97. How to Scale, Adapt, and Win in a Broken Market | Rio Caraeff

Welcome to All About Business. With me, James Reid, the podcast that covers everything about business, management and leadership. Every episode, I sit down with different guests, the bootstrapped companies, masterminded investment models, or built a business empire. Their leaders in their field, and they're here to give you top insights and actionable advice, so you can apply their ideas to your own career or business venture. AI is transforming the music industry. But who owns the data, the lyrics, and ultimately the value behind the songs we listen to every day? Today on All About Business, I'm joined by Rio Carrath, co-president of Music's Match, the company helping power music attribution, lyrics, and rights management at global scale. In this episode, we discuss the hidden infrastructure behind the music industry. How AI is changing the way music is discovered and monetized, and why the future of music may depend as much on data as creativity itself. Well, today on All About Business, I'm really delighted to welcome Rio Carrath, who's travelled all the way from Austin in Texas to talk to me today. Thanks so much for coming, Rio. Thank you for having me. It's a real pleasure. Rio is the co-president of Music's Match, a global lyrics and music data platform, so you know a lot about music and tech. Yeah, it's been about 30 years. I've been in music and tech, and since about 1993. First, attract you to that space. It's intersection of music and technology. I always like to go back and say, what are the deep psychological reasons that you're attracted to such an irrational and illogical and crazy. Isn't an interesting question. What is that? I think that the honest answer is my father was in the music business from 1967 to 1983, and he basically became a very famous rock and roll photographer. When he was 17 years old, just a kid in school in 1967, he went up to a rock concert in Monterey, California, and he was just, you know, no credentials, no backstage pass. 17-year-old, you know, high school kid, and went to the Monterey Pop and Jazz, you know, festival, standing on his seat, taking pictures, and he shot a photo of Jimmy Hendrix lighting his guitar on fire, which became a very famous, you know, photo. Yeah, I know it. I was just thinking that's where that happened. It's been on the cover of Rolling Stone, you know, two or three times, you know, Life Magazine. So your dad took that picture of the age of 17. Yeah, he was not a professional. He was just a kid, you know, and that's, you know, all the professionals were on stage, and they got the same photo, but, you know, from the side, and he was, you know, just a kid on his standing on his chair, and he got the frontal, you know, the frontal shot, the best shot. And also, I find that interesting. Remember, before digital cameras, there was just 32, you know, shots on the roll, you know, film, and it was the last shot on the roll. It was the 30 second shot. And so that, you know, things moved a little slower than, so it wasn't like, you know, he instantly became, you know, a big photographer. It took a couple years, but that, that essentially ignited his passion for rock and roll photography, and then that became later, you know, a famous photo. And in 1987, you know, 20 years later, Jan Venter, the founder of Rolling Stone, called it the most famous rock and roll photo of all time. But basically, from 1967 to 1983, he photographed art directed, designed, and produced, you know, nearly a thousand rock and roll album covers. So basically, every album, John Album, every Steely Dan album, every BG's album, every Neil Diamond album, every Ali Parton album, you know, Marvin Gaye, George Harrison. The album covers for younger listeners with like works of art. Yeah, everyone waits to see what they were like. I can't assume everybody knows what an album cover is. Yeah, but I mean, I know what they are, and I'm thinking these are really like iconic things you're talking about. So the little pictures you see on your phone, you know, on Spotify. But these are a bunch of art. Yeah, yeah. There was a time they were big gatefold, you know, LPs with pictures and words and lyrics. Sure. And them. So, so that launched essential, that was his career in music. And you know, it, so that was born, you know, in the middle of that, in 1975, you know, and when I had hair, you know, my, my first haircut was Olivia Newton-John, you know, gave it to me. And Ali Parton helped, you know, teach me to read, you know, there. Yeah. And so I grew up in you. John gave you your first hair. Yeah, yeah. I don't think many people can claim that. And Ali Parton taught you to read. I love it. And so it was the first book you read with it. I don't remember. I would you quite. But the, so you grow up in that era of, you know, of, I grew up essentially in visual music, you know, photography and images and music and creativity and art. And this was, he was not like an executive in a office tower, you know, somewhere he was essentially, you know, on the road, you know, with artists and traveling with, with the rock stars. And they were all at our house at our studio. And so it was also a tumultuous time, you know, lots of, you know, as you can imagine, you know, what the lifestyle, you know, would be like in the 70s, there. So a lot of ups and downs. And but that's really what I was, you know, born into. And so it would be getting back to the question, you know, if I'm honest and you're open, like that's probably where, you know, the seeds were planted and the passion was started, even though it's unconscious, you know, and you don't know it at the time. And then, you know, he got out of music in 1983. You know, he burned out. And his last album, I think, was "Holunotes' Private Eyes" there. And so, then he reinvented himself as a chef, you know, in restaurant tour and opened up some restaurants. Yeah. But basically, years later, you know, I got into music, I got into music technology very early, you know, in the early 90s, you know, I built websites for Michael Jackson and The Beatles. And I sold the first song over the internet from a major music company, which was Duran Duran in 1997, when I worked at Capitol Records. I helped. I was the first song ever sold commercially over the internet from a major music company. What was that? 1997. Right. Yeah. And then, I helped drive the 99 cent download, you know, business with Steve Jobs and Apple. I helped conceive the subscription model that's used today by, you know, nearly a billion people, which is turning music from a product into a service. I helped create the licensing model for music videos, to turn music videos from what I call the movie trailer, you know, of the music business, you know, into a multi-billion dollar revenue stream. And so, you know, I've been a part of nearly every inflection and change point in the music business in the last 30 years. And that's been where my passion is. So there's been a huge change over that 30-year period. And looking back, what do you think the music industry may be initially misunderstood about digital or digital platforms? Yeah. I think, well, the first thing I try to remember is there's a difference between the business of music and music, right? People can, it's easy for people to conflate them. Like, like, I