How the Music Business Is Looking Halfway Through 2026 w/ Dan Rys, Elizabeth Dilts Marshall & Bill Donahue

27:17You know, you can look to the deal that The Weeknd did. Like the catalog deal? Yeah. Well, and that's what I was going to say is that at the very least, it gives him a ton of leverage to renegotiate. even if he wants to stay at Universal, it gives him a ton of leverage because one of the things we talked about, right, when the lawsuit was filed and it was, there was much speculation about this was, is he using litigation as a means of leverage, you know, in with these, because it was very clear that, that his contract was coming up. And, um, so I think the question of stay, but have more, like have more leverage is, is a, you know, a big part of this conversation.

27:55And, you know, we're always talking about ownership, right? He wants to own his masters. He has owned his masters since around 2018 when he did a big renegotiation with Universal. He does not own the masters to the beginning, the first couple albums of his career. He would certainly like to. And I think that there will be, that will be a big element of this as well. Okay, let's spin the record. This is another one for me. In March, an episode of On the Record with digital marketing firm Chaotic Good went viral, sparking a huge online conversation about whether or not fans can trust the internet and what songs are trending through all of the various means of digital marketing sorcery that they are doing behind the scenes.

28:36Why do you think this episode in particular struck such a chord? Okay, so I'm not surprised that it struck such a chord because I think in the time period that we're in more broadly as an American society, everyone is obsessed with conspiracy theories. People don't believe anything anymore. I think like the Epstein, all of the Epstein files are like a perfect example of people liking to understand or they want to sleuth out like what's happening beneath the curtain, like behind the curtain rather. what's going on with the most powerful people that we don't know about yet and so learning that a lot of artists are using digital marketing companies and doing really savvy things like for example they talked about narrative campaigns which I think struck the most I think it created the most discourse around that narrative campaigns would be if they got a bunch of accounts to comment on you know let's say you do an SNL performance as an artist to control the narrative that the SNL performance was good, they would send in a bunch of accounts to comment, this is the best SNL performance I've ever seen.

29:44And that just kind of boosted in the algorithm. It keeps the sentiment high. That obviously was something that fans did not really realize was happening. And it's upsetting. And I understand that it's like, you know, realizing that there are so many, you know, puppet mastering kind of techniques that are happening behind the curtain that they didn't know about already. So I'm not surprised that that struck such a chord. I am struck by the scale I'm still seeing stories come out about it and not all of them properly said of the podcast by the way so I think it's it was striking that the initial kind of narrative that came out of that not to use the word narrative again but was was oh my god digital marketing is a psyop like what are we talking about with the word psyop it was that was bizarre to me and then I think that people were also very confused because they genuinely like the band Geese.

30:38Yes. Let me explain that for those who might have. Yeah, Geese was dragged into it unfairly. Okay. Yeah. Let me explain that. First of all, is Geese a psyop? No, it's not. In my opinion, I think they're a really talented band. Cameron Winter is an incredible front man. And also, I've said this, I made a TikTok about this. These campaigns to boost songs do not work if the song is bad. I've had so many people at record labels and management companies tell me, we've tried campaigns like this and the song never took off as soon as they took the foot off the gas of the digital marketing spend and they stopped throwing fuel on the fire it literally is fuel on a fire so if the fire is burning like it was for geese and then let's say they do a digital marketing campaign that might help make the fire bigger but it's not creating the fire itself you still have to be good and still have something appealing i think so there's something so like infantilizing about like telling a bunch of people that no you didn't actually like this band you were you were convinced by uh by a nefarious like black box uh to to like this band i think there was just a much more measured conversation to be had that that quickly spun out of control because that's how the internet is now but of like like you said i think some people don't know you know that this stuff is happening and that is an interesting thing for people to talk about.

31:55But the idea of whether or not it was a psyop or whether it was outside the realm of like the normal marketing tactics is like a totally different level than what, you know, than what then that sort of valuable conversation of like, should we be buying things? Should we buying these kind of like comments and clipping and all that stuff? There was just like a middle ground that I think the conversation mostly avoided. So there's a really interesting tie in here to one of your previous podcasts with the fabulous podcast you did with Kalshi. Oh, thank you. You were talking about narrative marketing as cranking up sentiment.

