1. Licensing.
If you want major artists from major labels, be prepared to pay multi-millions of dollars for it. And it may take years to finalize those deals (just ask Spotify).
If they don’t make you give away a percentage of your company, I’d like to meet your attorney.
I just got off the phone with a young, talented, and very smart entrepreneur who has a great idea that really addresses a lot of problems with Instagram, Facebook, and Twitter. But he was clueless about music licensing. And unless he can raise a giant pile of cash or radically change his business model, he’s f—ked.
I’ve found that only the extremely wealthy companies (like Google and Facebook) can effectively make licensing go away. But even Google and Facebook have to worry about it. And if Spotify’s IPO is endangered by licensing, your startup will definitely have to deal with it, guaranteed.
I won’t get into what’s fair and what’s not. Major labels invested to make artists like Rihanna and Coldplay into superstars. But there’s actually a substantial group of investors who won’t finance anything reliant upon major label licenses. They don’t think it’s a good financial bet.
2. The goal was to ‘save the music industry’
The music industry is a brutally unfair place. That doesn’t mean it’s a worthwhile mission to ‘save it’. But that’s a huge part of a lot of music-focused business models. Most have some variation of the following:
Digital is killing artists — this model saves them.
Great artists aren’t recognized by the major labels — this startup solves that.
Music is bad and people don’t even know it — we will make music better and help the world change.
That’s not to say there aren’t lots of music startups solving very real music industry problems. But big mission, highly-philanthropic startups with fluffy goals are usually failures. Instead, companies that attack more targeted problems are oftentimes more successful. Take these examples:
Patreon helps artists establish a direct-to-fan revenue channel.
Innovative Technology Electronics Corp. figured out a way to sell stylish turntables to people who didn’t have a ton of cash.
CD Baby helped artists create and sell CDs affordably, then helped them digitally distribute their music when CDs died down.
Source3 addressed persistent issues related to IP identification and protection online (and Facebook needed that).
See the difference?
3. Investor/entrepreneur conflicts.
This happens a lot more than I realized. Entrepreneurs can quickly become micro-managed by an investor freaking out about a $0 return. Or, simply guided in the wrong direction out of fear.
4. The money was blown on PR.
PR people are usually bad at getting the media excited about stuff. They blast emails using addresses found in a database they paid for (yeah, read this). Their emails get deleted on sight by writers. Sometimes, they put you in the negative by harassing or going nuts on a publication (it’s happened multiple times to DMN).
+ Prominent Music Publicist: F*&k Press Releases
Some PR people are great. Most are scamming you. They’re taking your finite startup cash and walking away with it while assuming 0 risk. Instead, try directly reaching out to the publications you want to work with. I’d argue this simple, direct approach is 1,000 times more effective (with a 100% cost savings).
5. The founders didn’t work hard enough.
There are two kinds of people that leave at 5pm: office workers in cubicles, and failed startup entrepreneurs.
The hours on a music startup are almost always brutal, especially during the early phases. My experience has been that entrepreneurs dashing away to 4-day snowboard getaways are flushing their companies down the toilet.
There’s also a brutal reality for those trying to juggle families. Let’s just say there’s a reason why people recommend starting a company in your 20s. But even 20-somethings will experience major issues with friendships and romantic partners.
6. 20 other companies were doing exactly the same thing.
Paradoxically, investors sometimes like it when multiple companies are pursuing a similar model. It helps to validate their idea, especially if other investors are taking similar risks.
The only problem? There’s usually very little room in the long run for overlapping, redundant companies. Sure, there’s Uber and Lyft. But there won’t be Spotify, Apple Music, SoundCloud, Napster, Google Play, Xbox Music, Deezer, YouTube and TIDAL in five years.
The world doesn’t need that many services. And even if Spotify dies tomorrow, a nearly identical service is waiting in the wings.
7. Founders gave up.
It’s that simple.
Say what you will about Pandora co-founder Tim Westergren. But there wouldn’t be a Pandora if he wasn’t the guy behind it. Now, he’s a millionaire. Then, he was $500,000 in credit card debt, battling lawsuits from unpaid employees, and experiencing heart palpitations.
That’s what it takes.
8. It’s someone else’s fault.
I’ve personally been blamed for ruining an entire company. I wish I was that powerful.
