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GM readers 👋,

Happy October!

One of the best parts of our new-ish interview content is that I get to talk to really smart people who are actually building the products, services, and companies pushing the industry forward. Sometimes Leveling Up writes long essays on the trends and companies that we’re interested in. But oftentimes, the easiest route to get insights out into the world is by yapping with the folks doing the work.

Along these lines, this month we’re chatting with Tim Hegarty, the head of M&A at Cutting Edge Media Music. Tim has helped Cutting Edge grow into a powerhouse for a segment of the music investment industry that often flies under the radar. Founded in 2006, the firm now owns or manages a portfolio of 400K+ media music rights valued at $1+ billion. Its catalog contains music from TV shows like ‘The Office’, films like ‘The Lord of the Rings’, and video games like ‘Assassin’s Creed’. And last year, Cutting Edge closed one of 2025’s largest deals via its partnership with Warner Bros.

At Alderbrook, we’ve worked on consulting projects that involve acquiring media music assets. In our experience, buyers often assign lower multiples to these catalogs relative to commercial music ones because they are perceived as less predictable and/or as having less longevity. But after speaking with Tim, I’m walking away thinking that this may be one of the most interesting risk/reward pockets in music IP investing today.

I hope you enjoy our conversation!

Two final administrative notes before diving into this month’s piece:

• We’re looking for another contributor to join our newsletter writing team. If you’re an excellent writer, a curious consumer of data, and a close follower of the music industry, please send us a note to learn more.

• I’ll be at Music Tectonics this week. If you’re around and want to catch up or learn more about how Alderbrook’s services can support your business, please reach out. I’d love to chat.

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

Building the Leader in Media Music Investing

"Even the smallest person can change the course of the future." - Galadriel in The Lord of the Rings

To set the scene, could you tell us a little bit about your journey in the music industry so far?

Tim: I was raised in a musical family. My father was in musicals in the West End and my mother is an actress too, so music was part of my life from a young age. That continued as I grew up – I was a chorister in a prestigious boys’ choir from seven to thirteen, a tortured singer-songwriter in my teens, and then a music scholar at university.

But I loved economics and finance as well, and after university I ended up joining an investment bank as a graduate. Over time, I realized I wanted to put that training to work in the arts, or in media and entertainment more broadly, so I started networking with that in mind. That’s how I met Philip, the founder of Cutting Edge, and started learning about the intricacies of the music industry. Cutting Edge already had a strong reputation as a services provider to film and TV production companies, and it was also investing some third-party capital into frontline releases.

One thing led to another, and I joined in 2015 to raise third-party capital and build out the catalogue acquisition side of the business. It was an exciting time – platforms like Netflix and Spotify were working out how to monetize their services, and we were starting to see that come through in royalty statements for the music involved.

Since then, things have continued to take off. We’ve deployed around $1.5bn on acquisitions in aggregate, and we’ve now firmly established Cutting Edge Capital Partners as the world’s pre-eminent buyer and manager of media music assets, by which we mean the rights to music made for film, TV, and video games.

And to provide a bit more context, could you remind us about Cutting Edge’s history? How would you break down the business today?

Tim: Our founder, Philip, comes from a real estate investing background and was (and is!) a serial entrepreneur. He got interested in film and TV music royalties in the early 2000s, off the back of a successful venture he worked on focused around celebrity-branded merchandise.

The trouble he found with merchandise was that talent licenses only run for so long, so he began looking for alternative investments in and around entertainment with longer duration. This led him to film and TV music royalties, where copyrights are typically protected for 70-90 years after the composer’s death (depending on the jurisdiction), making the asset class and cashflow profile more akin to real estate which he understood well.

His first push into media music investment was based on something much closer to a venture capital model than what we do today. Essentially, Cutting Edge invested in the production budgets of films and TV shows, which meant taking on the box office risk, and the way he made a return was by owning the music rights to the production, which then paid royalties over time.

It worked well for both sides. Producers got a bigger music budget and a better score, and we got exposure to the long-tail income those rights provided. And he worked on some great projects, things like ‘The King’s Speech’, ‘Drive’, ‘Whiplash’ and ‘John Wick’. Alongside that, Philip kept building out the services side of the business, incubating or acquiring companies that offered administration, sync, supervision, royalty analytics and soundtrack distribution, always with a specialist focus on media music, and that continues to this day.

I joined in 2015 to develop the catalogue acquisition strategy, which was part of our pivot away from pre-production rights and towards deep catalogue assets with existing, reliable cash flows.

Since then, growth has continued to accelerate, and now the business broadly falls into two camps that work symbiotically. The first is the investment side, where we buy and manage music rights, from composer catalogues to studio libraries like the Warner Bros. Discovery joint venture. The second is the services and creative side that Philip has scaled over the years, which we’ve kept and continue to expand into new areas. The two feed each other: the services businesses allow us to actively manage the catalogues and find new uses for the works while keeping us close to composers and productions, and those relationships and service offerings are where a lot of our deals begin.

Today, we are the biggest buyer and manager of media music in the world, with over 30 employees across London, LA, and New York and a portfolio of over 400,000 owned or managed rights worth north of $1.5 billion.

Cutting Edge has focused on a different slice of the music IP market. Can you unpack why you and the team think music made for the screen presents such a compelling opportunity?

Tim: Put simply, film, television and video games are some of the largest entertainment markets in the world. Together they generate more than $800bn a year, which is six times what the music industry does. Owning the music behind them gives us direct exposure to their audiences and revenue, because the music earns whenever the content is consumed.

Beyond the size of those markets, media music is benefitting from the same secular tailwinds as commercial music catalogues. Consumption across the board has shifted to streaming services, which let people watch what they want, when they want, as many times as they want. That is growing the pool in both audio and audio-visual markets, either through volume, because the total number of streams keeps rising year on year, or through price, because the royalty pool is tied to the price of the service, and that price has tended to rise over time – especially in the case of SVOD services as they each have shows and films unique to their platforms. And because audiences are now choosing for themselves, competition for their attention is more meritocratic, which rewards high-quality, globally recognized, older repertoire, which is what we tend to invest in.

On top of that, media music rights have some legal and commercial attributes that set them apart from conventional music IP. One of the key attractions for us is duration. Since copyright on a score typically lasts 70 to 90 years after the composer’s death, you’re buying an income stream with a very long tail, compared with commercial music, which usually reverts to the writer sooner.

Then there’s diversification. A single catalogue, whether it comes from a studio or a composer, often spans hundreds or even thousands of productions, so the income is spread widely across different works. It also carries limited ‘single artist’ risk, because audiences generally engage with the IP itself rather than the composer who contributed to it.

And finally, these rights live within franchises and universes that the studios create and sustain, which is something you only really find in film, TV, and video game music. Theme parks, merchandise, prequels, sequels and spin-offs are all powerful ways of reaching new audiences and new generations, and that in turn drives the derivative royalties we have exposure to.

Your role is focused on overseeing Cutting Edge’s investments. How do you and your team source opportunities and then how do you draw the lines around what it considers to be investable? Are you looking for similar characteristics as other music IP investors and are you relying on any established third party data to evaluate opportunities?

Tim: Obviously, no one deal is the same, but if I had to point to a through line, I’d say that we’re almost always looking for royalty streams tied to high-quality, globally recognized IP and franchises that are strategically important to the major studios.

As for where those deals come from, most of our deal flow comes through direct relationships with composers, studios and their advisors, a network we’ve been building over the past 20 years. Our recent deal with AMC Studios, the producers of ‘The Walking Dead’, is a good example. Our soundtrack label, Lakeshore Records, had been releasing their soundtracks for many years, so we were able to pitch management directly on the possibility, and the merits, of a catalogue sale. The same is true of our recent deals with John Paesano, the phenomenal composer behind ‘Kingdom of the Planet of the Apes’ and ‘Maze Runner’, and Brian Tyler, the composer for the ‘Fast & Furious’ franchise, ‘The Super Mario Bros. Movie’, ‘Yellowstone’ and ‘Avengers: Age of Ultron’. Both came together for the same reason: the trusted reputation we’ve built over the years.

When we decide what to pursue, three things matter most to us. First is the durability of the content: tentpole franchises, award winners, and shows that have stayed popular as viewing has moved to streaming. Second is the data. If we can’t see where the revenue comes from title by title, we usually pass, however good the catalogue looks. Third is what the deal adds to the portfolio, in terms of diversifying genres, territories and distributors.

It’s also worth adding that price matters as much to us as quality. We model each deal individually, using nearly 20 years of our own data on how titles of different ages and quality earn across platforms and territories, and we’re willing to walk away if we’re not comfortable with the pricing terms.

But overall, the underlying logic is much the same as for anyone buying music rights: we’re looking for durable, predictable income at the right price. What differs between our assets and commercial music is what drives that income. For a pop or rock song, it’s the lasting popularity of a single song, album or artist. For us, it’s usually the popularity of a whole show or franchise.

Through our consulting work, we’ve spent time analyzing film and TV music investments, but less time evaluating ones involving video game music. I’m curious to learn more about your experience in that subsector, and how its economics differ from other segments of the market?

Tim: A big part of what sets game scores apart is how long people live with them. A film score is written to a fixed timeline and knows exactly when each scene ends. In a game, the player decides how long to stay in a scene, what to do next and when to come back, so composers write the music in layers and sections that the game adapts to the action, which can go on for tens or hundreds of hours.

As a result, a player hears the score repeatedly, in new and different permutations, across a vast number of gameplay hours, and often builds a close bond with the music. For a rights owner, that attachment often translates into lasting demand for the music beyond the game itself.

Historically, video game music was overlooked, but the music industry has definitely caught up. Games got their own Grammy category in 2023, thanks in part to the work of Brian McNelis, who runs our soundtrack label, Lakeshore Records, a global leader in soundtrack releases for film, TV and games. The inaugural winner for that award was actually Stephanie Economou, for her score to ‘Assassin’s Creed Valhalla: Dawn of Ragnarök’, which is in our catalogue.

The income is different too. Across numerous major markets, playing a game doesn’t generate performance or mechanical royalties the way a TV or film broadcast does, so more of the value sits in the second life of the music: soundtrack streaming, vinyl, sync, and live orchestral concerts of game scores, which now tour the world to an increasingly enthused audience of fans.

All that said, it’s also a much less mature market. Games are roughly where film and TV music was 10 to 20 years ago. That means less transaction history to price against, on top of weaker royalty reporting, which makes our expertise, and our specialist data analysis and administration, all the more important.

The last few years have seen a substantial increase in franchises crossing between different media formats. What does that mean for the music rights attached to them and how does that shape what you look for when assessing potential acquisitions?

Tim: A franchise rarely stays in a single format any more, and that’s good news for the music rights behind it.

Just looking at our own catalogue, we have ‘Harry Potter’ making the jump from film to TV; ‘The Last of Us’, which has evolved from video games into a TV show now filming its third season; and ‘Game of Thrones’, which has already spun off two series and now has a feature film in development. We also have ‘The Super Mario Bros. Movie’, which took a video game and turned it into a huge film franchise. And we have ‘The Lord of the Rings’, which started as a novel series and has since moved into film and TV and, most recently, animation with ‘The War of the Rohirrim’.

What matters from our perspective is that the music is often the motif that holds a franchise together across formats. You might remember the first teaser for the new ‘Superman’ in late 2024. It was quite minimal and vague visually, and leaned almost entirely on John Williams’ theme from 1978, which is also in our catalogue. That resonated immediately with audiences, who recognized straight away what world they were in thanks to the music.

At a broader level, this multi-format phenomenon means scores from years ago are being re-used, reworked and replayed decades after release, in a growing number of settings, and each time the owner of the original music earns a royalty. The emergence of further installations in a franchise also drives consumers back to the original IP, and that’s a big part of what underpins our focus on premium titles, since they have the greatest capacity to travel between formats and hold their value over time.

But when it comes to pricing, we treat new installments as upside rather than the base case. We’re pricing the income we can see, and a franchise extension is a bonus, not something we pay for in advance. After all, a reboot can start with fresh music and leave the original score behind, so we don’t assume a franchise’s growth will extend to the music.

There are a lot of music catalog buyers in the market today. What does Cutting Edge uniquely bring to the table versus other catalog buyers?

Tim: While the number of investors in the broader music market has definitely expanded, media music remains a world of its own. It’s a part of the market that we’ve pioneered, and we don’t see any other buyers with the scale, pedigree, connections and infrastructure that we’ve developed.

A big part of that is how long we’ve been at it. Before we became catalogue buyers, we spent years providing music services on over a thousand films, shows, musical productions and games, so most composers and studios have already seen how we work, and they know they’re selling to someone who understands what they’re parting with. In that sense, we’re something of a known quantity, and providing liquidity through a catalogue sale is just another service Cutting Edge can offer them.

The same history helps on the data and technology side. Two decades of dealmaking has given us performance data across every major streaming platform and territory, and we’ve used it to build our own valuation models. And once we acquire a catalogue, we can plug it into our extensive infrastructure of tracking technology, global collection and platform relationships, which we’ve built over time.

What also sets us apart is our range when it comes to dealmaking. Take the last three years: we’ve acquired over 10 composer catalogues, some on a split rights basis, we bought AMC Studios’ entire catalogue, and we agreed to co-own and manage the Warner Bros. Discovery library through a dedicated JV. Those are all very different conversations and deals.

Many people reading might not have realized that Cutting Edge has a team of over 30 people around the world. I’d love to learn more about your approach for rejuvenating and finding new growth opportunities for the catalogs you acquire?

Tim: There are really two sides to it.

The first bit, and always the priority, is making sure we’re collecting everything we’re owed. That means checking registrations, tracking where the music has been broadcast and resolving conflicting claims across territories. Much of it comes down to cue sheets, the lists of every piece of music used in a film or episode. If one is filed incorrectly, the money can go to the wrong party or sit unclaimed, and as shows are translated into new languages, mistakes can emerge. So we’re constantly looking for unusual variances or gaps.

