How Mark Cuban Sees The Music Business — Live at SXSW

0:00Mark Cuban:Let's go. From Nintendo and Illumination... The Super Mario Brothers can take care of the kingdom. Hey! ...comes a super-powered adventure. Woo-hoo! On April 1st... Pack our things. ...the galaxy gets even bigger.

0:21Mark Cuban:He knows that's my bike, right? Yes-y. The Super Mario Galaxy Movie. Only beaters April 1st. Get tickets now. Kayak gets my flight, hotel, and rental car right, so I can tune out travel advice that's just plain wrong. Bro, Skycoin. Way better than points. Never fly during a Scorpio full moon. Just tell the manager you'll sue. Instant room upgrade. Stop taking bad travel advice. Start comparing hundreds of sites with Kayak and get your trip right. Kayak. Got that right. This episode is brought to you by White Claw Surge. Nice choice hitting up this podcast. No surprises. You're all about diving into tastes everyone in the room can enjoy.

1:07Just like White Claw Surge. It's for celebrating those moments when connections have been made and the night's just begun. With bold flavors and 8 % alcohol by volume, unleash the night. Unleash White Claw Surge. Please drink responsibly. Hard seltzer with flavors. 8 % alcohol by volume. White Claw Seltzer Works. Chicago, Illinois. We all know Mark Cuban, the famous investor known best perhaps because of his appearances on the hit TV show Shark Tank, has previously said in an interview that there's a few sectors that he considers to be the death in investing. This includes restaurants, liquor brands, clothing lines, and music.

1:46So, of course, when I knew I was going to Cuban in I's home state of Texas to film some live episodes of On the Record at South by Southwest, I knew I wanted to have Mark on to tell us why he said that. So on this episode of the show, here is an outside investor's perspective on the challenges and opportunities in music investing.

2:09Welcome back to On the Record, a music business podcast from Billboard and Sick Bird Productions. As always, I'm your host, Kristen Robinson, and this week we are doing something a little bit different. We are at South by Southwest in Austin, Texas, at the Billboard House, talking to some incredibly smart executives in front of a live audience. As many of you already know, Mark Cuban has an insanely impressive resume. Originally from Pittsburgh, Mark's career really kicked off after co-founding Micro Solutions, a systems integrator and software reseller in the 1990s. After a successful sale of that company, he was part of the famous dot-com bubble, building up a company called Broadcast.com, which was eventually acquired by Yahoo.

2:51Since then, he's done a million things in the world of business and entertainment. But he's likely best known, at least in Texas, for being the majority owner of the Dallas Mavericks starting in the year 2000. Now, he's still an owner, but now a minority owner. And he was a judge on the hit investment show Shark Tank. Most recently, he launched his latest company, Cost Plus Drugs, in 2022, with the aim of lowering generic drug prices for U.S. consumers. It's become a major disruptive force in the world of health care. And it's helped so many Americans afford life-saving medication without breaking the bank.

3:25You might also be wondering, what does Mark Cuban have to do with music? Honestly, not a lot, but I found this fascinating recent interview, which I mentioned between him and Shannon Sharp, in which Mark Cuban talked about how music was not the greatest way to spend one's money. So I wanted to have him on to tell us more about his perspective and to get out of our little music industry bubble for a second and to see how outside investors view our business. I'm honored to kick off this special week with the acclaimed Dallas-based investor Mark Cuban. Without further ado, let's get into it. Here's my conversation at South By with Mark Cuban.

4:03Hello, hello, hello. Look, I had to pick a Texas band because we're in Texas today, y 'all. Welcome to the first ever live taping of On The Record, which is Billboard's new music business podcast. We're here with the one and only Mark Cuban. Make some noise. Oh, my gosh. Mark, thank you so much for coming. Thanks for having me, Kristen. Okay, so I wanted to have you here today because you're outside of the music business, actually. Everyone that I've had on the podcast so far are people within the music industry talking about how great it is and how perfect everything is going. But you have an outside perspective.

