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A little bit about me

Hi. While this blog is a part of Seed Catalyst’s website, I realised over the initial few weeks that a lot of you are first introduced to the firm via the blog rather than our home page.

So to introduce myself - I’m a business consultant working with early stage technology firms to help streamline their strategy and go-to-market approach and support them for fund raising. 

With this blog, I aim to capture key market trends that I see in the industry, the ecosystem and cross-plays in some of the more interesting and upcoming sectors, as well as cover interesting companies that I meet. 

I will also be addressing vexing and interesting valuation and deal/term-sheet structures that would be of interest to technology start-ups at various stages of their growth.

So let’s get started...

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From Bach to Radiohead: key music developments in the last five years PDF Print E-mail
Blog - Market trends
Monday, 01 March 2010 22:02
Royalties

Image via Wikipedia

 

I sometimes wonder why we have all the noise about streaming music services and the associated revenue losses for record labels. At every stage of the music development cycle - live concerts, sheet music, gramophones, vinyl discs, magnetic tapes, CDs - there has been a huge hue and cry about the change i.e. no one will go to live shows or buy sheet music or buy tapes or buy CDs thus leading to a loss of sales for the musicians.

That’s not to say that there wasn’t an impact on sales in the traditional way of operations of the industry at each step. But the music industry as any other has moved with technological developments, been flexible and adjusted its business model, finding new ways of surviving even thriving. After all, no industry can put on blinkers to the world around them and hope to survive or better themselves.

So what are some of the key changes that we are observing for better or worse and is there further scope for improvement?

  • Selective radio: My earliest recollections are of my mom playing her favourite channel at 7 in the morning while we were getting ready for school. I don’t think it reduced her purchase of music in any way. The radio served as a great way to listen to new music and know whether you want to buy it. However on the radio you didn’t have any choice over the track played. Neither could you select the sequence of songs or the artists. However with online radio we can. Therefore, introducing new subscription revenue streams doesn’t seem like such a fine on users. Pandora has installed a listening fee of $0.99 for anything over 40 hours. Not too bad, methinks.

 

  • Ubiquitous medium of delivery: Traditional radio pays royalties in the range of 1.75-2% of revenues. Satellite and cable radio range from 8-10% of revenues. And then at the other end of the spectrum are the internet radio broadcasters. Their share of royalty payment has reduced over the last year and is currently in the 10-25% of revenues range or £0.00085 per track. Now that’s a difference that I can’t get my head around. Sure there does need to be a means to price for the multiple streams of music being played online as compared to traditional radio where there is only one stream of music being played. But we will need to see a lot more change in the calculation of royalties if we are to see the online providers of music survive and thrive. Else we might be moving into ‘1984’esque perfectly monitored world where every user’s account on a streaming music site would be monitored to observe their listening pattern. They would be allowed to listen to a track once and when they tried to play it again, there would be a block with the message – ‘Please buy now - available for $0.69’. Would that help?


  • Escape from middlemen: The next question is why make any payment to record labels and not just to the actual creatives – the musicians. I’ve heard a range of diverse views here, quite a few even suggesting that there be no payment of royalties but rather listeners should have the option of going to the musician’s site and paying as much as they want. Yeah – right. You wish. New organisations such as IODA, Orchard, INgrooves which can help the music industry and indie labels with their digital strategy are, I think, welcome developments. Increasingly you have new videos being posted on youtube and catching on virally. In France, there is Believe Digital, an Xange portfolio company, providing release management, real time sales data, promotion tools and the like for new artists and indie labels.


In summary, any development which can reduce the impact of the middleman and increase the revenue flows to the actual musicians is, in my opinion, a very welcome change.

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