Once upon a time, distribution wasn’t even remotely sexy. It was the province of guys named Morty and the subject of dry-as-dust articles in the back of Billboard. But times have changed, and the new ecosystem has foregrounded the importance of distro companies not only as avenues for game-changing indie acts but as primary discovery engines for the entire biz. It’s hard to think of two players who exemplify the dynamic new phase of the sector more than Stem CEO Milana Lewis (at right in the photo) and President Kristin Graziani, who have, along with their nimble team, played a key role in helping to break several acts, including Veeze, Chappell Roan, HARDY Mk.gee, bbno$ and Justine Skye—and remain on the cutting edge of what’s next in the biz. Meanwhile, the company’s new product, Tone, is streamlining royalty and accounting processes, further bolstering artists’ teams regardless of their resources.

You’ve stated that one of your company’s goals was to “unfuck the music industry.” What in particular needed to be unfucked?

Milana Lewis: We started out by asking people, both internally and externally, “Why are people so frustrated with the music business? What are the things that create the sense of unfairness that exists between artists and labels? What is the crux of all the drama?” We believe it comes down to the fact that no one really knows what they’re worth. People have no idea how much money their music makes, how much money is being invested in them, what the return is.

So how do we get people looking at the same information? How do we give people access to earnings data faster, and make sure that not just the label has that data but that the artist, the manager, the songwriter and the producer all see what their share is? That information is really important, because it determines not only how much money they’re making but how much you can advance to them, how much they can draw down, how much they can continue to reinvest.

You have two businesses, Tone and Stem. Can you explain the differences?

Kristin Graziani: Stem pioneered the splits feature, and pre-2019 no one else was offering a way to autopay collaborators, though that has changed now. This attracted all types of artists to the platform, but we weren’t working hard enough for our fee, and we had to make a decision: Do we want to service the long tail and create tools for everyone, or do we want to double down on these career artists, over-deliver and drive more value than the points that we’re taking? We knew that we wanted to make splits and other payment tools available to anyone, but you can’t scale distribution services and provide a premium experience to the top talent; you must be exclusive there. So it made the most sense to separate the offerings and brand them individually.

Lewis: Tone also came out of labels and artists who can’t distribute with Stem—because they are tied up in existing deals—coming to us because they wanted to offer the Stem dashboard experience to their artists. Stem is, by design, a very curated distribution offering. We built Stem because big-name independent artists and managers didn’t have a place where they could get their music up and get someone on the phone to help them.

Team Stem at Spotify’s Best New Artist 2024 event: Seth Faber, Graziani, Didi Purcell, Natalie Lewis, Nima Khalilian, Natalie Sellers and Colture’s Kylie Everitt

Can you explain the upside of being a curated distributor and how that has allowed you to structure the business?

Graziani: Once we pared down our artist base for the distribution business and chose those career artists with strong management teams, we started assembling the right services around them. First, we put into place our artist-servicing team, a team of artist reps whose role is to shepherd the artists and their teams through the Stem experience. The second function we built was our editorial and commerce team. We see a lot of the success here because we’re super-curated, and the platforms look at us as tastemakers. So in 2020, we launched our first advance facility, which enabled us to give artists advances—in some cases seven-digit advances. To make sure we deployed that money effectively, we brought on Seth Faber from Primary Wave, who’s now our GM. He spent decades in the marketing space and essentially defined what artist marketing is for Stem.

Lewis: One thing here that we haven’t mentioned yet is that when Kristin and I thought about who we were actually servicing as our client, we decided that managers were our core customers. We saw that most A&R was being driven by managers, because major labels and the label subsidiaries weren’t placing as much early investment in artists. Noah Assad was the manager for Bad Bunny and started a label around him. Seth England started Big Loud for all the music that Joey Moi and Craig Wiseman were creating, which led to Morgan Wallen and HARDY and ERNEST.

If I’m a manager coming to you with my act and looking at various services that you’re providing—distribution, data, marketing, etc.—what are the fees like?

Graziani: We’re starting at 10% for frontline. In many cases, when we’re winning label business or really big catalog business, we can discount further. And then, when an artist wants to take money, they might come to us and say, “I want the largest check possible,” and that 10% rate could go up to upwards of 50%. It really depends on how much they’re drawing down.

You described the advances as more like a line of credit. How is it different from the kind of advance that artists would get in the old days?

Graziani: Generally speaking, we can’t write the biggest check, and we’re aware of that. It’s probably our weakest spot and potentially our biggest area for growth as well. So we have to get really creative in terms of how we make deals, and the facility we have in place allows for that. So, for instance, instead of saying we’re going to sign the next three albums, we might say, “Hey, we want to get into business with you, so we’re going to sign one EP or a few singles here and there just to get started." And then we’ll re-up on projects.

Sheila DeMoura of Right Click Culture, Graziani, Sellers, Everitt, bbno$ and Stem’s Lexi Roney

Do any recent examples of artists who have utilized the data and put Stem’s tools into practice to create breakout moments stand out?

Graziani: Our team of artist-marketing strategists works with them to ensure we are acting accordingly on specific passion indicators. We were there, for instance, to help Justine Skye capture the moment on “Collide” when it became clear the track was having a TikTok revival. We worked with her team across digital marketing and commerce to eventually generate TikTok’s most-used song of 2023 in the U.S. As Brent Faiyaz and Ty Baisden were creatively and strategically building their artist and label profiles, they were able to utilize Stem’s splits to provide creative deal structures that allowed Brent to engage with collaborators, from producers like No ID to artists like Drake and Tyler, the Creator.

Lewis: It’s been incredibly rewarding to hear from people like Dion [No ID] Wilson about how he’s made more money from Stem on his share of the songs he worked on with Brent than any other collaboration—and this man has worked with JAY-Z. We know other collaborators were able to buy houses and get approved for mortgages because they could show consistent monthly earnings from Stem. It’s changing people’s lives like this that fuels us.

Over the last nine years, Stem has been a launchpad for some huge artists: Bad Bunny, Justine Skye, Brent Faiyaz, Morgan Wallen, Chappell Roan, to name a few. Can you speak to how Stem’s approach to distribution empowered these artists to develop into stars?

Graziani: We start with a diagnostic approach to each artist and identify where we think the points of audience connection are or can be and action accordingly. Here are a few very tactical examples: With bbno$, we’ve ensured we are maximizing gaming and Internet-culture editorial and influencer marketing. With Chappell Roan we directed our energy toward evangelizing to gatekeepers in the LGBTQ community, securing her early looks like Spotify’s Out Now [now Glow]. We partnered with Rachel Platten to host an intimate dinner for influential industry moms who, upon learning of and relating to Rachel’s own experience balancing motherhood, music and mental health, have committed to supporting her forthcoming album. The list goes on, but the strategy is the same: Understand which tactics will expand an artist’s audience or further engage the existing fan base in a way that authentically and intrinsically embodies that artist.

(The 2024 edition of Rainmakers will be published this fall.)