From little things, big things grow. With a little magic dust, Merlin did just that.
Its team, and its distributions are growing. The digital rights agency for the independent music community last August announced it had paid out its billionth dollar (AUS$1.25 billion) to its members. And after striking “landmark” deals earlier this year with Chinas’s NetEase, Alibaba and Tencent, those numbers should go north.
Guided by its Australian-born CEO Charles Caldas, the not-for-profit Merlin was presented to the industry as the “virtual fifth major” in January 2007 and launched for business in May 2008.
Ten years in a tech-disrupted world is a lifetime. EMI, one of the big four music majors, is long gone. And Merlin has flourished.
Today, it represents more than 20,000 indie labels and distributors in upwards of 50 territories, who collectively account for an estimated 12 percent of the global digital music market.
The organisation has offices in London, New York and Tokyo, with a head office in Amsterdam and, in recent days, added three staff to its 21-strong team (Marta de la Hoz joins as Head of Reporting, Chaida Kapfunde as Head of Technology & Development, and Quentin Martins as Member Operations Manager).
TIO caught up with Caldas to talk Merlin as the indie organisation celebrates a milestone anniversary.
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Congrats Charles. It’s amazing to think we sat in a pub in Soho 10 years ago to talk about the start of Merlin.
It’s funny, I’ve been looking back at some of the notes from that time. It feels a very long time ago to think we were sitting there not really knowing where it was going to head, whether it was a good idea or not.
I’d essentially moved to England for two years just to check the waters and see if I could get the thing off the ground. The market, the organisation, I guess the world has moved on incredibly since then.
There were a few flash points of big deals getting done or successfully suing LimeWire. For me it’s all just part of this growing, rolling continuum where you’re trying to keep pace with the market and trying to predict where it’s going and what deals you should be doing.
We had a blue sky projection back at the beginning that if we could make $10 million a year we thought we’d be flying. We’re paying out close to $40 million a month at the moment. We were slightly out on our projections.
What’s the one that got away? Is there a missed deal that keeps you up at night?
I don’t think there is. Merlin is just focused on trying to see how the market’s evolving and helping the labels we represent to make sure they’re participating in that.
So, given we’re in business with the key global partners in the world and now we’re opening up deals in markets like China in a new way, we’ve done really positive and interesting business in territories like China and India, and we’ve seen this growth in Latin America, it doesn’t feel like there’s anything we’ve missed or opportunities that have fallen by the wayside. I’m pleased about that as well.
YouTube Music rolled out this week. Does Merlin have a deal in place?
We’re talking to them. The YouTube Music app is really an update on the current music app. It’s not a new service in terms of rights.
We’re in ongoing talks with them about what our future relationship looks like. We’ve had a tough ride with that company over the years. We’re certainly deep in talks with them to work out where and how we deal with YouTube as our business evolves.
That’s an ongoing conversation. We’ve certainly been looking at the next phase of their business and what they want to roll out.
What are the growth markets for digital right now?
Obviously the one everyone has been talking about the last couple of years is Latin America. Since 2014, really in the last four years, as a percentage of our overall business Latin America has increased by over 600%. That’s more than six times the portion of the business it was.
All things being equal across our various deals, we’ll get somewhere between $60-$70 million in those Latin markets. That’s a definite shift, certainly for western independents.
The markets that are really showing big signs of growth for us are Russia, India — which is starting to show signs of progress — and the rest of the South East Asia region, including Indonesia and Philippines, which are really starting to grow. And I don’t think we’ve really started to scratch the surface in Japan just yet.
Geographically there’s still a lot of room to grow. We did those China deals earlier this year so it’s very early in the piece. The market has really developed in unexpected ways.
That’s a really interesting impact technology has had by turning on its head the expectation of where you can make money as a record label these days. It’s really incredible.
It definitely feels like, that day in the pub 10 years ago, if I told you I’d project that we’d get $60 million out of a Latin American market for audio streaming in 2018, you’d have had me certified.
Where does Australia fit in on all this?
The streaming revolution came relatively late to Australia. The encouraging thing for Australia is it’s grown incredibly quickly despite that late entry.
So Australia is definitely one of those growth markets for us and one of those markets we’ll see have a lot of potential in. The interesting phase for me in Australia is, it’s such a car culture. The geography of Australia, like the U.S., means people tend to spend a lot of time in their cars.
We’re starting to see some really interesting innovation around making streaming services within the car much more seamless and functionally simple and voice-activated. Trying to run Spotify in the car fiddling with your phone isn’t the most seamless way to do it.
I also look at the resurgence of Australian music on the world stage. It’s really interesting that’s happening in a streaming economy.
You look at how successful Australia’s presence at SXSW is doing and the amazing work done by Millie Millgate and her team are doing. You look at the amount of Australian artists being signed to international labels or touring internationally at the moment.
It feels like a really healthy time. I do think streaming helps music move much more quickly.
10 Key Moments In the Life of Merlin
May 2008 – Over 200 independent companies join Merlin in first few months, including labels Epitaph, E1/Koch, [PIAS], Epitaph, Dualtone, Saddle Creek, Domino, Beggars, Warp, Naïve, Wagram, !K7, Cooking Vinyl, Inertia and the world’s leading distributors such as Kontor New Media, Finetunes, Redeye, Thestate51consipracy and Kudos, estimates membership at around 8% of global market. With around 12,000 labels represented globally by its members, Merlin is open for business and five months later announces deal with Spotify in advance of its launch, alongside all of the major labels.
October 2011 – Merlin licenses Google Play store and appears alongside Universal and EMI at the Los Angeles press conference announcing the service.
February 2012 – Merlin announces landmark multi-million dollar settlement with LimeWire, the first time independents have participated in a settlement of copyright infringement claims against a global peer-to-peer service at this level.
February 2013 – Merlin, IMPALA and Warner announce deal to strengthen independent sector in a post-merger market.
January 2014 – Merlin adds it 600th member, and its first members from Nigeria, India, Greece and South Korea. Merlin now represents companies from 39 countries.
June 2015 – Merlin presents its 2015 members survey, announcing that digital is, for the first time, the main source of revenue for the majority of its members.
October 2016 – Merlin opens its Japanese office, having established its New York office exactly two years previously.
April 2017 – Merlin signs new multi-year licensing agreement with Spotify ahead of Sony and Warner, ensuring that its members will remain at the core of the streaming service’s offering.
August 2017 – Merlin announces its billionth dollar in distributions to its members since opening for business.
March 2018 – Merlin announces landmark non-exclusive partnerships with China’s five leading digital music services: NetEase Cloud Music (NetEase Cloud Music), Xiami (Ali Music Group), QQ Music, Kugou and Kuwo (all Tencent Music Entertainment).