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Music startups aren’t dead — they’re just changing

Thu, 29 Nov 2012 16:00:38 +0000

For those of us who work in digital music, this week has delivered a nasty one-two punch to the gut. First David Pakman (eMusic, N2K, MyPlay) posted the text of his testimony during US Congressional hearings on his blog. It focused on how prohibitively expensive it is to license music from record labels. Then Peter Kafka, one of the best writers at All Things D, was incredulous that anyone would even bother starting something new in the music space at all.

I’d argue that both of these very smart guys are obsessed with the wrong problem and, on this topic at least, they are as stuck in the past as major labels are.

They both make the mistake of focusing primarily on start-up business models that revolve almost exclusively on getting publishing or performance rights to stream or download music. And by getting tangled up in that mess, they miss the forest for the trees. They’ve forgotten that the music industry isn’t — and has never been — just about recorded music. Sure that part is hard and it’s been shrinking for the last decade, but that aspect is only a part of the bigger picture.

Don’t believe me? Here are some forward-thinking companies who are wisely focusing on other parts of the music world and not just whining about the high cost of licensing music. So what are they doing right?

They focus on live music

Live music revenues have eclipsed recorded music revenues and while a lot of that money is flowing through LiveNation or AEG, both of those companies are ripe for disruption. Live experiences are hard to pirate and commoditize. As the money drained out of recorded music sales, money spend on music has moved products and services that are harder to mass produce and offer intimate access to their favorite musicians. And fans are willing to pay for these experiences, in stark contrast to the smaller segment who are willing to paying for downloads or subscription music services.

This is what start-ups like SongKick and BandsInTown understand as they build communities and tools for live music.

They are making promotion and discovery better for artists

The truth is that 90 percent of musicians don’t have a piracy problem, they have an obscurity problem. The people who should love their music just don’t know it exists. The old channels of videos and radio are still there, but the internet exploded everything and diffused attention. In many ways it’s harder than ever for artists and fans to connect. While Peter scoffs at the value of a start-up based on bands without music contracts, it’s where the future Radioheads and Beyonces are going to come from. And plenty of new and old artists who DO have label deals also need these services and will pay for them.

This is what Soundcloud (CEO Alex Ljung pictured) is doing by proving easy-to-use tools for artists who want their music to be heard by more people in more places. Or WebDoc, which creates a platform for artists and their fans to collaborate and share creative projects. Or The Hype Machine, which has harnessed the power of music blogs to amplify discovery of new music. This is also the area that my old company, Last.fm, SHOULD be pivoting toward…but don’t get me started on that.

The opportunity to partner with brands here is also amazing. It’s also a place where you can get the labels to work with you instead of sending their shark-like lawyers to negotiate with you.

They are making the whole ecosystem better

The value of music for fans isn’t just listening to it. It’s about the connections you make with other fans and to the artists themselves. Or by disrupting the number of middlemen who take a part of each dollar an artist gets from fans. Fans want to pay artists, particularly when they understand that the artist gets a larger piece of the pie than they did with the old-school record labels.

This is what Ian Rogers has been preaching forever as TopSpin pioneered the direct-to-fan platform. Or what Benji Rogers is doing with his alternative funding platform for artists, PledgeMusic. Or what Bandcamp does when they create a better deal for artists by letting them sell direct to fans.

They created simpler and more intimate services

While the first generation of services that Pakman and his generation ran were based on the size of the catalogs they offered and on trying to be all things to all users, a music services doesn’t have to be massive and complicated to be valuable. This is what Hannah Donovan and Matt Ogle, formerly at Last.fm, are doing with This Is My Jam, which you an think of as Instagram for music. Watch them closely.

They move their focus to mobile

Mobile phones are already the most personal technology we own these and so they have already become central to many people’s music listing experiences. The opportunities to expand that to other music-centric features like with ticketing, new music discovery, fan/artist interactions are all fantastic. Location and hyper-local services around music are also untapped. Improving and enhancing music playback of music we already own is also under-developed as an opportunity. Apps have become a new medium for artists like Bjork and Brian Eno and there is more room for innovation here, even as it gets even more crowded.

This is what Mobile Roadie recognizes as they build a mobile-first platform for artists who want to want to reach their fans directly.

They build B2B services around the music

Every label and artist manager, large and small, is struggling to understand audiences and to collect data around how music is being used. And it’s not just labels who want this data. Brands and advertisers want it too. This is where Next Big Sound and MusicMetric live, providing important analytics and tools to create “actionable intelligence” in the fragmented music world. The Echonest, meanwhile, is also building data-driven services and commercial APIs to help small and big companies to make their music products with data, play listing, and recommendations.

And that’s not all

Here are other areas that haven’t really been touched yet:

Sync rights

- the licensing of music to TV, games, advertising and film is one of the most lucrative parts of the recorded music business. Creating a better marketplace for sync rights could make it even more valuable, particularly if you can make it faster and simpler for companies to do it.

Merchandising

The company that really fixes the “merch-table” for bands and creates the Threadless or the

Etsy

for music fans could clean-up. TopSpin and BandCamp are doing this now too.

Royalties and payments to artists

The accounting system that underlies the publishing and performance rights is one of the most rotten and complicated things about the industry. It’s only getting worse as are more digital products and services are created. A few companies like

Kobalt Music

are trying to start again from scratch. A music start-up built on transparency, great analytics and paying artists faster and more fairly would be the most disruptive music business ever.

