Get Ready for a Music-Making ‘Arms Race’ in 2021

·5 min read

Robb McDaniels has a habit of seeing around corners. The Los Angeles-based exec foresaw the independent artist boom long before many of his competitors, when he founded indie distributor Ingrooves — since acquired by Universal Music Group — in 2002. After leaving Ingrooves in 2014, McDaniels foresaw a related trend: Artist managers were spurning record company offers for their artists, and therefore would require bigger “in-house” resources. With this in mind, McDaniels founded Faction, an indie conglomerate offering centralized, shared services, from office space to technology, for talent manager members keen to resist those early major-label checks.

Since 2017, McDaniels has been CEO of electronic-music DJ and producer portal Beatport. The company hit financial uncertainty in 2015 under the rocky ownership of SFX Entertainment, but has posted a profit every quarter since McDaniels joined. He says Beatport has attracted around 200 million viewers to its live-streaming channels this year.

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Now, McDaniels has his crystal ball aimed at another seismic shift in the music industry — and he’s spent big money on the bet.

Earlier this month, Beatport acquired UK-based Loopmasters, one of the world’s biggest sellers of original samples and sonic plugins to music producers. For many producers using apps like Apple’s Logic Pro X, “sample packs” — spanning beats, loops and more — act as crucial building blocks for new music, while plugins enable them to generate different sounds and effects at their fingertips. McDaniels won’t put a figure on the Loopmasters sale, but says that before the acquisition, the UK company was “growing like a weed” with annual revenues up 50% in each of its last five years. “We had to buy it before it got much more expensive,” he half-jokes.

As reported on Rolling Stone in the spring, the pandemic’s stay-at-home consequences have vastly accelerated the amount of music being made by independent musicians and bedroom producers worldwide. This, in turn, has led to a boom for DIY music distributors. So it follows that music production companies offering readymade beats, samples and plugins for DIY musicians are also on the same growth upswing. “The pandemic has added fuel to this trend, but this isn’t just a pandemic story,” McDaniels says. He suspects the biggest acceleration in the commercial fortunes of “sample pack” companies will be yet to come.

“I believe the next format, the next way the customer is going to engage with music, has already started — and it’s DJ’ing and producing.” — Robb McDaniels, Beatport

By Beatport’s estimates, up to 20 million people worldwide currently consider themselves “hobby DJs” — and 70% of visitors to Beatport who consider themselves DJs also consider themselves music producers. McDaniels believes both of those stats hint at a huge addressable market for “producer tools” in the electronic music space.

“I get asked the question a lot: ‘Where do we go from here as a music industry?’” says McDaniels. “Spotify and streaming is now ubiquitous, and has been around for 12-plus years. But if you look at the history of the music industry, you normally have a format shift every generation, and that format usually launches in the middle of each [cycle].

“I believe the next format, the next way the customer is going to engage with music, has already started — and it’s DJ’ing and producing. Actually taking music, manipulating it, playing with it, remixing it, personalizing it. It’s a massive opportunity.”

McDaniels isn’t the only player spotting opportunity here. Loopmasters’ biggest rival platform, Splice, began as a scrappy tech startup inspired by open-source software, and has already raised over $100 million to grow its business, while recruiting top executive talent such Maria Egan, the ex-President of indie publisher Pulse Music Group.

Another “sample pack” marketplace, BeatStars, is estimated to have paid out over $100 million in royalties to music-makers to date, with clients including Grammy-nominated producers like Mr. Porter and DJ Green Lantern. (BeatStars is most famous for selling Lil Nas X the beat for “Old Town Road” — a reminder that, in the modern era, bedroom producers can quickly see an amateur effort snowball into a blockbuster.) There’s also Canada-based LANDR, which raised $26 million last year from backers including Sony, and launched an AI-powered tool in July that it claims can create an “almost infinite” number of sounds for producers.

McDaniels notes that Loopmasters’ individual deals with the creators of its samples bears some hallmarks of a record label and artist-type agreement: The company licenses the creator’s sounds for a certain duration, and every time those sounds make money within that duration, the ‘artist’ gets a cut of the royalties. (In other, less common, examples, he says, Loopmasters simply buys out all the rights.)

As the readymade music production market heats up with deals like the Beatport-Loopmaster acquisition, industry watchers are wondering just how hot it could get. Music business analyst and Midia Research managing director Mark Mulligan last month estimated that the “music software, sounds and services” sector generated $884 million in 2019, and predicted that this figure will double by 2027.

Mulligan further suggests that firms such as LANDR and Splice could soon become acquisition targets for major record companies, who are hungry to own and control more of music’s value chain. Sony Music Entertainment, the world’s second biggest recorded music company, has already pumped investment dollars into music creation startup Tully, something Mulligan theorizes could kick off a “creator tools arms race.”

According to Midia’s data, there are currently around 14.6 million people creating music around the world — in their bedrooms or otherwise — all of whom would presumably be interested in software and samples that could enhance their efforts. It’s a question of how, not if, they will get their hands on those tools.

Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis, and jobs since 2015. He writes a weekly column for Rolling Stone.

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