Boardroom speaks with the CEO of music fintech company Stem to learn how she’s reshaping what independence looks like in today’s industry.
Milana Lewis founded Stem to help fill a void she saw in the music industry. Her first foray into the world was as a digital music agent at UTA, and it was during this time that she was introduced to the complexities surrounding the world of digital distribution. “The thing I realized is that it was so unnecessarily complicated, both from a rights management perspective and a collaborative perspective,” Lewis explains to Boardroom. “There was so much friction because of the lack of investment in technology.” So, she started Stem, which originally started as an app meant to help automate accounting services and to create a level of transparency for artists; it was meant to clear the murkiness around when they were getting paid, by who, and why they were receiving a certain sum.
Lewis and her team quickly found that Stem needed to become something more. “On our path to creating that software, we realized that we needed to become a distribution business as well, largely because back then the idea of asking a label to give a dashboard to their artists about how much they were going to get paid, how much was spent against them, whether they recouped or not, was just so terrifying,” she adds. It’s in this second iteration that Stem has become arguably the hottest indie distributor in the game. Lewis sees parallels between her curatorial process and another heavy hitter in the media industry: “I wanted to be the A24 of music distribution,” she says. Stem is well on its way.
They were recently acquired by Concord, and recently inked deals with PMR Records (now rebranded as Big Family Music), Scenic Route Records, and babygrande records. The success of Stem has led to Lewis’ decision to found Tone, a company independent of her first brainchild but inspired by the original intention of the company. “Take everything that we’ve learned from building Stem, but now make it so that any record label or any distributor can offer that experience, the artists that they work with, and more importantly, the songwriters and the producers and all the other collaborators. That was the genesis of Tone,” she says. Check out our conversation below to learn more about how Stem came to be, where Lewis sees the music industry headed, and what makes her businesses stand out within a busy landscape.
This interview has been edited for length and clarity.
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What was your entry into the music industry?
I was hired as the first digital media agent at UTA. I got to work with every division, but at the time, they didn’t really have a music department. This was 2010 when I was hired, and 2015 is when I left to start Stem. I got to work with a lot of music clients that they represented in other areas. As part of the digital group, we signed a lot of YouTube stars that also became musicians. We worked with people like Troye Sivan and pursued other people like Shawn Mendes. There’s a whole cohort of talent that are now big pop stars that started on YouTube. Part of my job in digital was to help them figure out how to go directly to their fans. When it came time for figuring out solutions for distribution in a digital streaming world, I had to get familiar with all of the different platforms that existed and all the different tools. On top of that, I had to learn all the different tools for marketing and social media management and data and analytics. The thing I realized is that it was so unnecessarily complicated, both from a rights management perspective and a collaborative perspective. There was so much friction because of the lack of investment in technology. Something as simple as releasing music as an independent artist if you were collaborating with well-known songwriters and producers was really, really hard because those songwriters and producers didn’t trust that they would get paid by that independent artist. I thought to myself, well, ‘Why isn’t there an app for that?’ Stem was born out of that.
When did you first feel like you had achieved the mission you set out to, the first year where you’re like, ‘Oh, this is actually working?’
We’re just getting there with Tone. What Stem is today is not what it was meant to be when we founded the company. In fact, Tone is the rebirth of Stem’s original mission.
How would you describe the difference between the two companies?
When we started Stem, the vision was really to be more of an app that did automated accounting. As a part of that, we did the insights and created transparency for the people getting paid about where their money was coming from and all the different trends related to it. That’s kind of what changed and became much more complex as well. On our path to creating that software, we realized that we needed to become a distribution business as well, largely because back then the idea of asking a label to give a dashboard to their artists about how much they were going to get paid, how much was spent against them, whether they recouped or not, was just so terrifying. It’s a similar reaction that I remember getting when I was a digital media agent in the beginning of the social media days, asking for publicists to get comfortable with their celebrity clients using Twitter. That level of transparency and direct access scared everyone. We decided we should probably become our own distribution company and set the example of what we believe distribution companies and labels should look like when they work with artists and how they should treat them.
And what’s the core mission of Stem?
The core ethos behind what we do at Stem has always been empowering independent artists with the autonomy to take control of their own careers and arming them and their teams with the resources to be successful and make informed decisions. We’re the company that not only distributes our artists’ music, but we make it easy for them to know what they’re worth, where they stand financially, and give them streamlined rails to pay songwriters, producers, and everyone else who has a hand in making them successful. We’ve taken a curated approach to distribution because we don’t see artists as a volume game. Now, with Concord backing us, we’re looking to not only invest in the artists that we believe in, but also the managers and teams around those artists to give them the financial support and artist services to scale what they’ve already built to a new level.
Would you say that this year is the first year in which it’s fully operating the way that you intended it for it to operate?
It’s interesting. We ended up building two businesses under one company. We built the distribution business. We really got focused on that path because at the time there was a huge discrepancy in the offerings of distribution companies. There were a bunch of delivery services, the TuneCores, the DistroKids, the CD Babies of the world where you pay them a flat fee and they get your music on the services for you, but you don’t have a phone number to call anyone for support. There’s no one to strategize with. You’re totally on your own. On the other side of the spectrum, you had the major labels and independent distributors that took a very large percentage and the services weren’t really there either.
