealt with the NBA, ESPN, TikTok, and Twitch. These deals help provide streaming information across the UnitedMasters platform helping these companies innovate and disrupt the music and data landscape. Steve Stoute, the artist manager, made his name managing hip-hop icon Nas. Stoute went on to become an executive at Sony Music before helming Interscope Records as its President.
How Will The Deal Help UnitedMasters and Apple?
Most of Apple’s outside investments come from its Advanced Manufacturing Fund, which promotes U.S. manufacturing. The fund’s investment will also invest strategically in partners that make components of its hardware. Apple focuses on acquisitions rather than investing in a company and typically buying a company every few weeks to supplement one product effort or another. The investment into UnitedMasters would be a relatively unique partnership for Apple in the music space.
From the UnitedMasters standpoint, the infusion of capital from Apple will increase the volume of talent on the platform. Their mission is to take the platform globally, using the new talent acquired from the investment to improve streaming music distribution.
Apple, for its efforts, will have an investment in a streaming platform that can connect fans with artists and be able to collate the data that the platform provides analytically. The platform offers an endless stream of ways that an artist can connect with its fanbase. Recent developments such as non-fungible tokens and social tokens and the rise of digital frameworks have helped solidify the deal between Apple and UnitedMasters. The future from Apple’s perspective surrounds the artist, and this platform allows this process to prosper. Since UnitedMasters does not tie up the artist in a record label format, it attracts new artists to a forum that consists of Apple users across the globe.
While UnitedMasters is not publically traded, since the agreement’s announcement, Apple share trading has experienced some upward bias. With 33% of Apple’s month in the rear-view mirror, Apple shares were up nearly 5%. Historically Apple shares outperform Apple. Over the past 20-years, Apple shares have been higher in April 70% of the time for an average gain of 4%.
The Bottom Line
The upshot is that Apple is investing in a music platform that powers creators. UnitedMasters has an endless stream of directions that an artist can connect with their fanbase. The process that UnitedMasters use does not force the artists to give up the original masters. Instead, the artist gets to keep them. The upside for UnitedMasters and its partners is that it can connect with a considerable fanbase and collect data that can be analyzed. They can then use this data for advertising to fans, selling them concert opportunities and merchandise. Apple is getting a music distribution partner that has an edge. The deal also puts Apple in an excellent light. The company can now say that it has ownership in a company that promotes the articles and allows the artist to grow without taking away their right to ownership of their products. Apple invested $50 million in a Series B, which followed the company’s initial investment by Google in 2017. Apple saw the opportunity after falling to connect with fans and promote its music streaming service as a platform that drove creativity amongst artists. Usually, Apple’s investments come on the manufacturing end of its business, specifically targeting products that are used as components. Apple’s investment shows that they are expanding their reach into data and using that information to target advertisements to streaming customers.