By the mid-2010s, big-name artists like Taylor Swift and Paul McCartney were railing against YouTube: The site was home to loads of unauthorized uploads of their songs, and even the authorized versions paid paltry royalty sums. It was an even harder battle to fight for the much less famous--and less lawyered-up--musicians in the industry. So, a lot of them simply put music on YouTube for free and focused on other ways to make money.
It was that middle-class of artists that Jonathan Strauss and Alexandre Williams had in mind in 2015 when they founded Create Music Group, a platform designed to help musicians monetize their music on YouTube. Their pitch was simple and convincing: It consisted of an Excel sheet that showed all the instances in which a particular rising star's music had been uploaded without her consent. Also in the doc was a royalty figure--not massive, but for some in the thousands--the musician would be able to collect per month if she signed up with Create.
"It was a month-to-month deal, no commitment. It was the difference between getting something and getting nothing," says Williams, CMG's chief operating officer. "It was impossible to say no."
Online streaming has become the music industry's biggest growth driver. According to the Recording Industry Association of America, in 2018 recorded music generated an estimated $9.8 billion in revenue, with streaming accounting for $7.4 billion of that total. And CMG is one of a handful of competitors, including TuneCore, Stem, and Distrokid, that are attempting to collect some of that revenue for artists.
Naturally, CMG also gets a cut. More than 10,000 musicians use CMG's platform to collect royalties, with around 500 of them earning at least $3,000 or more a month. CMG itself pulled in $28 million in annual revenue in 2018, up from just $133,000 in 2016. That performance helped the business land at the top of the Inc. 5000 Series: California, a tally of the fastest-growing private companies in the state this year. How it got here--and where it goes next--has everything to do with CMG's ability to become much more than just two guys and their spreadsheets.
CMG's first big break came from targeting electronic music DJs, who often had no idea that other people were uploading their music to YouTube and profiting off the streams. "They were the most infringed upon," says Strauss, the startup's CEO. After months of pursuing DJ and producer Marshmello, CMG finally landed him as a client by offering him a $150,000 advance and a promise that the company would be able to find double what he was collecting in digital royalties at the time. And CMG delivered on that promise. A third co-founder and now chief business officer, Wayne Hampton, joined in 2016 and helped CMG gain a following among hip-hop artists.
Over the past five years, the company has catered to additional genres and expanded its artist services. Today, the 150-person startup offers music publishing and distribution to more than 100 media streaming platforms, data-driven music release strategies, a content creation team, and soon its Hollywood headquarters will offer artists the ability to record in one of its five studios currently under construction. CMG also runs the YouTube channels for Jennifer Lopez, DJ Dillon Francis, and others, and two of the top three music labels in the U.S. use CMG to track digital royalties for their artists.
"At end of day, [success] depends on knowing how to work [these] platforms. You have to think about coordinating the type of content, the timing of the content, which territories to target," says Aaron Rosenberg, a partner at the Los Angeles entertainment law firm Myman Greenspan Fox Rosenberg Mobasser Younger & Light, who represents several clients who use CMG's services. "[CMG] is giving artists another set of considerations when they think about how to roll out and exhibit their art to the public."
Whether it can withstand competitive forces in the long run is an open question. In April 2019, the company gained a new and potentially formidable competitor: Troy Carter, best known for his former gig as Lady Gaga's manager and his artist rights company Atom Factory, has launched a new company called Q&A that will offer many of the same services. Plus, Soundcloud, which recently sold a minority stake to satellite radio service Sirius XM Holdings, is on track to hit $200 million in revenue in 2020, with much of its growth due to artist services like analytics and distribution to streaming sites.
Strauss isn't worried, even as he takes a broader view of CMG's competition. Since the startup controls the YouTube channels for many of its clients, advertisers have to work through CMG if, say, they want to advertise on J.Lo's page. And that's just one aspect of how it's helping artists build a following online.
"The real people that should be scared of us are the Viacoms of the world. It's cheaper for us to directly reach the people who stream this content," he says.
Correction: An earlier version of this article misstated Create Music Group's 2018 revenue. It was $28 million.