always try to remember, let's go back millennia. Like, let's go back and thousands of years and think about, you know, what are the things that are hard-coded into our cellular DNA that make us human, right? You know, why does everybody love sports? And why does everybody love music? And why do people love movies and television shows and books, right? Narrative storytelling. Good questions. And, and religion, right? And so there are, there are a handful of things that we, you know, unconsciously gravitate towards and we resonate with. And that is, those are what I call pipelines to the soul, right? They create a pure emotional connection. They bypass the rational mind. And so it's why brand advertisers, you know, love sports because sports is a vessel to an irrational decision with which they can wrap their, you know, their automotive brand or their, you know, their lager. Yeah. I want that, I want that. I'll buy that. Yeah, I want that, you know, I want that. Because that's right. Okay. That's why they love music. It's why they love sports, right? And it's why advertisers and marketers love these things because that because people have passion for music. They have passion for sports. They have passion for, you know, whatever, whatever story, you know, you're telling. So, so these are fertile ground for businesses, of course. Whenever you have something that billions of people love, you know, what are the opportunities to create value on top of that? And so you're not going to wake up one morning and find a continent of people who, you know, just don't like sports or music or or storytelling. And so those are always the best places to start businesses, I find. And so, that's that's where I start. And then I get into to get to your question about what is the music business, you know, doing or what are they what are they learned? But I always try to remember, you know, the business of music or the business of sports are constant change. They don't have a God-given right to exist. There's no fundamental reason or even why they should exist. And so, you shouldn't be too precious or to hold on to tight and say, "I wish people still bought CDs or I wish that the cable television business still existed." You should just accept that change is the only certainty and meet the customer and the artist where they are. The second thing I learned is that there's also a lot of deep-seated psychological issues which inform the way the modern music business works, right? Some of it is rooted in this zero-sum game, you know, thinking like, "I win or you lose or you're doing something that's going to debit from me or my stream is going to debit from your stream and thus I'll make less money, you'll make money." So that is a short-sighted, you know, myopic way of thinking. I often call the music business a $10 business stuck in a $5 bag, right? You know, it's artificially small, you know, relatively small. What do you mean by that? Yeah, so it's, if you think about it, the music business and music itself transcends the economics, you know, of its category. So for example, music impacts and moves culture, right? Music is used in, you can't go to a sporting event without hearing music, right? You can't go to a fashion show without hearing music. You can't watch a movie or a television show without hearing music. You know, music moves, you can't, you can't buy an iPhone without, you know, music was a part of it, right? And so music moves technology, music moves culture, music moves the economy, moves politics, it moves fashion, it moves, you know, you know, many categories of industry. And so it is, but that's not counted as the music business, you know, even right? And so there's then there's all of these structural elements that conspire against the scale and growth of music, right? So for example, it's one of the only, it's probably the only industry that has a fractured copyright, right? So what that means is that the underlying copyright of music is fractured and there are two parts of it. And the people who write the songs are not the same as the, it's a, that's one copyright and the people who perform the songs, that's a different copyright. And then as music has become an asset class, you know, bought and sold, you know, for by investors, it is, the, the, the, it's accelerated the fracturing of the copyright because, you know, one investment company may hold the underlying compositions, you know, of these of the weekend or Justin Bieber or, you know, Ariana Grande. And then another company may own the underlying sound recordings, which could be universal or Sony or Warner. And so what that means is that it's very hard to do new things, right? It's very hard to invent an entirely new product or an entirely new service or an entirely new category. Like, let's say you had a great idea for some amazing new music experience, you know, that was native, you know, to, to AI or to the web. And you couldn't just do that because, because no one company controls all the copyright. And, and so even when I ran the digital business for the world's largest music company, you know, we were only 35, 36 percent global market share. Right. And we only had controlled, you know, the record, the record part or the publishing part, but not all of the parts, right? And so even if we wanted to do something as the world's largest music company, we would sit there and say, well, we don't control the entire market and we don't even have the majority of the market. And so we need to, and then also, it's against the law to collude, you know, with your competitors to talk about doing new things, you know, the, in the US, there's the sports leagues enjoy what I call it's an antitrust exemption, right? They can, it's legal for them to get together all the different sports leagues and talk about new things and, and set prices, right? But it's not legal for any other industry, you know, to do that. So it just means that things happen slowly and things are harder to do. And so, and then sorry, that's the root of it. That the last point I'll make, I know this is a long answer. The last point I'll make is that there's also this deep-seated psychology where there's like a resentment that happens when people build businesses on top of music. And then there's no value that a, that accrues to the underlying music companies or artists. So an example, it goes back to the 1950s when there's the creation of radio, right? Radio stations, you know, played music, but they didn't pay for the, for the music they, they, they, they tried, right? It was deemed promotional, right? You're going to, maybe you'll sell a record one day, but I'm not going to pay for this music, you know, I'm playing. And so then the music companies that, you know, worked, that was a fine bargain at the beginning. And then eventually the radio stations became worth a lot of money and they said, hey, that's not fair. That's not equitable. And then it was MTV, you know, in the 80s. MTV would play music and, and the music companies and the artists didn't own MTV and didn't, and then that was worth billions of dollars. And the, hey, that's not fair, you know, and then YouTube, you know, came out and YouTube had a lot of music and, and then YouTube became worth a lot of money. So you, and then everybody says, you know, they're taking advantage of us. They're, you know, building