The other side is finding new ways for the music to earn. Some of that is through advertising: music from our catalogues has been placed in adverts for brands such as Chase, Apple, Netflix and Intel, and in trailers like those for ‘Shogun’ and ‘John Wick 4’.

But it’s also a question of finding new ways for fans to consume the soundtracks on their own terms. That comes through streaming, vinyl, sheet music and, especially, live events. The last few years have seen a surge in the popularity of ‘films in concert’, where the film is screened in full while an orchestra plays the score live, in sync with the picture, and we now produce them ourselves. Interstellar Live, with Hans Zimmer’s score, played the Royal Albert Hall in April and is now on tour around the world. It’s been through Japan and the US this autumn, and it’s coming back to London at The O2 next May.

Seeing a film like that is a truly unique experience, and I’d really recommend it if you haven’t already. And for the rightsholder, the concert generates a new income stream for the catalogue, keeps the IP in the cultural conversation, and prompts people to go back and stream the original films and shows.

One of the biggest deals last year was Cutting Edge’s partnership with Warner Bros on their film and TV catalog. What was the driving force behind that partnership, which made it compelling to both parties?

Tim: It worked because it was a meeting of the waters, and it suited both sides. A studio like Warner Bros. is first and foremost a film and television company, not a music publisher, and a catalogue of that size, which spans almost a century of copyrights, needs specialist management.

The joint venture provides a solution to that. It means they keep creative and operational control of the music, and a share of the economics, while we bring capital and the capability to oversee the day-to-day management and exploitation of it.

From our side, it was the culmination of a long relationship. We’d known and worked with the team at Warner Bros. for around 15 years, and that history is a big part of why the conversation was possible in the first place – we were a known entity to them.

It also took a lot of care and preparation. Before signing, we mapped out how decisions would work in practice, including approvals, vetoes and re-uses of the music, and getting that right meant involving multiple stakeholders across the commercial and music departments. That’s a big reason the deal took time to design, and why the integration has gone so smoothly since.

Let’s talk about AI for a moment. I’m curious about Cutting Edge’s point of view regarding AI’s opportunities and risks for film, TV, and video game music rights specifically and how your business is approaching AI across the organization?

Tim: For us, it all comes down to the kind of music we invest in.

We buy high-quality, premium scores that already exist and are indelible parts of the film, series, or game they belong to. AI isn’t going to replace those shows or their iconic soundtracks – they already exist and audiences return to them time after time.

It may have a place in helping composers create new works, through assistive production tools that can support their authorship, but we don’t believe AI will ever displace a composer, especially given the degree of complexity that scoring an entire film, series, or game entails.

That’s how we see the output side of things. When it comes to the input side, in the form of AI training, our view is pretty straightforward: if scores are used to build a model, rightsholders and composers should give consent, be paid fairly and know what’s been used, regardless of what that model goes on to create.

In the meantime, where AI is becoming genuinely valuable, from our perspective, is in its applications for making sure composers and rightsholders are paid what they’re owed. It can be used to improve data quality, register and track uses of works, and catch misattributed or missing royalties, which is the cue-sheet work I mentioned earlier. If you give it the right cue sheets, publishing data and music, it can spot those errors far faster than people can, which is important when you consider each catalogue contains hundreds of millions of lines of data.

Where do you see dealmaking in the media music market going from here? Are there enough catalogs yet to come to market that you feel this pace of dealmaking can be sustained?

Tim: Yes, there’s plenty still to come, and the sources of deals are expanding.

Studios are one source, as seen in our deals with Warner Bros. Discovery and AMC Studios, but there’s plenty of activity in the composer market too. Pop artists have been selling their catalogues for years, whereas film and TV composers were generally slower on the uptake, so the market is still young. As it develops, more composers are learning that they can release some, or all, of the value of their work, and every deal that closes shows the rest what’s possible.

Whether it’s a composer’s catalogue or a studio’s, there are reasons to sell that go well beyond the upfront consideration. Media music catalogues, after all, are tricky to look after, even compared to equivalent catalogues of commercial music. A single catalogue can span hundreds or even thousands of productions, and looking after it means registrations, collections and platform relationships across dozens of territories, which is hard for an individual owner, or a small team, to fund and keep on top of. Partnering with someone who has access to professional infrastructure is increasingly recognized as a sensible option.

Looking further ahead, I expect the shape of deals to keep changing. We’re already doing a lot more than traditional acquisitions, such as complex and innovative joint ventures with studios, part-sales where the composer stays involved, and new ventures that are funded alongside a catalogue sale. I’d expect to see more of that.

Last investing question for you. Do you have any atypical investment views on the industry? Is there anything where you look out at what everyone is saying and believing and think that’s crazy? Or where no one’s talking about things and you don’t understand why, because you’re really excited about it?

Tim: There are two things that really excite us, and I don’t think either gets talked about enough.

The first is video games. They’re already one of the biggest entertainment sectors in the world, and the music within them is only going to become more important as budgets and audiences grow. However, although games are increasingly consumed on digital platforms and streaming services, there are no public performance royalties currently being paid in this space in the majority of markets. We think that is unsustainable and it is only a matter of time before the system is brought in line with the modern reality of the industry, which will bring new royalties to composers and rightsholders in due course.

The second is what happens as the royalty infrastructure in emerging markets improves, and what that will mean for screen music. It’s long been a talking point in commercial music, but the lack of royalty reporting is even more pronounced in audiovisual - where there might be hundreds of compositions in a single title compared to 10-15 songs on an album - which means there’s a lot more upside if the systems get better. Right now there are some real structural obstacles stopping rights owners collecting what they’re entitled to in certain territories, but there are also some really innovative solutions being discussed among the key players to get round them. We expect that to unlock a huge amount of value over time.

And last question. If anyone wants to chat with you, what’s the best way to contact you?

Tim: I’m always looking to make new connections within the industry. Email is fine (tim@cuttingedgegroup.com) and I am also active on LinkedIn.

Thanks to Matt and Adam for the feedback, input, and editing!

Leveling Up’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. In addition, our work may feature entities in which Alderbrook Companies, LLC or the author has invested, has worked, and/or has provided consulting services.

📚 Music Business, Tech, and Investing Content Worth Consuming

Here is some of the best content that our team has consumed over the past month or so –

Music In The Air: 10 Years On (Goldman Sachs: link): “Ten years after the original Music in the Air, the industry’s investment debate has solidly evolved from one centered primarily on streaming adoption toward one focused on monetization…The next decade will likely be shaped by three major investor debates: (1) to what extent is there opportunity to increase the price of subscription streaming, first in developed markets, but then increasingly in emerging markets; (2) to what extent can the industry improve monetization of free / ad-supported listening, where improved segmentation, enhancements to ad-tech, and a renewed focus on driving free-to-paid conversion will need to do a better job creating value; and (3) how will the opportunities and risks associated with Generative AI play out across the industry, where we generally view scaled DSPs as relative beneficiaries but see a more balanced risk/reward profile for labels and rights holders.”

Catalog Is Surging On Spotify – Making Frontline Hits An Even Harder Game (MBW: link): “Still, MBW’s findings raise big questions for our industry, especially as Grammy chattergrows louder, with first-round voting now underway. We still have a strong frontline business. But breakthrough records that truly break through – on a mainstream, global level – appear to be getting rarer. Meanwhile, the songs that broke through years, or decades, ago are taking up more and more space at the top.”

The Most Powerful Man In Music Isn’t Afraid of AI (The Hollywood Reporter: link): “No, we’re just going through a change and a transformation again. Now, when an artist does break and when it cuts through, there’s so much content and there’s so much history. There’s so much for the fan to enjoy and discover. When we broke artists for the first 30 or 40 years of the business, there was no audiovisual. No one had seen them live. You normally broke an act on the first single or for the first album. Now the entire ecosystem can get music to a consumer.”

🤝 Want to Work Together? Get in touch!

Alderbrook has helped dozens of companies create value for their stakeholders. We’d love to have the opportunity to work with you too!

Here’s what we offer music publishers, labels, tech companies, and investors:

• Growth and Strategy Consulting: Projects covering corporate & growth strategy, commercial & market analysis, stakeholder education materials, and more.

• M&A and Investment Advisory: Commercial due diligence for buyers, fundraising support for sellers, investment sourcing, valuation assessments, fractional VP of Finance / Strategy services, and more.

• Early-Stage Investing: Actively investing in start-ups, with a current focus on Pre-Seed and Seed rounds.

If you’re interested in learning more and exploring how we could work together, you can either reply directly to this email or click the link below to fill out our contact form. We’ll be back in touch soon!

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GM readers 👋,

Happy September!

Thanks to those who expressed interest in the fantasy football league. We didn’t have quite enough sign-ups to spin up a league, so enough of the sap. “Just put the insights in the bag, sir.” 😆

In this month’s newsletter, we have our quarterly update slides that offer a snapshot into some key trends shaping the music industry across public markets, private investments, M&A, and more. Here are a few takeaways from 2Q 2026:

• Music IP M&A reaches a post-pandemic high, with catalogs continuing to attract record investment.

• Private growth investments were driven by Suno’s $400M late-stage round, as early-stage funding pulled back.

• Public market valuations saw wide dispersion by category, as Live and Radio performed inline with the broader market while K-pop labels and Streaming stocks underperformed.

• AI Music Creation app mobile revenues and downloads continue to show strong growth momentum.

• Other insights in the report include the most active VC firms, the largest deals by type over the last twelve months, and more!

For our full analysis of the trends shaping the music industry, paid subscribers can access a link to the slides below. By subscribing to Leveling Up, you’ll guarantee access to all of our quarterly reports, unlock our back catalog full of deep analyses and takes, and you’ll be getting independent industry coverage not found anywhere else.

If you aren’t already a paid subscriber, we hope you’ll consider upgrading your subscription and supporting the newsletter (link to upgrade)! Either way, we’ll be back with a free newsletter next month.

Thanks, as always, for your support! We are very grateful for it.

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

Music Market Update - 2Q 2026

“Money, well, get back / I’m alright, Jack, keep your hands off of my stack / Money, it’s a hit / Don’t give me that do goody-good bullshit” - Pink Floyd on “Money”

To access this quarter’s Music Market Update report, click the DocSend link below:

Read more

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GM readers 👋,

Happy August!

Before getting into this month’s piece, I want to try out an idea. (American) football season is around the corner, so I wanted to see if folks are interested in a Leveling Up fantasy football league? I think that it could be fun and an opportunity for folks interested in music, tech, and/or investing to socialize. Maybe we’ll even have a prize for the winner. If you’re interested, fill out the form located at this link.

If 10 to 12 people are interested, we’ll spin up a league. If there is more interest than expected, priority will be given to paid subscribers. Excited to see how this comes together!

In this month’s piece, Drew Thurlow analyzes the state of the AI music creation market. Given the pace of AI music deal making, we think it’s worth taking a critical look at the size of the prize these companies are going after and their approach for tackling the opportunity. Drew also considers what has to happen for winners to emerge. It’s a well-timed piece, in my opinion.

I hope you enjoy it!

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

Designing Audio: The State of AI in Music Creation

“Yeah, but your scientists were so preoccupied with whether or not they could, that they didn’t stop to think if they should.” - Dr. Ian Malcom, Jurassic Park

There is a statistic that should anchor any serious analysis of generative AI music, and it comes from Deezer, the only major streaming platform publishing detailed data on the subject. As of July 2026, fully AI-generated tracks account for roughly 50 percent of all new music uploaded to the platform daily. This is about 90,000 tracks a day, up from 10,000 a day in January 2025.

Those tracks capture between one and three percent of streams. And of that sliver of listening, Deezer estimates that as much as 85% is fraudulent - bot-driven streams designed to farm royalties, not humans choosing to press play. Spotify’s internal research yields similar numbers.

Meanwhile, in blind tests Deezer conducted with Ipsos across 9,000 respondents in eight countries, 97% of listeners could not reliably distinguish AI-generated songs from human ones. These figures were backed up by a separate study run by NYU’s Gen AI audio club.

What do these two facts tell us? It’s the central paradox of generative AI and music. The technology really works. We passed the Turing Test, a test as to whether a human can distinguish a man from a machine, years ago. The supply is effectively infinite.

And yet, almost nobody wants to listen to it today.

Any investment thesis, licensing strategy, or product roadmap for generative AI music must ultimately identify commercial value in something. What is increasingly clear, however, is that traditional music listening is not where that value lies – at least for now.

This is strange, because listening has been the primary way recorded music has been monetized throughout its history. The struggle over every lyric, the years spent learning an instrument, the tedium of setting up microphones, and the endless takes required to get a recording just right are all, economically speaking, sunk costs. It’s the song that makes the money, not the process of creating it.

Despite this yellow flag, investors are piling in. Suno closed a $400 million Series D in June 2026 at a $5.4 billion post-money valuation - more than double the $2.45 billion it commanded just seven months earlier. ElevenLabs raised $500 million at an $11 billion valuation in February, tripling its worth in a year. Udio raised $10M before settling with UMG and taking its product offline.

Meanwhile, the Majors are starting to form partnerships with AI music companies. The three major label groups, which two years ago were suing this sector into oblivion, are in the process of converting many of those lawsuits into licensing partnerships. And industry executives are leaving their roles as stewards for rightsholders for leadership positions at these AI ventures.

Very smart people see value here, but what exactly is it? How are these leading AI companies positioning their businesses?

In order to find answers, we’ll look at the potential size of the AI music market. We’ll then compare the leading companies in generative AI music – Suno, Udio, ElevenLabs, and a handful of consequential others – not primarily as products but as strategies. Finally, we’ll wrap up our analysis by considering the question of “who survives?”

What is the Size of the AI Music Prize?

