Tag Archives: Tech

The Secret’s Out: Secret’s Dead

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The Background

So it was announced today that Secret is shutting down. Part of me is completely shocked, and another isn’t all that surprised. Secret has had a lot of problems over the last year and frankly, I haven’t seen them do anything to fix any of them.

The old Secret logo

The old Secret logo

Secret blew up last year at SXSW and was everywhere after that. I’m serious, you couldn’t get away from the damned thing. Along with Whisper and Yik Yak, Secret made anonymous messaging handy and fun. Secret screenshots and threads showed up on Facebook and BuzzFeed and essentially took over spring of 2014.

The Fuckups

  1. Yet, like Yik Yak did, Secret encountered a lot of criticism over the issue of cyberbullying. As far as I’m concerned as a spectator and casual user, Secret never really addressed any of these issues. Cyberbullying continued to plague the service (at least that’s what I heard from other users), and I never really saw any major PR campaign by Secret to really dispel any of the criticism. In my opinion, that was their first major mistake.

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    Criticism of Secret’s cyberbullying; courtesy of TechCrunch

  2. Then in December of last year, they made their second major mistake. Secret completely “redesigned” their entire interface. The app was redone from top to bottom. Here’s why the word “redesigned” is in quotes: they didn’t redesign anything, they just copied Yik Yak. No, they weren’t “inspired” or “influenced” by Yik Yak—it was just a shameless, lazy, total ripoff clone. And I wasn’t the only one who thought so.
    New Secret Redesigned Logo (left) and Yik Yak Logo (right); photo courtesy of TechCrunch

    New Secret Redesigned Logo (left) and Yik Yak Logo (right); photo courtesy of TechCrunch

    New Secret Redesigned Best/Hot Page (left) and Yik Yak Page (right); photo courtesy of TechCrunch

    New Secret Redesigned Best/Hot Page (left) and Yik Yak Page (right); photo courtesy of TechCrunch

  3. If their second major blunder set the stage, their third and final misstep locked in their fate: they really didn’t do anything about the criticism they got for essentially cloning Yik Yak’s layout and design. I don’t know if Secret’s leadership just kept hoping the backlash would go away or just didn’t care, but their inaction signed their death warrant as far as I’m concerned. Frankly, after such a series of serious blunders, today’s news isn’t as much of a shock to me as it might otherwise have been.

What They Should Have Done

Here’s what I think Secret should have done over the last year:

  1. They should have acknowledged and met criticism of cyberbullying head-on. They should have addressed it and appeared to take it more seriously than they did. They should have dumped major amounts of money into both looking for a cyberbullying-solution, and a massive PR campaign to set themselves apart from their anonymous messaging peers. The PR campaign should have centered on the fact that cyberbullying was their top concern, and that they weren’t hiding from or shirking responsibility; they were facing the problem head-on. This would have endeared them more to their userbase and the public, and possibly could have served to give them a leg up on their competition in the space.
  2. They should not have shamelessly cloned Yik Yak’s design. It was painfully obvious to everyone (even non-users), and pretty much tarnished their reputation. They came across as having no vision for their company, and as preferring to copy one of their competitors rather than do the hard work to underscore and highlight their unique qualities. The major redesign had to cost a pretty solid amount of money. I would have used that money instead for the cyberbullying problem, and put it towards the solution and PR campaign outlined above.
  3. This is the biggest kicker: they should have pulled back the “redesign” within a week and admitted their huge mistake. People understand and respond to others who act in humble and human ways, even if that means sometimes making mistakes. By not admitting their major blunder, Secret pretty much alienated the rest of their userbase.

Here is word for word the statement I would have released if I was Secret’s CEO:

Earlier this week we made a huge mistake. Our redesign did not convey the message we wanted, and we have decided to revert back to the original Secret for the moment. We do not want to be anyone other than who were are, and we know that our next step forward will better convey our vision for what we know Secret can be. Our next step will act as a tribute to our past even as we embrace our future. We never want to lose the unique qualities that make Secret so special, and we will go back to the design-board so we can better convey those qualities which we love so much. This is not the end; just a little bump in the middle. Our next step forward will be our best yet!

Unfortunately, I did’t see any release statement like that from Secret.

Why Are They Giving Up? Where’s the Fight?

That is all that it would have taken to convey to me that the people at Secret are human and have the best intentions. It would have confirmed for me that the leadership at Secret is committed to succeeding as themselves, and not trying to as someone else. Unfortunately that wasn’t the case, and now Secret’s hitting the deadpool.

What must be the most bitter pill to swallow for investors is the question of “why.” If I was an investor, knowing that Secret still had ~$35M in the bank, I would be wondering why they don’t just pull back and regroup. Where’s the fight? They have the funds, the (somewhat) intact userbase, the reputation, and the manpower, so why are they just throwing in the towel? That must be the most disappointing question for everyone involved to be struggling with right now. I know that’s what would be going through my mind as I cleaned out my desk.

