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“In a digital world there’s no up-front cost to have infinite inventory that replicates itself on demand as a perfect digital copy and it only does that after it’s been authorized to do so, which is usually with a purchase. It has really been a shift from having infrastructure and access to distribution to just having access to distribution.” -Jeff Price

My friend Charlie McEnerney recently interviewed Jeff Price of Tunecore. Here is an excerpt. Listen to the complete interview here.

“As anyone who buys music knows, the way we are finding it and buying it has changed radically over the last 15 years.

For musicians, it used to be that if you wanted someone to release your music, you’d have to get the attention and approval of an artist and repertoire (or A&R person) at a label, work to sign a deal either big or small so that the label would then press up your product and work with distributors to get your vinyl or 8-track or cassette or CD to ship them out to record stores where the music fan could have access to them.

Now, all you have to do it is get some audio files online and instantly be able to have your music available to the current online global audience of 1.5 billion people, which is still just about 23% of the world’s population, so the potential for reaching new audiences continues to grow. As mobile devices get smarter, it’s inevitable that consumers will be downloading more music and playing it without a desktop or laptop computer even being involved, too.

As a result of the rise of digital download stores such as iTunes and Amazon mp3, the need has come for new companies to aggregate songs and distribute them out to all these growing online stores.

That’s where TuneCore comes in.

After SpinArt, Price went on to work with eMusic.com, first as a consultant, then as interim VP of Content Acquisition, and finally as the Senior Director of Music/Business Development. He contributed towards the creation of eMusic’s initial business model and created and implemented the first subscription-based music sales and distribution structure.

In 2005 Price started TuneCore, which is an aggregator which helps get digital music into online stores such as iTunes, Amazon mp3, eMusic, Rhapsody, Napster, Amie Street, Groupie Tunes, ShockHound.com, and lala.

TuneCore has also been in the news in recent months as some very mainstream acts have used the service to get their music direct to consumers, including Nine Inch Nails and Paul Westerberg. Just a few weeks back, it was announced that Aretha Franklin would be using TuneCore to distribute her version of My Country Tis Thee that she performed at the Obama inauguration.

TuneCore’s competitors are services such as IODA, The Orchard, and CD Baby and I discuss with Price about what makes TuneCore different from these services.

This episode includes music from a variety of independent music that has been submitted to be for Well-Rounded Radio.

Listen to the interview here along with some great new music.

Want to know what’s up with new music startups? Read on. Great coverage by Paul Bonanos from The Deal. So good to see mainstream financial coverage of our music industry.

Striking a chord

A decade after Napster, a new crop of Internet startups is challenging the music industry’s dominant companies. Their instruments of choice: social networking, discovery, ad-supported streaming, marketing and other tools that change how business is done.

New Music Startups

Source: Tech Confidential

U.K.-based We7 Ltd., which has drawn funding from British musician Peter Gabriel, along with VC firms Eden Ventures and Spark Ventures plc, both of London, offers free songs that contain short advertisements that vanish after a few weeks. We7 recently added songs from a third major label, while SpiralFrog signed up only two of the four majors, meaning that finding free songs can still be something of a wild
goose chase.

Nashville’s NoiseTrade, a bootstrapped startup, provides a way for artists to give away music in exchange for the e-mail addresses of prospective new fans, while angel investor-backed TrueAnthem Corp. of San Francisco connects brand advertisers with musicians, who introduce tunes with short, personalized ads.

Consumers less inclined to possess a virtual copy of a song also have more options. That includes subscribing to libraries of music content and Web sites that allow streaming songs on demand and limited downloading. Publicly traded RealNetworks Inc. of Seattle has emerged as a clear leader among such products with its Rhapsody service, while the existing Napster, which purchased its trademark from the original bankrupt startup, has lost subscribers and remains far from profitable. Both companies offer several tiered plans, ranging from roughly $10 to $15 per month, that provide access to millions of songs from all four major labels, as well as “tethered downloads,” or DRM-restricted files that expire once a customer cancels his subscription.

The market for free music “streamed” on a Web site is more complex, with some startups relying on subscription services to supply songs through their own user interfaces. Most streaming services are married to some other Web utility, whether a social networking site, music discovery service or
paid-download store.

With investment from VC firms Sequoia Capital and Morgenthaler Ventures, both of Menlo Park, Calif., as well as from Universal Music and Warner, social music site Imeem Inc. of San Francisco has built the fastest-growing free streaming service. All four major labels now supply music to Imeem, which lets users play songs on demand.

Imeem’s growth highlights the pressure on “old music” companies, like other old media firms, to change with the times. And the legal battles between upstart music firms and incumbents have been no less intense than the fights in other quadrants of the media industry, such as the ongoing court dispute between Google Inc. and Viacom Inc. over the search giant’s use of protected video on YouTube. Warner sued Imeem in 2007 over alleged copyright infringement, only to later buy a stake in the startup after settling the case.

“Sometimes a lawsuit is foreplay to a licensing deal,” says Norwest Venture Partners principal Tim Chang of startups’ path to legitimacy in the age of free music. “They infringe so that users get what they want and advertisers pay attention, scale so that you have some leverage against labels, get sued and then settle.”