a business on the back of our music and not paying for it. So there's a multi generational decades-long deep-seated psychology of resentment that emerges when, when, and it's, you know, when it's all, it's all, there's always a trade and there's always a, you know, a deal. But, but when one industry, you know, YouTube is worth far more, you know, than the music business. And there was a time in 2009 when, you know, I think two out of every three streams on YouTube implicated a copyright that under controlled at Universal. And now, of course, YouTube is so much bigger than music. Anyway, I'll pause. So, so maybe it's a hundred dollar business in a five dollar bag. Yeah. So you see why I know that is. Yeah, no, no, I can understand that feeling. I feel like the music business should be, you know, much bigger than it is. But, but there are reasons, structural reasons and psychological reasons as to why it's relatively small. So I, I always think of my mission, right, is to, is to forensically dissect the supply chain of the music business and identify what are the things that are broken or what are the things that are grossly and tremendously inefficient. And if only those things could be fixed or changed, could we make the business bigger? And I try not to think about it for the lens of like my company or this company or that company. Because if you just think about it small, like I can only do what I can do at my company, you nobody will ever get anything done. You have to think about it in the, in a macro grand sense, like if I could do anything I want, you know, how could I, you have to break out of the prison of your mind and not think about why I'm powerless because I'm only 30% market share. Interesting. So you look at it, you're looking at it sort of systemically. Yeah, you have to. The whole thing. That's the key, I think unlock is in its intimidating because you're like, you're like, how am I going to do this or I'm staring up the side of a mountain, right? But you're never going to get anything big done if you limit yourself and and and think about like, I can't to do this for these reasons or I can't do it for those reasons. So you have to really break out of that prison. Okay, really. So that's sort of that's really helpful in terms of painting the whole picture of looking at the industry. What I'd like you to explain to me is what music match does. So what's it actually do? What do that? This is your business that you're running. How does that? Yeah, I run it with the founder and CEO Max Geochola, who started it about 16, 17 years ago in Bologna, Italy. And Max had a vision as great entrepreneurs, you know, do for how lyrics, you know, could be a business. And I remember when I met Max, you know, 15, 16 years ago, the first time. And he's talking about lyrics as a business. And I remember thinking, that's not a business, right? There's no business of lyrics, you know, and so you thought that. Yeah, I thought that. How are you proven wrong? Yeah. And I'm happy to be wrong, right? Because I have a lot of reverence. I always try to remember like entrepreneurship is not binary, right? You know, you're not an entrepreneur or not an entrepreneur. You know, you there's a spectrum of entrepreneurship. And I always think like a real entrepreneur to me, you know, could never work a day in their life, you know, for a giant company. And I find myself like, I have enough patience and fortitude to thrive in a big company, but I also find myself growing unfulfilled and feeling dissatisfied if I'm not actually making anything. You know, and so I gradually leave the big company because I feel like I'm in an ivory tower or I'm not actually doing anything or making anything of lasting value. And so, so I always have a lot of reverence for Max and for entrepreneurs because they can see through the eye of the needle, you know, to a world that doesn't exist yet. Nobody else can quite see it. And and then their job that like if you ask me, what's the role of an entrepreneur? What's the job of an entrepreneur? The simplest answer is it's to run through walls, right? You know, is to break through the mental barriers, the economic barriers, you know, and to be able to obsess about something a irrational, illogical way and see a world that doesn't exist yet and break through walls to get there. So it's an honor for me to work with an entrepreneur and to work with Max. So yeah, today it's a big business. And sometimes you do have to wander in the woods for a bit to find how am I going to make this work? But basically what do we do? So music matches, I think the world's largest music data company were entirely B2B. And what we do is we provide essentially a lot of services around lyrics and music data to a variety of constituents and customers. So for example, we provide lyric rights because lyrics are a subset of the music publishing copyright, which is also known as the underlying composition, the words and the melody. And not the performance, the sound recording, it's the Lenin McCartney, maybe not the Beatles part of it. And boom, boom, boom. Right. It's the genesis moment of creation where somebody's got to write the melody and somebody's got to write the notes and somebody's going to write the words. So the lyrics are part of the genesis moment. Yeah, there was no song and then there was a song. So that's the part of the copyright that lyrics reside in. So thus you need the rights from the rights owner in order to exhibit them or display them. So when you go to Spotify and you want to play a song, you'll see the lyrics there. In order to display the lyrics, you need the rights to display the lyrics. So you're not infringing on the copyright commercially. So we provide the rights to those. We have all of the major music publishers and all of the very long independent tale of music. It's a very long and thin tale. So we have an aggregate, maybe 250,000 licensing agreements for everybody from India, to Korea, to Japan, to all the major and minor parties. So that's the first thing we do is we provide the rights. Then we provide the actual lyric content itself, the actual data itself, which are the words to the song. We produce all of that. We have today, I'd say, over 20 million lyrics in our catalog and we're constantly producing more. So when you're listening on Spotify, you see the lyrics, it's coming from music's match. Yeah. So the rights are coming from music's match or deals that Spotify does directly. It's all, everything is different. So they may have a rights directly, they may get some rights from us, they get the content from us. Then the next thing we do is we provide the administration. And this is the least understood, but I would say the most valuable part of what we do. And the administration is a generic word for, how do you get people paid? And how do you tell them what's happening, reporting, right? So who are we talking about? So the people who wrote the song, the people who own the song, they should get paid. I agree. We all agree with that, right? And they should get paid faster and they should get paid more. Right. I think that's a new enable. You make that happen. Yeah. So basically, that's in the industry, that's called administration. So what do you do as an administrator? You're essentially collecting all of the activity that occurs, right? So we're getting