The Power to Destroy Your Music Startup, Overnight

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Who really has the power to kill your music startup?

It used to  be the major labels, but that’s so 2006.  “Index Ventures will put a lot of money into music,” said Vince Bannon of Getty Images at Canadian Music Week.  “But they won’t touch anything involving the major labels or licensing.”

In other words, they figured that part out!  And if Spotify dies while waiting for UMG’s signature, then it’s their own damn fault.  Because the ‘major label problem’ was isolated and identified years ago, and investors decided they wanted to make money, not burn it.

Actually, this problem gets easier over time.  Because every year, the majors become less powerful, and the ice slowly thaws on a heinous licensing process.  But the power of companies like Google, Apple, Facebook and the ISPs continues to expand, and so does their power to destroy your music startup – or even fully-grown company – overnight.

Take Apple and its in-app subscription fees.  Maybe Apple will spare the music companies, maybe they won’t.  But the fate of countless subscription startups depends on which side of the bed Steve Jobs wakes up on.  That type of power makes the majors look like Smurfs.

But it’s not just Apple.  The ‘finish them’ button also belongs to behemoths like Google, cable companies and ISPs.  Over the weekend, one executive at a major cable and internet property told Digital Music News that small switches in Google’s search algorithm have had profound impacts on his business.  And, if a major cable provider changes its mind about its lineup, people are getting laid off – tomorrow.

And let’s not forget Facebook.  One of the hottest startups of late is RootMusic, and currently, the Facebook environment is friendly for nestled music apps.  But what happens if RootMusic blows up, and dominates music on Facebook?  Will Zuckerberg change his mind, overnight?  Do you want to invest in a startup with that level of vulnerability?

Well, it turns out that plenty of companies – very successful ones – are living with it.  Tunecore is one example: this is one of the best-performing digital music companies right now, yet Apple could erase their middleman niche in a weekend coding session.

Oh, easy to say it won’t happen.  But the competitive environment is so intense, so quick-shifting, that no one can really predict these things in advance.  So maybe it’s just another risk to assume and weigh, and part of the game.  But in many ways, it sucks: because we live in their world now.

Paul Resnikoff, publisher, reporting from Toronto.