Why QED invested in Stem

Can you imagine your life without music? Very few people can. The truth is that music has played prominent roles in every known society throughout history. Musical preferences have varied from culture to culture, era to era and person to person, but the commonality is that music has always been present.  

And technological progress has only made music more present in society. The development of recording techniques and playback methods in the past few decades have proven to be as important to the distribution and consumption of music as the Gutenberg printing press was to the written word. People now have 24/7 access to millions of songs that can be played on devices in their houses, cars and phones….all for a fraction of a dollar a day.

But while these advancements have made music easier to produce and distribute than ever before, the industry as a whole hasn’t kept pace. For instance, as I write this blog post I’m listening to one of my “liked” songs on Spotify. The song is Obedear and the artist is Purity Ring.

Obedear was the theme song to a scripted show called Search Party on HBO Max, and after hearing it in a few episodes I had to Shazam it to figure out what it was. My first “play” of the song was on YouTube, and after realizing that I liked it I found it on Spotify and added it to one of my playlists.

The important question to answer is: “Who knows how much every person or company involved with creating, distributing and promoting the song should get compensated for each of my listens?”

Who knows how much each person involved with the song should get paid every time I watch an episode of Search Party or Shazam or play the song on YouTube or Spotify?  Does everyone agree that the funds are flowing to the right people?  Who’s entrusted to get the answer right and how reliable are they?

The reality is that while approximately 85 percent of all revenue associated with music is generated and tracked through digital platforms, the answer to “who gets how much under which situations” mostly resides in paper form (contracts). Distributions are made by gatekeepers who are “entrusted” to make sure that money is distributed to all relevant parties based on what’s outlined in these very complex contracts. They collect all the incoming money, do their internal calculations, and then send out a series of checks that supposedly adhere to the paper agreements.

To put it bluntly, this makes no sense anymore because technology can fix this issue. Just like Carta exists to house the cap tables for Private companies, there should be a similar technology company that acts as a “truth file” for how music revenue should be distributed for each and every song. Guess what?  This company does exist and I’m happy to say that QED Investors just led its most recent round of financing.

The company is called Stem, and its CEO, Milana Lewis, said it best when she said: “It’s asinine that labels are still sending paper statements to artists a couple times each year. We believe that labels should have a dashboard that tells them how much they’ve invested and shows their artists and collaborators when they can expect to get paid. We’ve brought this experience to life for our clients, and now we want to give everyone the experience they deserve.”

Today’s reality is that the vast majority of artists signed to labels have no direct access to an accounting of their earnings outside of the paper statements they receive twice a year. Stem solves this.

Today’s reality is that labels process royalties infrequently because the legacy systems they rely on make it painful to keep up with the increasingly complicated deals and business arrangements that are required for a successful music career in 2022. Stem solves this.

Today’s reality is that access to simple and powerful financial tools have empowered small business growth in other industries but the music industry hasn’t solved for the same level of clarity and fairness in payments. Stem solves this.

Stem has methodically been building a much-needed suite of tools for the music industry over the past 7 years. Its solution has been helping independent artists and labels by providing much-needed clarity to the notoriously opaque finances of the music industry. Artists and their collaborators can fairly and easily share royalties by relying on Stem to provide the operational backbone for agreements that previously required an entire accounting team to administer.

As of 2021, Stem has paid out over $200 million to 40,000 unique individuals and interested parties, but this is merely scratching the surface on its potential.  The new capital will help fund Stem’s next phase of growth, enabling it to offer a wider range of financial tools to artists and labels who want to gain greater control over and transparency about their business.

What’s obvious and exciting is that music is entering a new age that can be likened to a modern day renaissance. And with Stem’s technology playing the role of the all-important “truth file” for ownership and payment, Artists and their collaborators can focus on the things they do best — create.