If I Ran It: Turntable.fm
If you haven’t heard of Turntable.fm, its the new music web app that is all the rage in the tech scene. It is a great site that lets you listen to music in rooms with your friends/coworkers. There are some great social elements to it, and it just works well. The game mechanics are also interesting and can encourage people to buy music. As someone working on my own music startup in private beta, it is encouraging to see others in the tech/music space experiencing success. Here are my thoughts from an inexperienced student of the music industry.
Why is this app crushing it? Many little things that add up:
- Club Feel: It mimics the dynamics of a club graphically, giving you a fun interface through which to consume music
- Ego Stroking: In the points and avatars, you let people become DJs and satisfy the same ego needs that a service like twitter satisfies. People (myself included) love posting that they are *the* DJ right now and will gladly tell their twitter friends “hey come check me out”. It plays off of a few key social dynamics that are powerful
- Passive Application: This is the kind of application people will have in the background all day, popping in when there are discussions going on, or to check out who is DJ’ing the room.
- Social: You trust your friends for recommendations more than any recommendation engine. This is one of the ideas that Rexly is playing off of as well. With Turntable, you get to find out more about your friends taste in songs (not just the artists that they end up “liking” on Facebook). Music defines us in many ways (my current status: http://www.youtube.com/watch?v=78hT0H8nt_E) so we get to learn about who are friends are through music. Beautiful.
The main thing to think about with music startups is licensing. It should be the main thing on the mind of anyone doing a music service, especially if you are doing downloads or streaming. Without any real insider info (aside from my own talks with MediaNet for my service), it appears that Turntable.fm is focused on creating a DMCA compliant Internet Radio site. The main element of this is that it is non-interactive to end users. This means end users:
1) May not see ahead in a playlist past the currently playing song
2) May only play or pause the list
3) 3 songs per artist per hour, maximum
4) 4 songs from a single album in three consecutive hours, maximum
5) Users may skip ahead only 6 times per hour
Turntable.fm hold to this criteria in most use cases. The line between DJs and listeners is blurry, since at any point anyone can become a DJ, and a DJ can see their own playlist. If you are the only DJ, then you only hear previews, but the labels may still find a way to call this interactive since it is partially interactive for the DJs. What would make sense is that Turntable.fm pays a regular streaming rate for each DJ play, and their regular SoundExchange rate for the rest of the listeners. This is a bit of a grey area as I see it, so it is fascinating to see how this will turn out.
Turntable.fm is powered by MediaNet (who may also power my startup, Songsicle) for content delivery. The requisite DMCA takedown notice is included (DMCA = Digital Millennium Copyright Act, absolves sites of prosecution if they are notified and remove content that is uploaded by users. It is what made Youtube possible with all the illegal content on there. They dealt with Viacom and, miraculously, won: http://www.huffingtonpost.com/2010/06/23/youtube-viacom-lawsuit-se_n_623256.html). The other requisite parts for this are the relationship with SoundExchange, which handles royalties for audio recording public performance. MediaNet provides the data necessary for SoundExchange to charge them for usage. Also, musical work performance royalties must be paid through ASCAP, BMI, and/or SESAC (and now EMI Publishing directly, as they have pulled rights from ASCAP: http://bit.ly/m0sBvS). I have no idea if Turntable.fm has these things in place, but they are necessary since they have content delivery with MediaNet but also need content licensing done.
Whats the difference between licensing content and content delivery? Well in the music industry there are a ton of different rights types you can have (streaming, mechanical, public performance, derivative work, sync, lyrics, etc). Some of these rights are tightly controlled by labels directly, while others are pushed to other companies for control (like Harry Fox, BMI, ASCAP). So to run your music startup according to the proper procedures, you are to go to the rights holder and get a license for their content for your specific use case. In the case of on-demand streaming (which hopefully will not apply to Turntable.fm), you have to go directly to the labels. Apple had to pay $150 million for their service (http://gizmodo.com/5808172/is-icloud-costing-apple-up-to-150-million-in-music-label-payments). What do you get for that? A piece of paper that says you have access to the library of X million songs. If you want to actually deliver that content, you have to go to someone else (for most developers at least). Yes, the record labels give you a license for something they actually cant give you. Companies like MediaNet and 7digital (which helped power SongVoodoo, my Music Hack Day project) have the actual music files for you to use (and understand the business well enough to provide full solutions and APIs).