What’s more powerful is that the founders (and their attorneys) actually convinced themselves that this was a feasible rationale for the failure of their enterprise.
It’s an easy way out. And probably helped to explain the failure in the first place.
9. Your nice Jewish parents talked you out of it.
They’re probably right. Your startup is probably going to fail. And that pressure will intensify when things get difficult, especially since they’ve probably been dragged into it (emotionally or otherwise).
Maybe your parents have passed away or aren’t in the picture. But that just means you’ll be dealing with other loved ones trying to convince you to quit. Your spouse, siblings, best friends. They’re all trained to minimize risk, and maximize security.
A startup in music accomplishes none of those things.
10. Bad timing.
Good timing:
CD Baby started in the late-90s when independent artists were struggling to produce and distribute their CDs cheaply.
Napster entered the market when MP3s were proliferating on hard drives, but very difficult to search and trade.
Spotify entered ahead of a massive transition from ownership to access.
Pandora didn’t surge until smartphones proliferated.
Bad timing:
Apple Music entered streaming years too late, while refusing to shut down their out-of-date download store.
Generally speaking, successful music startups are typically well-positioned against a major consumer shift. Or, a surge in pent-up demand that isn’t being addressed.
11. Someone else did it better.
Great idea. Average execution. Doesn’t usually cut it.
12. Too many shiny objects syndrome.
Garbage founders typically hop from one idea sugar-rush to another. But sexy ideas are crap without execution. And execution introduces drudgery, boredom, and problems. Usually a few days after the idea is hatched.
Ideas are the easy part.
13. The founders didn’t want it badly enough.
This gets into some tough soul-searching. But most startups are so extremely demanding, they punish those that aren’t extremely, over-the-top dedicated.
The punishment is failure.
14. Burnout.
My aunt and uncle closed a highly-successful eatery in Washington, DC because they were fried. There were huge bags under my uncle’s eyes; his hair was cascading into his pillow.
I wish I had a good solution to this. Good sleep, forced time away and some sex can help. And so can success and momentum. Because burnout kills motivation, drive, and ingenuity. And difficult periods are a breeding ground for sapped motivation.
15. The economy crashed.
The global economy is boom and bust. And another bust is guaranteed (you just don’t know when). All of which is brutal to younger, vulnerable startups. It can kill even the most promising, momentum-rich music startups.
By the way: so can other global disaster like war, disease, terrorism, and other major events. It’s part of the risk.
16. Bad people, bad chemistry.
A startup is a small collection of people, plus maybe a few investors and advisors. That’s it. It’s just people, and a bad group means a bad startup.
But even great people who are fighting, distracted, or misaligned won’t make it. Typically, successful teams are extremely smart, driven, cooperative, and complement each others’ skills.
Image by Ah Riz Ko (CC 0).
Good article and it brings to mind what happened with music streaming start-up
Guvera and how it went pear shaped after burning through millions of dollars of other peoples money.
Ek with his Spoofy does the same!
Google keeps MUSIC AT ZERO VALUE.
It is STUPID, ARROGANT and unfair to convert every year $300B of music to just $5B of FERTILIZER on advertizing farms!
ALL DIGITAL AD BUSINESS IS SMALLER than potential MUSIC BUSINESS and someone has to communicate that fact to confused or just lost Larry Page at Google!
#17
you’re not really an entrepreneur.
most people have no idea what they’re getting into
#18 — inadequately capitalized. Even if a startup can navigate away from 1-17, it takes cash to get awareness and product adoption to take on the world’s biggest, cash rich companies.
NUMBER ONE REASON:
Google MONK keeps music in the open for all freeloaders with novalue as a product or merchandise.
Until Google exits digital medieval $300B of annual MUSIC goodwill will be converted some day to $25B of ads and subs!
Any start up that you’ve to pay licenses is dead in the water. Majors are money and indie market has so many options already. Music start ups that go near licenses in 2017 are just too late
“4. The money was blown on PR.”
Yeah well, here’s what Bill Gates had to say about that: “If I were down to my last dollar, I’d spend it on ads.”
(Granted, that certainly doesn’t mean you should blow it on publicists.)
Arguably the #1 reason is missing – your startup simply isn’t any good.
Most suck. No one wants to use it. It never gains traction.
