VNUE Inc., a publicly-traded company specializing in live concert recordings and experiential content for music fans, has announced today that it will be acquiring music identification and rights startup Soundstr for an undisclosed price, Billboard has learned.
The acquisition comes three months after VNUE bought live music distribution platform Set.fm from PledgeMusic, and signals the former’s expansion from consumer-facing products into the complex, B2B performance rights space.
Co-founded in Cincinnati, OH by Brian Penick, Todd Tieger and Eron Bucciarelli-Tieger -- the last of whom was co-founder and drummer of rock band Hawthorne Heights -- Soundstr last raised $1.1 million in seed financing in Nov. 2016, in a round led by local VC CincyTech alongside Gracenote and Accelerant.
In fact, Soundstr was an early pilot company for Gracenote’s Automatic Content Recognition (ACR) technology. The startup incorporates ACR into its Pulse monitoring devices, which in turn help improve Gracenote’s source-file library and fingerprinting algorithm with live performance recordings, not just pre-recorded MP3s. A Soundstr Pulse can plug into any in-venue soundboard or audio receiver with XLR inputs and outputs, and is also equipped with Bluetooth capabilities for better communication among businesses, patrons and advertisers.
VNUE has also been running its own device-based pilot with Gracenote's ACR -- dubbed the Music Identification Center (MiC) -- and plans to beta-test and ultimately integrate Soundstr’s solution with its own over the next several months into a single, cohesive offering.
"We’re pursuing the same paths, but from different angles," Zach Bair, CEO of VNUE, tells Billboard about his relationship with Soundstr. "I was approaching it from the perspective of having worked in the venue business and having dealt directly with blanket licensing agreements from the PROs. Eron [Bucciarelli-Tieger] was coming more from the artist side, where he performed all of these shows but wasn’t being compensated properly for his work."
VNUE hopes Soundstr will help streamline the process for rights clearances around its digital and physical live recordings for the likes of Ron Pope and Rob Thomas, in addition to refining the in-venue tracking process itself. Beyond the music industry, there is also ample potential to use the resulting tech integration to generate richer data around point-of-sale transactions, in order to justify how sponsorship dollars are being spent around music content.
Live performance royalty tracking has been a relenting problem in the industry for years, and collection societies around the world are competing on strategic tech partnerships as a result. For instance, DJ Monitor has secured partnerships with SACEM, PPL, PRS for Music and other societies to track live performance royalties for EDM creators, while SOCAN has inked similar deals with Muzooka and Pioneer DJ’s setlist platform Kuvo.
Barcelona-based music usage tracking company BMAT, which sources say was involved in acquisition talks with Soundstr, licenses out its own Vericast monitoring system, but focuses only on TV and radio. Soundstr was also part of an early pilot program with SOCAN alongside Kuvo, but sources tell Billboard that the latter won out more on pricing than on algorithmic complexity; the SOCAN-Kuvo partnership currently installs Kuvo devices into any EDM venue for free (albeit only in Toronto), but Kuvo bills itself as more of a consumer-facing social platform and does not incorporate ACR tech into its devices.
Most of the major PROs have their own live performance royalty tracking and payment system (BMI Live, ASCAP OnStage, SESAC’s Live Performance Notification System), and over 100,000 bars, restaurants and other smaller venues in the country pay a fixed price to PROs every year for legal broadcasting of tens of millions of musical works. According to a Soundstr study, this amounts to nearly a 4:1 ratio of general licensing revenue to digital service revenue for songwriters and publishers globally (2:1 in the U.S.).
But the PROs’ methods for securing and enforcing these blanket licenses are arguably aggressive. ASCAP in particular has sued nearly 70 different bars and restaurants over the last two years (most recently a batch of eleven venues in Nov. 2017), announced via a series of press releases that all tout the same headline: “Venues Refuse to Pay Songwriters While Profiting From Their Music.” It has also been well-documented that ASCAP and BMI traditionally pay anonymous "spies," often local DJs, musicians, music teachers, to visit non-compliant venues on a regular basis and document what music is being played with concealed recorders -- which they then use when testifying in court that a certain song was indeed played on a certain day at a certain time.
This is not exactly the most high-tech, efficient live tracking solution, and Bair envisions that the VNUE-Soundstr integration will benefit PROs as well by introducing the first reliable monitoring system around blanket license usage. ASCAP incorporates a "Follow the Dollar" factor into its royalty calculation formula, but without any monitoring system in place in a blanket-license context -- and with blanket fees determined more on a venue’s seating capacity, square footage or even the presence of a jukebox than on actual music usage or daily foot traffic -- there is no real way to “follow the dollar” as neatly as ASCAP and other PROs claim.
"From our perspective, we see that all venue owners want to pay for music to be played in their spaces, but the whole process has to be fairer and more transparent," says Bair, whose company has rallied the support of the Fairness in Music Licensing Coalition (FMLC). The CEO also hopes to change the entire fee structure around blanket licenses, such that venues pay only for the music they broadcast, as "99% of the music in these agreements will never even be used," he claims. "In order to be fairer to venues, we need to create a mechanism where they are paying on a more pro-rata basis, like in radio and TV."
The acquisition rounds out what Bair sees as a three-part vision for VNUE: helping artists and other stakeholders realize revenue from sources they might have not otherwise found before, protecting those artists’ rights and making sure the right people get paid. "We have this incredible opportunity to change the way things have been done for 50 years,” says Bair. "We don’t want to get into a big fight with the PROs, but we do want to get to the point where our tech can help everybody in the ecosystem: more licensed venues, more properly compensated artists and more clarity around exactly how and where the money is flowing."