News arrived last week that Mog and Rightsflow landed additional rounds of equity. One may wonder if investors are being lured into music again. The answer is both yes and no. Except for Spotify, few listening-based music startups have recently captured the fancy of investors. Lately, music-based companies that have landed venture capital do not have revenue models built upon licensing music from record labels. As a result, they do not have to deal with byzantine and expensive processes, lay out capital to obtain those licenses or shoehorn a business model into the constraints of those licenses.

In other words, Mog and Rightsflow are not subject to the risks inherent in music startups like Spotify, Imeem, Qtrax and the late Spiral Frog.

Rightsflow is on the opposite side of the fence from the music-based start-ups that get media attention. Rather than pay for licenses, they try to streamline licensing. Its services save time and money for record labels, publishers and digital service providers by allowing for, among other things, bulk mechanical, physical, digital phonorecord deliver and ringtone licenses.

Mog is more akin to the Huffington Post than Imeem. Its network of hundreds of music bloggers create content that is aggregated at the Mog.com home page. The result is a thorough collection of editorial and content that already attracts both eyeballs (eight million unique per month, according to Mog) and advertisers (Tag and Scion currently have ads on the home page). This is different than the models of competing streaming services. Editorial content came first. Streaming may be added later. The streaming service, which received a full (and positive) review by TechCrunch earlier this year, is not yet up and running. Universal Music Goup and Sony Music, which have invested in Mog, are reported to be the only two majors on board.

Offering editorial content rather than free music has proven to be a good path for Mog. "One thing we're proud of," said David Hyman, Mog's founder, "is that we've been able to built a large user base of eyeballs without giving away music for free." Networks of blogs - such as hip hop or heavy metal - offer the kind of volume brand marketers can deal with if they want to focus on one type of music fan. Hyman did not comment on Mog's music player.

So what about streaming services? David Pakman, a partner at Venrock and former CEO of eMusic, recently told Billboard the processes and policies of licensing content have pushed away entrepreneurs and made music a less attractive investment. "If the industry had a simplified, nondiscriminatory licensing policy," he argued, "without nine months of negotiation plus half-a-million-dollar advances per label, plus you have to give everyone equity, you could have had, overnight, 2,000 new startups." For more insight into the perils and potential of investing in the licensed B2C segment, read Billboard's Q&A with Pakman in Billboard's latest print edition.

Pakman speaks of startups that use recorded music to gain traction with users and advertisers. While some companies, such as MySpace and YouTube, have become de facto sources of free music to tens of millions of American consumers, they have not turned that traffic into profit. But profit and profit potential currently exists, as investors in Mog and Rightsflow can attest.

Questions? Comments? Let us know: @billboardbiz

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