The Major Labels Are Not Reestablishing Their Dominance

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The Misleading Statement

A couple weeks ago, Forbes ran an article detailing how the major record labels were taking their “revenge” on the current landscape by making “strategic partnerships” with music services to reestablish their dominance. This was a very bold statement. Here’s why it’s misleading, and essentially false.

The major record labels (the Big Three, Warner Music Group, Universal Music Group, and Sony) are indeed striking deals with music services like Spotify, Rdio, and SoundCloud, but these deals don’t signal what the article asserts that they do. The reality is that the majority of the label-service partnerships revolve around licensing rights and royalty payments, an already broken system that will continue to feel squeezing pressure as we move further into the digital age.

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What the major label industry really looks like; The Big Three

What the major label industry really looks like; The Big Three

The article focused on the labels’ calculated move to reassert their control as gatekeepers by using their access to artist content as a leveraging technique. This is true, and is completely expected; the labels are doing what they can to hold onto what power they have left. But the reality of the situation is that this isn’t a new move; it’s a rehashing of the same dynamics that the labels have relied on for years. This is exactly why they’re not “taking revenge” on anything or anyone.

The Ironic Voodoo of Ignoring the Middle

As much as they would like to believe they still hold the power they once did, the major labels need to acknowledge that their ability to deem music as “good” or “sellable” is essentially irrelevant in the grand scheme now. It’s lost a certain sheen of relevance because they’re no longer the only deciding force out there to dictate the music the gets made or played. Now, the power of choice and reach comes to and from anyone with an internet hookup and a laptop. Ergo, though they may try to deny it, the major labels are gatekeepers no more.

So here’s where the ironic voodoo comes in: major music streaming services like Spotify and Rdio sign licensing deals with the major labels because they think that’s the only way to survive in the music landscape, and the major labels license their music because they essentially see no alternatives at the moment. Simultaneously though, both sides ignore those artists who fall in the middle: the independents (who, by the way, make up a massively growing market). Thus they are dismissing today’s independent artists who might be major underground sensations tomorrow. SoundCloud used to be a happy place for the independents. Then even that changed when they signed a deal with Warner and began seeking out deals with the other major labels.

The Punch: The Percentage Dynamics People Ignore

I wrote here why independent artists will eventually begin to move away from SoundCloud. What I didn’t focus on at the time, and precisely what the Forbes article glazed over, are the percentages of these streaming companies that are owned by the major labels. Beyond my argument regarding SC and Warner, the Forbes article noted that Warner owns 5% of SoundCloud, which it acquired in the streaming service’s latest funding round (and also which it acquired at about a 50% discount from what other investors paid).

That’s not all though; all of the Big Three collectively own about 10-20% of other streaming services, such as Spotify and Rdio, as well, and Universal jumped on a 13% stake in Beats before Apple snapped them up. (And this doesn’t take into account all the “360 deals” that are taking place).

Thus, we have the major labels, who control the licensing that these streaming services depend on, owning parts of the streaming services themselves. Essentially they can bully the services into driving towards what’s best for their artists with the power to pull their licensing from said services if they don’t comply, thereby draining them of their lifeblood. Doesn’t sound like a pyramid scheme to me at all… Oh wait, yes it does.

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Major Label Percentage Ownerships of (some) Streaming Services

Major Label Percentage Ownerships of (some) Streaming Services

Here’s what it means in the bigger picture: the major labels are gobbling up these stakes to preserve their roles as the gatekeepers of the musical landscape, and to possibly make a grab at the distribution arm for their music. Despite the fact that this is working for them for the moment, it most certainly does not mean that they’re reestablishing their dominance over the music landscape. This matters for two main reasons:

  1. It underscores the reality that the labels aren’t really coming up with any new tricks; they’re just rehashing the same ones again.
  2. It proves that assertions of “equal opportunity” for independent artists on streaming services like Spotify and SoundCloud are basically false.

Why Warner Now Holds Leverage Over SoundCloud

With its 5% stake in SoundCloud, Warner will clearly attempt to steer the service’s vision and attention towards the the artists it represents, and whose interests it has at heart. Why would it not? That’s exactly what I would do. It’s not personal for Warner, it’s just business. But what it means for independent artists on SC is something much bigger: that they will no longer be the focus of the service, and again will need to contend themselves with scraps of attention after the major label(s) is (are) done feeding.

