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I came to this conclusion myself about 6 months ago, after Dalton Caldwell spoke at a YC dinner. I realized it was basically hopeless to start startups that tou

• sabat 16y ago
  only allowed to live so the labels can suck investors' money through them That's true, but not as true as you might suspect. Pandora is profitable. Yes, they are certainly pumping a large amount of money to the record labels, but they're able to exist without driving their users away with over-advertising. I wouldn't do a (label) music-based startup today, though. Sad.
  • pg 16y ago
    I don't know the details of Pandora's finances, but present profits tend not to be the whole story here. Many if not most of the startups that have deals with labels also have large debts to them. Plus the labels can change their terms. So you pretty much live on sufferance, for as long as you're useful to them.
    • whopa 16y ago
      AFAIK, Pandora is classed as radio, and doesn't have to do direct deals with the labels. They pay royalties to SoundExchange, which in theory distributes the royalties to the content owners. The rates they pay are a lot lower than the rates companies like Rdio, Spotify, and MOG have to pay to the labels directly for on demand streaming rights.
  • bl4k 16y ago
    Pandora has been close to shutting down a number of times: * http://blog.pandora.com/pandora/archives/2007/03/riaas-new-royal.html http://blog.pandora.com/pandora/archives/2007/03/riaas-new-r... * http://www.washingtonpost.com/wp-dyn/content/article/2008/08/15/AR2008081503367.html http://www.washingtonpost.com/wp-dyn/content/article/2008/08... they are at the mercy of the labels.
    • sabat 16y ago
      Absolutely true. I was making the point that they've survived and are apparently thriving. However: Pandora and similar services have had to work far too hard to do such a straightforward thing.
• Disparity 16y ago
  What PG says is 100% true. I say this having done a startup in the space. In a nut shell, you need roughly $1M upfront for legal fees to negotiate with the big four record labels (for an interactive service, not a non-interactive service like Pandora).
  • eru 16y ago
    Thanks for the details. I guess I understand what you mean. Though I wouldn't use the words interactive/non-interactive. Pandora is quite interactive in a UI sense, even though you can't select tracks directly.
  • emehrkay 16y ago
    Can you define interactive and non-interactive for me?
    • taylorlb 16y ago
      Perhaps passive radio style listening vs random access is a better way of explaining it. I think.
      • whopa 16y ago
        Yeah, non-interactive is radio style listening whereas interactive the user gets to pick and choose what they want to hear on demand. Interactive/non-interactive in this context are actually widely used terms in the digital music space.
• terrym 16y ago
  I remember watching a video of a talk you gave at startup school 08 and near the end during the Q&A, you said something to the effect of "we fund what people apply with, which usually ends up being some form of facebook or something to do with independent music". It seems that if the labels have positioned themselves as unfavorable toward startups to the point of making an anti-platform, that there would be demand for an independent, label-free music buying/selling experience for startups to work with. Yet the only thing I think of that comes close was the old version of thesixtyone's marketplace. Are the startups that apply to ycombinator in this area trying to build something outside of the current music ecosystem and failing (and why)? Or is everyone just trying to work with the current system and finding that it isn't feasible/profitable? The talk: http://www.youtube.com/watch?v=q7K0vRUKXKc http://www.youtube.com/watch?v=q7K0vRUKXKc
• milkshakes 16y ago
  There's plenty of startups in the music space that don't directly deliver music to listeners, what about those?
  • pg 16y ago
    It's hard to say exactly where the line is that you can't cross without getting killed. Industry experts know more precisely. I suspect the fatal combination is (a) a music focused startup that (b) touches label music and (c) makes money.
    • cabalamat 16y ago
      I suspect this is exactly right. If you make money, they'll send their lawyers in to extort some of it off you. And so what's happened is that digital delivery of music has largely been via alternative channels such as P2P. And a new generation of music fans is growing up, liking this, and hating the music industry.
• dalton 16y ago
  pg, thanks for mentioning me. I will be revisiting these themes at my Startup School talk this year.
• pstinnett 16y ago
  Just curious: Do you think popular music as a whole is a hopeless area or specifically companies that are looking to stream music? I agree in regards toward streaming music services, but there are a lot of startups focusing on other areas of music that seem to be successful: - http://bandcamp.com/ http://bandcamp.com/ - http://limitedpressing.com http://limitedpressing.com - http://songkick.com/ http://songkick.com/
  • taylorlb 16y ago
    It's important to point out that success for these companies isn't dependent on being in business with the major rights holders.
  • pg 16y ago
    As of this writing it seems to be ok so long as you don't touch the music files or the lyrics.
    • pstinnett 16y ago
      Understood. After reading more of the comments in this thread my original question was answered. Thanks!
  • siong1987 16y ago
    btw, songkick is funded by Y Combinator.
    • pstinnett 16y ago
      Didn't realize that!
    • ladon86 16y ago
      But they're based in the UK - did they move over to California for a while and then move back?
