Music Ally Report on Startups and Licensing in September 2019
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thereport ISSUE 424 | 02 SEPTEMBER 2019 Fresh start Rightsholders want to nurture the next generation of inventive music/tech startups – so how well are they doing? 1 After bumpy times in the past, ISSUE 424 30.08.19 STARTUPS REPORT 2019 is a good time to be a music/ tech startup… isn’t it? ver since music:)ally was founded in famous line about Hollywood – ”Nobody 2002, one of the key pillars in our knows anything” – applies just as well to editorial coverage has been our the task of spotting successful music/tech curiosity about new tech startups startups. But what music:)ally does know is Eoperating in and around music. that whenever we’ve been curious about One of those startups is now a $26bn+ startups in the present, it’s given us useful public company, but in the run-up to its insights into the future of this industry. launch in 2008 it was still an under-the- Countless features that are core to radar Swedish startup happy to give its today’s music-streaming and social- CEO’s mobile number to music:)ally when media platforms, for example, were first we emailed to find out what the company dreamt up by startups whose names was up to. “If tomorrow at 3 UK time if are long forgotten now, or developed by good for you please call Dan on +46…” people who’d honed their ideas in the It’s not just the likes of SoundCloud, music/tech sector. Plus, talking to those Deezer and Kickstarter who we first founders and developers has always given covered as fledgling startups with us a useful, external perspective on the big ideas: in our lifetime, Facebook music industry’s responses to the last two (founded: 2004), YouTube (2005), Twitter decades worth of digital disruption. (2006), Instagram (2010) and Snapchat The latest manifestation of our music/ (2011) have all gone from ‘this could be tech curiosity is this report. We’ve interesting’ startups to digital giants. explored the current strategies of the That said, we’ve also written about three major labels when it comes to many hundreds of music startups that… investing in and engaging with startups, didn’t become giants. In fact, most of and we’ve dived more deeply into Warner them ultimately disappeared without Music Group as a case study, in the words trace, although some – Qtrax, Beyond of three of its key biz-dev executives. Oblivion and Crowdmix to name but three, However, we’ve also offered a group with PledgeMusic currently threatening of startups a safe space to vent – to join them in the hall of infamy – went anonymously – about what they see as the down in very public flames. continued challenges of working with the That’s the pitfall of getting excited majors. It’s fair to say they didn’t hold back. about fresh new startups: often the Plus we’ve chosen 20 of the startups quality of execution doesn’t match the who we’ve written about for the first original idea; if it does, often there isn’t time in 2019 that show most promise, a sustainable business model; if there is, and – just to show we embrace our past sometimes the timing is just wrong; and overexcitement – we’ve taken a look back even if it is, sometimes… well, sometimes at our 40 ‘ones to watch’ picks back in report things just don’t work out, and even with 2012, to see how many survived, or at hindsight it’s hard to say why. least made an impact in some way after Screenwriter William Goldman’s they shuttered. :) the 2 ISSUE 424 30.08.19 STARTUPS REPORT have been driven from the west coast of the US, where the key western music and tech communities rub shoulders. There are some common threads between all three majors’ recent investments: an A&R-esque percentages game of urgently scooping up emerging tech talent; the need for data-driven artist discovery; finding technology that creates new music better, faster and more cheaply; and, to satiate a long-held urge, attempting to create platforms that connect labels directly with fans. There is also evidence of a thoughtful, pragmatic long game being played using the streaming dollars that are sluicing through the majors’ artfully-dishevelled corridors. Rather than scrabbling around for the Next Big Thing, the labels are quietly seeking unsexy, powerful, niche pieces of technology to augment their existing businesses. Warner Music Group WMG is perhaps the most publicly-bold of the three majors when it comes to tech investment, and its approach seems to less ‘give music/tech startups a miss’ and involve three main points of engagement. more ‘you were right to give Crowdmix a At a corporate level, WMG has made miss’. From angel-focused early funding high-profile investments in startups which to more-serious Series A rounds, there make sense to their core business: buying Major miners continued to be plenty