YouTube Music cracks down on rampant chart manipulation with new pay-for-play ban

YouTube will no longer allow paid views and advertising to influence its YouTube Music Charts, the company announced this morning. Instead, it will calculate its rankings based only on view counts coming from organic plays. In addition, it’s changing its methodology for reporting on 24-hour record debuts to also only count views from organic sources, including direct links to the video, search results, Watch Next and Trending — but not video advertising.

The changes come about after multiple reports examined how music labels were spending aggressively on video advertising in order to juice the views of their artists’ newly debuted songs.

One report by Rolling Stone detailed how the practice worked, with regard to YouTube’s TrueView ads. This form of advertising lets the advertiser, like the artist or the label, play a shortened version of a music video as an advertisement in front of other videos. Under some conditions — like if a YouTube user interacts with the video or watches it for a certain amount of time — it would count toward the video’s overall view count.

Bloomberg had also reported on the curious case of Indian rapper Badshah, whose video “Paagal” broke records with 75 million views in a single day — topping a prior record set by Korean boy band BTS. Initially, there were rumors that the label, Sony Music, had used server farms and bots to accomplish this. It later turned out to be paid advertising, which Badshah confessed to on Instagram.

But this was not an uncommon practice — Taylor Swift and Blackpink and many others had done the same, the report said. Badshah had just taken it much further.

The report also said YouTube was considering revising its system, as a result.

Today, YouTube is officially announcing those changes.

“YouTube Music Charts have become an indispensable source for the industry and the most accurate place for measuring the popularity of music listening behavior happening on the world’s largest music platform,” the company explained in a blog post. “In an effort to provide more transparency to the industry and align with the policies of official charting companies such as Billboard and Nielsen, we are no longer counting paid advertising views on YouTube in the YouTube Music Charts calculation. Artists will now be ranked based on view counts from organic plays,” the post read.

The changes impact the 24-hour debuts, plus all of YouTube Music’s other charts, including those focused on what’s rising, trending and popular, both locally and globally.

Though advertising and non-organic views will no longer contribute to the view count for the purpose of YouTube’s Music Chart rankings, the company says these changes will not impact YouTube’s existing 24-hour record debut holders. That means Badshah and others can continue to tout their “records,” tainted as those claims may now be.

The changes won’t likely mean the end of this sort of music video advertising, however. Ads still remain a great way for users to be exposed to new music which can, in turn, boost organic views as links get clicked, shared, and embedded elsewhere around the web, for example. But it could have a dampening impact on the pay-for-play business and the size of the ad spend.

“Staying true to YouTube’s overall mission of giving everyone a voice and showing them the world, we want to celebrate all artist achievements on YouTube as determined by their global fans. It’s the artists and fans that have made YouTube the best and most accurate measure of the world’s listening tastes, and we intend on keeping it that way,” said YouTube.

Pandora debuts a desktop app for Windows with support for music & podcasts

Pandora today is launching a desktop app for Windows users following its debut of a native Mac app earlier this year. On Mac, Pandora offers a variety of features for desktop users like on-screen notifications, keyboard controls, and a way to select listening “modes” and more. It didn’t, however, include support for streaming podcasts. The new Windows app includes a similar feature set, and adds support for podcast streaming.

Like its Mac counterpart, Pandora’s Windows app can be used by both free users and paid subscribers alike.

The free users will have access to Pandora’s ad-supported stations, while Pandora Plus subscribers get ad-free stations, unlimited skips, personalized stations, and up to four offline stations. Pandora Premium subscribers, meanwhile, get the same, plus the ability to make and share playlists, play albums and songs on-demand, and take advantage of unlimited offline listening.

Both of the paid subscription tiers can also stream podcasts via the Windows app.

Also like the Mac app, the Windows version supports keyboard controls for doing things like playing, pausing, replaying, shuffling, thumbs up and down, etc. And it supports the Pandora Modes feature which lets you refine your personalized stations by asking Pandora to focus more on certain types of songs — like crowd favorites, the discovery of new artists, deep cuts, songs from a select artist only, new releases, and more.

Desktop users often prefer to use a native app instead of leaving a service open in a browser tab as it allows them a more seamless and integrated experience. That said, Pandora’s Mac version didn’t have the best reviews from Apple users.