4:37And you've said a few times before that you think that music investing is really tough. Yeah, I think it's the worst industry ever. No, it's probably tied with clothing, branded clothing. You know how everybody always comes out, they have the slogan like I-B-Y-U, and they make it. Yeah, that's the worst, and music is right behind it. Okay, but there are so many different areas of music investing. We got catalog, we got traditional music companies like your record labels and publishers. We also could even look at the music tech companies, a lot of AI companies right now in music. So what are you talking about when you say that?

5:12So not so much the licensing, because that's just a stream. That's not even music investing. That's cash investing. So like catalog, you mean? Catalog, yeah. And then in terms of what's bad, more for artists, from the artist's perspective, because everybody's an artist. And no one ever creates a song in particular, and they think, well, my song sucks. So everybody thinks their song is going to be a hit. They hear it. They feel it. They spend all their time, all this emotion. and then you have to go through this machine to try to hope that you can pop out on the other side and actually make a living.

5:47And it's really hard. And 99.99 % of people fail. Yeah. So you're talking about kind of like frontline current artists. Yeah. It's just really tough. Any artists, yeah. Anybody trying to write a song or perform a song and get it published. Yeah. I mean, what's really interesting about the music industry is that I think it's inarguable that being a musical artist and having that work out is one of the hardest things to accomplish in the world. But also we're seeing a ton of interest from the financial world, like your KKRs, your shamrock capitals of the world, in investing in older music. We're seeing these giant sums of money for Queen's catalog, Britney Spears, whatever.

6:23And it's just interesting that there's... But that's not really music investing. It just happens to be music that is the vehicle for their investment. Because they look at Queen, they look at David Bowie, they look at the original Bowie bonds, right? And so they say, here's all the licensing revenues pretty much every year and it's consistent and it increases by three or four percent a year. And the artist really hasn't been able to get a big cash out yet or the catalog owner at that point in time. So someone like a KKR, a big investment company, will just come in and say, okay, I'll give you all this money.

6:55And they just see it as, you know, here's my returns. It's almost like, you know, owning an apartment building. It's an asset. That's how they always phrase it is like music is now an asset class, which I think if you say that in front of an artist, that would really freak them out. Yeah, because it kind of like diminishes their art, their work and everything. And they're right, right? At that point in time, they don't care who the artist is. They just care who licenses it. And then once you own the catalog, if they want to put you into a Skechers commercial or whatever, they can do whatever. Yeah.

7:28I mean, yeah, it's very interesting. I always tell people, I'm like, okay, when you're talking among your finance bros, you can talk about music as an asset all day, every day. But if you get in front of an artist and you talk like that, you're not going to like that. It's an insult. Yeah, yeah, yeah, it totally does. Well, I mean, moving on to a different category within the music industry, music tech. So Spotify is one of those companies that when I talk to investors about investing in music, they say, you know, it's not producing enough returns for us to be interested. but Spotify is usually the one example where they're like, yeah, I kind of wish I invested in Spotify.

8:04I'm wondering, do you think there, I mean, that was kind of the rise of the streaming era. We're now moving into an AI era. Do you think that there's going to be another opportunity for a Spotify-like music company to emerge? It depends how consumers, music consumers, take to AI-generated music. Yeah. Because if they see it as an equivalent to what an artist produces, then yes, there'll be new ways to do it and it may not even be through a third party it could be okay give me your spotify end of year right and then i'm going to create music just for you and if people accept that the game changes completely if you still want to get radio play and all that or if you listen to radio or if you want you know to take spotify's recommendations then i don't you know then no that won't happen but that that's to be determined we don't know how people are going to respond to purely AI generated music.

8:57And we're seeing some of it roll up the, you know, the hit list, right? And so it's not that people are saying no, we just don't know if they'll only say yes to it. Well, yeah, what's interesting about that is like, yeah, we don't know if they're saying no, we also don't really know if they're saying yes, because a lot of the instances where AI songs are moving up some form of a chart, we see it on the TikTok charts, we've seen it, we've seen it. But that's how everything works, right? Everything is built on the algorithms. yeah the entire music industry other than old school radio is built on algorithms i mean whether you start on youtube whether you start on tiktok whether it's instagram where you know whatever the meme is you need to be part of it and you need to feed that algorithm and even though if you're a new artist and you're trying to get on spotify you know you're pit you're trying to create content that tweaks the spotify algorithms to get you in front of more people right and so that's kind of what makes it so hard.

