▲ 206 points
back
153 comments
I came to this conclusion myself about 6 months ago, after Dalton Caldwell spoke at a YC dinner. I realized it was basically hopeless to start startups that touch label music, because even the ones that seem to be succeeding (in the sense of not being sued out of existence) are only allowed to live so the labels can suck investors' money through them.
But by creating a startup-free zone around themselves, all the labels are doing is hosing themselves, because they won't have startups working to develop whatever would have been the new ways of delivering and using label music. They've created an anti-platform.
What PG says is 100% true. I say this having done a startup in the space.
In a nut shell, you need roughly $1M upfront for legal fees to negotiate with the big four record labels (for an interactive service, not a non-interactive service like Pandora).
The situation isn't entirely hopeless. Even within the most aggressive labels (and by that I mean their legal departments) there are parties who do encourage innovation. These are the people that go to bat for artists and are trying everything imaginable to promote them. They try new advertising campaigns, are experimenting with alternate branding, and moving to the sports business model (ie endorsements). Its unfortunate that the legal departments have been the ones with all the power, but this will fade with time as current employees are replaced with ones who see the effectiveness of all these new promotional channels.
Just curious: Do you think popular music as a whole is a hopeless area or specifically companies that are looking to stream music? I agree in regards toward streaming music services, but there are a lot of startups focusing on other areas of music that seem to be successful:
pg, thanks for mentioning me.
I will be revisiting these themes at my Startup School talk this year.
"I realized it was basically hopeless to start startups that touch label music"
there's a key word missing in your sentiment. the companies that are streaming music require licenses. there's a number of great companies that are extremely innovative in the music space. the echo nest just raised a $7mil round today. tunecore and indaba are two more varying types that have very nice business models.
from the article: "There will be no new players of significance to enter the business. Investors don’t want to entertain the remotest possibility of funding any start-up that deals with music" once again, it's not fair to think of all startups related to music as synonymous with the struggles of the streaming startups. as one who has been involved in the music space for a couple years, i still believe there is potential as more & more music is being produced --> how do we sift through all the noise?
We figured this out at the end of 2008 when we closed our digital music startup, Mixwit (yc w08).
Not soon after we shutdown the founder of a similar service, Favtape, was sued. Yes you read that correctly, Favtape the business wasn't sued, the founder (Ryan Sit) was sued personally. I'm not sure what ever came of that lawsuit, but I'm fairly convinced our name was on their too until we shutdown since we had received threatening letters from the same label a few months previous.
At the time we looked up to imeem as a beacon, thinking if we made a kickass product we could be be on crest of a new wave of successful digital music startups. Fast forward a year later, at 16m users strong Imeem was "acquired" by Myspace for $1m (compared to $50m+ invested) and turned into a redirect to MySpace Music.
Looking back I'm happy we figured this out when we did.
There's plenty of startups in the music space that don't directly deliver music to listeners, what about those?
The only way out of this that I can see is for artists to sign onto digital-friendly (ie, small-time, currently) distributors. Which loses anything you'd get from signing with a big label. It's a nasty situation; with luck, the music labels will kill themselves off entirely, and something new can rise from the ashes. I doubt they'll actually embrace digital distribution for a minimum of several more years, which is murder to artists.
I remember watching a video of a talk you gave at startup school 08 and near the end during the Q&A, you said something to the effect of "we fund what people apply with, which usually ends up being some form of facebook or something to do with independent music".
It seems that if the labels have positioned themselves as unfavorable toward startups to the point of making an anti-platform, that there would be demand for an independent, label-free music buying/selling experience for startups to work with. Yet the only thing I think of that comes close was the old version of thesixtyone's marketplace.
Are the startups that apply to ycombinator in this area trying to build something outside of the current music ecosystem and failing (and why)? Or is everyone just trying to work with the current system and finding that it isn't feasible/profitable?
I think if the startup has to do with helping bands survive independent of record labels, there's plenty of room. Once the secret formula to finding success as a musician without a major record label is discovered, all bets are off for the suits.
What about funding something like Groveshark? It doesn't seem like they need to work with the labels.
Not all music startups have to be arms of the labels right? Do you think it's possible to develop a music startup independent and free of any association with record labels?
The way I see it is that if it's possible to do this then the reward would be huge since the system is so broken.
only allowed to live so the labels can suck investors' money through them
That's true, but not as true as you might suspect. Pandora is profitable. Yes, they are certainly pumping a large amount of money to the record labels, but they're able to exist without driving their users away with over-advertising.
I wouldn't do a (label) music-based startup today, though. Sad.
This is a throw away account, I would prefer to remain anonymous. I work for a digital music startup and am privy to the kinds of tactics and ridiculousness that the major labels engage in on a regular basis. I should note however that I am a developer, not one of the guys that do the deal cutting as primary focus.
For example; they're well aware DRM does not work, but their insistence on the implementation of DRM is absolutely not focused anymore on the idea that they can stop piracy, but that they can implement market segmentation and suck the profit out of the kind of content that people actually want.