Still, Pandora’s rollout of native desktop apps helps the SiriusXM-owned company better compete with rivals like Apple Music and Spotify, both of which have long offered desktop applications. In Apple’s case, it actually built so much into iTunes, that the company decided to finally break it up into parts with the next version of macOS. Pandora doesn’t have the same problem because it doesn’t include a user library or marketplace.

Windows users can download the Pandora app from the Microsoft Store starting today.

The app works on Windows 10. (Pandora also supports streaming to Xbox via the Microsoft Store app.)

Spotify acquires SoundBetter, a music production marketplace, for an undisclosed sum

Spotify today took another step in its efforts to build out services for artists to help diversify itself away from a business model predicated on paying music streaming royalties to labels: it has acquired SoundBetter, a music production marketplace for artists, producers, and musicians to connect on specific projects; and for people who are looking to distribute music tracks to those who want to license them.

SoundBetter has about 180,000 registered users and has paid out more than $19 million to musicians and producers to date, averaging around $1 million per month currently, itself taking a cut by way of a commission (of an undisclosed percentage) on each deal secured through the platform.

Financial terms of the deal are not being disclosed, meaning it’s unlikely to be a significant sum for the $24 billion streaming giant, which now has 232 million users, including 108 million Spotify Premium subscribers. New York-based SoundBetter had raised an undisclosed amount of funding from investors including 500 Startups, Foundry Group, Eric Ries and Verizon Ventures when it was still called Nautilus under AOL (disclosure: TechCrunch is part of Verizon Media). Its last funding — convertible debt from Drummond Road and others — was back in 2015.

SoundBetter is not being shut down with the acquisition: a spokesperson confirmed to TechCrunch that it will be business as usual as Spotify and the startup work on integrating SoundBetter’s services with Spotify for Artists, which currently offers musicians and others analytics on Spotify tracks and other services to help market themselves.

SoundBetter was founded back in 2012 by Shachar Gilad (CEO) and Itamar Yunger (CTO) and operates two main services. Its main business is an online marketplace for musicians to source singers, sound engineers, producers and other music and audio professionals to put the finishing touches on tracks (think Fiverr or Behance, but specifically for music). In June this year, it launched a newer marketplace called Tracks for people to license finished music, competing with the likes of Epidemic Sound (which earlier this year raised money at a $370 million valuation).

Interestingly, Spotify had tried to launch a direct music distribution platform in the past — including with an investment in DistroKid, a music distribution service that supports cross-platform uploads — but the effort never left the beta phase and was then shut down this past July. That decision possibly make more sense now, since the move might have been made to pave the way for SoundBetter.

Indeed, for Spotify, the deal is a signal that the company is going to continue investing in more behind-the-scenes services for artists and others in the music ecosystem. There are a few reasons why this needs to happen.

First, there is the financial predicament of musicians themselves. They have long lamented about how little they earn from Spotify, so having additional services available to them either to make money, or to at least operate more efficiently in their craft, can only be a boost to that relationship.

Second, there is the basics of Spotify’s streaming business for Spotify itself. The company says it has paid out  more than €13 billion ($14.3 billion) to rights holders since launch — there is money paid out with each stream — and that it’s renegotiating label deals all the time, but the company is still operating at a loss from its basic business model (albeit the loss appears to be shrinking).

Third, diversifying could help take some pressure off the streaming side of the business overall. Even putting the profitability to one side, last quarter, Spotify faced some criticism (and a drop in its share price) for missing its own targets for subscription growth

“As we build out our tools for creators, we want to give them the resources they need to thrive. SoundBetter has the same vision,” said Beckwith Kloss, VP Product, Creator at Spotify, in a statement.  “We’re excited that creators can generate income through SoundBetter, as well as benefit from its network of top professionals – from instrumentalists to songwriters to producers – as they perfect their tracks.”

Spotify has over the years amassed a growing list of assets that take the platform beyond basic music streaming, with a lot of attention of late focused on spoken word content, providing cloud-based studio services by way of SoundTrap (acquired by Spotify in 2017), and podcast platform Anchor (acquired last year).

