The global economy melt-down happened at the wrong time for the nascent digital music industry. We had comfortably settled into somewhat of a oft-repeating pattern:
- Someone from “outside the business” comes up with an innovative approach to music marketing or discovery using a new digital and/or mobile technology/application
- They raise some initial seed funding, usually from friends & family, launch a beta, garner a favorable mention in Digital Music News, Paid Content or TechCrunch, then secure some first-round venture capital
- They then either contact or are contacted by the Majors, discussions begin, and the division of potential revenues are addressed. More often than not, the negotiated split does not result in a sustainable financial model.
- Ultimately, a significant percentage of available funds are paid out as up-front advances, leaving little to grow the business. A second round of funding is therefore required to keep the company afloat.
- Then, one of three things happen: 1. They get that next round, giving the young company some needed growth capital; 2. They get acquired; or 3. They “go dark.” Unfortunately, the latter seems to be the more frequent outcome these days.
World economic crisis has disrupted the dance. Venture funding has virtually dried up. Ron Conway, the legendary Silicon Valley ‘angel’ who backed Napster in 1999, allegedly recently said the following, “I will no longer fund a venture that depends on the rationality of a music executive.” Whether this is Urban Legend or fact, that sentiment is pervasive. The deals are perceived to be irrational and economically undoable.
So, a change in approach is being thrust on all of us by forces beyond our control. If the traditional music industry wants to successfully navigate the transition to a digital & mobile ecosystem, they need to be willing to enter into true partnerships, supporting innovators’ efforts & working together to grow the business. They must expand on some of their recent efforts to invest in this very promising future.
To be clear: A. labels, publishers, artists and songwriters, all are both entitled and due reasonable compensation for their investment and creativity. B. The business must change to survive. These are not mutually-exclusive statements. We can both compensate and innovate, they can work hand-in-hand. Let’s put a little more effort into collaborative solutions, they will yield the most rewarding outcomes.