Before looking at the strategies leading AI music companies are using to productize the technology, it’s worth considering why they are focusing on this in the first place. What is the size of the prize? And will it expand the overall industry or simply take share away from existing incumbents?

Currently, there is a wide dispersion in the financial forecasting. One GEMA study published in early 2024 estimated that the Generative AI music market was ~$300 million in 2023 and would grow to ~$3.1 billion in 2028. Meanwhile, another 2024 study from CISAC puts the number roughly 8x higher, estimating that the market was ~$700 million in 2023 and would grow to ~$23 billion in 2028.

Given the differences in forecasts, what is the TAM or upside case for generative AI music products?

In large part, the answer depends upon whose needs a given product is meeting. AI music companies appear to be going after more than one type of customer.

As far as what needs generative AI music products actually meet, I currently see five categories:

1) The music creation market. These are musicians using AI tools as part of their creation process. This segment is already growing rapidly. Between 2020 and 2025, the number of music creators grew by 167% to reach 148.7 million, with gen AI users growing fastest. This is a positive sign for AI’s ability to not only threaten incumbent creator tool companies but to actually expand the market as AI widens the creative funnel, particularly for novice creators (i.e., fans).

For more professional musicians, AI products can provide a variety of tooling and creative co-piloting: stem generation, voice models, arrangement assistance, and reference generation absorbed into producer workflows. Sorry AI haters, but survey data consistently shows working musicians using AI to sketch and learn far more than to generate finished tracks. Count hip-hop mega-producer Dr. Dre as a recent advocate. Here, Suno Studio and their “Cover” feature is a clear market leader.

So how big is this segment of the market? In the past, MIDiA has estimated the creator tools market size at ~$6 billion growing to ~$10 billion by 2030. That’s not tiny, but it’s also likely not large enough alone to support some of the recent valuations in venture-backed generative AI music companies.

2) Entertainment or novelty music market. These are people whose outputs are more a souvenir than a professional aspiration. You are making the song for friends and family to enjoy as opposed to finding your 1,000+ true fans. For example, one use case might be making a song for a special life moment, like an anniversary or a child’s birthday.

Before AI, companies like Songfinch (expected to be $75 million of revenue in 2023) were using human songwriters to meet this demand. It’s difficult to find a reliable market size estimate for this use case. But given Songfinch’s scale a few years back and assuming some portion of Suno’s current $300 million ARR targets this market, I’d estimate this is a much smaller market today (sub-$1 billion) than the creator tools segment. That said, it’s one that could grow meaningfully over the next few years.

Along these lines, the industry is betting that fan remixes and covers will make this segment much larger over time. A key unlock will be working out a licensing framework that makes it relatively cheap and easy for anyone to let their creativity run wild on their favorite songs. Whatever you want to call it – consumer-as-creator, active fanship, participatory consumption – I believe there will be *some* incremental revenue from this. The power of being able to press a button and make that Ariana Grande banger reggae for a novelty seems pretty appealing to Gen-Z. This is the bet embodied by Udio’s relaunch, Klay, Hook, and Spotify’s yet-to-be-released remix feature.

3) Stock music market. Generative AI can also have a role in the market for background music used in video content. With the amount of content needing music scores, it’s logical that “good enough, instant, and legally clean” will beat “great, next week, with a licensing negotiation.” Large incumbents are converting their business models to meet market demands. For example, Epidemic Sound has recently shipped new AI products and acquired AI-native companies. In this segment, ElevenLabs’ fully licensed and downloadable marketplace wins here. In terms of market size, I couldn’t find a clearly reliable estimate. Epidemic Sound revenue was ~$200 million in 2025 and competitor Artlist reportedly generated $300 million of ARR in early 2026 (although Artlist is not a strictly music business). Meanwhile, several third party research firms (example 1, example 2, example 3) estimate that the stock music market is currently $1 billion to $2 billion.

4) Consumption market. In Suno’s investor materials and interviews, the company has talked about its aspiration to become a “music super app”. As it expands its offerings, Suno envisions an app where creators and listeners do not need to leave to create, share, and stream music. In other words, this is something akin to a streaming service or whatever a “better consumption experience” looks like in the company’s mind’s eye. The potential TAM is likely much larger here than in other segments. Spotify’s annual revenue is ~$20 billion and its current market cap is $100+ billion. Goldman Sachs’s most recent Music In the Air report estimates that global streaming gross revenues were ~$43 billion in 2025. It’s also worth noting that Suno’s ambitions appear to stretch beyond streaming as the company recently announced a vinyl pressing service for creators to ship physical records of their AI creations. In short, the consumption market appears to be far larger than the creation and stock music segments – although as we addressed at the top of the piece, this hasn’t materialized yet.

5) Artist services market. These are the services – distribution, marketing, funding, administration, etc. – that help artists build their careers. They’re what record labels and publishers do. Suno’s leadership has said in interviews that it doesn’t want to be a record label because it’s not end user facing. But given that Suno’s building a platform for creators and consumers, it seems obvious that many of these services would be valuable for Gen AI creators. Therefore Suno’s recently announced Spark program, which provides services for “the next generation of independent artists”, could be a seed for a larger services business long-term. Of course, AI companies like Suno will likely need to balance any artist services ambitions with agitating large music rights holders. What’s the potential size of this market? MIDiA estimated that self-releasing artists generated ~$2 billion and independent labels generated ~$11 billion of recorded music revenue in 2024.

So what’s the size of the prize?

Based on our segments above, the total addressable market appears to be ~$60+ billion. But it’s worth noting that these five segments overlap, so the market sizes shouldn’t simply be added together. For example, the entertainment and novelty market overlaps with creator tools. Meanwhile, artist services revenue is consumption (streaming, physical, etc.) revenue.

With that in mind, we think that it’s worth looking at the market in two different categories. Those segments that generative AI companies are able to ship products in today without rightsholder consent (even if they may and are getting sued for it) versus those segments where compelling products can’t really be shipped without rightsholder consent. This distinction is highlighted in the chart below.

Based on this distinction, the creator tools, stock music, and entertainment / novelty songs segments are estimated at ~$10 billion in total. Again, products in this category can and often have been launched without rightsholders’ permission as the legal framework gets sorted out. That’s likely why these three segments are where most of the actual revenue is generated today.

However, it’s important to note that the consumption and artist services segments are roughly five times larger. And neither of these can be captured without rightsholders playing ball. This market size asymmetry is important because a lot of the recent licensing deals have been viewed as legal housekeeping by the generative AI companies. I think that is certainly a large driver of what’s happening. But there also appears to be an important business strategy reality behind this dealmaking: the biggest markets require rightsholder consent. And going after these bigger TAM segments will be key to supporting venture-backed AI music companies’ $10+ billion valuation ambitions.

As for whether AI expands the industry or just takes share from incumbents, it is hard to say, but it appears to be mostly the former so far. The creator tools and novelty segments are attracting new revenue from people who weren’t creating music and buying anything before. Stock music looks to be a place where substitution is happening but incumbents are responding by developing and acquiring AI-powered products. It remains to be seen if the AI native startups will (or want to) penetrate the consumption and artist service segments at scale. As mentioned previously, AI tracks are still estimated to be 1-3% of streams despite exceeding half of daily uploads at some DSPs. This could change over the next few years as new licensed products are released.

With all this context in mind, let’s take a closer look at how some of the leading generative AI music companies are approaching the potential opportunity ahead.

How are companies going after the opportunity?

The generative AI music story started as a two-horse race – Suno versus Udio – with ElevenLabs treated as an adjacent curiosity. That framing made sense in mid-2024, when the RIAA sued both text-to-song leaders on behalf of the major labels.

At that time, Suno was the Dark Side: unapologetic about raising gobs of money and reaching $200M ARR on the back of scraping the art of hardworking musicians. Their controversial CEO made controversial remarks about the creative process. Their tactics led to a massive backlash in the artist community.

Udio was the rebel force: the company raised far less money and was quite public about wanting to work with – and compensate – artists and the industry. True to their word, they settled the first major label AI lawsuit and immediately offlined their “free-for-all” generative app.

Two years on, that binary is useless. The products, business models, and go-to-market plays have diverged so meaningfully that comparing them feature-by-feature misses the point. What distinguishes them now is their answer to a single strategic question:

What is the relationship between an AI music company and the recorded music business?

Product

The clearest split in the market is whether a platform lets you take what you make with you.

Suno has taken a laissez faire approach to music creation, allowing outputs to be downloaded, distributed, and monetized off-platform. That portability is core to why usage has scaled the way it has, with the company reportedly passing two million paid subscribers in early 2026 and projecting $300 million in annual revenue. Suno’s users generate on the order of seven million songs per day. That is enough, as one widely circulated Suno pitch deck puts it, to recreate Spotify’s entire catalog every couple of weeks.

Of course, not all outputs are created equal. And yet Suno has managed to become all things to all creators. A non-musician looking to make a dumb song about your group chat? Suno has that product. A professional musician looking for ideas before heading to the studio? Suno Studio has become the dirty secret in pop music. No one wants to talk about it, but Suno’s work is all over the Billboard charts.

For third parties looking to use its tech, the company recently announced an API. If it can continue expanding across these constituencies, Suno could reach billions of users while remaining essential to the industry’s upper echelon.

Udio, on the other hand, went the opposite direction. Its Universal-backed relaunch – “an innovative, new commercial music creation, consumption and streaming experience” – is a walled garden by design. Users can create and share within Udio’s environment but cannot export to Spotify, YouTube, or anywhere else. Royalties flow to participating catalogs, with artist opt-in governing what the models can reference.

On paper, Udio achieved what the entire industry claimed to want: the first fully licensed major label AI music platform…but boy, did this come at a cost.

The cost was users’ dramatic public backlash to Udio’s product pivot. Within 24 hours of the deal announcement, Udio disabled downloads of audio, video, and stems entirely. Existing subscribers were compensated with credit grants, but their creations were locked inside the platform.

The community’s reaction was a combination of mutiny and exodus, and it revealed something important about what customers in this category actually want. They are not buying a “superfan engagement” app to interact with their favorite songs. They are buying the ability to make a thing and then own it (i.e., do whatever the hell they want with it).

The third major player, ElevenLabs, doesn’t really compete on this axis at all, as music is just one product line among several audio products it operates (e.g., voice cloning, dubbing, text-to-speech). That diversification changes the company’s risk calculus entirely. Suno must win in music; ElevenMusic (as the product is called) merely has to find its music vertical as additive. In this way, the company might have more in common with Google or (eventually) Meta’s forays into generative music.

A further interesting wrinkle in ElevenLabs’s approach is its creator marketplace. In March 2026, the company launched a Music Marketplace, further extending the model it built with its Voice Library – where creators contribute an AI replica, set usage terms, and earn every time a paying subscriber uses it. The company has paid out more than $11 million to voice creators under that system and is explicitly betting the earning potential for musicians is comparable. I’m skeptical there will be a market for music in the same way (see: Grimes’ ElfTech). But there’s little downside here, and I applaud ElevenLabs for their creativity and community building.

Beyond the three key companies outlined above, there are two other entrants worth examining, both characterized by their tardiness to market and their model-led approaches: Klay and Google.

Klay, in November 2025, became the first AI music platform to secure licensing agreements with all three major label groups simultaneously before launching a product. Its model will be trained exclusively on licensed material by design. (Rumor has it that its model will be trained not just on full tracks, but on stems, too.)

Its leadership team is arguably the most credentialed group ever assembled at this intersection. The team is led by CEO Ary Attie alongside Thomas Hesse (formerly Sony Music), Björn Winckler (Google DeepMind’s music team), and Brian Whitman (Spotify via The Echo Nest). Klay is, in essence, the company that the labels wish Suno had been. And Klay’s existence helps provide the Majors leverage in every other negotiation. However, note how I refer to Klay in the future tense. Almost two years after their first deal announcement, we have yet to see a launch.

Google is the larger long-term threat to all of these companies. It shipped Lyria 3, its most capable music model, then acquired Producer.ai and relaunched it as Google Flow Music. Google has developed products for tracking, content moderation, and multi-modal creation all in one platform from day one.

Finally, it’s worth flagging separately that there are several players moving toward prosumer production tooling rather than pure generation. Examples here include Suno Studio, Udio’s remix-first design, the acquisition-driven build-out at Splice, and Aiode/BandLab, among many others. That’s a tell that the market is already segmenting its user base between casual “make a song from a prompt” users and semi-professional creators who want generation as one step in a larger production chain, not the whole workflow.

Pricing & Go-to-market

Despite looking similar on the surface (freemium, subscription tiers), the underlying monetization logic of each company differs in nuanced ways:

Suno sells subscription access to generation itself, with paid tiers gating downloads and monthly caps. It’s a consumer app business: more subscribers leads to more ARR. The company is chasing volume and breadth. For example, casual creators make joke songs, prosumers and professionals use Suno Studio, and soon third-party developers will be able to utilize an announced API. It’s trying to be useful to everyone from a novice to a working songwriter.

Udio is shifting toward a royalty-flow model on top of subscription, where participating catalogs get paid per generation. That’s closer to a streaming-style rights payout layered onto a creation tool (although it also offers subscription tiers and a la carte credit purchases, too).

Udio’s go-to-market plans are now largely dictated by UMG. Therefore, it appears to target fans who want a sanctioned, artist-approved way to remix and engage with music they already like. That is different from targeting creators who want ownable output. It appears to be a smaller market (for now) and likely a less loyal audience than the one Udio started with, based on its users’ reaction to the product pivot.

While they now have an uphill battle with consumers, Udio may yet prove out the labels’ preferred model. UMG’s marketing muscle behind a licensed creation-and-streaming hybrid has interesting upside. Meanwhile, the per-generation royalty structure reported in the settlement gives rights holders a template they clearly intend to standardize. Being on the right side of artist consent should garner them goodwill that Suno can only dream of.

