MOG CEO David Hyman Responds To imeem’s Dalton Caldwell | Hacker News Reader

MOG CEO David Hyman Responds To imeem’s Dalton Caldwell

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27 pointspx16 comments

Actually Dalton was careful to qualify what he said. He never said music startups were impossible. His message was that, given the uniquely horrible obstacles in this domain, you'd be stupid to start a music startup when you could instead start one in some other domain where the obstacles were merely the obstacles all startups face.

Everything we've seen confirms what Dalton said. If we published anti-rfses, this would be the first. Avoid starting startups that handle label music.

> If we published anti-rfses,

Actually that doesn't sound like a bad plan. Dalton Caldwell's talk was full of sage advice only a veteran could give. Perhaps other areas have similar obstacles that are not apparent to people looking to startup?

How far out does the infection spread? For example do startups like Songkick have these kinds of problems, or are they far enough away from the nasty stuff?

Songkick and thesixtyone both seem to be fine. It's not music startups per se that are dangerous, just music startups that touch label music in some way.

The music industry is rife with opportunity, in particular doing everything you can to kill the traditional label system. New ticketing methods, new distribution methods, new marketing methods, new ways to discover music. Dealing with label controlled music is the nasty bit (unless you are Pandora).

This is exactly correct. We shouldn't pigeonhole music startups in general, it's the ones that require direct contact with the dinosaurs of the industry or are right in the crosshairs of litigation that could be in trouble. Investments in SoundCloud and The Echo Nest are a signal that there's a lot of room for innovation yet to come.

I agree with what you are saying about pigeonholing, but please realize that just because something raises money, it does not mean that it will work.

VCs view investments as "bets", not sure things, and the vast majority of those bets fail... that's how the game is played.

(Also, for the record, SoundCloud and Echo Nest are awesome. We did a deal with EchoNest at imeem, and the SoundCloud team is worldclass.)

Of course, I agree with you on the fact that if something gets funded (even by great VCs), that doesn't mean it'll succeed. I also agree with you on the point that ANY music startup can have a tough time. You made the argument that musicians don't have a lot of money to spend so it would be difficult to monetize. While this is true, I think that argument would need to be discussed more as opposed to putting most of the emphasis on startups that deal with labels (if you want to discuss music startups in general).

It seems like most of the beef that people have with my talk revolves around the semantics of what a "music startup" is. Semantic arguments can end up being fairly tedious...

It is a complex issue because even if you don't deal with label music, there are still copyright issues. I personally would draw the line at "recorded music". If a startup does not deal with recorded music (ie streaming, downloads, mashups) they are mostly OK.

One caveat, there are also publishing rights issues around things like lyrics, tablature, etc.

Songkick does not deal with any of these issues, and I don't get the feeling that thesixtyone does either.

Also, if people get the idea that I don't understand the opportunity for independent musicians etc. please research SNOCAP, a company that I partnered with for years, ended up acquiring, and also ran. That company, despite having the star power of Sean Fanning & Ron Conway, was _VERY_ difficult. SNOCAP was promoted by MySpace, which was the #1 website at the time, as well as the #1 place for indie bands. MySpace promoted SNOCAP heavily etc.

http://en.wikipedia.org/wiki/SNOCAP

On one hand you have a huge market, ripe for disruption, with high barriers to entry. Seems perfect for a startup.

On the other hand, you have these enormous obstacles: upfront payments, minimum revenue guarantees, arcane and complicated reporting and security requirements, and strange nuances and differences in costs based on how you are using the music. It's a major pain in the ass.

All of this takes time away from building something people want. If you are lucky enough to find your product-market fit, the barrier to entry will keep competitors away and you'll have a huge head-start.

I think the big issue is that it isn't that big a market. When you factor in the COGS of label music, the market size relative to available profit is actually fairly small no matter what barriers you build.

To Dalton's point there are other interesting markets with barriers. For instance Scrapbooking is a $3B market, 1/3 the size of the music industry by revenue, with 2 tech players. One tech product in Scrapbooking generates $300MM in revenue and faces almost no competition. Arts & Crafts is a $32B industry. Toys is ~$30B, Jewelry is $60B, the list goes on, but there are SO many big markets that are ready for technical disruption that are ignored because they aren't very sexy.

YES, THANK YOU.

One of my personal goals for doing the talk is to get people thinking that way. I wish someone would had gotten me thinking that way years ago.

I wanted to put a quote from Aaron Patzer in my talk, but didnt have enough time.

Here is the quote: "For other entrepreneurs aspiring to such an exit Patzer advises solving a real problem. “When I founded Mint there were a ton of startups in the social networking space, and in streaming music,” he says. “I found something that was a real problem for me and I knew for millions of others, and I solved it.”

Totally agree, I made a presentation called "Web 3.D" which basically talked about how lucrative opportunities existed in areas where web service overlapped with physical goods. If you start at slide 35 in this presentation, I made a visual comparison of industry size vs. number of market entrants. Music, a shrinking $9B industry has hundreds of startups. Jewelry, a $60B industry has 2. There are some good reasons for this, but the industries are imbalanced.

http://www.slideshare.net/josephflaherty/web-3d-presentation...

The problem is, the barriers in this particular market involve people suing you. That's not the kind of barrier startups are good at.

Handling label music is without a doubt a dead end. Startups who rely on doing so are certainly increasing their chances of failure; there is too much evidence available to dispute this. However, you can build applications that make use of label music without actually dealing with the labels.

I'll preach the benefits of using the Echo Nest's platform[1] (which MOG uses for their playlists) until I'm blue in the face. They established a partnership a while ago with other music startups to provide label music access to startups. Through Echo Nest, startups can use label music in their applications by taking advantages of deals with companies such as 7digital (http://www.prnewswire.com/news-releases/the-echo-nest-and-7d...).

There's countless obstacles to reaching a repeatable and sustainable business model in the music industry, but these obstacles can be overcame. All industries put up such obstacles to new entrants. Is this not what startups are all about?

I've also been told countless times not to deal with music startups. While I do agree that building a business that tries to prop up the record label's business model is bad, I think there is lots of potential in the space given the supposed decline of the record labels and the huge and rising popularity of music.

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