Only then does your #1 kick in to kill the startups after they take off. 🙂
Another major missing reason… Music start ups talk to MUSIC people. Music Consultants or Industry people who LOVE music and think your idea is cool. When it launches is when those same product people realize that not everyone gives as much as a shit about the crap you think is important enough to build a music start up around. And it dies.
17. investment sweet spot, not having enough cash will keep you in once place while having too much can dilute your business model (throw at the wall to see what sticks method)
there is a sweet spot of cash that will keep efficiency and creativity alive without losing quality and brand
As a VC I can tell you that nearly half the start ups coming through the door is pitching the same thing. Instagram & Facebook & Spotify in one new mega social streaming app. We hear from founder after founder how its never be done before and how they are doing it different and how they can scale quickly to the next big social network. And every time we show them the door pointing them to over 20 start ups who have spent millions failing to do that exact thing.
Its 2017 and you are launching a streaming start up about 5 years late to make any cultural or social impact but you convince yourself it will be cool cause musicians need a new soundcloud and facebook just isnt cool anymore. And you find five or six wealthy people who think music is cool and convince them too!! Then you move back in with your parents in 2020 when nobody else will invest your dead music start up
A music start up needs a lot of cash. Most burn out not cause the idea isn’t good but because they need millions and millions of dollars to get any traction at all. Even ones that have raised 25 million plus never made a dent. Most of them run out of time and money
Say the words Instagram for Artists. Artist central. Say all in one place. Raise 10 million. Spend 10 million on licenses. Fail.
https://angel.co/music-streaming
look at all these music start ups and ask yourself how many have you heard of? They all fail because the market is over saturated
Yes your right, but what’s the alternative sit around and don’t try, music is important.
1. Nearly half of these startups spent months or even years building a product before they found out that they were wrong in their most central assumption: that someone was interested in that product in the first place.
RDIO and DripFM are two examples. Both had large user numbers. Both couldn’t make money. Streaming music start ups are the ones giving the music start up scene a bad name. In the end, even with millions invested, music start ups that need to pay for the content always have trouble paying the bills.
Without a sugar daddy (re: a rich dumb person), the vast majority (95%) of music startups are doomed to fail.
With a sugar daddy (99%) of music startups fail.
There are problems that need to be solved in the music scene. However, most music start ups fail because they fall into two sections of founders.
1) Spotify/Apple/Tidal/Amazon/Pandora aren’t perfect and aren’t doing it right. We will do it better. It will be better because it should be done this way etc etc. People will want to use our product because its is better than whats out there. These are the most delusional of founders. They set out with good intentions to “save the industry” or to “help artists” by creating a version of Spotify that they like better.
2) Founders who build products people don’t need, reinventing business models and believing with their great product they can take on Spotify/Apple and the 9.99 all you can eat model.
Problems with music startups are not so much failed products, alot of great
products haven’t made it(RIP RDIO) but rather an oversaturated market.
Spotify is MySpace for music, but better. Its 2017 and nobody wants to set up another new social network (Facebook, Instagram, Twitter, Snapchat, LinkedIn). All in one websites are old school. They are the 00’s and the 2010’s. Messengers are the new version of social networks. People want to listen to music and share it with friends. The mistakes a lot failed start ups made was thinking there was a demand for another all in one MySpace Music. They were looking to the past. And competing against Giants. Don’t build the new MySpace or a new streaming service but find the real problems in music and build a start up around that. Artificial intelligence and VR is the future and starts up in that field have a chance.
You don’t need AI or VR to build a successful Music Start-up, all you need is an imagination and the know how to put it together.
Something missing from this report, one of the MAIN reasons music start ups struggle and fail is that there is not a big demand for M&A’s.
Very few get sold or bought!
Theres very little acquisition opportunities in music tech. The companies who might want to buy them let them burn and buy them in fire sales, losing money for investors. Most of the startups picked up by Spotify, never made a ROI for investors.
A lot of people are trying music start ups. Most are doomed to fail. (by most I mean all)
Dave, are you in a Start-up.
Two words: You Tube. Too much overall competition and no one want to pay for it anyway…
Does Genius count as a music start up? Artists verified add credits, profiles, lyrics, producers, songwriters, all the extra info about music. Raised 40 million
#17. No licensed music start-up has achieved a successful exit since 2004!
#18. No large media companies want to buy music start ups!