ElevenLabs runs a two-sided marketplace, as mentioned above: it takes a cut connecting (a) rights holders and individual voice/music creators with (b) paying subscribers and enterprise buyers. The challenge with this model, of course, is the dreaded “cold start problem.” The company is betting its head start in other areas of AI audio generation will help to kickstart the flywheel. But if it is unable to satisfy both sides of the equation, it may find it difficult to build momentum.

With this marketplace model, ElevenLabs is going after the enterprise and professional-use case. For media businesses, publishers, advertisers, game studios, and so on, licensed and provenance-traceable output may become a compliance requirement rather than a nice-to-have as disclosure rules mature.

Google Flow Music is also a subscription product. Klay is rumored to be working on a subscription experience, too. These two are playing a patience game: let Suno and Udio absorb the legal and reputational risk, then arrive later with a fully licensed model, and in Google’s case, effectively unlimited distribution and balance sheet.

Legal and rightsholder licensing

This is the variable that actually explains many of the product differences above. We can’t consider each company’s strategy holistically without first understanding the legal considerations.

Suno has been in a more or less constant state of litigation since inception. In November 2025, Warner Music Group settled its copyright claims and struck a licensing partnership. This was Suno’s first licensing deal with a Major. Due in part to this agreement, the company has committed to launching new, licensed models in 2026 and deprecating its current ones. Artists and songwriters will control whether their names, voices, and compositions can be invoked. Downloads will require a paid account, with monthly caps on paid tiers and the option to purchase more. Suno also acquired Songkick, Warner’s concert-discovery platform, in the process potentially signaling ambitions well beyond music generation and supplying an interesting new source of data to feed its models.

Outside of the WMG deal, the legal picture, however, remains genuinely unresolved. Universal and Sony continue to litigate. The labels want a walled garden; Suno’s business depends on output that leaves the platform. Suno also faces GEMA in Munich (more on that below), Denmark’s Koda, and a class action on behalf of independent artists whose recordings appear in the training data but who were parties to none of the documented settlements.

Udio, on the other hand, settled early and completely with Universal and Warner. It reached licensing agreements with Merlin and Kobalt along the way. That said, Sony is still fighting Udio, with a new suit filed in July 2026. As discussed, the price of these settlements has been product control. Udio has pivoted to a walled garden structure where users can’t take songs from the app.

ElevenLabs has managed to avoid the lawsuits entirely by licensing before launch from SourceAudio’s pre-cleared catalog through Merlin, Kobalt, and Believe. The Kobalt deal in particular deserves wider attention than it has received, because it may matter beyond this product. Revenue from ElevenMusic is split 50/50 between the compositions and the sound recordings used to train the model. This cuts directly against one of the defining economic distortions of the streaming era, in which songwriters and publishers systematically have much worse terms than labels. AI licensing could easily have reproduced that imbalance. However, the first major precedent instead corrected it, and Kobalt reportedly secured most-favored-nation protection, ensuring its terms match any better deal struck later.

Klay also got its ducks in a row prior to launch and indeed represents the fully-licensed-from-day-one approach taken to its logical extreme. Klay has agreements from all three majors before any product exists. That legitimacy is also its bottleneck, however, as we have already noted. Time will tell if its eventual launch can make up for lost time.

Google licenses from a position of scale and leverage that none of the others have, backed by its own watermarking and moderation infrastructure.

Fundraising

Suno has raised aggressively to fund both product growth and litigation runway. Per Crunchbase, Suno has raised $775+ million since inception and recently raised a $400 million Series D that valued it at $5.4 billion. That capital is buying time to negotiate settlements from strength rather than weakness.

ElevenLabs has raised even more capital since inception ($900+ million) and raised at an even higher valuation ($11 billion in its February 2026 Series D) than Suno. The company is already a profitable, diversified audio business with ~$600 million in annual revenue. Its fundraising is more about supporting further expansion, rather than ensuring legal resilience.

Udio’s capital position is murkier and arguably the real explanation for why it settled so completely. Per Crunchbase, it has raised $10M+ since inception. Whether it ran short on runway, judged it couldn’t outraise or outcompete Suno, or simply wanted UMG’s backing, the settlement functions as a de facto acquisition of its product roadmap even without a formal buyout.

Klay and Google aren’t really playing the same capital game at all. Klay’s leverage comes from credibility, not cash raised. Google doesn’t need to raise anything.

(Note: both the Suno and ElevenLabs deals landed in the top five of the Private Growth Investments table in our latest Music Market Report, available to subscribers only)

Key takeaway

The Suno/Udio binary that defined this category in 2024 has been replaced by several distinct bets on the same underlying question: what should an AI music company owe the recorded music business, and when should it pay that debt?

Suno is betting it can negotiate from strength before paying. Udio paid upfront and lost its product in the process. ElevenLabs never took out the loan. Klay and Google are waiting to see how the first three bets resolve before placing their own.

What has to happen for winners to emerge?

I’m looking at three key events.

The first is a legal resolution, and it is closer than it has ever been. The important question: is training generative models on copyrighted recordings without a license considered fair use? This has never been decided by a U.S. court in a music context. The 2025 rulings in Bartz v. Anthropic and Kadrey v. Meta found training language models on books transformative (and thus fair use), but with important caveats such as how the models get the data matters. You can’t just scrape the internet for content and create, to quote one of the judges, a “shadow repository.” This is precisely what Suno (and originally Udio) did.

Importantly, both courts flagged that the calculus changes when AI outputs compete directly in the market for the originals. This is central to the RIAA’s argument, but I’m not so sure this is a winning argument. As mentioned earlier, despite the sheer volume of generative music flooding the DSPs, few people are actually listening to it. And there is evidence - as seen in the license deals, and hopefully proven by platforms like Udio’s Starstruck - that these models are now increasing the value of music IP.

Still, we’ll have to wait. Much trade coverage anticipated a summer 2026 fair-use ruling in Sony’s case against Suno, yet motions in the Massachusetts case (Suno is based in Cambridge, MA) are now scheduled into 2027. Discovery in the Udio case runs through the fall.

The nearest actual decision was GEMA’s case in Munich, where the court found against Suno.

As of this writing, the judgment is not finalized and Suno may yet appeal, but the initial ruling at least determined that GEMA was due injunctive relief and entitlement to damages. Though the ruling was made under German law, it has EU-wide implications for both training and output liability. Output liability, it’s worth noting, is not something U.S. cases include.

The stakes of the eventual U.S. decision are massive. A Suno victory on fair use could undermine the economic logic of every licensing deal signed in the past year. Conversely, a Suno loss could mean the UMG/Udio template is the de facto law of the land, handing the Majors control over the sector.

The second is whether licensed models are actually competitive. Suno’s model, Udio’s platform (Starstruck), and Klay’s licensed-only system will all reach users in roughly the same window. If a licensed catalog plus artist opt-in produces models that are noticeably worse – narrower stylistically, blander, more constrained – users will churn toward whatever alternatives exist. We have a current example for this: ElevenLabs Music model is *fine*, but no one would argue it creates the quality of outputs like Suno’s does.

At the same time, if you take the view that models will continue to improve to the point of commoditization (i.e. the upside of being at the frontier grows smaller and smaller over time), then it’s possible that licensed models – clear of legal concerns and free to advertise which artists they are trained on – gain a competitive advantage over their unlicensed counterparts.

The third is the download question. This is really a question of what business this is. It is remarkable that the reported impasse between Suno and the two holdout Majors comes down to whether users may download what they make. But it makes sense: downloads are the boundary line between the two possible futures.

In one, AI music platforms are creation tools – modern instruments whose output belongs to the user and flows into the open ecosystem of DAWs, DSPs, and social media. In the other, they are licensed superfan experiences – walled gardens where the catalog matters, outputs are engagements with it, and the label’s control is preserved end-to-end.

Based upon the Udio backlash, consumers have voted decisively for the first future. Rights holders are contractually constructing the second. When both are real options at scale, we’ll see what happens.

Closing Thoughts

The next twelve months will resolve more than the last three years did. The GEMA Munich verdict fired the first salvo. In six months or so, the licensed models from Suno, Udio, (maybe) Klay, Spotify, and others will meet real users, with a real marketing push, and their reception will test whether fans want a music remix tool in their lives. The Suno/Universal and Suno/Sony negotiations will either produce a settlement framework that preserves downloads - validating the “creator tool” thesis - or force the walled garden question to trial. And somewhere in the background, we’ll wait for Google, Meta, OpenAI, or even NVIDIA to decide that they want in on the game.

The companies were never really competing over who could generate the best song. They were competing over what generative music is. An instrument? A novelty? A superfan experience? A feature of a much larger artist servicing offering and consumption platform? The strategies now in the field each embody a different answer. In the end, it isn’t up to the industry or the AI companies. The market, the courts, and (potentially) millions of subscribers will tell us who’s right.

Thanks to Matt and Adam for the feedback, input, and editing!

Leveling Up’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. In addition, our work may feature entities in which Alderbrook Companies, LLC or the author has invested, has worked, and/or has provided consulting services.

📚 Music Business, Tech, and Investing Content Worth Consuming

Here is some of the best content that our team has consumed over the past month or so –

Duetti & Billboard’s Music Finance Index (Billboard: link): “Catalog multiples are expected to hold largely flat for the rest of the year despite investors growing interest in Latin, country and catalogs younger than 10 years old…Expectations for the values catalogs could get from investors was again heavily reliant on age, with the youngest publishing catalogs (six months to two years old) receiving a multiple of 4.7 to 6.5 times trailing 12-month net revenue and the oldest catalogs (10 years and older) receiving a multiple of between 12.1 and 14.6 times trailing 12-month net revenue, according to respondents.”

The Music Industry Has Priced A Customer It Cannot Find (Mag Rodriguez: link): “Before you price the superfan, prove you can find them. If your strategy depends on stitching together spreadsheets from five different platforms, you don’t have a superfan strategy. The fan was never fragmented. The industry fragmented them, one platform at a time. The companies that win the next decade of this business will be the ones who can see a single view in which every stream, every message, and every dollar points to the same fan.”

They’re Not ‘Major Labels’ (MBW: link): “In 2025, merch plus ‘License & Other’ at UMG generated over USD $2.5 billion, according to UMG’s reported results analyzed by MBW. That $2.5 billion was more than 50% higher than UMG’s turnover from either physical music sales or ad-funded streaming in the same year.”

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GM readers 👋,

Happy July!

A quick reminder that we published our Q1 2026 Music Market Update slides last month. This quarterly report provides a snapshot of where the money is moving across the entire music industry: from public markets to private investments to M&A transactions. It was referenced in a recent Billboard article on the music catalog investment market and is available to paid Leveling Up subscribers (link to upgrade your subscription). It’s worth checking out in our biased opinion 😄!

This month’s piece is a conversation with Rob Law, Co-Founder and Partner at Shot Tower Capital. If you’re a music finance nerd, Rob doesn’t need an introduction. But for those who aren’t familiar, Rob, his co-founder David Dunn, and the Shot Tower team have built one of the leading investment banks focused on music IP. They have worked on some of the industry’s most notable transactions, including:

• Advising Recognition Music Group on the sale of its music rights portfolio to Sony (link)

• Advising The Michael Jackson Estate on its sale of a ~10% interest in EMI Publishing to Sony (link)

• Advising Concord on the purchase of the publishing and recorded music catalogs of Genesis members Phil Collins, Tony Banks, and Mike Rutherford (link)

So I’m grateful Rob was willing to share his career journey, his perspective on the current state of music IP M&A, and where he envisions Shot Tower heading next.

I hope you enjoy our conversation!

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

The State of Music IP M&A in 2026

“And you better start swimmin’ or you’ll sink like a stone / For the times they are a-changin” - Bob Dylan on The Times They Are A-Changin’

To set the scene, could you tell us a little bit about your journey in the music industry so far and how you came to start Shot Tower?

Read more

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GM readers 👋,

Happy June!

In this month’s newsletter, we have our quarterly update slides that offer a snapshot into some key trends shaping the music industry across public markets, private investments, M&A, and more. Here are a few takeaways from 1Q 2026:

• Music IP M&A sustains its recent momentum, with catalogs continuing to attract record investment.

• Private growth investments reached a high in recent years, driven by late-stage funding activity in Artist & Label Services and AI Music Creation startups.

• Public market capital raises remained subdued amid broader macroeconomic headwinds and AI-driven market rotation.

• AI Music Creation app mobile revenue and downloads accelerated to new highs.

• Other insights in the report include the most active VC firms, the largest deals by type over the last twelve months, and more!

For our full analysis of the trends shaping the music industry, paid subscribers can access a link to the slides below. By subscribing to Leveling Up, you’ll guarantee access to all of our quarterly reports, unlock our back catalog full of deep analyses and takes, and you’ll be getting independent industry coverage not found anywhere else.

If you aren’t already a paid subscriber, we hope you’ll consider upgrading your subscription and supporting the newsletter [link to upgrade]! Either way, we’ll be back with a free newsletter next month.

Thanks, as always, for your support! We are very grateful for it.

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

Music Market Update - 1Q 2026

“If it don’t make dollars then it don’t make sense.” - Vince Staples on “DJ QUIK”

A big thank you to the contributors and editors of our 1Q 2026 Music Market Update. In particular, thanks to Beau David for all his hard work to make these insights possible.

To access this report, click the DocSend link below:

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GM readers 👋,

Happy May!

It was great seeing several of you at Amplify 2026. I’ll be heading back to NYC for this year’s Music Investor Conference Friday, June 5th through Wednesday, June 10th. If you would like to discuss ways to work with Alderbrook – consulting, investing, newsletter sponsorships, and more – or simply want to grab a coffee and say hello, please let me know by sending a note here. I’ll get back to you soon!

