As he spoke to MBJ, Floyd Tyler looked for a way to describe not just his firm, Preserver Partners, but George Monger’s startup, Connect Music.
“Both of us probably are, what’s the word I’m looking for — underappreciated,” he said.
For a local alternative investment management firm like Preserver — which has about $235 million in assets under management — participating in a meaningful deal tied to music royalties can be challenging. And for a young, Memphis-based music monetization business like Connect Music, scoring an ample amount of capital isn’t easy.
“The truth is, larger firms that are involved in music royalties … they don’t make room for firms like Preserver,” said Tyler, the firm’s president and chief investment officer. “They’re doing this investment activity, they love it, and it’s very attractive, so they’re not interested in sharing or bringing on any additional partners.”
Preserver and Connect Music, however, have forged a new partnership — one that could prove to be lucrative not just for them, but an array of promising artists.
“Here you have two minority firms, based in Memphis, who have decided to partner to build something that doesn’t exist in this community, or in the Southeast,” Tyler said.
'Turning that on its head'
Preserver has committed a $10 million credit facility to Connect Music, which plans to use the funds to support the work of independent and legacy artists, and ensure they keep the ownership rights to their songs.
The deal is the latest victory for Connect Music, which distributes songs globally, and ensures its artists, writers, and producers receive compensation and recognition for their work. The startup has about 220 label clients, acts as a sub-distributor for five other music distribution companies, and recently paid $2.5 million for a Downtown headquarters. That move placed it less than half a mile away from both FedExForum and the National Civil Rights Museum.
Connect Music HQ
The money from Preserver could help Connect Music — which focuses primarily on hip-hop and R&B — entice talented artists to its roster, as it provides them with a potential solution to a conundrum common in the industry.
Though streaming platforms’ rise to dominance has provided artists with more avenues to showcase their work, this has led to a flood of content. According to Monger, nearly 2.5 million songs are uploaded to streaming services each month, a number that raises a difficult question: When you’re swimming in a sea chock-full of content, how do you rise to the surface?
Typically, a significant boost can come from funding. As Monger said, “One of the things that helps cut through that noise is making sure you have the dollars to go to market.”
These are dollars that record labels are often willing to supply, and they’ll provide the resources and the promotional pushes that give artists the best chance of succeeding. But the arrangements can come with a trade-off — they can force artists to sign away the ownership rights of their songs to the labels.
Connect Music, however, looks to give artists the best of both worlds. Using the credit facility from Preserver, it provides the infrastructure, team, and resources they’d normally receive from a label, and help scale their releases for maximum exposure.
“What if you could put $15,000 or $30,000 or $50,000 into your press tour, your podcast runs, your platform, your out-of-home advertising,” Monger said. “This credit facility, in conjunction with our label services team, allows the artist to have the machine that you ordinarily look to a major label to get.”
The difference, though, is that Connect Music lets the artists keep all the ownership rights to their songs. Instead, the startup looks to make its money through a revenue share model, with the artists keeping 70% of their earnings.
“A lot of people in the industry … they want you to give up ownership, and give up agency, for the promise of success,” Tyler said. “And we’re turning that on its head, and saying, … 'You don’t have to do that.' We can provide capital, and come along side you, as you invest in yourself and in your music, to generate more wealth. And you can do that without giving up ownership.”
Dynamic modeling
That’s not to say Connect Music plans to write a check to anyone who walks in with a record. The startup has a staff of 14, and it’s highly selective on which artists it chooses to work with, using a rigorous process that goes beyond just listening to a song or looking at streaming numbers. Connect Music relies on hundreds of data points in its modeling, and this includes a three-phase approach to every deal it makes: team, talent, and total consumption metrics.
“These are all critical to our process,” Monger said. “Our modeling is dynamic and captures specific data beyond streaming metrics.”
It’s in-depth work like this that helped give Preserver the confidence to commit $10 million to Connect Music, and the credit facility puts the startup halfway toward its goal of raising $20 million. While this $10 million is to be used to attract and support talented artists, the other $10 million is to be used to fuel growth of the business, and it expects to start raising the money in the fourth quarter.
For both Preserver and Connect Music, the $10 million credit facility also shows what can happen when two local businesses work well together.
“This is an example of, if you have a good idea, and you can structure it fairly, and have mutual collaboration and respect, you can do something pretty impressive,” Tyler said.
