Top iPad Music Apps (a/o May 23rd):
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Guvera may have raised $30 million, but the rest of the music startup market is still struggling to get venture capital. Some noticeable recovery did happen during the first quarter, but according to insiders, most VCs remain highly cautious on this space.
Part of the problem is that music failed to produce enough mega-hits required to justify continued investment, and extreme licensing (and legal) costs remain. And, just like the record labels many startups are trying to replace, venture capital is a hits-driven business. On top of that, the failure rate among music startups remains abysmal, part of a very unforgiving and disruptive terrain.
But what about just getting a loan to create that initial spark? Here, entrepreneurs across the board - both in and outside of music - are trudging through lots of illiquidity and reluctance among banks. According to a recent, US-focused survey by the National Federation of Independent Business, just half of smaller businesses have been able to secure the loan amounts they want, down from 90-plus percent during the early 2000s.
This affects a range of music companies, including established ones within digital music. The Orchard is one company that has recently tapped significant loan sources, and others may be trying unsuccessfully. The rest is also difficult to document, though an entire ecosystem of smaller, music-related businesses - spanning instrument shops to budding venues - are also facing a cash-poor climate.
Comments Closed
keithmohr Monday, June 21, 2010
My website is one of the few artist based sites that have shown a profit over the past 7 years. The key is having a niche and providing service to both artists and customers. Keeping it lean and nice helps too!
http://www.indieheaven.com
DontJump Monday, June 21, 2010
amen to that! fuel your passion, with less fuel that's all!
slammer Tuesday, June 22, 2010
I have been raising capital from VC for digital music in various forms since 1999. There is a very simple reason why the VC community is now almost completely turned off on digital music. The reason can often be traced to the behaviour of the major labels over the last ten years. First they acted like they where doing you a huge favour by licensing you anything at all. Later they demanded huge advances for sales they knew would never happen (in learning processes they demanded to be a part of), and all the while they where working hard to alienate potential consumers from buying music in various retarded ways. The mobster heritage of these companies is still clearly apparent in their dealings. Is this lack of funding a good thing? I think that VC is no longer needed in digital music. The way things are now its time for the entire system to implode properly before anyone risks any more money trying to build it up.
belohorizonte Tuesday, June 22, 2010
slammer, I have to disagree with some of these assertions you make. First, I understand your point very well on label licensing, but if a startup were to blow sky-high, like a mini-Google or something, then none of that licensing would matter. I know this because in my conversations with some of the VCs that were putting together some of these deals, the label licensing costs were part of the cost, however outrageous. But also I think that it is misleading to think that everything will simply crumble, then get built back up. I think you will see threads of the old, mixed with threads of the new, it will never be a blowup and then a rise from the ashes like we like to think.
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