all of the reporting from Spotify and from Apple and Amazon and YouTube and Metta and everybody that we service. And so then we got all the activity, all the lyrics, all the streams that occurred, all the underlying lyrics that were displayed. And then we look at our database, which is essentially one of the world's largest database of song ownership. So we know who wrote all the songs, we know who performed all the songs. And we know who owns all of those copyrights. And the average song, you know, could have 12 or 17, you know, different writers on it. Like this Beyonce song could have nine writers and each of those writers, nine different writers. Yeah. And then they did. And then they each have one person. Sometimes it could be one person, right? And the simplest is when the person who wrote the song also performed the song and that's good. And that's simple, right? But it's never that simple, right? There could be a song that has nine writers. Each of those writers could have their own publishing deal. So they could be with Warner, they could be with Sony, they could be with Cobalt, they could be MG Concord. And so there's all these sub publisher relationships and then it could be different by country and geography. So so basically you've got to take all the activity, you've got to line it up against who owns what and then you've got to figure out the calculations of payments and formulas around there based upon your license agreement and what you get paid by the DSP. And then I want a DSP. I sorry, the DSP is Spotify. Okay. It's the industry term for the service provider, the digital service provider. Okay. Somebody who so they pay you and then you're responsible for and then we then we facilitate the administration. So it's the reporting, you know, it's the it's the reports to say, here's what occurred and then it's the payments to everybody on a timely manner. So so basically there's the rights, the content, the administration and all of that's that's the core business of what we do. We also have other things we do, but that's that's what we're known for. So a lot of data and a lot of moving paths. Yeah. And the thing that's going through my mind, I'm sure other people listening is AI, obviously if this is coming, it's already here and how does that affect the future of music and also what you're doing? Because I can imagine AI could do that, some of that function. Oh, yeah. We're using AI extensively around the company. Yeah. It's like a superpower that we enjoy. So you're seeing that as a positive, but also in the music space, there are lots of people concerned about it in terms of it. Of course. So where are we headed? Yeah. It's a big, big question. I think the first place to start is that it is a powerful tool, but that it is inherently neutral, meaning tools can be used for good. Tools can be used for bad. It just depends on how you wield and use the tool. So you have a choice, do you look at the tool as evil? Do you look at the tool? Is the hammer that you're going to, the hammer can build the house, the hammer could hit you on the head? No, it just depends on how you use it and how you look at it. And so we look at it as a powerful enabling technology that, for example, we just talked about reporting, all the administration in payments to people. That is complicated and many billions of lines of reconciliation. And before AI, that used to take months or weeks to process all of that volume of data. And now we do it in days, and in fact, it's actually hours. But we spend days checking it and checking it and double checking it with humans. But it enables us to move much faster, be much more efficient. And then what does that mean? It means you can report and pay faster. And who doesn't want to get artists paid faster? So that's a benefit of AI. People can get paid faster. And also the overhead of doing it is lower. And so you can take less deductions right there. So that's a part of the hammer as a tool. Yeah. What about the hammer that hits you on the head? Well, I think the, again, I'm not going to be a doomer, you know, and talk about all the negative things. No, but people are worried about it. Yeah. I think they're valid, right? I think that some of the worry stems from, if you're a creator, right? And anybody can push a button or prompt the creation of a song or the creation of a video or a picture. What does that mean for you, the photographer? What does that mean for you, the musician or you, the journalist, right? And so I think the first thing I would say is that, and again, this may be cold comfort, you know, to an individual. But the first thing you have to understand is that markets are classically made larger through the democratization of tools, right? And this is true if you go back decades, whether it's the printing press and desktop publishing or the laser printer or digital video or camera technology. Every time there's been a new technology, it disrupts the industry. But when the dust settles, the market is much larger, right? Because the tools are now more available and they're lower cost and they're democratized, right? So what that means is that the incremental cost of creation, you know, goes to zero. That humans, of course, are paralyzed by indecision when they're faced with unlimited choice. And are also, humans are also make decisions from the comfortable, from the, they prefer the comfortable and the familiar, right? Right. So what does that mean? It means that when I want to go to, you know, a music service in the future and use AI to make a song, right? I'm going to say, make me a song that's like Fleetwood Mac and Taylor Swift and Prince, you know, mix together, right? Or I'm going to say, and so I'm, I'm leaning on my comfort and my familiarity with major artists and major brands, right? And then, and then I'll make a new derivative song and due to these licensing formulas that are emerging now, all of those people will get paid, right? So there's not, they'll be new. So you, if someone makes a request of that sort, those people would get paid? They get paid because I'm using the name and likeness, right, to create a new song, right? And then that's actually happening. These are, this is, this is happening behind the scenes and you'll see this, this happening rather than coming soon. You'll see later this year, you'll see some of these things, you'll see them next year. So let me say it a different way, the industry is no longer on its heels, like pretending this doesn't exist or, you know, trying to litigate as a strategy. right? They're now on their toes, they're hugging it, leaning in and saying, "How do we, how do we take advantage of this? How do we, how do we harness it? What's the opportunity? How do we grow? How do we enable it?" There's no more pretending like, "Let's stick our head in the sand and pretend this doesn't exist and hope it goes away." That's of course what always happens, you know, at the beginning and the cycles are compressing that before. Seeing that before and that didn't happen a few years ago, you know what they are. So, so basically now the industry is licensing these services and they're going to, and there's different ways to, there's, there's, with AI, there's three parts. There's the training, like what happens? How is the model trained? Is it trained on licensed works and copyright and what's