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 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. And later, when it comes to building their business and deciding if they want to sell their catalog, they can make the right decisions based on knowing what that catalog is and what their share of it is worth. So just having that information on both sides makes conversations fairer and allows for more stability.

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—we had literally tens of thousands of artists using Stem. 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 have to 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: the monthly payments, clear reporting and insights. So we imagined and built a royalty platform that can handle any type of complex royalty deals, taking the splits product we built for Stem much further and making it accessible to anyone. 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.

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. It’s a no-brainer for them to plug our artists into their playlists. The third piece we layered on came as a result of us losing some amazing artists to major labels and major-label-distributed businesses. Obviously artists need money to fund their career. And we needed a way to fund them. 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. We weren’t going to do it the same way that everyone else did it.

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. And a lot of the business we get on the advance side is artists coming to us drawing down a certain amount of money, and we then over-deliver, and they have the ability to draw down more money even before it’s recouped.

It’s not one and done, and the deal can re-up accordingly, and we’re constantly rewarding artists for that as well.

Lewis: I describe it as us being at war for the best talent, but we have a water gun and everyone else has a machine gun. We will get more ammo, but for now we are very crafty with our water gun and still win at times.

Everyone has access to the same data and A&R, but you guys have a great track record in picking artists right before they blow up. What’s the secret?

Lewis: We actually make the bet on the manager or label owner. We’ve been really grateful to have become the go-to platform for a number of early successful ventures that have launched global superstars founded by managers. Turns out when you give smart people great tools and surround them with other strategic thinkers that can augment their existing relationships, you create the right ecosystem for growth. Our flexibility, agility and fast feedback allows them to make the right moves. It’s why we were the early home of Rimas, R&R Digital, Keel, Big Loud, Hundred Days, SOTA and Lost Kids.

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: Many of our partners—managers, labels and artists—leverage our custom data visualizations to make decisions. Additionally, 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. We leveraged early TikTok passion indicators to secure a significant marketing commitment for Tucker Wetmore from the TikTok music team. We warmed up Pop radio for Charlotte Lawrence with our partners at Lakeside Entertainment to boost her touring value as she plots a new project for the fall. 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.

Regarding Tone, walk us through the royalty process.

Lewis: Most royalty software, like Curve or SR1 or Music Maestro, handles the calculations, but there’s a lot of work that happens before and after that. And that’s really where we’re differentiated: We’ve built the before-and-after.

The before piece, which we call pre-calculations, is the gathering of legal, expense and revenue data. Chasing this down is gruesome and feels like navigating a hellish maze, but you can’t do any calculations without it. We see a huge opportunity in making Tone the one place that houses not only this data but facilitates all of the workflows between managers, lawyers, project managers, finance, marketing—the whole team.

And then what has gotten us a lot of praise is that we enable post-calculations. We have a simple interface for statements to be reviewed and edited. Once they are approved, Tone sends them out to every payee and invites them into a dashboard to review the statements in any format, including very easy-to-read charts and graphs. Tone also sends the funds and manages all the banking and tax information of the payees for the label. We’ve heard from clients how much time we save them and how we enable them to get rid of two or three other software programs they were using to manage all three steps of the royalty process.

What’s the response been like?

The part that we get the most praise for is the data and insights. The label can see the status of each contract, how close it is to being recouped. So if that artist comes back and says, “Hey, I need money for tour support,” they can very quickly see how far into debt they are, and if they can give them more money relative to what they’re making. The artists, producers and songwriters can see when they’re going to get paid back, proximity to recoupment, how a song is tracking in different territories across different platforms. They see all of the marketing insights as well. If you’re making an investment in one project and then you have another release that’s somewhat similar, you can look back and see: What did we spend? How did it work? Which vendors did we use? Should we use them again? And all of that information can be accessed by people outside of the finance team.

What were you doing prior to Stem, Milana?

Lewis: I was a talent agent at UTA, the first person hired on the digital-media side, when people had no idea what that role meant in 2010. I would identify new platforms that our clients should be using to better connect with their fans and show them how to leverage Instagram and Twitter to market their movies and TV shows.

As people became more comfortable with these digital platforms and wanted to go more direct to their fans, I focused on, well, if a client wanted to do something outside of a studio or a network or a label, how would they do it? And that’s really where I discovered how fucked up the music business was, because so many clients wanted to self-release and couldn’t. There weren’t great services to self-release through. There were software players like Tunecore and DistroKid, which were fine, but if you’re releasing music on behalf of a huge artist, you need someone on the phone, right?

There wasn’t anything in the middle. And that’s when I thought, there should be an app that not only distributes the content but can also split the payments, because the artists I’m working with need to pay songwriters and producers. And that’s how we came up with the initial concept for Stem.

When Kristin spoke earlier about making sure that we were always adding more value than the points that we were taking, that really speaks to her understanding of how you price things correctly relative to what it costs you to serve, relative to what the customer’s expectations are, so that everyone’s happy.

And that’s why we win. It’s not that we’re the cheapest option. But we are the fairest and the most right-sized relative to what we’re contributing.

Photos (from top): Graziani and Lewis; Right Click Culture's Sheila DeMoura, Graziani, Stem's Natalie Sellers and Kylie Everitt, artist bbno$ and Stem's Lexi Roney; Graziani, Stem's Matt Stroud, Jeremy Rice, Bre Harper, Sellers, London Hamilton, Lewis and Roney with the Recording Academy's Len Brown and Veeze and pals; Faber, Graziani, Stem's Didi Purcell, Lewis, Stem's Nima Khalilian, Sellers and Everitt at Spotify Best New Artist 2024 event; Stem's Robert Davin and Rice with artist Duckwrth; Tone CTO Brad Bennett and President Brendan Kao; Graziani, Faber and Lewis