Coming from a top tier talent agency that is very client-focused with a concierge style, I was like, ‘If we’re going to do distribution, every client’s going to have a person that answers when they pick up the phone to call us.’ We’re going to surround them with resources and intelligence, and we’re not going to be in the volume business. We want to be really specific about who we work with, how and why, and have a point of view. Coming from the film and TV world, I was inspired by A24. I wanted to be the A24 of music distribution.
Where does this music taste come from?
Just like at an agency, you have to have someone internally that’s willing to bang their fist on the table for the client, because in some ways, you’re making the impossible possible. In other ways you have to make sure that you have a point of view and you can connect with them because it’s so competitive. There are so many offerings. If you can’t help them, you shouldn’t be taking a percentage. If you’re not going to help them increase their revenue by a certain amount, you don’t deserve a piece of it.
What do you say to an independent artist who is very down about the streaming landscape, how they can make money in this industry?
I think music has more shelf life than ever before. The ways that your fan base and people can engage with your storytelling through music is so much more active than ever before. Music discovery and integrating it into your life now takes the shape of being able to create your own content to that music and tell your own interpretation of that story. For an artist who’s down with it, I think it’s about starting to experiment with how different audiences might want to engage with your music and finding them where they already are. You will find your audience. There’s an audience for everyone.
Talk to me about the Concord deal. Why did that seem like a good fit?
Having a curated platform with Stem allowed us to be a great launching pad for so many exciting artists that we have been lucky enough to have worked with over the years. The unfortunate thing is that as we did great work with them or they had a lot of success with our platform, they oftentimes would then get pursued by much bigger entities or global companies and get poached. We oftentimes didn’t have the global reach or the capital to continue to invest in their growth. Concord has changed that for us. They came in as a partner that’s allowing us to offer more risky advances. That means we can make investments earlier before there’s real data and also double down more significantly on things that are already working.
What makes you different from every other independent distribution platform?
The big thing is volume. We’re not in the volume game. We’re as curated as a record label would be with the services that a record label would have, except we’re a lot more flexible and a lot more fair — a lot more artist forward.
Do you have a general deal structure you’re comfortable revealing?
We did before Concord. Everything was pretty straightforward. If you were just using us for distribution services for new releases without taking an advance, it was a 10% fee. If you were taking an advance, that fee could go up depending on how much capital and how risky that investment was at the time. With a platform like Concord backing us now, we can do any kind of deal that we want.
How do you scale responsibly while still remaining a tightly curated company? Is it through finding the big artists? How do you grow responsibly?
It’s about making investments in the next generation of label owners. What do the next generation labels look like and how do we back them and how do we augment their relationships? One of the beautiful things about Stem is that we really do eliminate a lot of the back office that they would need to create in order to get their record label going. Even some of our newer labels like Boom.Records, it started off as two people, Felipe [Favela] and Tyler [Henry]. They had pretty decent growth and revenue in the short period of time that we’ve been working with them. It’s about not only providing them with the technology and the software, but also the team internally, because they’re working with us. They don’t need to have an editorial team. They don’t need to have a marketing services team. They can really focus on the digital marketing that they’re exceptional at and leverage us to do all other types of tactical marketing from radio to editorial to global, whatever that is.
We want to be able to have two things that I think most record labels will never invest in. One is data science, and it’s the data science that we have available that then informs label strategy. It doesn’t dictate it, but it informs it. They can choose to listen to the data or not, but it’s us surfacing the signals for them as quickly as possible. That makes all the difference in today’s world. The second piece is that getting really proficient at label services globally takes a lot of resources, and most labels just should not invest in that. They should be working with an ecosystem of partners and vendors, and we have that deep rolodex to know who they should be working with? We can shortcut a lot of their knowledge and their research just through the relationships that we have and the expertise that we have in house.
How long did it take to become a preferred partner in pitching to DSPs, TikTok, places like that?,
Early on, we were so focused on nurturing our relationships with the DSP partners, and not just pitching to them, but really getting to know them on an individual basis about what they care about, what they like, how we get them to our clients’ shows. We worked really hard to build those relationships on a personal level.
An artist or a label sees what you’re doing. They really want to work with Stem. What’s one piece of advice you would give them on how to cultivate their career so that they are an ideal partner?
It’s really important that they know the story they’re trying to tell or the world they’re trying to create, because if they don’t, we can only help them so much. We can help them create the story and amplify it, but it’ll take a lot longer, and it takes a lot more of our resources to do that. We’re willing to make those investments, but it’s a matter of the impact when they know what they’re trying to accomplish and what success looks like. Then, we can just help execute.
What are the core differences between Stem and Tone?
A lot of record labels were not comfortable giving dashboards, as we talked about. The idea of paying artists monthly was so silly because they wanted to hold onto the cash for themselves. In 2021 or so, we really started to see the pendulum shift in the other direction, where suddenly record labels realized that unless they made this data available, and unless they had it for themselves, they just weren’t going to be competitive in the market. It’s largely because of the pressure the distributors put on them. We all build dashboards, we all pay monthly. That has become the standard, and it definitely wasn’t when Stem was created. At that point, we figured it was time we go back to the original vision of Stem and build it as a separate product. Take everything that we’ve learned from building Stem, but now make it so that any record label or any distributor can offer that experience, the artists that they work with, and more importantly, the songwriters and the producers and all the other collaborators. That was the genesis of Tone.
For someone who’s stuck on an old method of doing royalties, why should they use Tone?
They’re probably spending more time and effort and energy doing it because they’re trying to do it all themselves with one person versus having a platform that the whole team can enter in the information as it becomes available. The process of doing royalties is cut in half.
