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).
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.
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.
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.
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.
This article can be found on DIGITALMUSICNEWS.COM