9:54It's almost like politics and you're a candidate that's trying to find your way. Music is the same way. You have to understand how algorithms work in order to be successful or you just have to be so good nobody can ignore you. Yeah. I mean, that's interesting you bring up politics. Tomorrow's episode, live episode of On the Record is going to be all about how songs go viral today and a lot of the tactics that are used by politicians are also used by record labels trying to break songs. Yes. It's all these weird covert ways that you wouldn't even know that they're kind of manipulating the algorithm.

10:27Because what record labels used to offer was access to all these gatekeepers. They used to know, you know, all the people at the radio stations. That's still important, but it's kind of further down the line. I knew all those people, right? You had to know the PD, the program director. You had to know the consultants. And there were consultants for every format. And then they would switch from classic rock to alternative or whatever. Now it almost doesn't even matter. Yeah, yeah. And so now what they're really trying to do is try to give you some sort of a boost on the algorithm any way that they can.

10:59And usually it's kind of throwing money at the problem, maybe hiring a digital marketing company who promises they can do it. Which they can. Which no one can totally promise it. But now what's crazy, here's what's changing. Yeah. Do you guys know what agentic AI is from companies like Claude and Clawbot and all that? That'll revolutionize all of that because it'll be able to not be smart, but to just keep on banging on. Because when you hire an agency, they bring in some people and they say, based on my experience, here's what you should do. And here's how we'll kind of reverse engineer the algorithms.

11:32This is what works. Agents don't have to do that. You set up your own little Mac mini with CloudBot and it'll just send everything it needs to to a list. It'll create websites. It'll create unlimited number of websites. Like you've talked about the fan websites that are created by the publishers or distributors. And you're going to see that times a million with agents. Yeah. Yeah. I mean, it just kind of, when I think about that and I go that far down the line with AI, it's like what music jobs are going to be left? And I - You still need to see the jobs won't disappear. It'll just, because, so you look where the leverage is, right?

12:10So if you're a distributor, publisher, you know, you're Warners, you're Sony, whatever, right? universal um you have all the leverage right now because you can get placement on legacy media no matter what right you're not going to all of a sudden be able to make something um um viral on tiktok well you can get placement in on radio stations you can help create a tour you can place them in in venues so you have leverage there the people at the bottom that the new artists have no leverage. And so the less leverage you have, the more you're going to try to use new agentic AI opportunities because the marginal cost for you to try to connect is really small.

12:52Well, okay. So if it was that a lot of baby artists who are not plugged into a record label yet start using all these new tools that are going to come about via agentic AI, it kind of makes it so the artist doesn't have to sign to a record label for even longer and even longer. And that's a trend we've already started seeing. Artists are doing a lot of stuff. I would say artists very much so have to be entrepreneurs to make it. Every artist is an entrepreneur. You have to be. And you have to make tough decisions. They're almost like athletes in that you weren't raised to be a business person or entrepreneur, but you've got to figure it out.

13:29And you've got to hope that if you don't work on it, then the people you trust are trustworthy but again i'll go back to ai like if i was a baby artist and i was getting started i would go right into clod and say okay what steps should i take to try to maximize my spotify um uptake if you will right how can i you know so you know the whole thing going to the spotify editors it'll write you know their letter to the editor now you now you have to like tweak it so it doesn't because otherwise they'll all sound the same yeah right yeah but then you know make I need some fan accounts, right? And I need some fan websites.