But music continues to be the beating drum of the platform — with paid streaming continuing to grow at the expense of the physical music business. So, Spotify will continue to build up that area of its business, too (not least also because competitors like Apple are continuing to build up its own services for artists that bypass traditional labels). 

SoundBetter already has a decent, if relatively small, business, with its fair share of big names. It claims that “Kanye West’s Producer, Hoobastank’s Drummer, Jamiroquai’s Guitarist, Beyonce’s Songwriter, Joe Cocker’s Bass player, Herbie Hancock’s Engineer, Morrissey’s Guitarist, The Killers’ Mixing Engineer, and George Michael’s Mastering Engineer” are among those using its services. Getting acquired will give it a big boost in exposure: Spotify for Artists currently has 400,000 registered users, but with the platform itself a cornerstone of digital music distribution, Spotify hopes that with the right mix of services, including the kind that SoundBetter has built, that number can grow much bigger.

SoundBetter offers the most comprehensive global marketplace for music and audio production professionals for hire in the world along with a member community spanning 176 countries and 14,000 cities worldwide,” said SoundBetter Co-Founder and CEO Shachar Gilad. “We are excited to benefit from Spotify’s global scale, resources, and vision to expand our network and drive more economic opportunities for artists of all levels.”

How Kobalt is simplifying the killer complexities of the music industry

Backed by over $200 million in VC funding, Kobalt is changing the way the music industry does business and putting more money into musicians’ pockets in the process.

In Part I of this series, I walked through the company’s founding story and its overall structure. There are two core theses that Kobalt bet on: 1) that the shift to digital music could transform the way royalties are tracked and paid, and 2) that music streaming will empower a growing middle class of DIY musicians who find success across countless niches.

This article focuses on the complex way royalties flow through the industry and how Kobalt is restructuring that process (while Part III will focus on music’s middle class). The music industry runs on copyright administration and royalty collections. If the system breaks — if people lose track of where songs are being played and who is owed how much in royalties — everything halts.

Kobalt is as much a compliance tech company as it is a music company: it has built a quasi “operating system” to more accurately and quickly handle this using software and a centralized approach to collections, upending a broken, inefficient system so everything can run more smoothly and predictably on top of it. The big question is whether it can maintain its initial lead in doing this, however.

The business of a song

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Image via Getty Images / Mykyta Dolmatov

Paid streaming music subscriptions in U.S. top 60M, says RIAA

Streaming music subscriptions continue to drive the U.S. music industry’s growth and revenues, according to a new report from the Recording Industry Association of America (RIAA) released this week. The organization said total music revenue grew 18% to $5.4 billion in the first half of 2019, with streaming music accounting for 80% of industry revenues. The report also noted the number of paid subscriptions topped 60 million in the U.S. for the first time.

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Streaming revenues grew 26% to $4.3 billion in the first half of the year.

This broad figure includes paid versions of Spotify, Apple Music, Amazon Music, and others, as well as digital radio service revenues like those from Pandora, Sirius XM, and other internet radio, plus ad-supported streaming like YouTube, Vevo, and the ad-supported version of Spotify. Screen Shot 2019 09 06 at 3.46.43 PM

Meanwhile, paid subscription streaming is continuing to grow, too, said the RIAA. Year-over-year, paid subscriptions grew 31% to reach $3.3 billion and remain the biggest growth driver for industry revenues.

In the first half of 2019, paid subscriptions made up 62% of all U.S. industry revenues and 77% of U.S. streaming music revenues.

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The number of paid subscriptions to full on-demand streaming services grew 30% to 61.1 million in the first half of the year, at an average pace of over 1 million new subscriptions per month.

This doesn’t include the “Limited Tier” subscriptions like Pandora Plus or that Echo-only subscription to Amazon Music, for example, where various factors limit access to a full catalog across devices or restrict some on-demand features. This category saw $482 million in revenues, up 39% from the year prior.

“Thanks to that breakneck growth, plus continued modest drops in digital downloads and new physical sales, streaming now generates 80% of music business revenues and has fundamentally reshaped how fans find, share, and listen to the songs and artists they love,” wrote RIAA Chairman & CEO Mitch Glazier, about the new figures.