One of the things I have learned at the Music Startup Academy (hosted by Bill of NARM) is that you have to play by the rules from the start if you want things to go will later on. If you plan on having a huge service, there will likely come a point where you have to negotiate with a label for content. If you annoy them by not respecting their rules, then you are going to have a tougher time negotiating later. Its like finding a loophole that lets you skip class in high school, and being surprised when the principal finds another way to put you in detention. You will likely have some kind of business model creep as certain parts won’t work in your startup, so best to play by the rules (which are changing, but mostly for the better).
Since Turntable is a private(ish) beta, they still have the time/ability to make the tweaks necessary to cover their tracks. The safe (expensive) bet is to do the things by their rules, which they seem to be doing, as far as I can tell. GrooveShark is the main example of a site that *everyone* loves but is deep in litigation because they didn’t have the proper licenses to start http://www.tuaw.com/2010/08/17/streaming-app-grooveshark-pulled-from-app-store/ . Although Dalton Caldwell from imeem might discourage you to start a music startup (http://techcrunch.com/2010/10/20/imeem-founder-dalton-caldwells-must-see-talk-on-the-challenges-facing-music-startups/), there is much hope for the industry’s future.
So what would I do if I was them? Three major things:
1) Start Licensing Discussions: Get every license they could possibly want in the future.
2) Make it as non-interactive for most users as possible: Create a separation of users so that you can consider this fully non-interactive (worked well enough for Pandora). Doing this can cut the rates down by a lot and wouldn’t hinder the experience too much.
3) Partner With MTV: This is right up MTV’s alley. If they are willing to do a partnership with GroupMe for messaging (check the ABDC partnership), then I am sure they would. They also want to repair their image as a place that doesn’t stand for music anymore.
4) Real DJs - Have some real DJ’s pop in to play music
5) Direct Social Features: Let users chat directly with each other.
6) Song Requests: This may be tough, since it makes it more interactive, but end users would like it. You can do it how real DJs do and just ignore all song requests anyway.
7) Other Business Models: Affiliate sales are not enough. Subscriptions, pay-to-DJ, exclusive rooms and virtual goods (extra DJ abilities) are all things to be considered.
8) Mobile: Although this complicates licensing even further, I’d love to select tracks and listen from my mobile device
The possibilities for them are pretty far and wide.
Music is one of the most powerful, transformative mediums we have. It has the power to inspire, to move people to action, to heal wounds, and to unite people of various backgrounds and cultures. Sometimes when I talk about music as communication, I can see people’s eyes glaze over with skepticism, but I know in my core that this is right. Where else can you see 50,000 people excited and passionate about one core idea: http://www.flickr.com/photos/anirudhkoul/2632880868/ .
It is still shocking to me that investors are so opposed to investing in these kinds of startups, while also saying that they want to invest in people who are bold and swing for the fences. Some parts of the licensing game are actually smooth (MediaNet, BMI and ASCAP are great, reasonable organizations to work with). It may be comparable to startups in the finance or banking worlds in terms of difficulty. Ringtones and Ringback tones, while on the decline, still do around $1 billion a year in sales, so there is still money in this industry. My goal with Songsicle is to create a new repackaging of music that hinges on the same concepts of “music as communication” that Ringtones and Ringback tones, and even knew applications like Steve Jang ‘s Soundtracking, were built on. I have only gotten a few no’s so far, so I have a long way to go until I reach Tim Westergren’s 300 VC no’s status.
Looking forward to the discussion of labels tonight with Fred Wilson about music industry at the Northside Ideas Festival: http://www.ticketfly.com/purchase/event/47123. We should be encouraging bold entrepreneurs to build great applications like Turntable.fm. I truly wish them the best!
Thanks to Joel Resnicow of Rexly for the lively email discussion which lead to some of these thoughts!