In this month’s newsletter, Drew Thurlow is back with a timely guest post. Every generation or so, a new technology forces the music business to do something that some observers say it struggles with: change. As generative AI music usage increases, the stakes grow for the industry to get the rules of the road right. Drew lays out a concrete – but admittedly an imperfect – proposal to address AI licensing’s unique challenges. It will hopefully spark a conversation, because the architecture the industry builds right now – while deals are still being struck and courts are still deliberating – will likely shape who gets paid (and who doesn’t) for decades.

And you can learn even more about the topic of AI’s impact on music by purchasing Drew’s new book at this link!

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

Does Music Need a New Royalty for the AI Era?

“I don’t know what they want from me, it’s like the more money we come across, the more problems we see.” - Notorious B.I.G.’s “Mo Money Mo Problems”

The music industry has a long history of treating every new way to monetize music as an invitation to create a new royalty.

That is the real pattern: not simply that technology changes things, but that technology creates meaningful new commercial uses for music that the existing system cannot measure, price, or administer. When that happens, pressure builds and eventually - usually late, usually with a fight - the industry creates a new royalty.

For example, this is what produced the mechanical royalty. In 1909, player pianos and piano rolls turned songs into a new kind of reproducible product. Music was drawing unprecedented crowds to bars and speakeasies, and songwriters wanted a share of those bar tabs.

It is also what produced the public performance right. In the 1930s, as radio fidelity increased, broadcasting went mainstream and opened up new commercial pathways for music. Songwriters, once again, wanted to be compensated. Congress agreed.

Thomas Edison’s gramophone eventually spawned the recorded music business and the master royalty. And in the late 1990s, we got the digital public performance royalty for sound recordings – after rights holders decided they were not going to let digital radio repeat terrestrial radio’s century-long omission of a master royalty in the United States. An omission, it is worth noting, that still has not been corrected.

Each of those royalties was created out of a specific set of technological and commercial circumstances. Each took years of fighting before coming into existence. None landed cleanly, and in fact, industry stakeholders still fight over them.

And now, we have Generative AI – a technology that could radically change how we make, consume, and monetize music.

How Big Is the AI Opportunity?

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GM readers 👋,

Happy April!

I’m heading to Amplify 2026! I’ll be in NYC Wednesday May 6th through Friday May 8th. If you would like to discuss ways to work with Alderbrook – consulting, investing, newsletter sponsorships, and more – or simply want to grab a coffee and say hello, please let me know by sending a note here. I’ll get back to you soon!

Also, as a reminder, we published our first Music Market Update last month. It’s our best effort to capture key trends across public markets, private growth investments, M&A, and more. Hopefully it’s a helpful resource if you’re a founder fundraising, an investor building a thesis, an executive developing strategy, a music finance nerd, or just curious about the space. If you have any feedback on it, we would love to hear from you so that we can improve future versions.

In this month’s newsletter, we’re going to cover a much discussed topic. Is there a dislocation in the market valuation for the publicly traded Majors – Universal Music Group (“UMG”) and Warner Music Group (“WMG”)? In short, do we think they’re cheap?

To try to answer this question, we’ll explore how UMG and WMG valuations have evolved; look at how they have performed operationally over the same period; discuss potential reasons for their struggles; brainstorm ways to improve things; and consider how this situation might impact private market investment activity.

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. I currently own UMG and WMG stock, so I’m biased. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

The Majors: Dislocation…Or Not?

“If you believe that the value of anything financial is the present value of the cash you can take out of [the business], then you need to know how much cash it is going to generate over its life…If we can’t predict the cash flows, then we can’t invest.” - Bill Ackman, Founder & CEO of Pershing Square Capital Management

It’s been a little over a year since we published our first deep dive on Universal Music Group. A lot has happened since that time.

Back then, we thought UMG looked cheap on a sum-of-the-parts basis. But we also acknowledged that the company would need to take a creative approach to investor communications, because it was navigating various music industry crosscurrents.

“For example, a greater share of revenue will likely be derived from servicing copyrights rather than owning them; gross margins may be pressured due to the shift to artist & label services and focus on merchandise and physical collectibles; and free cash flow may decline over the next few years as more capital is allocated to investments that enable UMG to execute its vision.”

In short, we believed that UMG was making smart strategic bets to meet its growth goals. But we were equally concerned that these bets would lead to a revenue mix shift that would likely negatively impact the company’s profit margins. To illustrate this dynamic, our team came up with one of our all-time favorite newsletter memes:

As it turned out, we were right to be skeptical about the impact of UMG’s strategy on its margins. As we’ll discuss shortly, UMG has successfully grown revenue but its free cash flow margins continue to decline. In fact, 2025 free cash flow (before investments) came in below 2022 levels!

A similar financial dynamic is playing out at the other publicly-traded Major. Warner Music Group is growing revenue but its free cash flow has remained relatively stagnant over the past five years.

This isn’t a great set-up in the eyes of certain public market investors, who often value mature companies – like UMG and WMG – by estimating their future cash flows (as opposed to revenue or EBITDA) and discounting those cash flows back to the present day. As a result, it’s unsurprising that both Majors’ share prices have struggled.

Since UMG’s IPO in September 2021, UMG and WMG’s share prices have declined ~21% and ~35%, respectively. Both stocks are trading near all-time lows. Meanwhile, the S&P 500 has increased 60% over the same period.

Given this underperformance, activist investors have taken notice. On April 7th, Bill Ackman’s Pershing Square proposed a merger transaction that would combine UMG with Pershing Square SPARC Holdings. As part of the proposal, Pershing Square outlined a number of reasons why it thinks UMG has underperformed and its plans to unlock “enormous shareholder value.”

In this newsletter, we’ll give our take on whether the publicly-traded Majors (i.e., UMG and WMG) are undervalued and explore some options to unlock that potential value. We’ll then wrap up by outlining how the Majors’ valuations might impact the broader music IP investment space.

But first, let’s set the foundation here and understand why some investors still believe the publicly-traded Majors’ valuations might offer compelling value today.

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GM readers 👋,

Happy March!

We have a few exciting announcements this month, so please bear with me for a minute.

First, a couple weeks ago news broke that Reservoir Media received competing takeover proposals. With Reservoir now in play, we wanted to highlight our deep dive on the company published in October, where we contemplated this potential outcome. (This is the diplomatic way of saying we called it!) If you want to get up to speed on the situation, it may be helpful.

Second, we have a new piece of content that we’re excited to roll out. We’re calling it our Music Market Update. [Creative title I know 😝.] The report offers a snapshot into some key trends shaping the music industry across public markets, private investments, M&A, and more.

In interviews and conversations, I often hear things like:

• “The number of music catalog funds has grown significantly…I don’t know how many there are but there are a lot more now.”

• “My founder friends say that it’s harder for music tech companies to raise funding right now. Is that what you’re seeing?”

• “Music stocks are a way to get investment exposure that has a low correlation to the broader market.”

We think that these slides are cool because they quantify – and in some cases contradict – narratives that folks who follow the industry know about. If you are fundraising, developing strategy, considering an investment case, and/or just curious about the space, these slides will hopefully be helpful in painting a more accurate picture of the market as it stands today.

While we were creating this report, an interesting observation occurred to us: nobody else appears to be making this type of information easily available in this format, as far as we’re aware. The slides candidly took a loooong time to put together, so maybe that’s why 😀? Regardless, the link to access our first Music Market Update slides is in the next section.

We’d love to hear your feedback on them. Do you like them? Did we miss anything? Should we make any changes for the future? Shoot us an email or leave a note in the comments!

Finally, we are launching a paid tier. Several subscribers have asked about monetization over the years and some have even indicated that their companies would pick up the subscription cost. We haven’t seriously considered it in the past, because we have wanted to keep Leveling Up as open as possible. At the same time, our deeper research newsletters (e.g, these slides) take meaningful investments of time and talent/people to achieve the quality bar that we strive for. These things all have a cost. In addition, we believe that they often provide a good amount of value (e.g., our call on Reservoir).

That said, we still intend to publish the majority of future articles for free. If you’re a free subscriber, not much will change as it relates to the normal newsletter cadence and availability. There is simply now an option to support the band making Leveling Up possible and to receive access to future Music Market Update slides as an added benefit. Along these lines, our current plan is to make this first Music Market Update report free, and then release future market update reports like this to paid newsletter subscribers only.

We’re looking forward to seeing how this change goes; our hope is that it allows us to provide more of the deep-dive content our readers consistently ask for. So if you want to receive future paid content or support Leveling Up, you can upgrade your subscription to paid here:

Subscribe now

I hope you enjoy this piece and thanks, as always, for your support!

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

Alderbrook’s Music Market Update - 4Q 2025

“You have to keep learning if you want to be a great investor. When the world changes, you must change.” - Charlie Munger

A big thank you to the contributors and editors of our 4Q 2025 Music Market Update. In particular, thanks to Matt Jacobs and Ric Funchess for all their hard work to make these insights possible. To access this report, click the DocSend link below:

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GM readers 👋,

Happy February!

First, thanks to everyone who entered our annual king cake raffle. Congrats to Nicholas N. on winning the prize!

One of my goals for writing this newsletter is to share the unique insights and earned perspectives of the people who learn by actually doing stuff in the industry.

I met Henry Hall a few years ago after we published our first SoundCloud newsletter. At the time, Henry was leading SoundCloud’s corporate development function. Since then, we’ve kept in touch about industry trends and where things might be headed. I’ve enjoyed our conversations as I always walk away learning something new.

So I asked Henry if he’d be open to sharing his career journey, his learnings in corporate development, and where he envisions SoundCloud going from his new seat leading the company’s Listener business.

Thankfully, he said yes. I hope you enjoy our conversation!

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

The Future of Streaming at SoundCloud

“I’m a SoundCloud artist for sure…That’s how I found everything, and that’s how I became who I am.” - Billie Eilish

To set the scene, could you tell us a little bit about your journey in the music industry so far?

Henry: Like many of us in music, it’s a journey that started early but has been far from a straight line. I was a radio DJ in college, and interned at Columbia Records and at SiriusXM. Terrific experiences, but the writing was on the wall for the industry’s old playbooks. These were the early days of SoundCloud, and just before Spotify launched in the US. Both were fledgling platforms, and compelling in quite different ways.

SoundCloud was the Wild West, something truly democratizing and revolutionary, really born of the early internet culture. Spotify was revolutionary as a business model, an evolution of iTunes’ “world’s biggest record store in your pocket.” So I applied for every role I could find … from community manager to front desk reception. Neither one bought my philosophy thesis on “Communal Expression in Music” as relevant experience, so I hit pause on music and worked at unrelated startups to get my bearings in business. I spent a couple years in B2B SaaS in NYC, then 5 years in Taiwan and the Philippines at a company called Migo, which distributed digital content to “data-poor” consumers’ smartphones without using the internet. I always tried to wedge music into the roadmap, but movies and TV came first – that’s how we raised our Series B from Temasek, so it was the right call. That was a wild ride… and a story for another newsletter.

I moved back to NYC intent on going into music tech, spending my MBA summer on Sony Music’s Digital Strategy & Investments team to get the lay of the industry. I finally landed the SoundCloud gig a decade after my first application, and have been with the company for 5 years – first in strategy, then building our corporate development function, and now as GM of our Listener business.

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GM readers 👋,

Happy New Year!

It’s Mardi Gras season in my hometown of New Orleans. So, it’s time for our annual tradition of offering a free Gambino’s Bakery King Cake to one subscriber. Fill out this form with your name and email if you’re interested. We’ll randomly draw a winner on February 17th. To participate, the only rules are that you have to be a subscriber to this newsletter and located in the United States (for shipping reasons).

Before diving into this month’s piece, I wanted to flag one important music IP lawsuit ruling in January. The US Court of Appeals for the Fifth Circuit upheld a lower court decision allowing songwriter Cyril Vetter to take back full global control of the song Double Shot (Of My Baby’s Love). I’ll be following this appeals process closely because its outcome will have important implications for music catalog underwriting assumptions going forward.

In this month’s newsletter, Drew Thurlow takes time away from his new book launch (preorder at this link!) to write a timely guest post. Drew shares his perspective on how music streaming services need to evolve their content upload policies. With ~100,000 new music tracks uploaded to platforms each day – a problem that has been exacerbated as AI tools make it easier to create music – Drew argues that the current system is no longer sustainable and looks at how non-music UGC platforms have approached similar issues. I hope you enjoy it!

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

🤝 Want to Work Together? Get in touch!

Alderbrook has helped dozens of companies create value for their stakeholders. We’d love to have the opportunity to work with you too!

Here’s what we offer music publishers, labels, tech companies, and investors:

• Growth and Strategy Consulting: Projects covering corporate & growth strategy, commercial & market analysis, stakeholder education materials, and more.

• M&A and Investment Advisory: Commercial due diligence for buyers, fundraising support for sellers, investment sourcing, valuation assessments, fractional VP of Finance / Strategy services, and more.

• Early-Stage Investing: Actively investing in start-ups, with a current focus on Pre-Seed and Seed rounds.

If you’re interested in learning more and exploring how we could work together, you can either reply directly to this email or click the link below to fill out our contact form. We’ll be back in touch soon!

Contact Us

The Realities of Music Streaming in the Age of Excess

“If it keeps on raining, the levee’s going to break. When the levee breaks, I’ll have no place to stay.” - Led Zeppelin on When The Levee Breaks

When I (Drew here 👋) was Director of Industry Relations for Pandora ten years ago, we had a large chunk of the entire history of Western recorded music in our catalog. Back then, that totaled about 30 million songs, give or take a few million.

It was a huge challenge managing that much music - not only storing and categorizing it, but also curating it. How could we serve the right song, to the right person, at the right time? There were so many options…tens of millions of them, in fact.

Fast forward to today and the problem has only gotten harder. While exact numbers are impossible to know and differ slightly by DSP, the bulk of Western musical output now sits around 253 million songs, according to entertainment data and analytics company Luminate. That’s over a 7x increase in eight years!

What is driving this exponential increase in uploads to music streaming platforms? Leading music DSPs such as Spotify and Apple Music have historically taken a more open approach to uploading content than other creator platforms, but can that continue indefinitely?