A successful Music Start-up should run itself so why sell.
Roon is a music start up that offers digital liner notes and provides much more information, including photos, in its interface. One very cool feature is the links that appear to artist/band names in artist/album descriptions. This allows the user to immediately jump to the source of these links discovering how interconnected the music world is. This is heaven for those who are easily distracted and it’s easy to navigate back to where you started. Roon’s includes a feature to allow the user and artist to insert their own digitized liner notes, lyrics, and album art. They have a shot because they aren’t trying to be a streaming service, they link into Tidal and Sonas etc. Hopefully they link into Spotify soon.
#1 BRAND LOYALITY – RDIO $4.99 couldnt keep the doors open! Tether Music $1.99 subscription for access to all music, wide range of features and innovative offerings all in a single music app. $10 million raised. Failed. Cur Music, enters a crowded field for music-streaming services. Its strategy? Target fans with a $1.99/month plan. Didn’t even get out of the gate. Soundcloud Go $5 a month can’t catch a break! Yet every week there is a new streaming based start-up launching? These were all fine products built by intelligent people just looking for a consumer that is already signed up elsewhere. Once you’ve built up playlists you arent going to move services even if these new services are in some way better!
Founders always overestimated the amount of money in the indie music space.
Startups need to find a way to stay in the music space, sustain a profit and be relevant to users who have so much content from musicians (insta, snap, twitter, fb, spotify, apple music, connect, bandcamp, websites) That means staying away from the streaming trap. The problem is that music streaming is a broken business with practically no barriers to entry anymore thanks to B2B companies like 7digital. Anyone can enter. At their own peril. Its a winner takes all game.
1 – Competition
4 years. $11.8 million in funding. 1 dead company: Vadio.
Indiesound.com is both an app and website for independent music artists. It offers an instant message feature for independent music artists to share content, connect with their fans, interact with other independent music artists, and collaborate with other independent music artists in producing music.
All music start ups either seem to offer streaming or social features. They either charge the artists via rev share for using their platform or charge the fans. They all fail because your favorite artist has a Facebook page, and a Twitter account, and an Instagram profile. And Spotify, Apple Music, Amazon music, a SoundCloud account, and a YouTube channel, a Bandcamp, a Reverbnation, an Apple Connect and an Audiomack account, and probably a Snapchat and Tumblr and Periscope and whatever else is out there. Artists always will put there stuff on any new platform to try and promote but the chances of a start up gaining traction is so slim.
Let’s be honest the music startup scene is filled to the brim with companies who think they can release a cool product, secure a few funding rounds and either not pay for full licenses or convince themselves with no profits they will get bought cause their product is so cool.
Whitestone – the first interactive platform – a social network to connect with fans. Whitestone is the first platform for interactive music experiences. A place to create, collect and truly enjoy music. With other platforms we lost the album, the cover and the art, and a place for the artists to create rich experiences that are auditory, visual and interactive to go with their songs. On Whitestone you can convert a static album cover to an interactive cover by assigning key commands, swiping left or right to control the layers of the artwork and the tracks, ever wanted to know who played or produced on the tracks, you will find all that info about the creators of the song. We are providing tools that enable artists to build a true fan base and connect with those fans as easily as possible launching 2018.
You are just as likely to fail with poor market timing (launching a product too late or
launching a product people don’t know they need) as you are with poor product.
Plenty of angel funding around music starts up will always be
able to raise a few rounds and most do manage to raise upwards of $10million but most fail to make the leap to institutional funding because the high angel seed rounds have already killed any value in the start up.
Music start ups are like the walking dead. They value themselves for millions of dollars and can’t show a profit. If there seed investors stopped pumping lifeline money into them they would close down way faster than they actually do.
Spotify has become so popular because it gives users what they want. The guy who is addressing the problems with Instagram, Facebook and Twitter is just searching for a problem and is actually going to create a big problem for himself and his investors. A lot of music start ups dress themselves up as a Spotify or
Facebook-clone. If you are selling streaming music to consumers at all no matter how you are doing it differently to them, or if you are selling social networking to music fans wake up and smell the coffee, thats not innovation, thats throwing your investors money away
Great article. As a serial entrepreneur in this bizarre industry I’ve experienced most of the items on your list. Some were my fault, some unavoidable (don’t open a subscription service a month before YouTube launches).