of activity. data-driven A&R service Sodatone and The major labels are digging deep, wide and early, hoping This hasn’t just been about angels investing in AI-powered mastering company and VC companies though. With growing (turned distributor) Landr. to hit a rich seam of smart (and unsexy) startups revenues from streaming services swelling Meanwhile WMG Boost, the seed-stage their coffers, all three major labels have investment fund set up by the recently uring the fallout of 2016’s multi- other music/tech startups. However, one upped their efforts to invest early and firmly departed Ole Obermann and overseen by million pound tragicomic disaster of the failure points at Crowdmix was that in music/tech SVP, global digital business development report Crowdmix (read more here), you’d its main investors were from an unrelated For this report, music:)ally has tried to and head of innovation & emerging have been forgiven for expecting industry: property development. identify some of the wider strategies behind technology, Jeff Bronikowski, has just Dthe toxicity to have a knock-on effect for For savvier investors, the message was the major labels’ investments, many of which invested $2M into Artiphon, the innovative the 3 ISSUE 423 23.05.19 STARTUPS REPORT one-size-fits-all music smart-hardware As VC and tech soothsayer Mary maker. Meeker pointed out in her 2019 Internet WMG is also entering its third year Trends report, the companies that connect of association with the Techstars Music with their customers directly, and analyse accelerator, which enables WMG to rustle their data well, tend to exhibit the kind of around in music-tech’s grassroots. The perky growth curves that major labels love. label’s involvement with Techstars Music was spearheaded by Alex Kamins, WMG’s Sony Music Group VP, global Digital Business Development. His enthusiasm for Techstars is derived Sony Music, according to a well-placed from a combination of unearthing innovative source, has in the past had a slightly businesses, learning new practices, and less coherent overall strategy than the helping demystify the music biz for startups: other majors. But now a combination of “One of the tenets of our group, and why an expanded involvement in Techstars, we do Techstars, is to lift that shroud of spearheaded for Sony by Brad Spahr, and a mystery that has forever covered the music West Coast-based team creating a clearer business: how it works, how it’s structured, overall startup investment/involvement how the rights work, how to actually get strategy, aims to change this. content deals - and we really try to be Until now, Sony’s startup investments transparent and open minded.” Dai has specifically praised WMG CEO hypothetical scenario - consider paying have been a more localised, piecemeal, And speaking of mystery, there’s one Steve Cooper, telling Alleywatch that the for gig tickets, merch, and even streaming traditional affair - with some notable more interesting investment that WMG has two companies “really saw eye-to-eye on itself with something similar to TAP - is not successes. made on a corporate level. In the last 12 the potential of strategic partnership and too far-fetched. Like WMG, Sony Music is a partner in the months, WMG has contributed to funding collaborations between Hooch and WMG.” Cutting out transaction fees, ticket Techstars Music accelerator programme and rounds for three very different startups. Another music biz connection on services, and the pesky anonymity that this year is actively strengthening this role, While investments in Aaptiv, (https://aaptiv. Hooch’s advisory board is Teymour comes with cash or third parties - whilst involving both the US and Japanese arms com/) a fitness app combining workouts with Farman-Farmaian, who spent 14 months keeping fans in a hot state of interest of Sony Music Entertainment as well as the music, and Artiphon are fairly clear, it’s the as Spotify’s chief marketing officer and with a built-in “rewards” system - would Sony Innovation Fund (SIF). investment in Hooch.co, a $9.99-a-month chief acquisition and retention officer back be a useful future service for WMG. The latter invests on behalf of the food and drinks rewards app, that could in 2011-12, but is currently SVP and head And - again, hypothetically - companies wider Sony Corporation across a startup- point to some more complex longer-term of USA at bitcoin wallet company Xapo. taking part in Techstars Music - like the salad of tech sectors - entertainment, thinking. music:)ally was not able to get This summer, Hooch plans to launch on-demand t-shirts and merch startup manufacturing, fintech, Internet of Things someone from WMG to speak on the record its own blockchain-driven stablecoin (a Inklocker - could also slot into this (IOT), artificial intelligence, VR, AR and so about Hooch.