On the opening day (Nov. 17) of Billboard's FutureSound conference in San Francisco, executives from RootMusic, Mobile Roadie, Grooveshark and Headliner.fm discussed some of the challenges and lessons learned in starting a new digital music company. See below for details on what was discussed at each of the afternoon sessions.
5 Barriers to Launching a Digital Music Startup, and How We Overcome Them
RootMusic founder/CEO J Sider led a discussion at FutureSound surrounding the barriers that digital music startups typically face, pulling from his experience in building the largest music application on Facebook -- BandPage.
Above all, Sider stresses the importance of proper due diligence in all areas where legal complications may arise, which may impede on the company's growth process. "For steaming services, you will undoubtedly incur high costs," he said. "You need to know the laws behind that before making any strategic decisions."
Sider continued, "For services where content holders hold the rights (such as SoundCloud or YouTube), again you must know those laws inside and out so you don't get caught up as you're trying to grow."
CEO/founder of RootMusic J Sider speaks about the "5 Barriers to Launching a Digital Music Startup, and How We Overcome Them." (Photo: Arnold Turner/A. Turner Archives)
He also stressed that one need not wait on acquiring large sums of money in order to get the ball rolling. "Take the first few steps on your own," Sider suggested. "Make the product, give it to your friends and musicians at the lower level, and build it up from there. You can then present case studies off those."
To keep the burner low, Sider suggested integrating with other companies to assist in building functionality aspects."When you start out, it'll be difficult to build a huge platform right away," he said. "Try to integrate first with others first."
He then went on to use his BandPage app as an example, where the application utilizes Songkick for tour dates, SoundCloud for streams, and so on.
When it comes to bringing the company to potential gatekeepers, like labels and managers, Sider suggested bringing the true value of the product to the table -- "real" in terms of how all sides shall benefit.
"They don't have much time," Sider said. "When you finally have that moment, make sure you're providing the real value for them as business allies."
Is It 1995 Again? Why Mobile is the New Web
MobileRoadie CEO Michael Schneider shared an interesting outlook on the ways digital startups are experimenting with mobile and apps today, and how it strongly resembles the early days of the web.
"Back in 1995," Schneider explained, "when there were 19,000 websites on the web, brands weren't sure what to do with the Internet. Nobody knew."
Today with over 300 million websites on the web, a strong web presence is absolutely vital. However, Schneider went on to provide facts that demonstrate how the mobile sector is growing at a staggering rate:
-- "On average, we check our phones 150 times a day."
-- "Four people are born a second; 39 mobile phones are sold a second."
-- "There are presently 5.5 billion-plus mobile users -- smartphones users comprise 21% of them."
-- "iPhone users spend 90-plus minutes per day in apps."
In 2007, with the emergence of smart-phones, consumers began visiting websites from mobile devices -- and they had terrible experiences. "Every industry suffered from not paying attention to the mobile experience consumes had," Schneider said.
Flash-only websites became useless once accessed from a mobile device, and commerce transactions were painfully difficult providing an overall lousy user experience. "By 2013, there will be more people accessing the Internet through mobile devices than their desktops," Schnieder said. "By 2014, mobile will be a $35 billion/year industry."
He went on to point out that no matter how interesting real life is, people are continually augmenting it with mobile. Users take photos at concerts, upload to Facebook, and check-in to the venue -- all from the same device.
"Mobile's 'Trump Card' is location," Schneider said. "It's a hyper focus on the consumer from your brand, with the user's location as an integral part of the communication process."
(L-R) Community Manager of NARM's DigitalMusic.org Antony Bruno, CEO/Founder of RootMusic J Sider, CEO of Mobile Roadie Michael Schneider, EVP of Strategic Development for Grooveshark Paul Geller and CEO/Founder of Headliner.fm Mike More. (Photo: Arnold Turner/A. Turner Archives)
What Startups Can Teach the Music Biz About Monetization
Former professional musician Paul Geller, external VP for strategic development at Grooveshark, said the company had no idea how to build an audience. Grooveshark simply built their music search engine, and musicians and advertisers came, he added.
Geller said he is not surprised music labels have trouble advertising on the Internet. There are 200 companies online facilitating the servicing of ads and it's impossible to make heads or tails. Still, recorded music revenue is down from $19 billion in 2000 to $6.8 billion in 2010, while marketing online continues to explode.
"This is the rise of digital advertising," Geller said. Grooveshark will continue to find revenue in streams other than royalties, like pairing bands with brands. He said a new band shouldn't expect mechanical royalties for anywhere from three to five years.
Leveraging the Social Graph To Build a Digital Music Startup
Another company hoping to eek a profit out of helping bands and advertisers go further online is Headliner.fm.
The Brooklyn-based company hopes to supercharge sharing for artists like Pitbull and Lady Gaga. Headliner.fm CEO Mike More noted more than four billion things per day get shared, and music is second only to electronics.
Optimizing sharing to boost engagement has enabled bands like All Time Low to reach four million new fans in 10 seconds. Headliner.fm helped Pitbull find 27 million new fans, he said. The company is aggressively data mining to identify the "mavens" and "influencers" who seed future trends, he said.