I would add one characteristic to #7 and #13 – tenacity. If they don’t find your picture in the dictionary when looking up tenacity, don’t even think about starting a company.
Music tech founders indulgence of the startup world leads to a failure in smart decision-making. Founders of music start ups all tend to be very product based and very weak on strategies in areas such as business, hiring, marketing, and finance. They waste so much time believing if the product is good the rest will figure itself out. One music start up I was pitched spent 1.2 million on the product and took
18 months without ever hiring a member of staff and called this ‘bootstrapping’.
Please do not launch any new music subscription services.
MSF: We’ve raised $5 million and we are valued at $20 million
VC: How do you plan to monetize?
MSF: Ads and sell subs to listeners
VC: So you’ll never make money?
MSF: We want to get acquired
4 – Consultants earning 1k a month to talk to you about your start up are scamming you. They’re taking your finite startup cash and walking away with it while assuming 0 risk.
4 (b) – Developing companies earning 15k a month to build your start up are scamming you. They’re taking your finite startup cash and walking away with it while assuming 0 risk.
4 (c) – Your family and friends telling you they love your idea are scamming you
4 (d) – You are scamming yourself – enjoy it while it lasts
4 (e) – Your investors telling you they aren’t freaking out about a 0 return on investment are scamming themselves
The pitch from founders is they offer different feature sets. We do x. They don’t have y. They fail to grasp that the main content they offer is not different. They might deliver a different UX. They might offer ticketing events for music or music attached to photos or music community led platforms. At the end of it all, they have artists, they have music, they have content, and they have a real problem with the artists being present on all the major platforms. Differentiating features are never differentiating enough for music start ups to get people to sign up.
Music is ubiquitous.
With all due respect to my musician friends, musicians are musicians for a reason. Getting into Harvard is not one of those reasons. So while you’re great idea that entails other musicians participation gets a lot of love, the actual follow through from the artists might not pile up as high. Musicians will place themselves on every advertising platform available to them. There really is just too many band music discovery apps and platforms out there. Its that simple
Founders don’t work hard enough. Yes you can work from home and be somewhat
productive. Yes, emails and phone calls are effective at staying in touch with partners, but in music start ups there is a failed chasm between your company’s strategy and your userbase’s reality. What problem are you solving?
Another problem is that many music industry startups do not actually test their riskiest assumptions when developing a strategy. They build platforms for artists and raise silly amounts of money without a real way to return the investment beyond acquisition. If you’ve raised 5 million for a music start up that involves artists tools or streaming services you are relying on either artists paying you for those tools or the consumer paying to stream then you are already half dead before you even launched. When the investor money dries up the lights always go out!
Crazy valuations and founders/investors out of touch with reality is a big reason music start ups fail. They aren’t disruptive start ups. You raise 3 million at 8 mil valuation? Then next round you want to raise 10 million you need to hit a 40 million valuation for investors to imagine getting a 10x return on their investment. This is the problem, you can’t build a website/app and value it at $8 million/$40 millon on the dream that it will be big. When the books get done and you launch and show revenue of 100k a year, your valuation looks stupid, raising $13 million looks stupid and your left with no choice but to close the doors because you raised $3 million dollars and bet on it being big in a very saturated marketplace and can’t finance the company!
So many music starts up pitch they are helping artists connect to fans or offering
them a new tool to use. There’s stuff like Jukely, an app built around essentially helping you bypass cover charges via subscription full of indie artists no one has heard of. Most of these music start-ups are like that, music artists nobody has heard of, they don’t really care about whether what they’re doing puts money in artists’ pockets. Music consumption couldn’t really get any more convenient than it already is and all these apps really do is further demolish music income by spreading it too thin across too many apps.
Reason 1 – Music start ups never ever get the company cash-flow positive.
It might seem culturally normal now a days to raise millions of dollars by pitching to angels or vcs but nobody is making money in music start ups that involve licences in any way. Its a shit show. Congrats on the $61M in funding though. That’s impressive and a great living till your unemployed.
The landscape is so much different now in 2017 to what it was even in 2015 in regards to music tech. Many startups build products and fail to grasp that it is a two sided market.