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Ad-supported on-demand services grew 25% year-over-year to $427 million, while digital radio service grew 5% to $552 million in the first half of 2019.

However, the gains made by streaming were somewhat offset by declines in digital downloads, as Glazier noted.

Revenues in this category fell 18% to $462 million in the first half of the year, with digital track sales down 16% year-over-year and digital album revenues down 23%. Overall, digital download only accounted for 8.6% of total industry revenues.

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Physical product revenues grew 5% to $485 million in the first half of 2019, but the RIAA attributed this to a reduction in returns.

 

Spotify expands its new Premium Duo plan to Latin America

Spotify’s newest paid subscription, the Premium Duo plan designed for two people, first launched this spring as a pilot test in Ireland, Colombia, Chile, Denmark, and Poland. Today, Spotify says the plan is being more broadly rolled out to 14 more Latin American markets.

The new markets include: Argentina, Bolivia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, and Uruguay.

The Duo plan is meant mainly for couples, though it could apply to roommates or any other two people who share the same home address.

In terms of pricing, it’s a step up from a single Premium subscription but more affordable than a Family Plan, as it’s limited to just two accounts. However, the Duo plan is discounted so it’s a better deal than buying two separate Premium accounts.

The benefits are similar to those on the Family Plan. Like the larger group plan, Duo keeps each user’s music preferences and recommendations separate from one another. And like the Family Plan, which recently added a custom mix composed of track everyone in the family enjoys, the Duo subscription also includes its own shared playlist, the Duo Mix. Members can easily share their playlist libraries with one another, too.

Despite now reaching 19 total markets, Spotify still refers to the Premium Duo plan as a “pilot,” which typically means the company hasn’t fully committed to bringing the service to all its users at some point. Instead, that terminology typically implies the company is continuing to evaluate the new service’s impact.

In Spotify’s case, Premium Duo’s launch in March hasn’t yet led to a massive subscription bump. When reporting its Q2 2019 earnings, the company said it added 8 million new subscribers in the quarter, which was below the estimated 8.5 million figure. It now has 232 million monthly users and 108 million paying subscribers.

That said, Duo hasn’t reached many of Spotify’s key markets where such a plan could have more of an impact to subscriber counts, including the U.S.

If you live in a supported market and already have a Premium plan you can visit your Account page on Spotify’s website to add a partner and upgrade. Both plan members will need to share the same home address.

Pandora now lets you share music and podcasts to your Instagram Stories

Pandora today announced a new integration with Instagram that will allow users to share to their Instagram Story their favorite music and podcasts. The feature comes well over a year after Spotify launched a similar integration with Instagram Stories, and only days after Spotify introduced sharing to Facebook Stories, as well.

In Pandora’s case, accessing the feature is also a quick and easy process — you just tap the “Share” button from the Now Playing screen in the app, then choose “Instagram Stories” as the destination.

A cover art card for the music or podcast will then be generated on your Instagram Story, which you can further decorate with text and stickers, as usual. You also can choose to send the story as a direct message to a friend or a group chat instead of all your followers.

Where Pandora’s experience differs from Spotify’s is what happens when that story is viewed.

When a friend taps the “Play on Pandora” button from the Instagram story, they can gain direct access to that content — even if they don’t have a Premium account. Those who aren’t paid subscribers will be able to view a short ad then gain access to both the shared content as well as a session of free, unlimited, on-demand music.

This is made possible through Pandora’s Premium Access ad solution, which rewards users with free, on-demand sessions for watching video ads.

That means Pandora’s take on Instagram sharing won’t just be useful to artists looking to promote their music, or fans looking to engage their friends — it also will potentially serve as a way to convert free users to paid subscribers after they get a free taste of what Pandora has to offer.

The feature also can be used to promote podcasts, which is a newer battleground between Spotify and Pandora these days. The former has spent on acquisitions and hosts a number of exclusive shows while Pandora is now benefiting from (new owner) SiriusXM’s talk radio programming and its own “Genome” classification technology. 

Pandora says the Instagram Story-sharing feature is launching today for select users, and will support sharing songs, albums, podcasts and playlists.