• physcab 16y ago
  The situation isn't entirely hopeless. Even within the most aggressive labels (and by that I mean their legal departments) there are parties who do encourage innovation. These are the people that go to bat for artists and are trying everything imaginable to promote them. They try new advertising campaigns, are experimenting with alternate branding, and moving to the sports business model (ie endorsements). Its unfortunate that the legal departments have been the ones with all the power, but this will fade with time as current employees are replaced with ones who see the effectiveness of all these new promotional channels.
  • pg 16y ago
    This sounds naive. The people running the labels are very cynical, and the way they're compensated makes them even more so. They don't have equity. They're motivated by bonuses that come out of this year's revenue. So they're not interested in building stuff. They just want to extract large amounts of money, this year, from whoever they can.
    • ABrandt 16y ago
      But why can't this change over a period of time as physcab has indicated (who by the way, works/worked for one startup leading the charge)? I believe it impossible for the industry to fail--there will always be people making music. So the big four are either going to have to get with the program (and probably significantly reduce their market cap), or get the hell out the way. This is in someways analogous to what YC, super angels, et al. have done with venture capital. Just like ~$20,000 is about all you need to get a talented founding team started, musicians today can do things on the cheap just as well. The entire system no longer hinges on the $100M home-run in either case. Everyones been focused on investing in the killer app that will bring the music industry back to equilibrium. The Spotify's and last.fm's will certainly play their part, but its a fundamental shift in capital structure that the industry needs. Making it as a musician is, never has been, nor ever will be easy. There's extremely talented people out there though that, given a little cash and a little support, have the drive and persistence to make a career for themselves. Sans record label.
• marknutter 16y ago
  I think if the startup has to do with helping bands survive independent of record labels, there's plenty of room. Once the secret formula to finding success as a musician without a major record label is discovered, all bets are off for the suits.
• Groxx 16y ago
  The only way out of this that I can see is for artists to sign onto digital-friendly (ie, small-time, currently) distributors. Which loses anything you'd get from signing with a big label. It's a nasty situation; with luck, the music labels will kill themselves off entirely, and something new can rise from the ashes. I doubt they'll actually embrace digital distribution for a minimum of several more years, which is murder to artists.
• thewordpainter 16y ago
  "I realized it was basically hopeless to start startups that touch label music" there's a key word missing in your sentiment. the companies that are streaming music require licenses. there's a number of great companies that are extremely innovative in the music space. the echo nest just raised a $7mil round today. tunecore and indaba are two more varying types that have very nice business models. from the article: "There will be no new players of significance to enter the business. Investors don’t want to entertain the remotest possibility of funding any start-up that deals with music" once again, it's not fair to think of all startups related to music as synonymous with the struggles of the streaming startups. as one who has been involved in the music space for a couple years, i still believe there is potential as more & more music is being produced --> how do we sift through all the noise?
• chrischen 16y ago
  Not all music startups have to be arms of the labels right? Do you think it's possible to develop a music startup independent and free of any association with record labels? The way I see it is that if it's possible to do this then the reward would be huge since the system is so broken.
  • lambda 16y ago
    No, it's not really possible, since the labels have a government supported monopoly (with pretty serious enforcement, and lots of laws in place to prevent most clever workarounds) on pretty much all the music that anyone wants to listen to. Even people who like to listen to indie music usually have some more mainstream music owned by the big labels that they want to listen to. The problem is that most people won't stick with a service that doesn't offer the range of music they want to listen to. And of course, the other issue with an all-indie catalog is that then you have a lot more players to negotiate with, many of whom will be just as clueless as the big labels. So, you might be able to start a business with a small fraction of the indie labels represented, and appeal to a fairly small demographic, but there just isn't much room for growth there. I remember trying to use Emusic back in the day; while there was some music on there that I was interested in, it didn't even begin to cover most of what I was looking for.
    • chrischen 16y ago
      Ok, so what about a service that doesn't revolve around music delivery/listening?
      • twymer 16y ago
        While yes you'd be safe, you'd also much reduced interest. Your service would likely revolve around people using your site and getting told to go elsewhere to find it to listen to.
• tomjen3 16y ago
  What about funding something like Groveshark? It doesn't seem like they need to work with the labels.
  • ladon86 16y ago
    Grooveshark aren't exactly in a safe position: http://news.ycombinator.com/item?id=1660645 http://news.ycombinator.com/item?id=1660645
• mchristoff 16y ago
  We figured this out at the end of 2008 when we closed our digital music startup, Mixwit (yc w08). Not soon after we shutdown the founder of a similar service, Favtape, was sued. Yes you read that correctly, Favtape the business wasn't sued, the founder (Ryan Sit) was sued personally. I'm not sure what ever came of that lawsuit, but I'm fairly convinced our name was on their too until we shutdown since we had received threatening letters from the same label a few months previous. At the time we looked up to imeem as a beacon, thinking if we made a kickass product we could be be on crest of a new wave of successful digital music startups. Fast forward a year later, at 16m users strong Imeem was "acquired" by Myspace for $1m (compared to $50m+ invested) and turned into a redirect to MySpace Music. Looking back I'm happy we figured this out when we did.