The digital-music business is entering a phase common to many emerging high-tech sectors. The land rush of startups that follows any significant technological shift, such as file sharing, is already starting to thin out as winners stake their claims and losers get consolidated, if they’re lucky, or simply disappear.

For example, Last.fm rival Pandora Media Inc. faces a fight for survival despite having attracted prominent venture investors and a slew of good publicity. The Oakland, Calif., startup employs music experts to create a recommendation “engine” for Internet radio. But an upcoming regulatory change that will result in a doubling of streaming royalty rates for Web radio companies could spell the company’s doom unless it elects to charge users a subscription fee or finds a way to add advertising that its audience will accept.

Like Pandora and Last.fm, music discovery site iLike Inc. of Seattle has become popular, if not consistently profitable. One key to its success in attracting users has been its availability over Facebook Inc. of Palo Alto, Calif., through which more than half of its 30 million users connect to the service. Through a partnership with Rhapsody, iLike allows users to stream as many as 25 songs per month and download selected others for free while examining their friends’ tastes and recommendations. The startup has raised $15.8 million in two rounds of funding from former Time Warner Inc. executive and MTV co-founder Bob Pittman, star venture capitalist Vinod Khosla, and the Ticketmaster unit of IAC/InterActiveCorp of New York.

“There’s a natural propensity for social networking and music to go together,” says MySpace founder Brad Greenspan, who left the social network in 2003. “When you’re surfing people’s profiles and everything starts to look the same, the only way to differentiate among them is their individualization. And if you add an image of an artist on a site, you will bring in people who want to be close to that musician’s energy, whether by blogging, chatting, befriending or following them.”

Drawing on such desires, music-blogging hub MOG Inc. of Berkeley, Calif., wants to tap into fans’ efforts to spread the word about their favorite artists. Universal and Sony BMG joined the Angels’ Forum of Palo Alto in putting $6 million into the startup, which compiles the musings of volunteer bloggers writing on given musicians and bands. MOG, which also offers on-demand music, represents a one-stop version of the musical blogosphere, where songs are commonly shared without compensation for content owners.

Also harnessing the power of the blogosphere are music-focused search engines such as the bootstrapped Hype Machine Inc. of New York and angel-backed Seeqpod Inc. of Emeryville, Calif., which index thousands of music blogs where MP3s often reside for a few weeks so users can sample them.

Another area where Internet startups are encroaching on the record labels’ turf is marketing. Launched this summer, Los Angeles-based Topspin Media Inc. enables artists and fans to communicate directly, offering a sort of customer management technology package for musicians that allows sales of songs, albums and merchandise. Under one subscription option offered through the company, a fan can pay a flat fee for a musician’s entire recorded output over the coming year — income a musician might otherwise have to share with a label. Venture investors are on board, with Topspin having raised funding from Redpoint Ventures of Menlo Park and Foundry Group of Boulder, Colo.

But rampant music piracy continues to dwarf legitimate sales, cutting label revenues by as much as half since the mid-1990s. Meanwhile, work that had long been the province of music companies has been gradually appropriated by newer, fleeter Internet companies or, as with marketing, “disaggregated” out of existence. Other competitors also have emerged. LiveNation Inc. of New York, a publicly traded live music promotion company spun out of Clear Channel Communications Inc. in 2005, has signed top acts, including U2 and Madonna, and has sweetened its deals by letting artists maintain ownership of their material.”

If so, what will the business look like? A dying era of superstar acts may give way to a music scene carved into myriad niches, with proliferating media channels creating room for more voices — the “middle class” of artists, as Rogers puts it. Artists and fans will operate in closer proximity, with more tools in place to help them connect.

How, then, will music derive its commercial value, and where should investors place their bets? The future is likely to include more sponsorship and patronage. Imagine liquor companies, fast-food joints and other advertisers paying the band of the moment for rights to its music before it’s recorded rather than after it hits the charts. Alternatively, rich benefactors — or legions of fans — could support artists in exchange for early access to a new album or even a shout-out in the liner notes. Tie-ins with other media such as video games will also create opportunities: People may not buy the album for $15, but they’ll pay $39.99 for the “Guitar Hero” version.

The old ways, reinvigorated by technology, are made new again.

Read the complete article at The Deal.

The state of the music business is obviously in transition, but new models are beginning to work at various levels that shine a very positive light on the future of the music industry. For example, some of the predictions made in the Future of Music Book and in other places are beginning to come to pass, such as the abandonment of DRM, music subscription and licensing services, ad supported music and the ascent of the Indie artist and Indie label. Take a look at these examples:

You can now purchase MP3 files for download without DRM from all four major labels on Amazon.com, emusic and a growing list of music destinations. The predictions that an unprotected format would kill sales have simply not been true. These businesses are exploding.

Early proponents of the subscription models Napster and Rhapsody have survived and are growing.

There is active discussion of a flat-fee structure for music at major labels where once we were laughed out of the offices.

Indie Labels now account for upwards of 30% of total music sales, up from the low 20’s just a few years ago. This is a profound shift in the powerbase that favors the independent artist and innovator.

Social music sites such as LastFM, Pandora, iLike and many more are making the fans into tastemakers with the ability to promote and share great new music at the touch of a button.

This is all very good news for musicians, writers and artists who want control of their destiny and their careers.