SXSWorld May 2014


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4 4 S X S W O R L D / M A Y 2 0 1 4 he music industry's rapid evo- lution has opened numerous opportunities for startups in the music tech arena. So, in what direction should aspiring music entrepreneurs aim? e most influential startups in music tech today connect fans and music. Core to this business model is the acquisition of music. Many startups in this category will need to license major label catalogs to be relevant, operate under a statutory license or build an opt-in catalog. Licensing entire major label catalogs is an extremely expensive and time-consuming proposition. Startups that have thought that they can get by with only a few tracks have been proven wrong. Even with licenses, copyright laws have grown so complex that it has become difficult to be 100% legal, even with the best intentions. With statu- tory damages of up to $150,000 per slip-up, one has to be pretty brave to be in business. e most successful companies that have licensed entire catalogs include Spotify and Rdio, which have major label-related investors. rough persistence over many years, others, such as LyricFind in the lyric space, have built steady, successful businesses. Alternatively, startups can build a platform where through statutory licensing, they do not need to negotiate individual licenses. DMCA (Digital Millennium Copyright Act)-compliant services like YouTube and Internet radio stations like Pandora have built great businesses. However, this is a tough arena to get into without being really well-funded. Finally, it is possible to start a busi - ness based on partial catalog/artist opt-in. Companies such as CDBaby and BandCamp have found great success without major label content. Bandcamp recently announced that it has distributed $66 million to artists so far, and is likely to be distributing more than $100,000 per day at this time. After a company has its catalog, the next challenge is building a unique discovery and engagement platform in order to position the startup away from the crowd. Panos Panay, who founded Sonicbids and is now Founding Director of Berklee College of Music's Institute for Creative Entrepreneurship (BerkleeICE), believes there are still untapped ways for startups to help fans discover the music they like. "I am less interested in 'If you like this artist, you might like that artist,' " Panay explains, "and much more interested in extracting what people might like from other cues … whether how they're feeling, what restaurants they like, what movies they view, a photo which resonates, their actions in other media." Still, building startups around licensed music is tricky, and there are plenty of opportunities in other areas of the music tech space. Computers have made it much easier and less expensive for musi - cians to record. Many more artists are using at-home music produc- tion software. It is clear that one can create more professional sounding music in a fancy studio with extremely expensive equip- ment, but for most musicians today, home studios are the reality. For startups building tools for these folks, whether Native Instruments, Gobbler or any of the other burgeoning music creation and collaboration tools, there is opportunity. Plus, the copyright issues are much easier (except where samples are used). Yet, there are still hurdles. For example, the platforms on which these companies need to build their products change frequently; if a platform is not web-based, one is largely at the mercy of whoever controls the chosen platform. As an alternative, Nate Anderson, West Coast Director for Little Kids Rock, believes there is opportunity for startups around music education. According to Anderson, "Leveraging technology to learn is great, and I think that as the technology continues to advance that integration is only going to get stronger. We'll never replace the strength of an individual teaching, but if we can leverage technology to maxi- mize the number of people who could be taught, that's really game changing." Finally, there are startups that are helping fans and musicians to connect socially in real time. One example is the market for new kinds of concert listing applications. is space has exploded over the past 24 months and has become extremely crowded because these businesses generally do not require music licenses. ere are dozens of concert listings, buy-a-ticket and last minute ticketing apps. at said, DJ Sean Glass, Impresario of Win Music, feels that data-driven startups are most interesting. According to Glass, "We're still getting pitched a lot of music discovery startups. I feel that those startups are adapting and rearranging ideas that peaked in 2004 and am not interested in that space. Music-based social net- works are also not interesting to me. Data driven startups, especially those that inform decisions on the live music side, are VERY inter- esting right now." n Brian Zisk is the Executive Producer of the SF MusicTech Summit. Merging Music and Tech: Tips (and Pitfalls) for Aspiring Startups by Brian Zisk t Startups at SXSW V2V 2013 D AV I D F O X Elektrik People performing at SXSW V2V 2013 M I K E K O J O O R I

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