Case in point; digital music startup that charges a subscription for global access to a large library of content from the major labels charges a flat fee to the customer and is charged by the record labels on a pay per play basis, thus the effective margin that the startup makes is a function of (average amount of plays per user / subscription cost per month) - price paid to record label for the play. It turns out that if you do not use DRM for your player the record label leaves you around a 10% per play margin (on quite a hefty monthly subscription fee). With DRM it's much much more profitable for the startup in question, they bank on DRM being so repellent to customers that the startup will pay the much higher rate for DRM free.
They also micromanage the hell out of the details of implementation, for example they have a specific set of "acceptable DRM" standards which you must adhere to to be eligible for the rates in question. There have been negotiations running for months with them just to get approval to run the same kind of streaming clients as the web service provides available as applications to android / iPhone clients. When considering implementing AWS for site infrastructure one of the objections raised by the music companies was that "they don't want their music on the cloud".
Effectively it chokes what it is possible to do in the market, inflates the prices, and makes the entire offering far less appealing. It does seem like they're headed for destruction but they seem just as steadfast in their refusal to amend their course.
Why, hello there Grooveshark.
The Dream was over a while back when digital music and Internet got popular. Apple iTunes store kind of brought it back except Apple as the dreamer not Record Labels.
The Dream being control over distribution. Selling over and over the same product. Selling lots crap (most songs on album) on the backs of 1 or 2 hits. Being the gatekeeper between artists and their fans. Near monopolistic control over supply and demand. All of it, a cash fucking cow.
Over, for the Record Labels. Although they're doing a damn good job at legislating their dream into law. Their government mandated welfare will live on similar to but more insidious than farm/corn lobbies subsidy program. And just like corn subsidy it(warping of copyright) will fuck the rest of us for decades.
The point about the labels doing it to themselves is probably only half the story.
The other half is the culturally ingrained phenomena of "the dream." Many artists jamming in their basements dream of "signing," and expect a big advance, tours, radio play, and all of that old-world stuff. Many today of course realize that there's the Internet and they can afford to distribute their work for pennies and market to their hearts desire; but even those artists generally still think that "signing" is the next, big logical step.
The big labels cannot change. The 80s and 90s left us with a market and taste for stadium tours, music videos, and times square billboards. Six decades of business have given us a model that requires a huge up-front investment for a risky, but lucrative return.
The problem is the returns are becoming scarce.
Yet I think big labels will continue to persist only because they're the loan sharks with the money. I think the author is pretty close to right that there's likely no one that will fund a start up that has anything to do with music. If you have an innovative idea that you think can improve the situation, create new markets, etc you'll have to do it on your own.
There are several reasons that "signing" is the next, big logical step.
Larger venues (most of which are owned by Clearchannel) will not give you the time of the day if you don't have a label behind you. It doesn't matter if you consistently sell out of venues a tier below them. Their booking agent won't even take your call. Sell a million mp3s of your song online? If one of the subsidiaries of the Big Four aren't behind you, forget getting to play a place like Bowery Ballroom. The "break-in" venues like CBGBs don't even exist anymore.
In order to tour, and I mean really tour - spend six, eight months on the road - you need a lot of money. To haul equipment. To pay people to schlep your equipment. To deal with contracts with venues. To deal with venue management. To make sure you don't get screwed by the venue management. To book the shows. It's really, really hard for even a locally established artist to tour. That's where the label helps out. I'm not talking stadium shows. I'm talking about shows that break even, where 200-300 people show up.
The big labels don't feel like changing, not that they cannot change. They are a bunch of human beings at all.
Aren't human beings flexible enough to thrive anywhere on earth?
Yet, some humans choose to die rather than adapt.
The labels don't want to deal with the changing business. So they rather die.
I think labels will continue to have its piece of the market. Not the whole market as in the past, but a important one, because they still control access to mainstream media.
Isn't this just wishful thinking? Everybody hates labels, and so wishes them dead (and for the record, so do I). But just because everyone wants them to die doesn't mean they will die.
Labels sit on content, and their monopoly is protected by the full force of the law. The number of startups in the field or the evilness of label people does seem a little bit irrelevant.
There is only one way labels can die: if they cease to have a monopoly on music content -- which means, either the world gets rid of copyright, or (young, new and aspiring) artists stop signing with labels.
None of this is happening anytime soon. (It may happen, but in a rather distant future.)
A question, honestly: have you ever visited or spoken to anyone at a label?
The irony of the matter is people care: for their music, for their favorite artists, for their lives and moral values.
So instead of making people be grateful for their services, the record labels are doing everything in their power to alienate their customers, bullying them into paying: and in the meantime piracy gets stronger and more accepted, since it's a lot more comfortable to just download a torrent (and no matter how much legislation they're lobbying for, the genie is out of the bottle and millions of people are doing it).
Not only that, but they've been promoting crappy music for a while now, since it is cheaper to produce and such artists are expendable.
I'm not a hater, but as long as they are selling crap, then I'm not buying.
The article never said labels were going to die. It just pointed out how they screwed their digital future.
> Nobody’s going to pay Google $25 a year to store their music in a cloud.
I'd pay that to be rid of iTunes.
I think the question is: "What else do I get for that $25?"
