Josh Katz has come a long way from fetching tuna sandwiches for Clive Davis in the Nineties. Back then, he was fresh out of college and working as an assistant at Arista Records. Now, he’s running YellowHeart, a blockchain-based company that’s focused on strengthening the relationship between artists and fans by cutting out music business middlemen.
When Kings of Leon became the first rock band to release a new album as a non-fungible token (NFT) in March, Katz was standing by: YellowHeart advised the band’s team, built the actual NFTs that housed the art, and orchestrated the drop. Kings’ drop drew in $2 million in sales, $500,000 of which the band donated to charity. But it more broadly opened floodgates, bringing conversations about crypto and music’s revaluation into the mainstream. A couple months beforehand, in a quieter fashion, Portugal. The Man had also released their PTM Coins — social tokens that act as keys to archival footage and other exclusive, fan-club experiences — and Katz was behind that too.
How did this Long Island native go from taking deli orders for executives to designing NFTs? After Arista, Katz went to work in sales and marketing at Jive Records when it was still known as a cool hip-hop label in 1997. Within a few months, though, his team released the first Backstreet Boys record and everything changed. Then came Britney Spears. “Jive went from being an awesome, cultural hip-hop place to one of stressed-out, under-staffed people,” Katz says. “A lot of people left, and I was one of them.”
Music sales were still booming at this point, so Katz went to work at another label. But everything changed with the death of the CD.
“Part of my job was selling to Tower Records and Virgin Megastore,” he says. “The only way to get mass adoption was to have shelf space, and it was impossible to get it unless you went through one of these five majors. I thought, for the first time, with file sharing through Napster, that it would now be open to everybody to just have the best song.” Instead of working with Napster to evolve, the music industry fought back for years and struggled until Spotify and Apple came by and “ate their lunch,” as Katz puts it.
He left the record business altogether to found EL Media, which provided background music curation and commissioned brand-friendly remixes for hospitality and retail brands, in 2004. “I became known as Josh, the guy who puts playlists in Nobu and Tao, Vegas lobbies and casinos,” he says. Katz sold the company at the end of 2016. He recalls the joy of finally having extra money in his pockets and breathing room, and says that’s when he went “super deep into crypto.”
“I bought some Bitcoin, and I bought a lot of ETH. I thought it was cool, because I bought it for 11 cents, and the next day it’s worth 32.” He laughs at the memory — given that 1 ETH was worth $2,000 this April.
Katz started talking to every venture capitalist he knew — and he knew a lot, from his days servicing tech to hotels and restaurants. He met two savvy, young guys raising money to get into the crypto space. “I literally moved them into my offices,” Katz says. By May of 2017, his rooms were filled with “interns from Stanford and Harvard who opted out of Goldman to get into blockchain that summer.”
With half-eaten sandwiches strewn everywhere, they started mining, researching, and investing. “We went on a tear,” he remembers. “It was wild. That summer, I had the idea for YellowHeart.” In thinking back on the music industry’s biggest pain points, he says he quickly realized he could curb ticket scalping with the use of NFTs. (The secondary ticketing market is a multi-billion dollar industry, ravaged by ludicrous up-selling that rarely ever benefits actual artists.)
Because of the smart contracts that live within these digital, tradable containers, YellowHeart can set a maximum price for reselling, as well as royalty percentages to ensure that the artists — and any parties of their choosing — appropriately benefit from the transactions. That idea was the seed that blossomed into a multi-faceted organization.
Katz soon decided to use YellowHeart in the primary ticketing market too. He worked with Live Nation to develop his ticketing procedures, which he says were finalized last year but were put on hold with the worldwide disappearance of concerts.
Now, YellowHeart offers “full integration services for NFTs,” Katz says. And the Kings of Leon drop illustrates just how versatile the offerings can be. That series included three types of tokens. All of them included unique and immersive art akin to a futuristic trading card, but some included a digital download of the new album and a limited-edition, redeemable vinyl, while others housed “golden tickets” to future shows.
“Golden ticket” token-holders are guaranteed four front-row seats to any Kings of Leon concert during each tour for life. Those tokens also unlock a VIP experience that includes a personal driver, a concierge at the show to take care of needs, a hangout with the band before the show, and exclusive lounge access. And, upon leaving the show, the fan’s car is packed with four bags with every item from the merch booth. Upon announcement, Katz told Rolling Stone that this was an “extreme example to prove a point.”
While juggling all the inquiries that have come in since March, Katz was putting the finishing touches on YellowHeart’s own NFT marketplace, which he revealed in May. He says he’s been working with artists to develop enough content to give them “their own galleries” and describes the future of the marketplace as “Discord meets iTunes.”
“People want to make money and they think there’s a gold rush. But at the end of the day, real art can’t be rushed. It needs to come on its own time”
He wants to make it as user-friendly as possible, so that first-time buyers aren’t deterred. (That’s why he accepts credit cards as well as crypto payments.) “This new format that’s going to be so much better for artists and fans needs to be adopted,” says Katz. “That’s my goal right now: Mass adoption.” He promises to work with artists to harness their creativity, and he stresses that YellowHeart has no intention of telling artists how to make the actual art.
“Art is sacred,” he says. “We take that art and do every other aspect of putting it on the blockchain and minting the tokens. We ideate the token drop, figuring out what that looks like and what the story is.”
He points to a broader “creative boom” happening right now, stemming from the rise of DIY services, TikTok, and the extended at-home period spurred by Covid-19. Seas of artists are rushing to produce content, and Katz hopes people will remember to practice patience: He, for one, is in this for the long haul. “People want to make money and they think there’s a gold rush,” Katz says. “But at the end of the day, real art can’t be rushed. It needs to come on its own time.”
He warns creatives of possible pitfalls that can come from new players jumping into the mix. “Artists should be super careful,” says Katz. “We’ve been building YellowHeart’s tech since late 2017. I know how difficult it is to build the tech that works correctly, and so does every other founder. At the end of the day, you should be very wary of anyone who’s starting their tech now. Because, in this universe, one wrong hexidecimal and your ether’s gone forever.”