32:39So Sam Handel, who is the lead partner, I think is his title, at Dundee Partners. Dundee Partners is the primary backer or a primary engineer behind Cord, which is a catalog acquisition entity that works with UMG. Sam founded a thing called Dataminer as his first major success in his career. And Dataminer was the OG version of sentiment analysis, a tool that would basically look at what people were tweeting about and socializing on all of the platforms. and then provide that sentiment index data to investment firms. And then you would act on that. You'd make investments in or against consumer products based on that.

33:30I think of consumer products is probably the most obvious. But, like, it worked for everything. It was a huge success. And so, you know, catalyzed this, you know, in some part catalyzed Sam's success and movement onwards into other things he did in music. But the new version of that is CalSheet, right? Like she was saying on your podcast that people are going, you can't trust maybe the original iterations of sentiment mining for investment decisions now because of things like narrative marketing. So you're now going to platforms like Kelshi to see what is actually, like how big is the fire underneath that fuel?

34:09Yeah. She was saying also, I think this is a really good note that, you know, her take on prediction markets is that when you put your money where your mouth is, you're more likely to be honest. You actually believe it. You know, the pro use case of prediction markets. You've got a dog in the fight. Yeah. You have skin in the game. Yeah. So, yeah, that's super interesting. I mean, I think it's worth noting before we move on that basically the music industry is always trying to find ways to put a thumb on the scale and help artists succeed. like the whole point of signing to a label or bringing people onto your team is to try to hopefully like have some advantage.

34:45So unfortunately, this is, you know, the way that it works now. And I understand that it's upsetting to some people, but you know what they were doing in the radio promo days was way crazier. This is what I was going to say is that the idea that it is any worse than it ever was when in, in previous years, when there was much more severe gatekeeping that just no one talked about because the means of... And much more severe manipulation. Yeah, right. And then the government got involved. The means of media distribution was so limited that if you think that people are being manipulated by this, they were being manipulated in much deeper ways previously.

35:15Well, and also just kind of as a final point here too, I think that there is a nuance to the idea that if anyone thinks that this isn't how it happens for every artist that becomes successful in some ways, Like we talk all the time about 100 ,000 tracks a day being uploaded to streaming services. How is any artist supposed to cut through any volume of that if there isn't a record label or some other entity like pushing them in some way? And then to the point we were talking about before, the quality of the music has to take over, you know, like, but there is no other way to do it. And I think that was some of the more nuanced takes immediately after the podcast where some people writing like, you know, this is eye opening, but like it is a reality of how the system works.

36:07And then everyone went ballistic after that. Eliza McWaam, who's an independent artist, really helped propel the podcast conversation into a wider discourse with a Substack story that she wrote. And I thought she had a really nuanced take. Yeah, that's kind of what I was referencing. Yeah, which was basically like, wow, this is crazy that this is what's happening behind the scenes. And then she kind of ended off by being like, if I had the ability to afford something like this, I probably would have to do it too. Yeah. And it is unfortunate that although all the barriers to entry for the music industry have fallen in some ways, there are always new barriers that come up.

36:43And one of the barriers here is the pay barrier of being able to afford a company like Chaotica to help your music do better in an algorithmic setting that we're working in now. And everyone wants their art to be able to stand on its own and people to come to it naturally and organically. And that's just not how the world works. Yeah. Okay. Let's see what we got now. All right. Liz, we finally got one for you. Okay. So between Downtown and Universal Music Group, BMG and Concord and Primary Wave and Cobalt, 2026 is a time of major consolidation in the music industry. Why is this happening now? So let's zoom out of our very insular, you know, music-centric focus for a second and think about the broader world.

37:26What's going on? Isn't that great? Really? There are multiple conflicts throughout, around the Middle East, around the world, around Latin America that are having substantial impacts, triggering greater volatility, impacts on the energy markets, impacts on the oil markets. And it has been true for some time now that there is more institutional investor capital in music than any other kind of capital. So institutional investor is like a catch-all that always means the big banks, the endowments, the college funds, pensions, teachers' pensions that are managed by states. all of these pockets, sovereign wealth funds, you know, these entities that are names you don't ever remember, but have hundreds of billions of dollars, sometimes trillions of dollars at their disposal.

