Music’s Other IPO: How A Scrappy Indie Record Company Turned An Army Of Nobodies Into $2 Billion

When Charlotte Sands penned her single “Dress” late last year, it was in response to conservative outrage over Vogue’s glamour-shot coverage of gender-bending pop star Harry Styles. Little did she know that the bouncy, tongue-in-cheek song was about to alter her musical career forever.

Long ignored by the music industry, Sands teased the music with a TikTok video while offering it up for streaming on the likes of Spotify, Apple Music and Amazon using a subscription to digital distributor TuneCore that cost her $20 a year.

The two-and-a-half minute song became a viral hit almost instantly, landing the blue-haired chanteuse on the covers of trendy magazines like Paper and Allure. With help from TuneCore, which secured promotion for “Dress” on critical Spotify playlists and on multiple social media platforms, the song was streamed more than 9 million times. When the industry came calling, she rebuffed the offers and signed with PIVTL Projects, an independent label owned by TuneCore’s parent, Believe. 

“It was always about making my career sustainable and having me keep ownership,” says Sands, 24, who says she was drawn to the operation in part by the creative control over her career offered by Pivtl. “That’s not something that happens in label conversations.”

Such talk is music to the ears of Believe’s 52-year-old CEO, Denis Ladegaillerie, who cofounded the business in 2005, when technology had the music industry in a death grip that sent global sales of recorded music from a peak of more than $24 billion in 1999 to a bottom of $14 billion in 2014. Ladegaillerie kept the faith through it all, including in 2017, when he turned down Sony Music’s offer to buy the company for $440 million. 

“We are going to be larger than Warner Music by the end of this decade,” he says today. “Why would we sell out?” 

He has a long way to go to fulfill that promise—Warner had revenue of $4.5 billion in 2020 compared with $520 million for Believe—but in one way he has already made his point: Paris-based Believe, which went public in June, is valued at almost $2 billion, with Ladegaillerie’s stake worth some $250 million. 

Call it music’s other IPO. Warner, acquired by billionaire Len Blavatnik for $3.3 billion in 2011 went public last June and is now valued at almost $23 billion. Shares of Universal Music Group, the world’s largest music company, soared as much as 40% when they began trading last week, and is now valued at $50 billion. All of them are cashing in on a rebound fueled by the widespread adoption of streaming that lifted global music sales to almost $22 billion in 2020. 

While much of that is still from superstars signed to the three giants—Universal, Sony and Warner—a more freewheeling machinery is also in place that eliminates the need for physical products, stores to sell them in or any of the expensive infrastructure used in the past. Chance the Rapper learned that in 2016 when he won a Grammy award for the album Coloring Book, which he released independently using TuneCore. Earlier this year, Indie rapper Cupcakke earned a gold record certification for the single “Deepthroat,” which was released through TuneCore and went viral. 

The tiny business—subscription revenue was just $35 million in 2020 — punches above its weight: In the first half of the year, TuneCore passed through royalty payments of $150 million to a subscriber that numbers in the hundreds of thousands. It’s also backup for Believe’s more traditional independent label business, which paid out $175 million in royalties and advances in the first half of 2021. The two units delivered an average Ebitda margin of about 14% in the first half, which is less than Universal and on par with Warner’s recent results.

A classically trained pianist, Ladegaillerie discovered his founder footing while working as an attorney for Shearman & Sterling and living in New York City’s West Village during the 1990s’ dot-com boom. He watched as his roommates abandoned cushy jobs at Goldman Sachs jobs to chase internet dreams with their own ventures or at startups like The Motley Fool. He was enticed by the feeling of boundless possibility and the allure of late-night outings in New York’s Meatpacking District and packed parties on the roof of his shared triplex and the seemingly endless flow of VC money funding it all. “I thought, ‘Hey, there’s something going on here,’” he recalls.

He quit practicing law to join Vivendi, the French water utility that was being rapidly transformed into a digital media conglomerate. His main contribution: the acquisition of MP3.com, a precursor to legal streaming services like Spotify and Pandora. He quickly saw that digital distribution was the future, and that meant a potential explosion of interest for artists who would normally have no chance at success. 

With two cofounders—Arnaud Chiaramonti, who has since left the company, and Nicolas Laclias, a label manager—Ladegaillerie created Believe a digital-first record label just as the Apple iPod was redefining music consumption. At the time that meant ripping CDs into MP3 files, scanning cover art and uploading all of it to hard drives that fed then prominent online music stores like iTunes, which offered a lucrative partnership that boosted their visibility and led to a $60 million funding round in 2014. 

“It was a thesis that we had, but it’s played out even better than we thought,” says John Doran, a general partner at Technology Crossover Ventures (TCV), the VC firm that was an early backer of Netflix and led the round. “Streaming has grown faster than we thought across the world; local domestic music has gone faster than we thought, and as a result, independence has grown faster across the world.”

Believe had an early hit with French rapper Mc Solaar that was notable in part for its 50/50 deal structure, something virtually unheard of at a major music company, establishing the focus that has defined the company ever since: This year, 86% of Believes revenue comes from outside of the Americas and 91% is from digital sales. Brooklyn, N.Y.-based TuneCore was purchased in 2015 as a way to tap into the value of DIY artists, which Ladegaillerie sees as an underexploited opportunity.

“[TuneCore] is only available today in 14 countries around the world, and we are expanding it as rapidly as we can,” says Ladegaillerie. “Spotify covers about 140 countries now around the world, so we’ve got plenty of legroom ahead of us.”

It’s also a valuable tool when trying to promote a scrappy ethos to artists who cherish the possibility—and freedom—of orchestrating their own breakthroughs.  

“As much as I love to trust people, I also have to be a businesswoman,” says Sands. “I have to look at the numbers and be, like, this is how I will make an income in case anything goes wrong. And I still am legally allowed to do what I need to do with this music.”