the, what's the remuneration model for that? The second part is prompting, like what happens? How does the user make something? Like make me a song like this or make me a song, you know, that sounds like this or over this artist. And then the third part is the output, right? What's the end result that's coming out at the end? And so the, who gets paid? What's the formula? How does that work? So, so you're envisaging a world in which the training, the prompting and the output are all potentially resulting in payments to be envisioning a world. This is happening. This is actually, but people are actually being paid, are they? Not yet. Well, that's what I mean. Because none of these services are live yet. No, but they're, but they're in progress. Yeah. Yeah. It's okay. So we're on the cusp of this. Yeah. There are, there are services like Suno and Udo that are, you know, generative AI music services. Because I've got books behind you that apparently fed into sort of AI training for which I've received no payment. And then there are class actions about this. Yeah. Yeah. I'm not trying to paint a perpetually rosy picture. No, no, no, no, no, no, no. I mean, certainly, the dust has not settled on, you know, is training fair use or not, right? Courts have ruled so far in the US that, that training could be fair use, but not if the underlying source material was pirated, right? So if the books were purchased or if the music was purchased or, but if it was stolen or tormented or scraped from, you know, from security there, then maybe that's not fair use, right? So there's that. Yeah. So I think the leisurely pace of the law, right? You know, we'll, we'll play out. So am I putting it? Yeah. That's what we always call it in music is. The leisurely pace of the law, the engineers will call it the latency, you know, love it. But basically that'll get sorted out eventually. But the business moves on without regard, you know, and so, so a lot of what were the industries focused on is how do you license training? How do you license the prompting and how do you license the output? Right. And because without that there's no business, you know, around any any of this. And, and again, I can't speak to books or any other industry. I'm just talking about music. No, it's interesting. It's interesting. So the industry is bear hugging it, actively licensing it, and you will see services out, I think as early as this year, you know, that that embody these type of things where artists and songwriters get paid for all three, you know, parts of that chain. And so that's the that's what's happening. I think people would be pleased to hear that. Yeah, that's what's happening now. But I think the the other thing I would say that there was a great interview with Strauss Zelnik, the head of take two interactive, the creators of Grand Theft Auto, you know, video game this week where he was asked about AI and, you know, why do you spend billions of dollars making a game and, you know, five years of production when somebody could just make it with AI. And I think his his fundamental point was that, you know, creativity is by its very nature, forward facing. Yes. You know, you are informed. We're all informed by the music we've heard in the books we've read and the movies we've seen. But nothing new is ever created by staring backwards. New things and creativity are only enabled by looking forward, right? And an AI is fundamentally built on data sets and data sets are by the very nature backwards facing. So if you rely on AI only, you can only make derivative versions of the past. And if you are truly a creator, you're making something new that didn't exist before, right? And so that's creativity is forwards facing. It's forward facing and AI is by its very nature backwards facing because it's relying on. It's solely in, you know, reliant on on on backward facing data sets. Right. Now things will evolve and change, right? But I think that so I think what is the artist of the future, you know, or what is I like to think about what is the ascendant generation? Like what is my three year old or 11 year old, you know, going to do like what I what I want to do is a relevant, you know, because basically dead, you know, but the the point is that they're going to the creator of the future will look at these as tools and say, what could I do? What new things can I create using these powerful generative AI tools, right? That allow me to, you know, have unfettered creativity and powerful superpowers, you know, to make things. But yeah, like I said, the future is here. It's just unevenly distributed, right? And so a lot of people aren't even aware, you know, that this world has changed. So music's match recently launched Sentinel. Yeah. What problem is that trying to solve? Yeah. The first Sentinel is a new service we've launched for businesses that essentially allows them to detect what is being prompted and what is being uploaded to them because they do incur liability and risk if they copyrighted materials are uploaded to their service or prompted into their generative AI service. So an example, and this is not just music services, it could be, you know, Roblox or Canva or any company that has an upload button or a prompting box. And so if copyrighted works like Taylor Swift lyrics or, you know, other types of songs are uploaded in there and then it shows up somewhere in the service and it's not licensed, you are incurring risk and liability. Well, you like in the future to get a bill for that. Yeah, you could you could be in an infringer. You could be sued, right? You could have claims made so because those are copyrighted works. And so the first step is detecting, you know, what is being uploaded? What is being prompted? Right. How can you figure out, you know, what's being put in your business? If you're an organization with lots of people, you don't know what people are asking. Right. So that's what Sentinel is. So you integrate Sentinel into your service where you have a prompt or where you have an upload. And we essentially in sub millisecond time, we deliver a confidence score to the business. We say, Hey, I'm I'm 99% sure that's a copyrighted work. I'm 100% sure as public domain. Right. I'm 100% sure I've never seen that before and it looks original. Right. We don't tell the business what to do. Take business makes their own decisions about whether they want to let it fly or take it down. Right. But the first step is detection. Right. And that's what Sentinel is that the vision of Sentinel is actually not to take anything down. The vision is to leave it up because leaving it up is what I call the happy path. Right. That's that's what the user wants. The user put it there. The user wants it to go out. Right. And so the I always look at YouTube content ID as the model for Sentinel because YouTube content ID is not about taking things down. It's about leaving it up. But you can't leave it up if you don't know what it is in the first place because you can't if you you have to first figure out what it what are people uploading. So that's the recognition part. Then you get to say, OK, now I know it's a Bob Marley song. And now I'm going to license it. And then now that I know what it is and it's licensed, I can advertise and monetize it. Right. And then money flows. So YouTube content ID is a $58 billion business. Right. And