38:34Zooming back into our music world. So if this is music, this is everything else. Right. And then even within entertainment, music for all of its incredible cultural impact, That financially is still significantly smaller than other entertainment industries on a monetary basis. So you can get a really good bang for your buck if you're a big, fat, huge institutional investor like GIC, who partnered with Sony to, you know, fuel more of their catalog investments. Or Michigan Teachers Fund, which has for many years through Great Mountain invested in Concord. And then, of course, BMG, which is this sort of interesting private company owned by Bertelsmann, which is still a family-controlled German media conglomerate.

39:40So we can use that example of those two. Why did that happen? They'd explored it a number of times. BMG and Concord. BMG and Concord had been exploring whether or not this would make sense. Two of the biggest independent labels in the world, yeah. So looking at the example of Concord and BMG specifically, this is not the first time that they'd explored a tie-up. their relationship and how many times these companies have evolved in ownership and structure goes back decades. Dan knows the history well there. But when I interviewed Thomas Kosfeld, the CEO of BMG and soon to be of Bertelsmann, and Bob Valentine, the CEO of Concord, they said it actually went back to like the very first time that they met each other, which was a couple of years ago in, I believe, 2023.

40:30They both became CEOs on the same day. Previously, they were. Yeah. Wait, I did not know this. Yeah. I feel like they're a good match, actually. They're both very tall. Yeah. And they're very finance-y. I feel like they would probably get along well. I'm not totally surprised on a personal level. Yeah. On a strategic approach, on a temperament approach, I think they're a very good match. And I mean, that goes to the core of the companies as well, which are very well suited for each other. But yeah, I mean, like what we're seeing is the result of conversations that have evolved over years. And then there's just this moment where because of all that's going on in the rest of the world, it's hyper fueling activity and investment in music.

41:18Because music is cheaper and non-cyclical. OK, that classic, which I remain, you know, my journalistic bias to be skeptical of everything makes me want to say that it's not cyclical until it's not, you know, it's not cyclical until there's that black swan event that means that the war in Iraq or Iran also somehow impacts music. But for right now, there have been multiple test scenarios over the last decade in particular that lead investors to believe that when shit hits the fan elsewhere in the stock market or in the commodities, it somehow does not trickle back to music. I also think just to add to Liz's point, you know, I mean, there's a lot more of this money coming into the music industry now because of what streaming has laid bare, which is predictable returns on listening to catalog.

42:12And I think that that's why this arms race of catalog acquisitions has really kicked off and has led to finally these tectonic plates shifting in the music business that we've seen this past just six months. Yeah. Crazy. Yeah. Well, OK, so I want to move on to the next question. I already pulled it off because it goes along with what Liz's question was. So, Dan, this one's for you. with so much consolidation in 2026, what does this mean for independent music? And should independent music companies be worried? I do not think that independent music companies should be worried. And I don't think that they would want to be considered to be worried either.

42:58I think that there's a lot of health in the independent music sector. And I also think that we're coming to a bit of a blurring of the lines of what we're even really talking about when we're talking about independent music. And this is something I've been talking about a lot in the background, and I would really love to get a story together on this. And so I guess I'll use this moment to say, I would love to, I think that the music business needs to come together to talk about what we're talking about anymore. Because what is indie versus major when you have a tie up such as Concord BMG? I mean, we talked about that being a quote unquote quiet major just because they have so much catalog and less emphasis on the front line as much.

43:46But I mean, there are now many companies that are raking in five, ten billion dollars a year or whatever it is. And like these are gigantic companies. And how are we calling them independent? How are we not calling these major companies? So that's an aside. I do think that we need to kind of come up with a little bit more terminology there. But is that our job? Well, I mean, as the sounding board for the music business, as the. First draft of history. Yeah. In the mirror to which they have to look. I do think that to some degree it is it is our place to create the environment where that conversation can happen.