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GM readers 👋,

Happy Holidays!

Before diving into the final piece of 2025, I wanted to say thanks for all the feedback on our Reservoir Media newsletter. One reader – Sleepwell Capital – pointed out an important risk that I failed to note in the piece. Reservoir is effectively a controlled company (i.e., two groups currently hold ~66% of the company’s shares). As a result, there is a risk that one or both of these insiders could try to buy the company at an unreasonably low price to the detriment of minority shareholders. While I still own shares in the company and believe that this scenario is currently lower probability, this risk is an important one to consider.

This kind of feedback is one of the main reasons I write this newsletter – to learn in public. To that end, if you’re an experienced M&A lawyer who reads this newsletter, feel free to drop me a note. I’d love to discuss the above scenario to better understand legal precedents and the likelihood of it resulting in competing bids.

For this month’s newsletter, we’ll reflect on the past year. 2025 was a year marked by constant change. I started a family in 2024, so this year has felt like an ongoing attempt to refind my work sea legs while balancing new family responsibilities. It’s been a challenging change, but I think that I’m slowly adjusting.

All in all, the newsletter had a good year. We covered several interesting topics, added new team members, and saw our readership grow ~40% from the end of last year. We invested in two startups, after their founders read the newsletter and cold emailed us. And we met several prospective consulting clients due to relationships developed from the newsletter. The internet can create magic sometimes. 🪄🔮🚀

If you’re new to Leveling Up, I like to keep the year-end newsletter light relative to our usual ones.

1. I’ll cover the three most read articles this year. I’m basing the results off of Substack’s “views” metric on each post. The most read article also happened to be the most “liked” and “shared” article from the past year.

2. I’ll highlight the songs that stuck with me in 2025. These are some of the tracks I’ve listened to over and over again while writing, parenting, learning, reflecting, etc.

3. I’ll share some of the most interesting content our team has consumed over the past month or two.

Thanks for taking the time to read our thoughts. I’m very grateful for it. We have some exciting new content planned for 2026, so hopefully you’ll enjoy what’s in store.

If you have any feedback or suggestions for topics that you’d like me to cover next year, drop me an email or comment in this post. I’d love to hear from you.

Finally, a huge thank you to newsletter editors Adam and Matt for providing invaluable feedback on each article. The newsletter wouldn’t exist without their help.

Now, let’s get after it!

Jimmy

2025’s Most Read Articles

Here are the top three most read Leveling Up articles in 2025. I’ll quickly share how I feel about them and why they might be worth another read. Or if you’re new to the newsletter or missed any of them, why they might be worth a first read.

#1) UMG: The Show Me Story (Link to read it)

This was the top post across all three metrics: views, likes, and shares.

I wrote this when the Majors were missing Wall Street’s streaming revenue growth estimates. As a result, investors and industry thought leaders were questioning the future of the Major labels. I wanted to explore this debate by looking at Universal Music Group’s financial performance and strategy. It also includes some ideas on how UMG can argue that its stock price is undervalued (not investment advice, do your own research!). I think that people wanted to better understand why UMG was underperforming analyst expectations and the potential implications of the company’s new strategic bets on its future financial results.

#2) How Are VCs Thinking About Music In 2025? (Link to read it)

I wrote this because I think that entrepreneurs can often find the fundraising process to be a confusing one. This is particularly true in music where there are fewer sector focused funds. As a result, I wanted to interview investors excited about the space to better understand why they’re excited, what they’re excited about, and more. This “VC Edition” was intended as a quick primer for music founders raising capital or investors exploring music.

#3) Reservoir Media: A Hidden Gem? (Link to read it)

This was the only stock pick that I’ve made via the newsletter (again – not investment advice, do your own research!). I think people liked reading a data-backed opinion piece, particularly one that offers potential solutions for how a company can increase its value rather than just pointing out its problems. It also covers strategy and investing – areas that I’m passionate about and have experience in.

My 2025 Year-End Playlist

Here are some of the songs that stayed with me throughout the year. You can click this link to listen to them. I hope you enjoy them!

📚 Music Business, Tech, and Investing Content Worth Consuming

Here is some of the best content that our team has consumed over the past month or so –

Dan Sundheim of D1 Capital on the art of public market investing. (Cheeky Pint: link): “I mean, I like to think of myself as being a little more academic than vibe trading. But look, I think that you’re always going to make the most money for multiple expansion. Just like it’s hard to have that differentiated a view on a company’s growth rate. You can have a differentiated view on the longevity of the growth rate or the ultimate margin profile of the company based upon some work you’ve done. But the multiple over the long term is a function of the perception of stability of the cash flows over the long term. And sometimes people are skeptical about the business model and then, over time, it gets proven out that the business model doesn’t deserve to have that skepticism. And then the multiple expands. You do make most of your money on multiple expansion.”

The Company as a Machine for Doing Stuff (Not Boring: link): “At their best, companies are machines for doing the stuff a founder really wants to do, but bigger, with other people who want to do it too. The longer I spend investing in and writing about startups, the more I think my job should just be to find the small handful of people who view their companies like Forrest does, and then put as much money and effort as I can behind them to help them build their machines.”

Streaming Flattened Music. Gaming Makes It 3D. (Emily White: link): “The lesson from gaming isn’t “add points and badges.” It’s that participation and world-building create meaning. Music does not need more “content,” it needs meaningful places – shared, persistent worlds for fandom, identity, and creativity.”

Global Value of Music Copyright Hits New All-Time High. (Pivotal Economics: link): “The global value of music copyright reached $47.2bn in 2024. That’s up just $2.3bn (5.2%) on the prior year; growth is slowing largely because this is the first year where the pandemic effects have vanished. Stacking the puzzle pieces shows a mixed bag of growth stats. Labels grew year-on-year by 5% to $29bn, songwriter CMOs grew by 8% to $13.6bn and publisher direct revenues (i.e. with no CMO involved) fell slightly, down 1% to $4.6bn.”

Netflix and the Hollywood End Game. (Stratchery: link): “That YouTube is Netflix’s biggest threat speaks to a broader point: because of the Internet there is no scarcity in terms of access to customers; it’s not as if there are a limited number of Internet packets, as there once were a limited number of TV channels. Everything is available to everyone, which means the only scarce resource is people’s time and attention.”

Why AI won’t kill Duolingo and other passion-driven apps. (London Jackson: link): “Duolingo’s stock is getting crushed right now. Investors think AI translation is going to kill language learning apps. I think they have it backwards…If you just need to read a menu in Barcelona, you’ll use ChatGPT; but I really don’t believe this is the core reason people use Duolingo. They use it because they actually want to learn Spanish. The challenge creates the reward…Music is maybe the clearest example. Every day hundreds of thousands of people upload their songs to Spotify knowing full well they’ll get maybe 50 streams. AI can generate professional-sounding music in seconds now. Doesn’t matter. People want to make music. Go look at Splice or Bandcamp and you’ll see millions of people paying to do something AI could do faster and cheaper.”

🤝 Want to Work Together? Get in touch!

Alderbrook has helped dozens of companies create value for their stakeholders. We’d love to have the opportunity to work with you too!

Here’s what we offer music publishers, labels, tech companies, and investors:

• Consulting: Projects covering corporate & growth strategy, commercial & market analysis, stakeholder education materials, and more.

• M&A and Investment Advisory: Commercial due diligence for buyers, fundraising support for sellers, valuation assessments, fractional VP of Finance / Strategy services, and more.

• Early-Stage Investing: Actively investing in start-ups, with a current focus on Pre-Seed and Seed rounds.

If you’re interested in learning more and exploring how we could work together, you can either reply directly to this email or click the link below to fill out our contact form. We’ll be back in touch soon!

Work With Us!

📭 Share Leveling Up with a friend!

If you enjoyed Leveling Up this year, the greatest gift you can give back to us is sharing it with a friend or colleague. (link to share)

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GM readers 👋,

Happy October! And Happy Halloween to those who celebrate! 🎃

It was a busy 3Q here. My 1.5 year old daughter learned to say “gargoyle” in time for Halloween (ok, she really says “gah-go” but it’s cute). Alderbrook closed three early-stage investments and formed one exciting partnership. I’ll likely have more details to share on all this at a later date. But if you’re interested in learning more about our consulting services and investment focus, you can reach out to us here [link] to explore how we can work together.

Been a minute since I wrote the monthly newsletter. Happy to be back with a new collaborator. A big thank you to Vanderbilt MBA Ric Funchess, who helped with this piece.

This month we’ll analyze a company that I’ve wanted to write about for some time. Reservoir Media (“Reservoir” or “RSVR”) is well known in music industry circles. It has been acquiring music catalogs since 2007 – long before the most recent catalog buying boom on Wall Street. Fast forward to today, Reservoir is publicly-listed on the Nasdaq stock exchange and has grown to become a leading independent music company. Yet, Reservoir’s current share price is trading meaningfully below where it went public in 2021. This has likely – at least in part – contributed to activist investor interest.

To better understand what’s going on, let’s examine RSVR’s history, strategy, and its current state. Given that context, we’ll consider a few options to unlock potential value for its investors.

Grab a cup of coffee and let’s go deep on a company that appears to be flying under many investors’ radars. ☕

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. We are not licensed investment professionals. I (Jimmy here 👋) purchased RSVR stock after researching this piece and could absolutely be making the wrong bet. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

🤝 Want to Work Together? Get in touch!

Alderbrook has helped dozens of companies create value for their stakeholders. We’d love to have the opportunity to work with you too!

Here’s what we offer music publishers, labels, tech companies, and investors:

• Consulting: Projects covering corporate & growth strategy, commercial & market analysis, stakeholder education materials, and more.

• M&A and Investment Advisory: Commercial due diligence for buyers, fundraising support for sellers, valuation assessments, fractional VP of Finance / Strategy services, and more.

• Early-Stage Investing: Actively investing in start-ups, with a current focus on Pre-Seed and Seed rounds.

If you’re interested in learning more and exploring how we could work together, you can either reply directly to this email or click the link below to fill out our contact form. We’ll be back in touch soon!

Work With Us!

Reservoir Media: A Hidden Gem?

“This goes out to the underdog / Keep on keeping at what you love / You’ll find that someday soon enough / You will rise up, rise up, yeah” - Alicia Keys on Underdog

Sometimes companies can present investors with unique insights and opportunities. I believe that’s currently the case with Reservoir Media.

The company’s stock price is ~20% below where it opened its first day of trading as a public company in July 2021. Meanwhile, its operating metrics have consistently increased over the past four years. This has resulted in RSVR’s valuation metrics reaching all-time lows.

Against this backdrop, we are now at an interesting point in time for RSVR. An activist investor, Irenic Capital Management (“Irenic”), has built an ~8% stake in the company. Last year, Irenic reportedly asked RSVR’s Board of Directors for a “strategic review to maximize shareholder value.” However, I haven’t been able to find details of Irenic’s proposals for the company or any updates on the status of their campaign. Regardless, the company’s share price is roughly unchanged since Irenic issued a statement making its intentions public.

What might be driving the decline in Reservoir’s valuation metrics over time? Is the company being undervalued? Finally, what plans might Irenic Capital have in mind to unlock any potential value?

Armed with a longstanding interest in the company and many unanswered questions, I set off writing this month’s newsletter. In this deep dive, we’ll look at Reservoir Media’s beginnings, its strategy and vision, and evaluate how the company’s been performing. Then we’ll turn our attention to its current valuation in light of its recent performance. And we’ll conclude by considering ways the company might increase its valuation.

To start, let’s take a brief look at Reservoir’s history.

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GM readers 👋,

Happy September!

One quick announcement: Alderbrook will be attending Mondo in NYC the week of October 13th. We’d love to chat about our early-stage investing focus, consulting services, and more. If you’d like to meet up there, fill out this short form. We’ll reach out ASAP to get something scheduled.

For this month’s newsletter, we’re joined by a new guest writer!

Drew Thurlow is a music industry strategist and Adjunct Professor at Berklee College of Music. He is also an advisor to early-stage music tech investor Mindset Ventures. Drew previously held executive roles at Sony Music, Pandora, and Warner Music Group.

Much of Drew’s current work focuses on the intersection of music and technology. In this month’s piece, he’ll leverage that experience to outline some of the investment themes and companies that he is most excited about. Given slowing US recorded music industry growth, several rounds of layoffs, and investors’ recent struggles to generate venture-scale returns in music tech, Drew’s optimistic perspective is refreshing!

I hope you enjoy the piece and consider giving Drew a follow on Linkedin!

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. We are not licensed investment professionals. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research!

Now, let’s get after it!

Jimmy

Pockets of Opportunity in Music Tech

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” - Winston Churchill

For the last 15 years, music tech has been a challenging sector for investors. Unlike other parts of media and entertainment, the returns haven’t come easy. Leveling Up has written about how there have been very few venture-scale exits in the music industry over the past 15 years. According to Alderbrook’s analysis, there have only been 9 companies (across both music IP and music tech) that have exited for $1 billion or more since 2010. My own research and firsthand experience confirms this trend.

There are good reasons why: the (insanely) long time it takes to license master and publishing rights, the (perceived) limited TAM, and the (constant) uncertainty that comes with a business always in transition. And while streaming created a rising tide over the last generation, it didn’t lift all boats. Many startups rode the wave of excitement only to wash up on the shores of high customer acquisition costs and razor-thin margins.

Against this backdrop, the music tech ecosystem is undergoing another transition: one driven by AI, the accompanying legal mess, and changing models of fan engagement. But even as buzzy generative AI tools like Suno dominate headlines and creators adopt AI in record numbers - 91%, according to Epidemic Sound’s 2024 report - we’re not yet seeing widespread operational disruption. The promise of AI-driven efficiency remains largely that: a promise. Meanwhile, layoffs continue across major music and tech companies as they brace for slower growth.