They falsely assume that a new tech or innovating an existing product in some form that they demand will be there. They get early adaptors and can build a small community but a few years in when they look at the books they can’t keep raising money on losses. Its a much smaller market then most founders care to realise.
every single streaming music start up is the same pitch. Everything about you in one place including social media, music, videos, merchandise, articles, tickets, meta data trivia and contests, analytics, live streaming direct to fans. Digital superfan clubs designed to monetize fan bases. Over 100 of these have raised over 280 million in funding over the past 6 years and 0 have ever made a ROI. The Q you should ask is how do so many of them keep getting funded by angels but not by respected VC companies?
Funding is the main issue. You can’t scale as a music service without the majors and they require advanced payments. The services that failed all went down the road of offering some form of indie only catalogues because they couldn’t get the funding for major label advances. You can’t make the economics work unless you have sufficient scale and you can’t scale without the full catalogue.
Slacker raised $75.7m in funding, has 1.5 million monthly unique users including 400,000 paying subscribers and sold last week for $44m. Thats a 31million loss with 1.5million users. All the music consultants are trying to push the idea of niche streaming so they can get paid consultant fees from music start ups! There is no room for a standalone niche streaming entity against the giants of the music-streaming world.
Too much money gone into music tech over the past 18 months
After attending SF MusicTech Summit last week it was crystal clear from the keynote speakers and investors present that another social network with a brand name is not what the music industry needs right now. They don’t want to see the new Spotify or another streaming service emerge. Before the musicians would bring the listeners but now in 2017, the musicians have to go where the listeners are. The listeners are on Spotify. The problem now is why would musicians give their time, energy and data to these branded streaming start ups that offer tools to them to promote to fans but when they go bust or don’t take off with the fans its a ghost yard or dead space. If Apple Connect didn’t take off what chance does the Twitter/Instagram/Facebook guys business have? No chance at all. He is about two years behind the curve now.
All your media, info, links and other assets in one place, clean and clutter-free. Manage, organize and showcase all your music, lyrics, pictures, videos, events, merch, blog, press & social in one, making life easier for you, your fans and professionals looking at you. No more navigating various sites to access everything!
Artists and creators can consolidate, showcase and monetize all their music, lyrics, videos, pictures, events, tickets, merch and information conveniently in one place, and a smart online workplace with an ever-growing suite of tools to support a music career, accessed through an affordable $/€/£9.99 monthly subscription.
After taking on over $27M of investment Bandpage sold Google for $8M. It’s not that music start up ideas are bad, its that they do not stand a chance. If you are
currently working on a music start up: stop being so fucking stupid and stop believing your own bullshit.
A ton of startups are essentially trying to do direct to fan. Many useful features within one application, sales and exclusive fan promotions, event calendars, upload photos, videos, music…. great concepts… if the artists and investors is okay with not making a living out of it.
Would love to tell you all about our exciting and revolutionary new start up, we believe will impact. Profyles is a fully funded start up with $25 million raised in our Series A round in 2016, two years in development, and launching worldwide in March 2018 we are a fully licensed streaming service with industry backing and over 5,000 major artists and indie artists currently participating in our BETA test. Profyles is the streaming services fans have been asking for, we are a new interactive artist subscriptions platform for major and indie artists as well as unsigned musicians, songwriters, producers and industry figures.
Every artist on the platform builds and creates their own artist-specific profile, blending their music with artwork, videos, photos, stories, live stories, liner notes, crowdfunding, and the social aspect lacking from current streaming platforms.
Profyles provides a way for fans to buy merchandise and tickets direct from the app, no more being redirected to other platforms. Fans can follow their favorite artists, and delve into a world of information to help them discover new music via other artists they have worked with.
We have build the platform for artists to connect with their fans, artists participate with profiles, news feed where fans and artists can chat, post comments, pledge money, gain access to behind the scenes access to their favourite artists or connect with other fans.
Profyles allows musicians big or small to tell the artist’s story to their fan base, enriching the experience for fans, allowing them to deep dive into information on every song from their favourite artists, from where it was recorded, to who played bass on the track, who produced it. With Proflyes artists can finally have a place to share their body of work, display their artwork and liner notes alongside their music and give credit to the producers and songwriters who worked on the tracks with them. Introducing Profyles. Fully licensed with all the artists and music you love in one place.
Is there a way to view your beta?
Whats your email?
I’ve not still heard of your startup in 2020, What’s up?