It’s rolling out to a limited number of Pandora users to start, and will gradually reach the rest of the user base in the weeks ahead.

SiriusXM undercuts rivals with a $4 per month student subscription

SiriusXM is making its streaming service more affordable for younger consumers with the launch of a new subscription package for college students. While SiriusXM’s Premier package is $12.99 per month, the new streaming-only student offering will be just $4 per month — a 69% discount. This comes in a dollar less than competitors’ student plans, including the $4.99 per month packages from Apple Music, Spotify, Amazon Music Unlimited, YouTube Music, and even SiriusXM-owned Pandora.

The move represents a big grab for a growing user base who prefers to subscribe to streaming music services rather than make purchases on digital marketplaces, like iTunes or Amazon.

Though the SiriusXM brand has for a long time been associated with being an upgrade option for vehicles, the service has been working to establish itself as a viable option outside the car. In April, it launched a streaming-only subscription for listeners without cars.

Today, SiriusXM streams across phones and tablets, on the web, and at home on connected devices including Amazon Alexa, Fire TV, Chromecast, Roku, Apple TV, smart TVs, Sonos speakers, Xbox, and Sony PlayStation.

Like other student packages, SiriusXM’s student plan isn’t a watered-down subscription. It offers access to SiriusXM’s full lineup of music, including its over 200 commercial-free channels, which feature both music and talk radio-style programming as well as sports, entertainment, comedy, lifestyle, news and more.

This also includes some of SiriusXM’s more recent additions, following its $3.5 billion Pandora acquisition last year, which bring Pandora -powered content to its service. For example, the companies this spring launched Pandora NOW, a station that streams on both services that used Pandora listener data to pull in the most listened-to and the fastest-trending new tracks across Pop, Hip Hop, R&B, Dance and Latin.

Plus, students will have access to the over 100 SiriusXM Xtra channels which allow you to skip through songs, the company says.

The service does not include the ability to stream to cars, however — it’s a student version of SiriusXM’s streaming-only plan.

To join the service, students will have to verify their status as a registered student by providing their university or college name upon sign-up. The verification process is handled by SheerID, which also powers verification for others in the space, like YouTube, Spotify and more.

“Today’s college students grew up listening to SiriusXM in their parent’s car, and now we have a package built just for them,” said Matt Epstein, Vice President, SiriusXM Outside the Car, in a statement. “Our Student Premier Package enables students to have their own subscription and continue to enjoy the SiriusXM programming they love in their dorm room, at home or on the go,” he said.

 

 

How a Swedish saxophonist built Kobalt, the world’s next music unicorn

You may not have heard of Kobalt before, but you probably engage with the music it oversees every day, if not almost every hour. Combining a technology platform to better track ownership rights and royalties of songs with a new approach to representing musicians in their careers, Kobalt has risen from the ashes of the 2000 dot-com bubble to become a major player in the streaming music era. It is the leading alternative to incumbent music publishers (who represent songwriters) and is building a new model record label for the growing “middle class’ of musicians around the world who are stars within niche audiences.

Having predicted music’s digital upheaval early, Kobalt has taken off as streaming music has gone mainstream across the US, Europe, and East Asia. In the final quarter of last year, it represented the artists behind 38 of the top 100 songs on U.S. radio.

Along the way, it has secured more than $200 million in venture funding from investors like GV, Balderton, and Michael Dell, and its valuation was last pegged at $800 million. It confirmed in April that it is raising another $100 million to boot. Kobalt Music Group now employs over 700 people in 14 offices, and GV partner Avid Larizadeh Duggan even left her firm to become Kobalt’s COO.

How did a Swedish saxophonist from the 1980s transform into a leading entrepreneur in music’s digital transformation? Why are top technology VCs pouring money into a company that represents a roster of musicians? And how has the rise of music streaming created an opening for Kobalt to architect a new approach to the way the industry works?

Gaining an understanding of Kobalt and its future prospects is a vehicle for understanding the massive change underway across the global music industry right now and the opportunities that is and isn’t creating for entrepreneurs.