Investment capital has followed suit. According to Traxcn and Music Technology UK, funding into music tech companies has fallen meaningfully over the past five years. And while music tech funding appears to have started the first half of 2025 off strong with ~$700M raised, it is still well below the $1.7B reportedly invested in 2015, largely on the back of streaming optimism. The birth of AI hasn’t had quite the same effect - at least not yet.

For founders, two narratives dominate the pitch decks crossing investor desks: AI and superfans. One primarily promises greater efficiency; the other, an untapped resource.

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GM readers 👋,

Happy August! 

This month we’re trying a new format: a Leveling Up guest post! The goal of guest posts is to bring you more insights than I’m capable of delivering solo from people who have different perspectives and areas of expertise than I do.

Today’s guest writer, Nate Fisher, is a perfect fit. Nate is the Director of A&R Research and Label Acquisition at Too Lost. He has previously worked at Warner Music Group, beatBread, Royal.io, and other respected music firms.     

Given Nate’s background of finding and structuring innovative deals with artists at various career stages, he is exactly the person who should be exploring this newsletter’s topic. 

This month’s piece explores a novel artist funding structure (which Nate has dubbed “Artist Inc.”). To do so, we’ll consider the evolution of how artists build their careers, the typical financing options available to artists, and how & why one company in particular, Firebird Music, is introducing this new funding structure into the mix.

I hope you enjoy it and consider giving Nate a follow on Linkedin! 

And with that, on to the disclaimers…

Note: We write this newsletter to learn in public. We are not licensed investment professionals. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research! 

Now, let’s get after it!

Jimmy

Exploring the Artist Inc. Funding Model

“I’m not a businessman. I’m a business, man!” - Jay-Z on Diamonds From Sierra Leone (Remix) 

I’ve long admired artists who have branched out and successfully built businesses in new verticals. My favorite example is Jay-Z, who has shown an incredible entrepreneurial spirit and drive while building out a formidable empire. His business portfolio includes a variety of ventures across music (e.g., Roc Nation, TIDAL), sports (e.g., Roc Nation Sports, NFL partnerships), consumer products (e.g., Puma, D’Usse), investing (e.g., Marcy Venture Partners), and more. According to Forbes, these interests have amassed Jay-Z a $2.5B net worth, with the vast majority of his estimated wealth attributable to non-music catalog assets. 

Over time, I’ve seen a growing number of artists from different genres leveraging their brands – initially built within the music industry – to endeavours outside the music industry. Some noteworthy examples include:

• Rihanna: 50% interest in Fenty Beauty made her a billionaire and represents the majority of her estimated net worth.

• Jimmy Buffett: 28% interest in the Margaritaville brand contributed to his estimated net worth of $1B+.

• Selena Gomez: stake in makeup company Rare Beauty Brands made her a billionaire and represents the majority of her estimated net worth.

The list goes on. From Bad Bunny to Snoop Dogg to Chris Stapleton, many artists are leveraging their music-native fan communities to launch and scale non-music products, services, content, and IP. 

Although the way artists are building their careers has changed, I believe that the best practices for financing their growth – particularly for smaller and emerging artists – is actively being discovered. Artists have more diversified revenues and options for business partners than ever. And I’m increasingly convinced that we’ll see novel funding structures emerge that enable artists to fund their various entrepreneurial interests while maintaining a greater degree of IP ownership and autonomy.  

Along these lines, one recent deal between UK rock artist YUNGBLUD – who has ~11 million monthly Spotify listeners and ~6 million Instagram followers – and institutionally-backed Firebird Music (“Firebird”) caught my eye. In short, the deal sees YUNGBLUD and Firebird owning equal 50/50 shares in a new company called YB Inc. that houses YUNGBLUD’s earnings from his core music assets (e.g., recorded music royalties and touring income) as well as his music festival Bludfest, a fashion/lifestyle brand, and comics.  

Today, we’ll walk through the emergence of this new funding model – one I’ll be calling “Artist Inc.” To do so, we’ll first need to understand how the music industry has evolved, the funding options available to artists today, and how this Artist Inc. funding structure is different. Then we’ll talk about why I’m so optimistic on the Artist Inc. model. Finally, I’ll wrap-up with where I think the economic model between artists and their business partners is headed in the next few years. 

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GM readers 👋,

Happy June! 

Over the past three years, Leveling Up has served partly as a way for me to learn in public and get to the right answer, partly as a serendipity / marketing tool, and partly as a journal to capture the wins and losses of building a small business. As it relates to that last point, we saw some big milestones in June –

• We welcomed three part-time writers to the Leveling Up team. I’m excited to see how much better this newsletter becomes as super-smart, curious folks with diverse backgrounds share their unique perspectives on the industry.   

• We spun up our first SPV via an investment in the pre-seed round of Qanooni alongside some great venture firms! This one was extra special, because many of the investors are Leveling Up readers. If you’re a lawyer who wants to get repetitive tasks done quicker, check them out!

• One of Alderbrook’s first seed investments achieved unicorn status! An exciting milestone that wasn’t on my 2025 bingo card. 

So a big thank you. None of these milestones or this month’s newsletter would be possible without you reading, commenting, sharing, and reaching out. I’m grateful that you are willing to take time out of your busy schedules to read what I write. 

Ok, back to the regularly scheduled programming… 

This month’s newsletter is Leveling Up’s “VC Edition”. We asked five experienced investors how they’re thinking about the current climate in music investing, what they’re most excited about, how they’re advising founders, and more. Thank you to each of them for taking the time to provide their perspectives. Their responses should be insightful for music tech founders, executives, and other investors in the space.   

I owe an extra special thank you and shout out to long-time Leveling Up supporter Andres Lauer at Fairway Partners for helping us connect with many of the excellent contributors to this piece. 

And with that, on to the disclaimers…

Note: I write this newsletter to learn in public. I’m not a licensed investment professional. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research! 

Now, let’s get after it!

Jimmy

How Are VCs Thinking About Music In 2025?

“I’ve always been more of an analyst than an optimist.” - Bill Gurley, venture investor and General Partner at Benchmark

Investor Intros -

Andres Lauer / Partner / Fairway Partners

Andres Lauer is a partner at Fairway Partners and a specialist in corporate strategy for media and entertainment companies, with +10 years of experience. 

Andrew Kahn / Managing Partner / Yamaha Music Innovation Fund

Andrew Kahn is the Managing Partner of Yamaha Music Innovation Fund. Previously, Andrew was the head of Crush Ventures, a leading early-stage fund focused on the intersection of music, technology, and cultural innovation.

Daniel Ibri / Managing Partner / Mindset Ventures

Daniel Ibri is the Managing Partner at Mindset Ventures. With over 10 years of experience as a venture capitalist, international management consultant, angel investor, M&A advisor and mentor for startups, Daniel closed over 100 deals across six different countries and founded three VC funds. 

David Tauber / Investor / Creator Partners

David Tauber is an Investor at Creator Partners. David previously worked on the investment and strategy teams at Influence Media Partners and Kobalt Music. 

Ishan Sachdev / General Partner / Deciens Capital

Ishan Sachdev is General Partner at Deciens Capital. Previously, Ishan was a growth equity investor and an early member of the portfolio operations team at PSG Equity.

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GM readers 👋,

Happy May! 

*Due to a Substack technical issue causing the original post to get cut off, we’re re-publishing this piece.*

This month’s newsletter is a fun one. We have two exciting collaborations! 

First, I’m teaming up with talented media consultant and analyst Maxime Eyraud to write this piece. If you aren’t already familiar with Maxime’s work, I recommend checking out some of his prior media industry year-end reviews and subscribing to his newsletter Recreations. Second, we worked with the team at Luminate, the entertainment industry’s most trusted data source, to access streaming data that made this piece more insightful. You can request a demo for Luminate’s music product offering here.  

This month we’re going to explore a company that I’ve wanted to write about for some time. Pophouse is taking a unique approach to the music catalog investment game. After starting its life as a real estate and branding business, the Pophouse team and its backers made a huge financial bet (and appear to have been proven right) on their ground-breaking ABBA Voyage show. Just recently, the company made another splash, announcing it had closed a $1.3 billion music rights investment fund.

I’ve wanted to better understand why and how this team did it. In the process, I’ve learned a lot about where the music catalog space may be heading.

And with that, on to the disclaimers…

Note: I write this newsletter to learn in public. I’m not a licensed investment professional. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research! 

Also, one quick announcement. We are still looking to add a couple writers to our newsletter team. If you are interested in business strategy, are familiar with aspects of the music industry, and have the ability to learn and share insights from a variety of companies and trends, please send an email to contact@alderbrookcompanies.com and we’ll be in touch!

Now, let’s get after it!

Jimmy

Pophouse: The Music Branding Pioneers

“We don’t buy catalogs to put them on a shelf and let them grow slowly … is there a brand that is not utilized or being exposed for a generation to discover.” - Pophouse CEO Per Sundin

In 1800s America, hundreds of thousands of people traveled West into unexplored territory looking for a new life. These pioneers embarked on an uncertain future and embraced risk to maximize their potential opportunities. 

These days a few entrepreneurs from Sweden are carving out a new trail in the catalog investment space. Unlike many music intellectual property (“IP”) investors that seek to insulate themselves from risks, Pophouse Entertainment (“Pophouse”) is embracing innovative ideas to bring older artists’ music to new generations of fans. Along these lines, Pophouse is well known, in music circles at least, for its groundbreaking ABBA Voyage show, which has generated hundreds of millions of dollars in revenue over the past three years. More recently, in March 2025, Pophouse announced that it had closed a $1.3 billion fund to purchase music IP. But its plans appear somewhat different from the typical music rights fund.

Today, Maxime and I are going to uncover most of what we could find on the company’s backstory, strategy, growth, risks, and future. 

• Meet Pophouse

• What Is Pophouse’s Vision?

• How is Pophouse Currently Faring?

• Looking Ahead for Pophouse

It’s our pleasure to go deep with you on Pophouse!

Meet Pophouse

Pophouse is a global entertainment and music investment firm that acquires select music properties and develops them across multiple mediums and formats, with a focus on location-based and interactive entertainment.

Based in Sweden with offices in London, the company was co-founded in 2014 by Björn Ulvaeus, one of the four members of legendary Swedish pop music band ABBA, and Conni Jonsson, the founder of private equity giant EQT. Today, it’s led by CEO Per Sundin, a music industry veteran who earned his stripes at Sony Music Nordic and Universal Music, where he was instrumental to Spotify’s first deal with a label, and chaired by Lennart Blecher, EQT’s Head of Real Assets.

Pophouse’s activities consist of two main segments. On the one hand are productions, a growing range of location-based and often technology-enhanced entertainment experiences. These include:

• ABBA The Museum, an interactive museum in Stockholm celebrating the legacy of ABBA

• Mamma Mia! The Party, an immersive theatrical dining experience with productions currently ongoing in London, Stockholm, and Rotterdam

• ABBA Voyage, a virtual concert residency in the purpose-built ABBA Arena, and developed in collaboration with all four ABBA members

• Avicii Experience, an interactive museum in Stockholm dedicated to the life and work of the late Tim “Avicii” Bergling

• Pippi at the Circus, a now discontinued original circus musical based on Astrid Lindgren’s kids IP that performed in Stockholm, and

• An upcoming KISS avatar show, planned to launch in Las Vegas in 2027

As of March 2022, Pophouse is also a music investor, focusing on three categories of rights: publishing, master recording, and importantly, artists’ Name, Image, & Likeness, or “NIL”. Today, the company’s portfolio of rights includes (ordered by the time of their acquisition):

• The master recordings and publishing rights for Swedish House Mafia’s back catalog

• A 75% stake in Avicii’s master recordings and publishing

• A majority share of Cyndi Lauper’s master recordings and publishing, and

• The music catalog, brand, and NIL, “including the world- famous face paint designs”, of KISS

As we’ll explain throughout this piece, the production and investing components of Pophouse’s activities are not just complementary; they are indissociable. The team’s entrepreneurial savvy, as well as their branding skill and success, has convinced artists or their estates to entrust the company with their lives’ work. As Per Sundin put it in an interview, “We have a different approach to pursuing music rights deals than traditional investors. [...] There’s a parallel in private equity, when acquiring companies from founders — understanding the founder’s perspective significantly facilitates the transition.” Tellingly, while only the KISS acquisition included brand and NIL rights, the announcements for the three other deals all specified that Pophouse would be collaborating with the artists or estates on creative initiatives through dedicated joint ventures.

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GM readers 👋,

Happy April!

Before diving into this month’s newsletter, two quick announcements. 

First, Alderbrook is heading to Music Biz 2025! We will be attending the conference Monday through Thursday (May 12 - 15) and would love to meet you. If you want to discuss ways to collaborate with Alderbrook – from investing to research to consulting to partnerships – please let us know by filling out this form.

Second, Leveling Up is looking for a few part-time writers, who are interested in business strategy, are familiar with aspects of the music industry, and have the ability to learn and share insights from a variety of companies and trends. If that’s you, please send an email to contact@alderbrookcompanies.com and we’ll be in touch!

It’s been about a year since Jesse Feister and I wrote a piece about one of the music industry’s favorite buzzwords: “superfans.” At the time, it was clear that recorded music growth was decelerating and the Majors would try to invent new pockets of growth. 

A year on, industry growth has indeed decelerated, but the superfan opportunity still feels like a hand-wavy one. 

You already know respected firms expect 20% of paid streaming subscribers to be superfans. You’ve flipped through UMG’s Capital Markets Day deck outlining their research about why superfans should be a significant opportunity. And you’ve read the Bloomberg article about what the Spotify “Music Pro” (i.e. superfan) tier might look like.

Still, you might be hungry for a bit more. What superfan features will Western DSPs release and at what price? What will the adoption curve of superfan tiers look like? How big of a near-term impact will new superfan tiers really have on industry revenue?