it's not and not it's not about taking things down. So because we have 250,000 rights agreements, we could also issue instant licenses. Sorry. I'm hitting the table here. So we can say we're 100% sure it's Taylor Swift love story. And now we could say, and here's a license for it. So it stays up. And then that creates a second business model for us, which is the administration of that copyright and the annuity that that afford that's dependent on someone who posted this on YouTube paying the license. Then it's it or whatever business is using. So yeah, so it tends to be to business. Yeah. So yeah. So Sentinel is a service for any business. Right. That has prompts or upload business to business to business to consume. Yeah. Yeah. And so, you know, there's a leading generative AI music service that has integrated Sentinel today. And we are everything that gets prompted, everything that gets uploaded hits our Sentinel service. We deliver the score back to them in, you know, near real time. And then they make decisions about licensing it or leaving it up or taking it down. And it's essentially a way for them to manage and mitigate their risk. So how does Sentinel actually detect these copyrighted lyrics in music that maybe AI generated or AI generated? Yeah. And as you can imagine, it's built upon our competency, you know, which is lyrics and lyric data. Yeah. And we have the, and we know who owns what. Right. So we, because we know who wrote it and who owns it and who, and who, where the splits are and who administers it, we, we can tell whether it's a copyrighted work or public domain or, or not, because we have all of that information for our business. So we, but that's AI checking it. Is it? Again, AI is like, at this point, AI is like talking about oxygen, right, or air conditioning, or, you know, AI is going to be in your toothbrush and your gmail. And so it's a it's AI's in everything, right. And so we we use AI, yes, in order to help it make it work well. And but we're looking for strings and matches. It may not you may not be somebody may not upload the entire lyrics, but just an excerpt or a portion of parts of it. And so we're doing all of that pattern matching. And identifying it and we're saying, yeah, this looks like it implicates a copyrighted work. And so the business can take it down or the business can leave it up. And we do that because we have all the lyrics and we do that because we have all the ownership data. So we know what's copyrighted and what's not. The other point I would make is lyrics are very durable in terms of a signal. So for example, there are other content identification technologies, but they don't focus on lyrics. They focus on the waveform or the way that sounds does it sound like a Taylor Swift song does it sound like a Bob Marley song like let's examine the, you know, the Vince right and look at the waveform. But those are easily easily defeated. You can speed it up and slow it down. You can put white noise in. You can flip it around and change it. You know, you can alter it. You can remix it in a different genre, you know, and all of a sudden the forensic fingerprinting technology says, you know, I don't know what this is anymore. Right. And so lyrics though, they have to be there. They have lyrics. Yeah, lyrics are lyrics. They can't be removed. Right. Because then it's not the song anymore. So they're surprisingly durable and not brittle. And that we find out to be a good signal to base Sentinel on. So real. I can hear that there are really a lot of opportunities emerging in the space with new technologies. What are the challenges you might be experiencing? Are there any sort of obvious things that you feel challenged by? Yeah, that's a great question. I think fundamentally, you know, the challenge we face, you know, is how we navigate all of the different parties and constituents, you know, in the music industry. You know, you may have an idea or a service or a product or something you want to do, but you there's a lot of cats to herd. Right. There's a lot of people to compel and convince who may not be as far along. Right. And they're in their thinking or maybe more conservative or more less progressive. And so a lot of the work is in moving the hard part is moving everybody forward and moving the industry along and doing that through consensus. So I like in it to that, that Christopher Nolan movie inception, right, which is. It's not nothing really works. If it's your idea, you have to make it everybody else's idea. So you have to be willing to give up ownership over your idea and essentially tell a story that implants the idea in everybody else. And then they take then they dream about it and then it becomes their idea and then and then all of a sudden they want to do it. And so so I try to try to think about that it's like if I want to do something doesn't really matter what I want to do what matters is how do I get everybody else to think that it's their idea so that they can also want to do it as well. And that that is sounds easy, but it's really hard. And and I find that that's my biggest frustration often is how do I get things done. And then I realize I have to do a lot of communicating and a lot of meetings and a lot of conversations and a lot of work, you know, to just to take one step. You have to hurt a lot of cats. Yeah, and that's but that's what you have to do when you want to move the industry forward or do something new, you know, on behalf of everybody, you know, and that's the that's the nature of the fractured copyright or that's the nature of the structural elements of the music business is again no one person can do something you have to get everybody to move in that direction. But this is this is what I had to do, you know, with Vivo. This is what I've had to do, you know, with subscription music. And so I'm used to it and I and I see a path, you know, to do it, but it's it's the hard part is I wish it can move faster. I wish, you know, I could break through walls easier, but that's the that's the challenge every day. Right. So you've also launched music lens. Yeah. So what exactly is this music lens is interesting. It's the first application of AI that we undertook last year on our business. And the idea was, you know, our thesis, you know, fundamentally as businesses who have proprietary data and who serve vertical industries are well positioned in the with this transformation of AI. You know, if you if you provide horizontal services like generic databases or CRM or you don't have proprietary data, you're going to have a harder time, I think in this new world. And so because we have proprietary data and we serve a specific industry, we said what what will happen if we take all of our data and we and we allow you to interrogate it right with the power of a large language model. So, for example, now I can learn why are songs about love in a perpetual decline since 1950, you know, in in America. Right. And they are. Right. And we learn that, you know, from from music lens, right. Or you can take a different tact and say because the lyrics and look because we're looking at the long arc of time, we're looking at streaming volume and activity, we're looking at the meaning and sentiment of the song. Songs about love are in perpetual decline. Perpetual. Yeah, for multi decade decline. Yeah. Oh, no. There's a lot of