I hate dealing with my library of songs. If I could stream it to any device, any time, as well as have -any- other value-added service attached, I'd pay the $25 per year.
By 'any device' I mean TV, PC, Android Phone, PS3 and more. Basically, any device that I can hook to the internet.
Me too. iTunes is just horrible. I'd love a non-iTunes way of getting my music onto an iPod.
What happened to the YC startup that allowed you to store all your music in the cloud?
If Google's plan is to use Simplify Media's tech then it will probably be a plugin for Winamp and iTunes.
I don't know if it was just me growing up, but music changed dramatically right after Napster was forced to kill itself.
Perhaps someone else can support this: "Music" has never been the same since then. It seemed so much more available, so much more pervasive, more frequently invasive to my life; better than it is now.
Like I said, I've grown. But it seems that as the generation behind me moved online in a major way, the music didn't quite follow. Its not that you can't find great music these days, it's that - ironically - it is so much more difficult to do so.
I don't see this ever changing really. The blip that was the 20 century music industry is dead and gone, replaced with essentially a long tail market of grains of sand of that - occasionally if you look hard enough - has a couple of diamonds hidden away in obscurity.
But then again, maybe I'm just getting old.
I would absolutely pay google $25 to store my music in the cloud. I have 150GB of the stuff and keeping it on my laptop has become impossible.
The old guard is losing power, their business models are failing, their control is going away.
A new dream is starting. A different dream than the fantasy of being "discovered" by a major record label and becoming rich and famous overnight (which translated into a reality that often didn't quite match up to the dream, for the bands or for their fans). A new dream where increasingly many artists are bootstrapping themselves into making a living from their music without big record labels interfering with their creative process, sucking the bulk of the profits away with little in exchange, and adding layers of corporate bullshit between artists and fans. Instead, bands are connecting directly with fans, selling music directly to fans, producing their own albums on their own schedules and releasing them however they like for whatever prices they wish to charge, and making the lion's share of the profits for themselves.
This is happening right now. Spreading right now. Becoming the new way that music is produced and distributed. It's something to look forward to.
The music industry is dead! Long live the music industry!
This was a foregone conclusion when the labels set this policy several years ago. Clearly this former president of Grokster is still telling the same story.
An interesting bit of insider info I have - a relative of mine is a young Sony VP. Apparently their senior executive still wants their digital people to explain things in terms of 8 tracks and tapes. No exaggeration.
It seems to me like too many bands are trying to be startups. More bands should try to be lifestyle businesses.
I still don't get how an artist actually makes money on a streaming service. It seems pretty good for the labels, but not for the artists. I know people say artist should make their money off other things, but their are some good artists who do poorly in a concert venue.
Personally, it's extremely simplistic to say that the labels aren't "changing"
The ecosystem, the market, and working with artists engenders a much more complicated landscape than one might think.
agentultra has some good points there.
>Nobody’s going to pay Google $25 a year to store their music in a cloud.
I probably would. $25/year for my collection would make it by far the cheapest file hosting available, and as I have a couple machines and a couple OSes, being able to consolidate everything, synchronize everything, and actually keep my ratings of songs across different systems would be wonderful. Most places I go I can stream music, so I wouldn't even need to keep most / any of it on my devices.
Go me thinking, wonder how successful it would be if someone like apple wrote a program to determine people pirating music then sent then somehow got in contact to them with a link to buy, like the Microsoft anti piracy strategy with windows. On the whole would probably be more successful than the lawsuit path.
Another idea for a service, something that scans a computer for pirated music, lets a user select which albums they would like to buy and offers a big discount.
Maybe the real answer is an entirely new label, having to start from zero (sign on new artists, establish new distribution channels, etc.), but with a corporate philosophy diametrically opposite the existing market and simply subvert the whole thing.
Small labels like https://www.candyrat.com/ are signing on new and growing artists.
it's not like the major labels have much in the way of good music to offer these days anyways
God... This whole debacle is a true indicator that the patent office should just grant my patent already. I have a non-obvious solution that has solid legal grounding.
If anyone is interested I am going to be handing out a bunch of trial membership codes to interested parties in a few days...
Somewhat related, what's the status nowadays of un-DRM'ing music you've purchased, say from iTunes Store, to play on other players, particularly on Linux? Is it possible? What if you don't have access to Windows or OSX (to burn an non-DRM cd)? Legal?
Nobody’s going to pay Google $25 a year to store their music in a cloud.
What if cloud hosting was bundled with MobileMe or the initial sale of an iPod? I bet Apple could get people to pay $12.50 additional hidden in the price of the iPod and $12.50 as an add-on.
So what will music look like in 5 - 10 years? Still just iTunes and streaming? Lets not forget labels aren't sustainable businesses in their current form.
How about funding a startup which would also act as a label? Long shot (you would need to sign big names) but the rewards would be huge.
Remember Google Wave and Buzz?
Yeah, except the verdict on Buzz isn't in yet.
Google music. Who cares? Oh right, you guys don't have Spotify.
I don't know anyone that has it that bothers with iTunes or actually buying music anymore. Get the free version, and get any music anytime and the occasional ad. Pay a few bucks a month, and you get any music anytime with no ads.