Digital Distribution Pioneer Robb McDaniels on Creating a Better Future for Music Managers and their Artists

“Managers simply have to evolve otherwise we will never turn the recorded music industry around.”

When Robb McDaniels launches a new business, it’s smart to pay attention. In 2002, the now 41-year-old entrepreneur began developing a digital platform in his extra bedroom to distribute European dance music to the US. Within a decade, INgrooves was distributing Universal Music Group’s entire digital catalog in North America and servicing millions of other songs worldwide, and McDaniels, whose previous industry experience was a handful of DJ gigs, was featured in Billboard’s 40 Under 40. McDaniels made up for his initial lack of music business knowledge with tenacity, as well as an emphasis on efficiency and superior technology. By the time he stepped down as CEO at the end of 2014, that approach had helped him grow the company into the leading independent digital distributor in the world, while shaping the digital marketplace along the way.

Earlier this month, McDaniels announced his latest project, Faction Entertainment. He hopes the management services company will help artist managers (“The new power center”) navigate their ever-increasing workload, which he believes is riddled with inefficiencies. Most of these issues “aren’t from a lack of effort from managers,” he told us in an interview after the launch, “but rather a lack of tools, infrastructure and technologies developed specifically for them.” Sound familiar? Six managers have already signed on to work with Faction. The combined roster include artists such as Everlast, Jamestown Revival, Royce Da 5'9, Dilated Peoples, Blackalicious, and Ryan Bingham. Faction’s model is ultimately designed with artists like these in mind. “There’s plenty of money to go around,” McDaniels says. “We just need to eliminate the friction as much as possible and allow the artist-fan relationship to flourish.”

Knowing what McDaniels achieved at INgrooves with minimal music business experience, we’re excited to see what he can do with nearly 15 years of knowledge and relationships under his belt. In the meantime, we caught up with him learn more about Faction and his plans for empowering artist managers to chart a better future for their artists and the music industry.

SONGSPACE: INgrooves played an important role in helping labels navigate the transition to the digital download era of the 2000s. Now that we’re at the beginning of a new streaming era, what do you see as the biggest challenges and opportunities facing artists and their teams?

McDaniels: With any format change, or change in consumption pattern, there are going to be many challenges and opportunities that present themselves for both the business and creative processes.

Here are some examples for each:

Business Challenge — increased streaming consumption results in a meaningful shift of cash flow from today out over several months. Instead of receiving $1 for a download today, I now receive several cents per month over many months, hopefully eventually surpassing the $1 I would have received today. This means that I will make my money back more slowly, but potentially make more money over time. Just think about how this can impact marketing spends in advance of album releases.

Business Opportunity — with more consumption happening from the “lean-back” experience, there is more opportunity for music to be discovered via playlists. I believe 70% of all music streamed on Spotify comes through playlists (now if we can just ensure that the majors aren’t buying these playlists and dominating the set lists!), which opens up an infinite market opportunity.

Creative Challenge — with the always-on, always-available streaming platforms, there is just so much content and noise out in the marketplace. Thousands of songs are released every week and added to playlists, so how does one emerge from this clutter and reach the fans that will appreciate the art? It’s never been easier to get your music “out there” but never been harder to get your music “heard”.

Creative Opportunity — the streaming services aren’t just about a change in format, they are platforms to increase engagement with your fans and potential fans. These platforms have very active user bases that want to engage and absorb with the artist through the music and other social layers. Artists and labels that leverage the technical investment made by the streaming platforms to more actively and intimately engage with their followers will “win” in this new era.

In a recent Billboard article, you claimed the artist management space is riddled with inefficiencies. What are they? Do you see technology as the primary solution?

I can’t give away all the secrets about what needs fixing and how Faction is going to change the dynamic for managers, artists and all the partners in the ecosystem. However, let’s just say that most of the inefficiencies aren’t from a lack of effort from managers but rather a lack of tools, infrastructure and technologies developed specifically for them. You don’t realize just how important the artist-manager relationship is until you have lived it and watched it in action. You then realize how vital it is to provide managers around the world with the business support they need to run their business like an effective CEO. That’s what Faction will help managers do, and their artists will reap the rewards of a healthier, more productive CEO.

Do you think managers are best positioned to take advantage of the next era of the music business? Is there a place for traditional labels and publishers in your long term vision?

Managers are the new power center of the music business — maybe they have been all along but now they are definitely in the spotlight. More and more responsibility for curating, expanding and harvesting their client’s careers is being pushed on them by consolidation in the marketplace on one side (with labels and publishers) and a fragmentation on the other (increasing number of revenue streams and promotional outlets).

Managers simply have to evolve otherwise we will never turn the recorded music industry around. I am sure there will always be a role for labels and publishers — especially those that are passionate about the music they are working on and not just fixated on market share gains — but the lines continue to become blurred. But one things hasn’t changed — artist managers can’t offload responsibility for their artist’s careers. The buck stops with them, and Faction is here to help shoulder the load.

What does a viable music industry look like to you in 10 years? What are the key problems that need to be solved in order for it to happen? How can managers help push the ball forward?

Music has never been more ubiquitous, interactive and fun, but we need to do a better job of monetizing its popularity. More artists are making money, but fewer artists are making lots of money. That’s ok, but we are easily leaving $.50 of every dollar uncollected or unmonetized. We need the entire ecosystem to work towards ensuring a fair and equitable system for compensating copyright owners for their art. There’s plenty of money to go around we just need to eliminate the friction as much as possible and allow the artist-fan relationship to flourish. Sometimes the best thing the business side can do is get out of the way. Riding shotgun is just fine with me, and that’s why I am more than happy to partner with artist managers and let them do their thing!