44:30And I just think that unfortunately, the music business will never agree on anything. So we'll have to come up with some terminology that works for everybody. But I do think that we're in the midst of this kind of shift here. But to more directly answer the question, I don't think independents need to be worried. I think they have, to some degree, more options than ever. I think that you can be just as nimble with a five-person team as you can with a 5 ,000-person. Well, more nimble, obviously, than a 5 ,000-person team. but you can get the job done with just a handful of people. And it's just about how you do it, how you deploy your resources, how you're smart in the marketplace.

45:11And I think that there is a lot of space there. Yeah, that conversation has been had a lot with like individual creators and artists launching their own careers through technology and all that. But like the same thing applies to small companies and gives them the resources that they maybe wouldn't have had 15, 20 years ago. More technological resources, more financial options than ever before. Yeah, I mean, you had to go along with all these points. I think we have also seen a lot of layoffs and restructuring within the major music companies. And a lot of really talented people from those majors who have really been trained in how to build a superstar are now out on their own.

45:47And many of them are choosing the route of doing an independent label. That being said, we could get into the weeds on if it's distributed by downtown, which is now part of UMG, is it really an indie? There's some existential anxieties there, I think. Legal anxieties. They were discussed a lot in the merger review, which I think we talked about last time we were on this show. Yeah. And I do think that that exists. I think that exists more in music than I think in almost any other industry, that existential, like, no, I'm going to do it myself. like you know independent way um but even still there are still more more options um and to this point technological solutions than ever for them totally if i could just chime in with one last thing on that you said that no one in the music industry ever agrees on anything which is so true except scale they pretty much across the board agree that in this day and age with as much music is being uploaded every single day, you can't get through unless you have some component of scale, whether that's the breadth of UMG or the catalog of, you know, what Concord and VMG have built or Cobalt and Primary Wave teaming up to becoming the biggest publishing company in the world.

47:15And independent music. Independent music, excuse me. But, yeah, you need to have that reach in some way. Too lost, getting a massive investment from a private equity firm and Gold State. You know, like, you got to do it some way. And, you know, the flip side of that is also, like, really what you need is brand loyalty, fan loyalty, you know, because there are so many different ways of, you know, from the artist's perspective, making a living now. And, you know, you don't necessarily have to be the biggest thing in the world. But at the same time, there are these companies that are massive now.

47:51But there's a lot of ways through. Yeah, absolutely. OK, so we have one final thing to go over. So this one is for Liz. Bill Ackman and his firm Pershing Square offered over$60 billion to buy Universal Music Group. Then in late May, Universal Music Group shareholders rejected this. First, catch us up on this and then tell us what seems to be Ackman's motive with this move. Bill Ackman has this reputation that precedes him. Whenever his hedge fund investment firm, Pershing Square, comes into the room and invests in a company, whether it's a major fast food chain like Chipotle or Wendy's or hotel groups or UMG in 2021, there's like an apprehension of like, oh, we've got an activist in the room.

48:43Like, uh-oh. So and Pershing always pushes back against that reputation and says, you know, look, that was what we did with Herbalife like that was a million years ago. It was more than a decade ago that we've sort of been painted with this moniker of an activist investor. But it sticks with you. And so there has always been a lot of handling, I think, for the UMG team, executive team, and for the other shareholders and for the board in working with Pershing. Nonetheless, they have a lot to offer, not least of all in capital, but Bill Ackman was on UMG's board for a number of years. I go through all of this to say that it actually looked like he cared a lot about the company and that he really liked this company.

49:33There's a story that Wall Street Journal had that after investing in or maybe after just having some exploratory talks, Bill Ackman learned that his grandfather had written a song that was held by UMG. Like they had the rights to a song that his grandfather had penned decades ago. I think the song was something like, put your arms where they belong for they belong to me or something. That sounds like a 1940s smash hit. A publicist's dream, this situation. So, you know, it looked like he really cared about this company. And indeed, Pershing Square made two bids to really take over UMG. And the first was through this really complicated maneuver proposed, you know, years ago.