14:05And I need this and I need that. It'll all do it in three minutes. Yes. Okay. But then, okay, the Spotify editors are going to be flooded. I'm going to be flooded as a music journalist. And I think it's going to, I mean, it's just going to be even harder to break through and to get noticed. Every time there's a new technology, the early adopters get an advantage. So if you're one of the first hundred to use Spotify editor, you do this for Spotify editor, you're good. Right. Because they're still figuring it out. Then if you're the next five thousand, then it all has to change. And so you'll start looking for different ways to accept input from people.

14:44And so you'll use your own agent that says, OK, if this comes from a gentic A.I., dismiss it unless it's A, B or C. And so, you know, and people think these are going to replace jobs and it's all going to get ugly. And I don't believe that at all because somebody has got to have some common sense. Somebody's got to be able to use judgment because you're not going to trust your AI to, you know, to look at the emails or the input that you get and make a decision. Yeah. Interesting. Interesting. One thing that a lot of people in the music industry believe, especially investors in music catalogs believe, is that the music industry is recession resistant or recession proof.

15:22That is not correlated with the overall market. If the economy were to tank tomorrow, people are not going to stop listening to music. Spotify is so cheap. Why would they cut the cord on that first? Maybe they would cut the cord on Paramount or their million - Whatever comes next. Video on-demand services. But maybe not music. I'm wondering what your thoughts are on that idea. Does that hold up? No, I think it holds up, right? Because the worst things are, the more people need music. So I'm a big believer in that. that music soothes the soul type thing, right? Totally. And just, you know, makes life livable.

15:57But at the same time, again, what's the source of all that new music? That's what we don't know. And so if you've played with any of the music creation tools, they're good. Have you tried them out yourself? Yes, of course. I've tried everything from Sora to all of them, you know, because we all, you know, we sing in the shower. Now we don't have to sing in the shower to sound good. You know, you just talk and give it your voice and let it create a song to the genre you want. And you're like, oh, my fucking God, is that me? You know, and now imagine if somebody that has talent is able to do that.

16:33Yeah. Right. And has is creative, unlike me and can create something. Now, is that going to be the source? And, you know, how are we going to convey that? Is it like, okay, Mark, I like the tenor of your voice. Can I license your voice and put it into this new AI music generation tool and let it create the songs that I like? Or you could, you know, Adele, I don't need you to write the songs. I'll write my songs. I want to use your voice. There's going to be a lot of instances where music companies, they're already starting to do licenses with some of these AI platforms. They're going to be having to reach out to the art.

17:11Score more with the college branded Venmo debit card and earn up to 5 % cash back with Venmo Stash. Got paid back? With the Venmo debit card you can instantly access your balance and spend on what you want. Like game day snacks, gear, tickets and more. The more you do, the more cash back you can earn. Plus there's no monthly fee or minimum balance. Sign up now at Venmo.com slash college card. The Venmo MasterCard is issued by the Bancorp Bank N.A. Select schools available. Venmo Stash terms and exclusions apply at Venmo.me slash stashterms. Max$100 cash back per month. So good, so good, so good.

17:44Spring styles are at Nordstrom Rack stores now, and they're up to 60 % off. Stock up and save on Rag & Bone, Madewell, Vince, All Saints, and more of your favorites. How did I not know Rack has Adidas? Why do we rack? For the hottest deals. Just so many good brands. Join the Nordiclub to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite Rack store for free. Great brands, great prices. That's why you rack.

18:11Mark Cuban:Protein is now at Starbucks, and it's never tasted so good. You can add protein cold foam to your favorite drink or try one of our new protein lattes or matcha. Try it today at Starbucks.

18:26Artists and be like, hey, are you cool with us doing this? So it'll be interesting to see if your Adels of the world have any interest in being part of this or not. I think it's good. Hey, for sure. Yeah, but that's one of the things I've been dealing with in my reporting is I can't get much clarity on how it's going to trickle down to the artists. The reason you can't get clarity is because nobody's paying enough money to get their attention. Because remember, my company, AudioNet, way back when 1995 was the first streaming company. And when there were 1 ,000, then 10 ,000, a million, 5 million, 10 million people streaming, when it was 1 ,000, we couldn't get the label's attention.

