The Crescendo of Music Tech
From Silicon Valley to London the walls of some music-related startups seem to be crumbling. Yet people are listening to as much music as they ever have so how are startups able to build a business in this huge market with the gatekeepers and steep licensing fees in the way.
“On Monday, Cumulus Media, which operates 525 radio stations, will announce a deal with Rdio, a subscription music service from the founders of Skype, that will give Cumulus an online outlet and help Rdio compete against more established players like Spotify. Cumulus will also sell advertising for a free version of the service in the United States.”
In some respects this story reminds me of when Color announced a “multi-year deal” for their video chat app to come pre-installed on every Verizon Android phone. The problem was that it wasn’t any better just because it was in front of a million people.
As part of this new deal it sounds like Rdio will syndicate Cumulus talk content. On a parallel, Color seemed to build their V2 app with Verizon in mind as they were looking for something that they could demo their shiny, new LTE network on. If you’re adding features to fit into a strategic partnership instead of on customer demand then it doesn’t look great. Although it’s yet to be seen if this will be the case for Rdio or not.
Generally focusing on music alone gives you little leverage within the music industry because you’re at the mercy of a single group. Why shouldn’t they take a stake in the company for connecting you to another label or for having an artist use your service. Even if you aren’t after licensing deals they know there’s nowhere else you can go if your product is solely branded as a music product.
The powerful thing about ‘DJ social game’ Turntable.fm was the social interaction and game mechanics but their sky-high licensing deals meant they have recently had to switch to the Soundcloud API.
A number of precedents have been set in the startup world for companies that built great products for a wider market (audio hosting, ticketing, merch) and end up selling their product with the commercial music world after they had grown rather than as a scrappy startup.
Companies like Eventbrite allow anyone to sell tickets and they’re in the perfect place to take on TicketMaster. Their brand recognition and size makes it hard for label to whip together a team or back a competing product for musicians. For example in the film business consumers want to use YouTube not “film-industry-owned-trailer-site.com”.
WillCall had been building out their last minute ticketing app for music in San Francisco but London-based YPlan have taken over the space with 10% of iPhone distribution in London and $12M in venture funding because they were able to launch with different types of events and build up their userbase so they could eventually add signed musicians and large scale concerts. Their “going out app” tag-line didn’t sell them as a music ticketing product.
SoundCloud allowed independent musicians, DJ’s, podcasters, etc to upload any kind of sound recording and once they got popular it became important for labels to add music to SoundCloud, link to paid downloads and offer free tracks to entice fans.
Bandcamp went after the SaaS model, rather than building out a music marketplace, they let artists create beautiful pages to sell their music and let artists offer music in any format you can imagine with added optional features like “pay what you want” and merchandising tools. Now Bandcamp is a destination site as much as iTunes for certain genres of music.
The innovation to move the industry away from antiquated business models will continue but it probably won’t be sold as a saving grace for the music industry but as a fun way to do X.