50:24That would have been through Pershing's SPAC. And that was, they backed down from that after like they got some regulatory pressure. But then this most recent bid was like, it was not an acquisition bid. It's important to distinguish from. It was an offer to merge UMG with a Pershing vehicle and then use that opportunity basically to recapitalize the company in a couple of ways by eliminating a whole bunch of their stock, buying it back, thereby boosting the share price for most of the investors, and then moving its listing to the United States. That's something he's wanted for ages. And among a bunch of other initiatives that he said that the company ought to do.

51:11Most people did not really argue with the points that Ackman and Pershing made on why the company needs to change some really important things. However, they completely were against the way the structure really wasn't an acquisition bid. It wasn't a takeover offer where Pershing would become this majority or even largest shareholder. If the Pershing offer had gone through, Pershing would have only controlled 11 % of UMG stock. So that's kind of why the Bollare group, the head of that group said at their shareholder meeting, this was a takeover offer with our money, not their money, with shareholders' money.

52:07And they were, they're the largest, largest shareholders. So it really mattered what they said. And so once that shareholder encouraged rejection of this offer, the board acquiesced, rejected Ackman's offer. So ultimately, and then, you know, days later, Pershing moved to sell its$1.5 billion stake in UMG's stock. So fast forward, is this a win or a loss for Ackman and for Pershing Square and for UMG? Still really uncertain. But it's very clear. There's some estimates. I think Wall Street Journal estimated that they're going to have that Pershing will have something like a six hundred million dollar windfall from this.

52:57So, yeah, that's nice. That's a nice return on your investment. The question is, is it as good as he wanted? You know, it's always compared to what? So did that meet Pershing's initial investor expectations and their investors' expectations? We don't know. Yeah. For UMG, there's this conventional wisdom that they're happy to no longer be in the spotlight and, you know, have to manage the leadership of this headline grabbing investor and investment firm. However, now they have to sort of execute on all of the fairly reasonable points that were raised about why their publicly traded company is so underwhelmed, trading at such an underwhelming price.

53:45And this is an undoubtedly valuable company, well run. You know, why is that 18 euros price when it is, you know, something like 20, more than 20 percent under its IPO price? Yeah. I mean, that's a great point. And I do think one of the big outcomes that is like a very tangible outcome from what just happened here with Bill Ackman and Pershing Square is that UMG actually did move to sell half of their shares in Spotify, which is totally adopted. one of those six point plan, you know, of Pershing's six point plan. That was like number three. They wanted to sell all of it, though, I think. Right.

54:20Oh, and they they know he wanted them to. Yeah, he wanted he wanted them to sell out of their Spotify stake because he was saying that they're basically getting no credit for having roughly, you know, this this three percent stake, I believe, in Spotify. They're not getting any credit in their share price from investors. So get rid of it, offload it and cash out. But they would have missed the high side of Spotify's stake, right? Remember when Spotify was worth more than$700 a share? It's not there anymore. So, like, you missed that opportunity. So this went to the other points that Ackman made of saying, like, your shareholder, you know, investor management, investor relations team has a lot to be desired from.

55:02You know, the CFO missed that high side moment to sell out of that Spotify stake. Yeah. So there are management questions here, financial management questions. Thank you for that, Liz. OK, so I feel like with that, we've gone over some of the biggest moments of 2026 so far. I want to quickly just hear rapid fire what you guys think are your big predictions for the next six months. OK, I can start us off. um my very quick prediction is you know as of the last report from luminate over 100 000 songs are being uploaded to streaming services every day they just have kept it kind of vague over 100 000 i think whenever they decide to make another report which will likely be at the end of this year i think that is going to be much higher i don't know how much higher but given the amount of ai generated music that's ending up on streaming services today i think we're going to get closer are like 200 ,000.

55:58I don't know. So that's my prediction. Bill? I don't know that we see the much promised walled garden new Udio 2.0. Do we see that before the end of the year? It's more of a question than a bold prediction, I suppose. Just putting a question out there. Yeah. We've been sort of like, there was so much to our point earlier about the vague statements about all this stuff. It's like, you know, it's, this is going to launch in 2026. We're going to see it at the beginning of the year or whatever. Like, it's like, we're still waiting for a lot of like hard answers on how these, you know, the AI settlements struck by the majors in the last year are really going to work out.

