The music industry is a tough place to start a company right now. No online music start-up has managed to turn a profit and most artists make pennies off streams of their content. (Just ask Spotify's CEO.) Meanwhile, no one has yet to crack the royalty code, not even Pandora.
But lately, a new crop of start-ups are emerging that offer a glimmer of hope. Not only do they have fresh business models, they have plenty of capital and the support of big names like Fred Wilson and MTV.
Here are five music start-ups worth watching and why:
Splice, a GitHub for musicians
Anything with Fred Wilson’s money behind it has got to be interesting, right? Funded to the tune of $2.75 million by Union Square Ventures, Lerer Ventures, and Turntable.fm’s Seth Goldstein, Splice has more going for it than a clever name. It’s a platform for editing, annotating, and sharing works in progress, which, for the bedroom artists, is a pretty big deal. Musicians can post tracks for fans or share them with a network of collaborators. The service is the creation of Steve Martocci of GroupMe and Matt Aimonetti, formerly of LivingSocial and PlayStation. Splice unveiled its community site last week, along with a waitlist for its beta site.
DeliRadio, local performers on demand
DeliRadio made raising $9.4 million look easy. What started as a way to stream bands with upcoming shows quickly evolved into a “community radio” that features venue-based radio stations with links to concert tickets and info. For bands, concert sales are a large source of income. For DeliRadio, it's a way to gin up uber-local advertising. DeliRadio is also harnessing the potential of location-based stations in a way other start-ups aren’t. While Spotify is bent on promoting the biggest acts out there, DeliRadio ensures the little guy gets heard.
This Is My Jam, music of the moment
This Is My Jam is where you go to share your favorite song at any given moment. Users only follow other users whose taste they like, “not people you went to high school with who happen to be also be on the streaming music service,” said co-founder Matthew Ogle. With one click, you can play all of that person's favorite songs. Each time you post your own favorite song, that “jam” is available for a week. It’s unclear how this service benefits artists and whether it’s a viable business, but as long as The Echo Nest--the music intelligence company behind MTV, Twitter Music, and Foursquare--retains an undisclosed equity stake, This Is My Jam could have a long shelf life.
Earbits, a Bitcoin for music
While most music start-ups charge listeners for the privilege of streaming music, Earbits charges artists for listener data and promotions. Bands tell fans to find their music on Earbits. Customers need 10 “Groovies” to hear a song. Groovies can be earned in a number of ways, including opening an account (500) and sharing music on Facebook or Twitter (100). The start-up calls Groovies the first “currency” for streaming music. “Over 70 percent of the people on Spotify are not paying, said Earbits’ CEO Joey Flores. "I think there’s a lot of evidence that the ad- and commercial-supported experience not only doesn’t generate enough value for the industry, but it makes the experience worse for the consumer.”
Soundrop, the best financed Spotify app
With $6.4 million in funding, Norwegian start-up Soundrop seems to be doing alright. The Spotify app makes discovery and group listening a cinch and recently raised $3.4 million from Northzone, one of Spotify’s early investors, along with Investinor. Some call it a “social jukebox” because users create their own DJ rooms and invite friends to join. Users also can visit friends' rooms and become DJ by adding tracks and voting on songs. It’s a democracy, so songs with the most votes get the most play. Recently, Soundrop said visitors streamed 500 million songs from Spotify in 2012. Of course, Soundrop's next focus is revenue. It hopes to generate sales with the help of big names like Robin Thicke and David Guetta, who will host listening parties in rooms.