Block invests in music fintech Stem
- Lucinda Shen, author of Axios Pro: Fintech Deals
Illustration: Sarah Grillo/Axios
Stem, a Los Angeles-based music distribution and payments company, raised $20 million in funding from QED Investors and Block.
Why it matters: This gives us a glimpse into how Block (formerly Square) plans to position itself in the music industry after it controversially acquired a majority stake in Tidal, the streaming service founded by Jay-Z.
How it works: A single song may have a multitude of stakeholders — from producers, streaming services, and co-artists, to Peloton and private equity owners — that make tracking who owes who what, difficult.
- Stem aims to help music labels and artists keep track of all this, and help make payments out to the parties that may own part of the song's royalties.
- "We're trying to build the economic backbone for the music industry," Milana Lewis, CEO of Stem, tells Axios, pointing to cap table management startup Carta as an example.
Background: Just over a year ago, Block agreed to buy Tidal in a deal valued at roughly $300 million. The financial heavyweight hinted it would bring more financial tools to Tidal, but stayed mum on the specifics.
- Is Lewis worried that Block could flat-out copy Stem in the future? For now, she is unperturbed.
- "They realized how complicated it is," she says. "It's a strategic relationship to help understand the space even better."
Of note: Block's Tidal acquisition is still raising eyebrows over the valuation compared to the latter company's market position.
- A pension fund filed a suit in January against Jack Dorsey and several other Block board members, alleging that the deal made no business sense.
- Tidal notably holds just a 2% market share in the music streaming space.
Still: The music industry is only getting ever more complex.
- a16z-backed Royals raised a $55 million Series A last year to give fans the ability to buy music rights via NFTs.
- Tidal itself launched a radically new subscription model that would give even smaller artists a greater cut of streaming payouts.
Bottom line: Fintechs are coming for the music industry.