This article is Part 1 of the Kobalt EC-1, focused on the company’s origin story and growth. Part 2 will look at the company’s journey to create a new model for representing songwriters and tracking their ownership interests through the complex world of music royalties. Part 3 will look at Kobalt’s thesis about the rise of a massive new middle class of popular musicians and the record label alternative it is scaling to serve them.

Table of Contents

Early lessons on the tough road of entrepreneurship

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Image via Kobalt Music

It’s tough to imagine a worse year to launch a music company than 2000. Willard Ahdritz, a Swede living in London, left his corporate consulting job and sold his home for £200,000 to fully commit to his idea of a startup collecting royalties for musicians. In hindsight, his timing was less than impeccable: he launched Kobalt just as Napster and music piracy exploded onto the mainstream and mere months before the dot-com crash would wipe out much of the technology industry.

The situation was dire, and even his main seed investor told him he was doomed once the market crashed. “Eating an egg and ham sandwich…have you heard this saying? The chicken is contributing but the pig is committed,” Ahdritz said when we first spoke this past April (he has an endless supply of sayings). “I believe in that — to lose is not an option.”

Entrepreneurial hardship though is something that Ahdritz had early experience with. Born in Örebro, a city of 100,000 people in the middle of Sweden, Ahdritz spent a lot of time as a kid playing in the woods, which also holding dual interests in music and engineering. The intersection of those two converged in the synthesizer revolution of early electronic music, and he was fascinated by bands like Kraftwerk.

Nielsen reports a record half a trillion on-demand music streams in U.S. so far this year

Music streaming services have already delivered a new high of half a trillion (507.7 billion) on-demand streams in the first half of 2019, according to Nielsen’s mid-year Music Report released this week. This record number — an increase of 31.6% over the first half of last year — was attributed to the success of singles and albums from Ariana Grande, Billie Eilish, Halsey, Khalid, BTS, Lil Nas X, and Bad Bunny, among other factors.

For example, the report also noted the outsized impact of TikTok and its global audience of 500 million monthly users.

“No emerging app helped break more songs in 2019 than TikTok,” Nielsen said.

It then pointed to various TikTok hits like 2019’s year’s most-consumed on-demand song, Nil Nas X’s “Old Town Road,” which saw 1.3 billion total on-demand streams year-to-date; as well as Ava Max’s “Sweet But Psycho,” which snagged 310 million on-demand streams (YTD); and Joji’s “Slow Dancing in the Dark,” with its 165 million on-demand streams (YTD).

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The report additionally broke down the record 507.7 billion on-demand streams into both on-demand audio streams — like those found on Spotify and Apple Music — and on-demand video streams, found it was the latter that was growing faster.

According to Nielsen data, video streaming grew 39.6% from 124.7 billion streams in the first half of 2018 to 174.2 billion streams in the first half of 2019.

Meanwhile, audio streams only grew 27.8% by comparison, going from 261.0 billion streams in the first half of last year to 333.5 billion streams in the first half of 2019.

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Further analysis by Music Business Worldwide found that, despite the record streaming numbers, annual growth in audio streaming is actually declining. This year’s 27.8% growth in audio streaming from H1 2018 to H1 2019 was a reduction from the 41.5% growth seen from H1 2017 to H1 2018. Or, more simply put, the annual growth in total U.S. audio streaming was over 4 billion streams smaller between the two reports.

Also trending downward are physical album sales (-15.1% to 32.5M); digital album sales (-24.4% to 19.1M); vinyl (-9.6% to 7.7M); and digital track sales (-25.6% to 153.1M).

The report made mention, too, of a few notable moments in music so far in 2019. One key finding, in terms of its relationship to technology companies, was Marshmello’s concert held in Fortnite. Nielsen found the event led to “major gains” in artist’s catalog, with 13,000 equivalent units earned during the debut week of “Marshmello: Fornite Extended Set” — the DJ/producer’s largest sales week to date. His album “Joytime II” in the week following his appearance in Fortnite saw a 316% increase in sales, as well.

The full report, which dives into individual artists and trends, is available here.

The data was calculated from Jan. 4, 2019, through June 20, 2019.

Image credit, top: Billy Ray Cyrus and Lil Nas X perform onstage at the 2019 BET Awards on June 23, 291 in LA, CA. Photo by Kevin Winter/Getty Images