Concord Entertainment Acquires Music Distribution Platform Stem
Concord Entertainment has finalized its acquisition of the music distribution service, Stem, as confirmed by both companies on Monday. This partnership marks a significant milestone in the evolving landscape of music distribution.
Earlier in March, The Hollywood Reporter broke the news regarding this acquisition. Although financial terms were not disclosed, both parties clarified that the agreement pertains exclusively to Stem’s distribution services, leaving its parent entity, Stem Disintermedia, and financial service provider Tone outside the agreement.
Background and Rationale for the Acquisition
Milana Lewis, founder and CEO of Stem, along with Tom Becci, CEO of Concord Label Group, reported that discussions about this acquisition began in earnest last July, although the two companies had been informally talking for several years prior.
Concord is recognized as a powerhouse in the independent music sector, boasting an impressive portfolio that includes well-known record labels like Rounder, Loma Vista, and Pulse Records. Their publishing division features notable catalogs, representing iconic figures such as Rodgers & Hammerstein, Kiss, Daddy Yankee, and Phil Collins.
Addressing Artist Needs
Lewis highlighted that the decision to partner with Concord was driven by a “graduation problem”faced by artists. Many musicians begin their journeys with Stem but require additional resources and investment as they achieve greater success, which Stem was unable to provide independently.
During acquisition negotiations, Stem presented a roster of artists that had previously collaborated with them, including names like Bad Bunny, Morgan Wallen, and Conan Grey. Lewis expressed her hope to continue retaining high-profile talent as part of the newly merged entity. Past efforts to bridge the funding gap, such as a substantial $250 million credit agreement with Victory Park Capital, had proven insufficient, with Lewis describing those measures as “Bandaids on bullet holes.”
Lewis emphasized that their primary objective over the past year has been to secure a robust partnership that would allow them to not only sustain the business they built but thrive and attract new talent.
Concord’s Strategic Vision
For Concord, the acquisition of Stem signifies an entry point into indie distribution, allowing them to engage directly with a growing class of artists who might currently be uninterested in traditional record deals. Becci pointed out that if these artists ever seek additional label support in the future, Concord should naturally be their first choice.
“The intention is to let Stem flourish while maintaining its core values, ensuring that artists don’t feel compelled to leave for better opportunities,” Becci stated. “However, if they choose to move on, we want to be ready for that transition.”
Future of Stem Post-Acquisition
Following the acquisition, Stem will continue to operate independently within its established framework. Becci confirmed that Concord would maintain its distribution partnership with Universal Music Group for both new releases and catalog offerings.
Although Lewis refrained from naming other potential buyers, sources indicated that Sony Music and Warner Music Group had previously expressed interest in acquiring Stem, recognizing the potential they hold. However, she felt that Concord was genuinely committed to allowing Stem to focus on its strengths.
Market Trends and the New Landscape of Distribution
The acquisition aligns with a larger trend in the music industry, which is experiencing a surge in demand for distribution services. For example, in December, Universal Music Group’s Virgin Music Group announced a transformative deal valued at $775 million to acquire Downtown Music Holdings, which operates prominent distributors like CD Baby and FUGA.
As independent artists steadily increase their share of the market, they wield more power in negotiating favorable record deals. Becci stressed that integrating Stem into Concord’s framework would enable them to adapt to the rapidly shifting music business landscape and draw in a more diverse array of artists.
“Not long ago, artists were often locked into long-term contracts that offered meager royalty rates,” Becci remarked. “Now, agreements are evolving towards profit-sharing models where artists retain more ownership. Stem has helped to equalize the competitive landscape by providing artists with various options, reaffirming the necessity for labels in some contexts.”
In this evolving industry, partnerships like the one between Concord and Stem reflect a strategic approach to nurturing talent and responding to the changing needs of music creators.