And with that, on to the disclaimers…

Note: I write this newsletter to learn in public. I’m not a licensed investment professional. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research! 

Now, let’s get after it!

Jimmy

Looking East For Music Superfan Clues

“[World of Warcraft] was the best subscription business of all-time…We never raised the prices. My view was to come up with value added services. Come up with new things to sell. But just leave the price…It’s a prickly audience. You don’t want to do too much to agitate them.” - Former Activision CEO Bobby Kotick describing why Blizzard never raised World of Warcraft’s $15 per month subscription price

The once booming recorded music market has begun to slow down. Recent analysis by IFPI and MIDiA shows that streaming revenue growth – the driver of industry revenue over the past decade – has decelerated.

As Leveling Up has written about, the industry’s leading players are searching for the next vector to reignite growth. One of the key areas being explored is segmenting music fans in hopes of getting the most engaged, most willing-to-spend users – so called “superfans” – to open up their wallets for more stuff (e.g., special content, access, perks, etc.).  

When it comes to the music superfan trend, the big burning questions that I think a lot of investors, and executives have are -

• What value (i.e., products and features) will be offered to “superfans”? 

• What will it cost fans to access this value?

• How many fans will adopt these premium offerings?  

• How quickly will fans adopt these offerings?

• Given all of the above, what impact will superfan offerings have on industry revenue? 

To kill any suspense, I have no insider knowledge or experience building and launching these types of products. Still, I think that there are likely clues to these questions by looking closer at non-Western companies that have been shipping superfan products for years. 

In 2022, China-based Tencent Music Entertainment rolled out their “Super VIP” streaming tier. Since then, TME’s “online music” annual revenue, average revenue per paying subscriber, and stock price have increased ~75%, ~25%, and ~85%, respectively.

These are promising high-level signals of product and creative teams finding new ways to unlock user spend. In this month’s issue, let’s take a closer look at TME’s superfan tier experience and wrap up with some big picture thoughts on the potential lessons for Western companies readying new superfan products.

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GM readers 👋,

Happy 2025! 

There’s recently been a lot of debate among investors, music industry professionals, and entrepreneurs about the future of the Major record labels. Will the Majors be able to grow streaming revenue inline with Wall Street expectations? Has the balance of power shifted away from the Majors to streaming platforms? Do artists even need Major labels to achieve superstardom anymore?

Universal Music Group (“UMG”) – the largest Major by revenue – is a company at the heart of this debate. While UMG has its critics, the company also has some savvy and well-funded backers. And its biggest investors feel that UMG remains “an attractive long-term investment.” 

In my opinion, this ongoing conversation has lacked some depth and failed to acknowledge the dynamic nature of the playing field. I want to take a swing at clearing things up in this piece. 

So let’s explore the following -

• Why do investors believe that UMG is an attractive investment?

• What’s holding back the bullish thesis?

• What is UMG’s strategy to address these concerns? 

• Given the above, how might UMG convince the market of its investment case?

Keep in mind – I write this newsletter to learn in public, and this topic is complex. I’d love to hear your thoughts, so please shoot me a note if you have any feedback, alternative takes, or think I missed something.

And with that, on to the disclaimers…

Note: I write this newsletter to learn in public. I’m not a licensed investment professional. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. As far as I’m aware, I don’t own any UMG stock right now. Do your own research! 

Two final items before diving into the post -

1. I’m sure most of you saw the news of the New Year’s Day tragedy in my hometown of New Orleans a few weeks ago. If you’d like to support the families of the victims, consider donating here. 

2. My heart goes out to everyone impacted by the fires in Los Angeles. I wanted to share links to a couple of incredible organizations – Baby2Baby and Los Angeles Fire Department Foundation – working tirelessly to provide relief and support those impacted. If you’d like to make a donation to these organizations, click here and/or here. 

Now, let’s get after it!

Jimmy

UMG: The Show Me Story   

“I think music is forever. Music is a many thousand year old part of the human experience. And I think it will be thousands of years from now…And [Universal Music Group] basically owns a third of the global recorded music [business]. And that’s the most dominant market share in the business.” - Bill Ackman, founder and CEO of Pershing Square Capital Management

What feels like many moons ago, I was an analyst at a firm that invested in public companies. Certain companies became unaffectionately known as “show me” stories. This typically meant that a company’s financial results had underperformed expectations and the stock price had declined. For the company’s stock price to recover, investors needed to see better results before they felt compelled to buy shares, as opposed to simply taking management’s guidance and their confidence in the business’ prospects at face value. 

If you’ve been following music industry news over the past few quarters, Universal Music Group (“UMG”) seems to fit the mold of a show me story. In July 2024, UMG reported its 1H 2024 earnings, which caused analysts and investors to become increasingly concerned about the company’s future growth prospects, particularly in comparison to streaming services like Spotify. As Leveling Up has written about, UMG’s recent revenue growth has been driven by the emergence of streaming. However, the company’s growth has been decelerating over the past couple years, with its subscription streaming revenue growth decoupling from that of Spotify.  

In response to UMG’s 1H 2024 results, several banks (e.g., Citi, Wells Fargo, Guggenheim, Barclays) downgraded their ratings on the company’s stock, and the company’s share price fell ~30%, erasing over €10 billion off its market capitalization.

Then in September 2024, UMG hosted a Capital Markets Day to lay out its strategy and financial outlook. At the four-hour-long event, the company’s top execs outlined UMG’s track record for identifying and developing superstars, its runway for future growth, its future capital allocation priorities, its deep bench of talented executives, and much more. Importantly, UMG guided to high single digit revenue growth and mid twenties percent EBITDA margin targets through 2028, which was in-line with its guidance before going public in 2021. 

UMG’s CEO Sir Lucian Grainge summed up his pride and confidence in the company’s history, trajectory, and positioning: “Simply put, UMG is not only the most successful company in the entire history of the music business, but also the company that is the most essential in driving the industry forward.” 

Wall Street analysts’ reviews of the presentation were generally positive. JP Morgan’s analysts said it was “one of the best capital markets days we have attended in the past 30 years, and it further increased our already high conviction in the UMG story.” High praise! 

Nevertheless, UMG’s share price hasn’t fully recovered. It remains ~15% lower than the closing price the day before the significant 1H 2024 earnings sell-off. And unless an investor was able to participate in the stock’s 36% IPO pop, long-time shareholders likely haven’t seen their shares appreciate much, with the stock still ~5% lower than the closing price on UMG’s first day of trading publicly.  

As you’ll see, this piece dives into the streaming market’s evolution and how UMG is positioning for it. Based on my research, I believe that UMG has a thoughtful and adaptable leadership team. And the implications of their current strategy will likely impact what a Major record label looks like in the future – both from a business model and a financial profile standpoint. And these are things that I don’t think are fully appreciated by the market quite yet.

But first, let’s set the foundation here and understand the bull case for investing in UMG.

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GM readers 👋,

Happy Holidays! 

2024 was a transformative year on a personal level. Hannah and I moved to a new city, bought a house 🏡, and welcomed our first child 👶! 

As a result, 2024 wasn’t the most prolific writing year for Leveling Up, with only four new posts. Still, our readership grew 40%+ year-over-year! 🚀

And I've been blown away by the kindness of this readership. On more than one occasion in the past couple months, I’ve been in conversation with apparent strangers at conferences and events. When they find out I write Leveling Up, they tell me how much they enjoy it. Thank YOU for the support. 🙏 I’m extremely grateful for it. 

With my sea legs a bit more under me on the home front, I’m focused on writing more often in 2025. And I hope you’ll continue to enjoy the ride! 

If you’re newer to Leveling Up, I like to keep the year-end newsletter light relative to our usual ones. You can think of this edition as our version of the Dundies (if you’re not already a fan of The Office, click this link for a glimpse at what I’m referring to).

This year-end review will mix a few topics.

1. I’ll cover the most read articles of the past two years (since we wrote less in 2024). I’m basing the results off of Substack’s “views” metric on each post. 

2. I’ll highlight the songs that stuck with me this year. These are some of the tracks I’ve listened to over and over again while writing, traveling, learning, reflecting, etc. 

3. I’ll share some of the most interesting content I’ve consumed over the past month or two.

One final ask before diving into this month’s piece. In an effort to improve Leveling Up, I’d be grateful if you could fill out this survey (linked here) and let me know your feedback. It will help me get a better sense of what you’re most interested in learning about. 

Finally, a huge thank you to my wife Hannah and my business partner Adam for editing and providing invaluable feedback on each article. Leveling Up wouldn’t exist without their help.

Now, let’s get after it!

Jimmy

2024’s (and 2023’s) Most Read Articles

Here are some of Leveling Up’s most read articles over the past two years. If you’re new to the newsletter, I hope you’ll find them interesting.

1. The Music Industry’s Superfan Ambitions (Link)

2. SoundCloud: Understanding Music Streaming’s Dark Horse (Link)

3. Has Hipgnosis Hit The Bottom?  (Link)

4. The Contrarian: Understanding MUSIC’s $200M Raise (Link)

5. beatBread’s Moneyball Approach to Funding Musicians (Link)

6. Music and the AI Opportunity (Link)

7. Universal’s Push for Higher Streaming Payouts (Link)

8. A New Tune: Looking at the Future of BMI (Link)

9. The Rise of Concert Films (Link)

10. Exploring Africa’s Music Market Opportunity (Link)

My 2024 Year-End Playlist

Here are some of the songs that stayed with me throughout the year. You can click this link to listen. I hope you enjoy it! [And yes, I had to include one that we’ve listened to over and over again with our daughter. See if you can spot it 😊.]

📚 Music Business, Tech, and Investing Content Worth Consuming 

Here is some of the best content that I consumed over the past month or so – 

• Global Value of Music Copyright soars to $45.5bn (Pivotal Economics: link)

• [untitled]: building the operating system for music (Not Boring: link)

• State of the independent music economy: fragmentation AND consolidation (MIDIA: link)

• Universal Music: I Was Brutally Wrong (Seeking Alpha: link)

• ABBA Voyage Generated $129M in 2023 (MBW: link)

• Hold or twist? The music industry’s innovation dilemma (MIDIA: link)

• Why Subscription Growth is the Barometer for Major Label Success in 2024 (Billboard: link)

• Will UMG’s Lawsuit Against Believe User in a New Era of Regulation for DIY Distribution (Billboard: link)

• Global economic study shows human creators’ future at risk from generative AI (CISAC: link)

• HYBE wants to change fan culture in US, Latin Music, and 4 Other Things We Learned on the Company’s Latest Earnings Call  (MBW: link)

• What HYBE and UMG’s Q3 earnings tell us about superfans (MIDIA: link)

🤝 Want to Work Together? Get in touch!

Since 2017, Alderbrook has consulted with numerous companies across various industries and stages. This includes working with labels, publishers, music technology companies and investors on a range of projects. 

Our Investment Consulting Services -

Over the past few years, we’ve had the privilege of supporting several great investment firms. Our team is available to provide market and investment research, due diligence, and advisory support. Whether you invest in public markets, venture capital, private equity, or are a business or investment bank facilitating deals, we’d love to help you meet and exceed your investment goals. 

Our Early-Stage Investment Focus -

In addition to our consulting services, we make early-stage investments, with a focus on companies building in media and government technology. If you’re a founder who is raising, please reach out to us!

To get in touch, you can either reply directly to this email or click the link below to fill out our contact form. We’ll be back in touch soon!

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  📭 Share Leveling Up with a friend!

If you enjoy Leveling Up, please consider sharing it with friends and colleagues (link to share)! 

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GM readers 👋,

Happy July!

I’ve been quiet on the newsletter front the past couple months. I’m excited to say that this is my first Leveling Up newsletter as a dad! Hannah and I are loving spending time with our newest family member. But the result is less time to put together the usual monthly deep dive. 

To help keep the content cadence consistent, I’m hoping to collaborate more on future newsletters. I’ve met lots of folks who read Leveling Up that are incredibly knowledgeable on a variety of topics. In short, I believe this readership will benefit from greater collaboration. If you’re interested in teaming up or even writing a guest post, please shoot an email to contact@alderbrookcompanies.com! I’d love to hear from you.  

Back in March 2023, Leveling Up wrote about artificial intelligence’s potential value to the music industry. We looked at barriers standing in the way of realizing that value and made some predictions on which parts of the value chain may be most impacted.

A lot has happened in this space in the year since. AI continues to dominate headlines, with the music industry remaining both excited over AI’s potential and concerned over how music AI startups are utilizing this technology.

In this month’s newsletter, we’ll analyze the music AI startups that have successfully raised venture funding over the past couple years. In doing so, we can try to 1) identify the areas that music AI builders see as the biggest opportunities and 2) observe which investors are most actively funding them. 

And a quick shoutout to my friends at Naavik whose recent piece on gaming and AI served as the inspiration for this one. If you’re interested in learning more about gaming, I highly recommend subscribing to their free newsletter. It’s consistently packed with insights!

And with that, on to the disclaimers…

Note: I write this newsletter to learn in public. I’m not a licensed investment professional. This piece is for informational purposes only. None of this is tax, financial, investment, or legal advice. Do your own research! 

Now, let’s get after it!

Jimmy

Music and the AI Opportunity

“AI at the service of artists is a good thing, but AI that is used to harm or prevent artists from due compensation is a bad thing. So, our approach is to embrace responsible AI technology in a way that enhances human creativity. How is this done? By letting artists lead the way.” - Sir Lucian Grainge, CEO of Universal Music Group

The past two years have seen the artificial intelligence hype cycle continue to pick up steam. The public launch of popular generative AI models – like OpenAI’s ChatGPT (chatbot), Midjourney (text-to-image), and Stability AI’s Stable Diffusion (text-to-image) – has driven much of the recent excitement over AI’s potential. Depending upon which firm you ask, the generative AI market is forecasted to be anywhere between $50 billion to $400 billion by 2033.

Read more