How a Scrappy Independent Record Company Turned an Army of Dummies into $ 2 Billion



WWhen Charlotte Sands wrote her single “Dress” late last year, it was in response to conservative outrage over pop star Harry Styles’ glamorous cover of Vogue. She had no idea that the bouncy, ironic song was about to change her music career forever.

Long ignored by the music industry, Sands teased music with a TikTok video while also streaming it on Spotify, Apple Music, and Amazon using a subscription to digital distributor Tunecore that cost him $ 20 a year.

The two-and-a-half-minute song went viral almost instantly, landing the blue-haired singer on the covers of trendy magazines like Paper and Seduce. With the help of Tunecore, who promoted “Dress” on critical Spotify playlists and on several social media platforms, the song has been streamed over nine million times. When the industry called, they pushed back the offers and signed on with PIVTL, an independent label owned by Tunecore’s parent company, Believe.

“It was always about building my career and keeping the property,” says Sands, 24, who says she was drawn to the deal in part by the creative control over her career offered by PIVTL. “It’s not something that happens in label conversations. “

One such talk is music to the ears of Believe CEO Denis Ladegaillerie, 52, who co-founded the company in 2005, when technology put the music industry in a deadly embrace that spiked sales. worldwide recorded music from a peak of over $ 24 billion in 1999 to a low of $ 14 billion in 2014. Ladegaillerie kept the faith throughout everything, including in 2017, when he refused the Sony Music’s offer to buy the company for $ 440 million.

“We’re going to be bigger than Warner Music by the end of this decade,” he says today. “Why would we sell? ”

He still has a long way to go to deliver on that promise – Warner grossed $ 4.5 billion in 2020 versus $ 520 million for Believe – but in a way he has already made the case. his take: Paris-based Believe, which went public in June, is valued at nearly $ 2 billion, with Ladegaillerie’s stake amounting to some $ 250 million.

Call it the other music IPO. Warner, acquired by billionaire Len Blavatnik for $ 3.3 billion in 2011 went public last June and is now valued at nearly $ 23 billion. Shares of Universal Music Group, the world’s largest music company, climbed to 40% when they started trading last week, and are now valued at $ 50 billion. All are benefiting from a rebound fueled by the widespread adoption of streaming that has lifted global music sales to nearly $ 22 billion in 2020.

While much of this still comes from superstars signed with the Big Three – Universal, Sony and Warner – a freewheeling machine is also in place that eliminates the need for physical products, stores to sell them, or any infrastructure. expensive used. in the past. Chance the Rapper learned this in 2016 when he won a Grammy Award for the album. Coloring book, which he published independently using Tunecore. Earlier this year, indie rapper Cupcakke earned gold record certification for “Deepthroat,” which was released through Tunecore and went viral.

The small business – subscription revenue was just $ 35 million in 2020 – exceeds its weight: in the first half of the year, Tunecore paid $ 150 million in royalties to a subscriber numbering in the hundreds of thousands. It’s also a safeguard for Believe’s more traditional independent label business, which paid $ 175 million in royalties and advances in the first half of 2021. Both units generated an average Ebitda margin of around 14% in the first half, which is lower than Universal and on par with recent results from Warner.

Classically trained pianist, Ladegaillerie discovered his founding position working as a lawyer for Shearman and Sterling and living in New York’s West Village during the dot-com boom of the 1990s. He saw his roommates give up cozy jobs at Goldman Sachs to pursue their dreams on the Internet with their own businesses or in startups like The Motley Fool. He was drawn to the feeling of limitless possibilities and the allure of nightlife in New York’s Meatpacking District and crowded parties on the roof of his shared triplex and the seemingly endless stream of VC money funding it all. “I was like ‘Hey, there’s something going on here,’” he recalls.

He left the practice of law to join Vivendi, the French water company that was rapidly growing into a digital media conglomerate. Its main contribution: the acquisition of, a forerunner of legal streaming services like Spotify and Pandora. He quickly understood that digital distribution was the future, which meant a potential explosion of interest in artists who would normally have no chance of success.

With two co-founders, Arnaud Chiaramonti, now responsible for the international promotion of Believe, and Nicolas Laclias, who heads A&R, Ladegaillerie created Believe, a first digital label at a time when the Apple iPod was redefining music consumption. . At the time, it involved ripping CDs to MP3 files, digitizing the cover art, and downloading them all to hard drives that then powered leading online music stores like iTunes, which offered a partnership. profit which increased their visibility and led to a funding round of $ 60 million in 2014..

“It was a thesis we had, but it went even better than we thought,” says John Doran, general partner of Technology Crossover Ventures (TCV), the venture capital firm that was the an early supporter of Netflix and led the way. “Streaming has grown faster than we thought across the world; local domestic music has gone faster than we thought, and as a result, independence has grown faster across the world.

Believe enjoyed early success with French rapper MC Solar, who stood out in part for his 50/50 chord structure, something virtually unheard of in a large music company, setting the direction that has defined the company since. : This year, 86% of people believe that revenues come from outside the Americas and that 91% come from digital sales. Brooklyn, NY-based Tunecore was purchased in 2015 in order to leverage the value of DIY artists, which Ladegaillerie sees as an under-exploited opportunity.

“[Tunecore] is only available today in 14 countries around the world, and we are expanding it as quickly as possible, ”says Ladegaillerie. “Spotify now covers around 140 countries around the world, so we have a lot of legroom in front of us. “

It’s also a valuable tool when trying to promote a rambling philosophy to artists who cherish the opportunity – and the freedom – to orchestrate their own breakthroughs.

“As much as I like to trust people, I also have to be a businesswoman,” Sands says. “I have to look at the numbers and tell myself, this is how I will earn an income if something goes wrong. And I’m still legally allowed to do whatever I need to do with this music.


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