sad stories, you know, here, you know, songs about songs about politics and civil, you know, civil disobedience or unrest or protest are also in a perpetual decline. Right. So, what are the new songs about? They're about consumerism. They're about, you know, what are the top three luxury brands, you know, in songs or automotive brands or alcohol brands. And so they're they tend to be they're more about, but they're also about friendship and they're about, you know, love and, you know, some about love or about sex or other things. And so there's not there's no it's not a all hope is lost, you know, but but it is things that you know, I'm sorry about this loss of romance, but yeah, yeah. You know, I music used to be, you know, a way for people to talk about society and, you know, and the government and and and civil, you know, the civil nature and, you know, and everything from protest songs or protesting the war or these things. And, but there's not a lot of songs about the Ukraine war or about this in Palestine or there's not a lot of songs about that unfortunately there. And so, yeah. So, so lens getting back to lens, it's essentially a powerful magnifying glass that you can use to interrogate and understand, you know, the corpus of music in whole or in part. And, and that is a powerful tool that you can use for different industries and purposes. So, for example, if you were a brand marketer or advertiser and you want to know what are the top, you know, fashion brands that are sung about in songs in the UK in the last 30 days, you know, you can use lens to learn about that or automotive brands or, you know, consumer products or. So, these brands are appearing in songs. Yeah, people sing about Gucci or those sing about, you know, Balenciaga or those sing about, you know, Mercedes or Bentley or different things like that. And they show up in different songs in different ways and or those sing about different geography or different, you know, themes or places. So, you can dissect the semantic meaning and understanding, you know, of the songs that way. But there are practical commercial examples. So, in music, one of the big revenue streams for music companies and artists is called sync licensing and sync licensing is where you license a song to be synchronized with a video or moving picture. So, like, when you see a TV commercial and there's a song or a video game or a movie or there's a song, that that is licensed and under what's called a sync license because it's synced with a moving picture. And sync SYN. Not a SYN. And so, it's in the realm of music publishing arcana or music. It's an obscure thing, but it's a big business. It's a multi-billion dollar business. And so, my point is, so let's just pick an example, you're a big music publisher, you have 3 million copyrights in your database and you have 11 people on your sync licensing team. Those 11 people don't have 3 million songs in their frontal lobe, you know, of their brain at all times. And they get the RFP from Nike or, you know, this McDonald's commercial, you know, they're looking for a song, you know, to use. They can now drop that RFP in that proposal into music lens, which may be trained on just their 3 million songs, you know, if they're a customer of it. And then we'll spit out, here are the top 5 songs in your catalog that are well suited for that proposal. And you may not, some of them may be obvious, some of them may be not so obvious. You may not have thought of them. Here's why they're the best fit for them. So, that could lead to more sync licensing and more, you know, more commercial opportunities for. Yeah, yeah. Another example could be financial forecasting, right, or the CFO, you know, of a big music company, you're going to use music lens to figure out what are the, what are the top songs. that are likely to generate income for me next quarter. What artists who wrote those songs and maybe I should re-up my contract with those people or maybe I should find other songwriters like that? What genres are likely to drive more income for me in the future? How do I increase my market share, which gives me more prerada income in a shared pool? There's all kinds of financial forecasting benefits to blends. It's a powerful tool and we haven't even begun to discover all of the possible commercial opportunities there. The Economist in London is using lens to tell stories and find trends about the economy, about politics, about society. Then they want to express it through visual charts and graphs and using the power of music to do that. So they're using lens as there's not much money in that. But it is a. Quite an interesting cultural insight, but we're happy to have them do it. So we're just uncovering the use cases of it. One thing that's on my mind is obviously there are huge back catalogs of music. AI and lens and other tools like it. Does it have the potential to surface more of that? Bring it to life, I suppose. Then to my synchlic licensing example, there are some music publishers where the songs may be Sam Cook from the '60s or Rolling Stones here and the people who work in those teams may be generationally come later. They may be 24-year-olds and they may not know everything about every song from the '50s or '60s. So lens could help them understand, "Hey, this is what's in your catalog." These are the little diamonds that you may not have missed. This is why they're good and this is why they're useful for this purpose. So you sound. I want to draw this up to a conclusion because we've lifted the bonnet on the music industry in a really interesting way and had a look at the engine beneath and you've been incredibly insightful, which I'm grateful to you for. Do you feel optimistic about the future with these new technologies coming over here? I do. I do. I'm excited and more optimistic about it because I feel like these are all enabling opportunities. They're powerful tools and they give you superpowers. So again, if you're an entrepreneur, I believe there's never been a better time to be an entrepreneur. There's never been a better time to start a company because you think of the leverage you have, right? You can now get things done as if you had a team of 10 people, as if you had the team of 100 people. You can now have powerful financial tools and powerful business tools and powerful marketing tools and powerful creation tools. And you don't need to say like, how do I raise a bunch of money or how do I dilute my equity or how do I spend six months doing something that can now take six weeks or six days. So. This is very recent. Very recent. I have personally right now, deep into my open claw, which is an agentic AI framework. And I'm constantly having these mental breakthroughs and unlocks when I realize like what's possible and it's enabling me to do all kinds of things that I'd never would have been able to do before, like, you know, manage my health or be more effective at work or be a better communicator with my six thousand people in my address book and my network. And so it's, I'm constantly giving my agent, like I used to think of my agent like an assistant, right? And now I think of it like a genie and a bottle, right, where I just like whisper to the genie, you know, and things happen, right? And and and I, you know, the first mental unlock for me was, was when I realized that software doesn't