56:42So I'll be interested to see what happens there. Yeah. I think it's going to take some time, but I don't know how long. Dan, what's your prediction? I'd say two things quickly. One being, I think that we will see a lot more clarity in the AI conversation. I think there's a lot of companies out there who are promising a lot of things and that are not really finding that there's an appetite for them. And I think we'll see them shift and maybe simply fritter away a little bit. And then the second thing is, to the point of all of this consolidation thing, I mean, I think the deals have been done and now the hard work has to begin.

57:18And so I think you might see a period of pain, layoffs, actually trying to make this work, and then it's prove it time. Yeah. Okay. Liz, bring us home. I think that, unfortunately, the layoffs are going to be a next year story. I think that, yeah, hopefully. I mean, hopefully they never come, but it's... It feels inevitable. It's just what always follows major merger. Yeah. I think that we, so the first six months of this year were, from the financial seat, were major mergers and acquisitions and major investment coming in and more insurance money than ever before coming into this space. I think that we might, before the end of the year, see at least one really blockbuster catalog sale.

58:12Six months ago when we were here, you asked me what we might see, and I was thinking, I don't know, we've heard a little bit about Metallica. That's apparently very much on the back burner. A lot of superstar artists who have never sold before are having exploratory talks because why wouldn't you if there's more money sloshing around music than ever before? So it just takes one of them to be like, yeah, I can't turn that price down. Yeah, Garth Brooks maybe? Garth Brooks was just a recent one. Yeah, we'll see. Okay, so we end off every episode of On the Record with what would you cue? And so I've divided this up between the three of you.

58:57So each of you are going to answer one of these. So what would you cue, Dan, I'll start with you. What would you cue to take you back to your childhood? Well, being very young, I remember a lot of James Taylor and Carly Simon in the house. You and Garth Brooks. One and the same, really. But I would say the Allman Brothers band were another artist that really raised me, especially in my awakening to music and how it worked and playing music myself. I think that that always brings me back to being 14, 15 years old. Do you have a specific song? I mean, anything live, really, you know, from the Fillmore on.

59:44Okay. Okay, Liz, this one's for you. What would you cue to represent your favorite era of music? Sort of coming back to, you know, those 14, 13 year old years as well. I guess I was 11 when this came out. But Tonight Tonight by The Smashing Pumpkins. I mean, I remember being at summer camp at like a local college in Chicagoland and just being like mesmerized watching the video, which I just learned was directed by Spike Jonze. So cool. Not a surprise that it was so damn good. Love it. Okay, Bill, for the final question, what would you cue to remember the best concert you've ever been to? I want to go with something more recent, but I will say, so I went to the very last Springsteen concert at the old Meadowlands, which was cool.

1:00:38And like at the time, I grew up in Jersey, but I was never really like a big Springsteen guy. And just sort of randomly got invited to this, to the very last show at the old Meadowlands. And it was awesome. Like it was just, it like opened my eyes to the whole world of Bruce. And he's become like a big, I'm like a big fan now. And so it's like a big part of my sort of like music, you know, fandom experience. But do I, so I pick a specific song. I'll go Jungle Land. Ooh, great pick. Just a nine minute epic. Nice. I love that. Okay. Well, Bill, Dan, and Liz, thank you so much for coming back to On The Record.

1:01:19Thanks for having us. It was great. All right. Thank you so much to Dan Rice, Bill Donahue, and Liz Dultz-Marshall for coming on the show for an extra special mid-year check-in. And thank you for listening to this week's episode of On The Record. If you like today's show, give us a follow on Instagram or on our brand new TikTok page at Billboard On The Record, where you can find new clips of this show every single week. We also would appreciate it if you rated our show on your favorite podcast platform, because all of these things help On The Record grow bigger and better than ever. Again, I'm your host, Kristen Robinson.

1:01:48and actually this is the final episode of season two of On The Record. So we will be back for a extra special season three with even more guests starting in September. I am so excited to see you then. Thanks for watching.