19:02and then we got up to a couple million and then we had like matchbox 20 releasing songs we had willie nelson releasing songs on our jukebox you know where you had to download all the stuff it's not like spotify or netflix or anything so it was a different world but once the numbers got big enough you know and then when napster came along and it started taking money from cds and dvds etc then that got their attention right now it's not enough money and it's not taking enough money to get their attention, but it will at some point in time. Yeah. I mean, well, that's very interesting that you bring up Napster.

19:37That's kind of around the same time as the dot-com bubble. I know that you were very active during that time in the early days of the internet. That ended up being a bubble that you were able to glide through and continue on. Yes, I did okay. Yeah, you did okay in it. You did okay in it. But now a lot of people are saying that right now we're in an AI bubble. What do you think? I think for private companies, the economics may be a little bit rich right now. because like back then, anybody with a website could go out there and raise a million dollars. Now, if you have, you know, any amount of decent AI technology, you could raise, you know, in some cases, tens of millions of dollars.

20:12And so, but back then it was a public company bubble. Now, because it's geared towards private companies, it's not really a bubble by definition because most people can't participate. Like I remember to come in the early days of South by when we had AudioNet and then Broadcast.com and we went public. and it was just like a huge IPO. And being in a cab, remember cabs? Being in a cab and people talk, the cab drivers just wanting to talk about internet stocks. Like you don't have people talking about internet maybe a little bit. You've got like NVIDIA and some of these others, but it's not the same at all.

20:48Okay, interesting. And plus the other thing I'll add, AI, like once you got to a certain point from 1995 to 2000 and 2002, like it was only about bandwidth the technology didn't really change a lot the technology in on with ai is just changing by the millisecond and so as it applies to music we're i mean like in 1995 to stream a song like if you want you could literally go stream willie nelson's latest album right we brought we broke songs for um matchbox 20 and others but to do that you had to first have an internet service provider subscription, download this thing called a TCPI client, download your internet service provider client, and then on top of that, download, you know, Real Audio or Microsoft, whatever, to listen to the song.

21:37You had to go through all this just to be able to listen to a song. The technology got better and it got easier. AI is the same way. The technology is going to get a lot better, just like the streaming technology did. And what happens then? Oh my God. Because now no one thinks twice about what's streaming, what's behind all that happens to stream. You just click on your Netflix movie or you click on Spotify or whatever comes up. It's like magic. It's magic. Yeah. Yeah. And AI is still not in that magic phase yet. Yeah. Yeah. Well, I mean, okay. So you were in on early streaming. Why do you think Spotify ended up being the one that really nailed it for music?

22:14Because I sold to Yahoo and they fucked it up. I'm being serious. I'm being very serious. Cause like when we well when we sold in 2000 we had um 400 internet radio stations we had literally it could be here in march and we had christmas radio stations playing i remember programming my own radio stations and you could program your own radio station um we were streaming everything we started doing live tv all this stuff and then um we sold to yahoo and then the internet bubble burst and they kind of closed everything down because they were stupid and that's when youtube like YouTube took off, took five years before YouTube started to happen.

22:52You know, Spotify, I knew all those guys, right? You know, they would come to me, they would come to these events where I was speaking and they were just getting started. So, and I think we'll see something build around AI that just changes the game because AI can do things that we never imagined. Yeah. I mean, going back to what we were talking about earlier with whether or not audiences will enjoy and take to AI generated songs. It's really interesting. Like what we've been seeing recently is the songs that have climbed the charts. It seems like the audience doesn't really know it's AI. It's usually the very passive forms of consumption when it can succeed.

23:30So like when I'm scrolling on TikTok and there's a song in the background, I'm not really thinking about who's that song. Yeah. But on the flip side, like I've heard real artists and I thought they were AI. Okay. Yeah. Fair. You know, I mean, that's kind of become like an insult to hurl at people if they make some battle or it's just like, oh, is that AI basically? Right. I mean, but you know, I mean, have you guys listened to something and you thought it was AI or saw it? Yeah, that's just, and you will get to the point where we don't know. The question is, will we get to the point where we don't care?