exist, it can be willed into existence, right? I mean, I said, the very first project I gave my AI was, you know, I had 30 years of my address book was a mess, right? I got six thousand people, it's a freaking mess, right? You know, I don't, I don't, I don't have time to go deal with that. So I said, clean that up, right? Deduplicate it, make sure all the most recent contact information is in there and then put it in a CRM so I can actually stay in touch with these people and I'm on a, on a more proactive basis. And and in my head, I'm thinking, oh, now I got a license of CRM and which CRM and I don't have time for that and I got to modify it and then my agent said, so you want me to make you a CRM, right? And I was like, oh, yeah, you can do that, right? And then the next moment when I got my anthropic credit card bill, you know, from all of the tokens I was burning, I was like, oh, this is expensive. And it said, oh, you want me to figure out how to get that to zero, right? You can do all this, this and this and this locally and I can set that up for you so you don't have to pay anthropic, you know, to do that because I can tell on your network you've got an Nvidia 4090 card, you know, on this PC or I can tell you've got this much unified memory and I can just do this, this, this and make it work for you for free. And I said, oh, yeah, do that. It's like, did it, did it, done, you know, now I don't pay, you know, for any of that. And so every day I have these breakthroughs like where I can do more and more things and it's really empowering because I, there's no limits anymore to my, I don't think I don't have time for that or I don't think I don't have the skills for that. And so it's a great time to start a business, it's a great time to be an entrepreneur, it's incredible leverage. It's a real, it's like, and again, the world hasn't in the world of tech or, or San Francisco or London or New York, there, everybody seems to be like doing this, but you don't have to go too far out of those bubbles to realize that a lot of people are not even aware, you know, of this stuff yet. And that's a temper, not a permanent advantage, it's a temporary advantage, but when you, when you have a superpower and other people don't, you know, it's, it is an incredible advantage, right? And that window will close eventually, but it's like realizing the world has changed and other people haven't yet realized it's changed, you have, you have a, you have a, you know, maybe it's a six-month advantage, maybe it's a 18-month advantage, but you've got an advantage over everybody else, you know, if you take advantage of these tools, you know, the alternative is to live in fear and to be paranoid and to be negative and to be, you know, here's, everybody's going to do this and everybody's going to do that. I tend to also think it's human nature to think in binary absolutes, like everybody will lose their job and nobody will ever drive a car again and everybody will do this and nobody will do that. And that's normal human thinking, you know, to go to those extremes. But history shows the pendulum swings hard, right, in directions, but it usually settles back, you know, somewhere in the middle and things are never that simple, right? And there's also a difference between like what the technology could do versus what actually happens in the labor markets or these things. And so I tend to be more optimistic by nature because I like to build things and I'm, I'm a, I'm not an entrepreneur, but I'm, I have entrepreneurial tendencies and, and you can never, I believe also you can never be an entrepreneur and build things if you're pessimist, if you're negative, right? Because because it is, being an entrepreneur and building a business or building a product is by its very nature irrational, it's illogical, it makes no sense. The odds are against you, it's probably not going to work, right? And if you let that consume you and dominate your thinking, you'll never actually build a company or launch a product. You have to be able to believe that in yourself and believe that you can do it. And even if you can't quite figure it out yet, you have to believe that you will figure it out. And so the best entrepreneurs are optimists, I think, and they believe in themselves and their team and their ability to pull it off, even if they don't know exactly how they're going to do it. Thanks, Rio. Thanks for that. Uplifting and inspiring conclusion to our conversation, I agree, I think it's important to be optimistic and entrepreneurs, I think have to be optimistic, to be entrepreneurs. That's right. I agree, otherwise you wouldn't ever go. It's so important to have a go. So thanks so much for coming in and sharing your incredible knowledge of the music industry and what's coming and also some of your own personal stories, which I enjoyed. Yeah, thank you. Happy to be here. I don't think I've ever met anyone who was taught to read by Dolly Parton. So I love that. I'm a huge fan. I wanted to just finish, as I always do with two questions that I ask all my guests. The first is that read, here we love Mondays. So my first question to you, Rio is what gets you up on a Monday morning? On a Monday morning, what gets me up lately is the smile of my three-year-old daughter. So I love having a daughter, I love being able to see how she sees the world and loves discovering music and art and making things. So it really motivates me to think about my own health and my own ambition and my own responsibilities. So my family and my daughter. Does she start early or three-year-old daughter? She likes to sleep in. That's quite unusual. That's good. She's a grandson. Yeah, she does like to sleep, but eventually she gets up in the morning. Oh, cool. So that's really why I look forward to every morning. Fantastic. The last question, which is from my interview about why you, is, where do you see yourself in five years' time? Hopefully retiring in Italy, you know? Headed for Italy. No, but I'm just joking. Just joking. Yeah, the five years' time, you know, I'd like to be, you know, I'd like to still be curious and building. And I find my passion and my purpose is really about supporting people who need to put their fingerprints on the world, who artists, they all have certain things in common, right? They need to make a living. They need to find an audience, obscurity is the enemy of artistry. They need inspiration through tools and creativity. And so my mission and my purpose is to solve those things. And that drives curiosity, that drives my ambition. And so to me, that's my purpose on life. I'm not a great musician, you know, but I like supporting musicians. I'm not a great artist, but I like supporting other artists. And doing that at tremendous scale, if I can. Well, I wish you a complete success in that. Yeah, thank you. Endeavour, because I think that's really important. Yeah, thank you. And it gives people a lot of meaning and purpose in life. So thank you very much for coming. Thank you. Sharing those thoughts. Thank you. Thank you, Rio, for joining me on All About Business. I'm your host, James Reed, Chairman and CEO of Reed, a family-run recruitment and philanthropy company. If you'd like to find out more about music's match, or Reed, you'll find all the links in the show notes. Thank you for listening, and see you next time. [BLANK_AUDIO]