Start-ups create the most value when they carve out new business models and transform the way we used to do things. They are less valuable (and thus less viable) when they just wringing the last drop of money out of old models. The truly great ones transform industries and build new opportunities, growing the market for everyone.

Kafka and Pakman are right about one thing: trying to licensing music is hard and the corpses of many start-ups litter are littering the battlefield. So be smart and don’t play on that field. Move to a new one or make your own field.

Matthew Hawn is product development and strategy consultant based in London, and previously VP of product at Last.fm

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Two years after launch, Rdio finally ready to make a splash

Janko Roettgers — Thu, 25 Oct 2012 22:43:52 +0000

Rdio, as, a music industry insider told me recently, is a bit of an enigma. The Spotify competitor has been chugging along ever since its launch two years ago, quietly rolling out product updates as other players like MOG were making headlines. “They seem to be very heads-down. You don’t really know what those guys are up to,” that insider said.

Rdio CEO Drew Larner laughed when I told him this story during a recent sit-down, but he also made it clear that he wants to change that perception. He wants more people to know about Rdio, and he wants to tell them exactly what makes the service different from the rest. That’s why the San Francisco-based company rolled out a massive ad campaign this fall, with big billboard ads in New York’s Times Square as well as in cities like Los Angeles and San Francisco.

The ads feature musicians like Snoop Lion, Santigold & Chromeo, and Larner told me about an interesting twist: Each ad shows artists following other artists – just like Rdio users can follow other users, including some of the artists featured in the ads, on the service. “We have from Day One built our service around social discovery,” said Larner.

Doing social differently

Social is one of a few notable differences between Rdio and Spotify. The latter has been heavily relying on Facebook’s social graph, relaying all the listening habits of folks you may know, but not necessarily value for their taste in music; that’s why Spotify apps like the just-relaunched Soundrop have had so much success with their own take on social.

Rdio has always had a different approach to social. Instead of random social connections, it relies on musical influencers that you follow for — not despite — their listening habits. Larner told me he follows a few hundred people on Rdio, but only knows a small number of them personally.

Another difference from Spotify is that Rdio now pays artists to promote its service. The company recently launched its Rdio Artist Program, which pays artists $10 for every new paying subscriber they help recruit. It’s an industry-first, even though it’s not exactly designed to get rid of the middle man and turn the music biz upside down. Still, it could get some artists some extra pocket change.

And for Rdio, the benefit is twofold: Not only will artists try to win over new users, but their increased use of the service will also make it more interesting to existing subscribers who chose to follow those artists. It’s a subtle side benefit that likely wasn’t lost on Janus Friis, the Skype founder that is financing Rdio. Friis was the brain behind the artist program, Larner told me: “It came from Janus, it really was his idea.”

Next up: carrier billing

So what’s next up for Rdio? Larner said that the company is going to take its ad campaign to Europe, Australia and Brazil in the first half of 2013. Rdio is also planning to make its API more widely available to developers, making it possible for them to use Rdio’s tracks within their own sites and services. That used to be a licensing challenge, but Larner told me that he sees the industry ease off on licensing terms.

But the biggest step forward for Rdio – and the music subscription market in general – could be a partnership with mobile operators. Muve music has demonstrated that bundling music with other phone services works, and Larner agreed that it is an important piece of the puzzle. “To me, the key is the billing relationship,” he said.

His company struck a billing agreement with Canada’s Telus last summer, and has similar agreements in place in Brazil. When will we see Rdio partner with a U.S. telco? Larner wouldn’t say, and just smiled. Maybe some things won’t change about Rdio after all.

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Spotify’s new apps could be a big boost for labels

Janko Roettgers — Thu, 22 Mar 2012 00:01:44 +0000

Sub Pop, Ninja Tune, Matador: Record labels used to be known as curators of a certain sound, and collectors would sometimes buy every new release on their favorite labels. The weight of an iconic label has largely disappeared in the age of digital music, but Spotify is now offering record companies another chance to prove their chops as curators. The music subscription service is launching a second batch of apps for its desktop application this week, and some of the new partners include Def Jam, Domino, Pias, Warner Music and Matador Records.

Spotify is also launching a number of other apps that make it easier to discover entire bodies of music, including one that offers an easy way to explore curated playlists from artists like Miles Davis and Bob Dylan, and one that lets listeners explore classical music by composer, era or instrument. However, the launch of label apps could be the most significant development, in part because labels seem like a natural fit for these kinds of apps.

Apps on Spotify have proven to be pretty popular. Some of the launch partners of the service’s app platform shared some first numbers with us in January, pointing to impressive engagement levels. Spotify followed up with an official tally, which showed some 15 million song plays for app partner Soundrop in February alone, and also included encouraging data from other apps.

One question not answered by these numbers was: What are third-party developers getting out of building these kinds of apps for Spotify? “Right now, there is really no monetization within the Spotify platform,” explained the company’s CEO Daniel Ek when Spotify launched the apps in November. That hasn’t changed since, and it’s unclear why startups should develop their app within Spotify’s walls, as opposed to on the open web.

Labels on the other hand can only gain from increased visibility on Spotify. Not only can they direct listeners towards the music of their artists, they can also use these apps to promote and monetize other things their artists have to offer – including limited downloads, tours and merchandise. The biggest benefit may actually go to those smaller labels that have a relationship with their artists that goes beyond music sales – which are exactly the labels that used to be known as curators of a certain sound. You know, like Sub Pop, Ninja Tune or Matador.

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