Look at it from the point of view of Warner: why would they contribute to SoundCloud’s latest round, snapping up 5% (even at a 50% discount) if they weren’t going to leverage that to their advantage? The point is they wouldn’t because they’re going to do exactly that.

soundcloud_logo

SoundCloud logo

Now that Warner has control (to some extent) over the new distribution channel, SoundCloud, as well as the music that SC wants to license (i.e. the lifeblood of any music service), it holds all the leverage in the relationship. Essentially if SC doesn’t steer its model towards what would benefit Warner’s artists, Warner can decide not to renew its licensing agreement with the service, thereby cutting out SoundCloud’s feet from under it. And the same is true with the other labels and streaming services. The labels are worming their way into controlling not only of the material for distribution (the music), but the distribution channels as well. As a result, we end up with the same concentrated power dynamics and gatekeeper power-plays as we had before.

Squeezing Models of the Past

Yet, easy though it may be for the major labels to dig into their deep pockets and purchase stakes in these streaming services hoping to once again gatekeep the music landscape, it is nonetheless not the same game they are used to playing. It’s now much easier for any music startup to get into the streaming or downloading service—and thus become a new source of distribution for artists. This means that the probability for the major labels to bottleneck and control the distribution channels is actually much smaller, particularly when it comes to artists and services that don’t focus on major label content, but rather independent dynamics.

For all their “strategic partnerships” and licensing/royalty practices, the major labels are not taking revenge or “reestablishing their dominance” over anyone. They’re still playing catch-up, and will continue to do so as long as their business model revolves around the obsolete (and completely unfair) royalty paradigm. Realistically speaking, the majors are playing a losing game: they’re no longer essential for artists to find fanbases or have exposure—the internet’s taken care of that. Independents can now crowdfund themselves, as well as make their own way in the live arena sans any “360 deals” with labels.

Perhaps the most telling part of the Forbes article came in the last sentence. One phrase pretty much summed it all up: “By looking forward, while squeezing the models of the past…” The rest is irrelevant. Even Forbes knows that the major labels’ models are outdated and like squeezing water from a stone. That begs the question: if they know, and we know, why don’t the major labels seem to get it?

The Making of a Music Lover

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Happy Birthday Mom and Dad

Today was my parents’ birthday. Yes, they both have the same birthday. So as I was busy writing the traditional birthday post on their Facebook walls this morning, I started thinking about how my parents shaped not only my life (duh), but how they’ve made me so much of who and what I am (a die-hard music lover and artist). I began to really take a moment to remember just how my parents each played a role in my growth not simply as their son, but as someone who is (more or less) forever tied to the world of music. And the more I thought—the more I remembered—the more I really began to see just how much of an impact they had on me in that arena as well. In fact, it’s an impact they continue to have every day.

Induction

I suppose my induction into the world of music took place in my youth, but it really geared up around the time I was 10. That’s when my real education began. It was because of my parents—what they introduced me too was lightyears ahead of most any and everything my peers had in their CD players (yes, we still used those back then). It began, then ramped up—and then I never looked back.

My Dad gave me what I will always refer to as my first Big Five: The Beatles, The Kinks, The Who, The Doors, and Cream. Some people hear The Who’s “Baba O’Riley” and think of CSI: NY; I just think of my Dad. From there, it was just a hop and a skip to Jimi Hendrix, Jefferson Airplane, and Jethro Tull. I vividly remember hearing Cream’s “Sunshine of Your Love” for the very first time; I’d dozed off on the couch when he popped the CD in the player. I heard that Jack Bruce bassline, sat straight up, and said “what is THAT?!”

From Mom I got more of a taste from the ’70s; Led Zeppelin, Queen, Fleetwood Mac…and metal. I actually wouldn’t discover until more than a decade later just how into metal my mom actually was. KISS and Def Leppard were favorites, so I guess it shouldn’t have surprised me when she asked if I’d go see them in concert with her last summer. And so we did.

Me, Mom and my brother Josh at KISS and Def Leppard last summer

My brother Josh, Mom and me at KISS and Def Leppard last summer

“Mom, I’m Gonna Start a Band”

My parents took me to my first concert. And not a Backstreet Boys show either. My parents took some friends and me to The Masquerade in downtown Atlanta (google it, it’s still around and still a popular venue). We saw Bowling for Soup. Don’t laugh; they rocked and kicked ass. In fact, I’ve gone on to see them almost 10 times since then, and more than once my Mom has gone with me.

I’m not sure many parents would even drive their kids down to Masquerade, let alone take their kids to a show there. It’s not exactly PG; Masquerade is a real venue, complete with people full of tattoos, piercings, sweaty, jumping, and rocking out.

Around this time—my 13th birthday—I got a knockoff Fender guitar starter pack. Pretty much the next sentence out of my mouth one morning was, “Mom, I’m gonna start a band.” And I did. My buddy got the same starter set, and we set out to conquer the world. I loved that guitar; I still do. It reminds me of my roots.

My first guitar, and still one of my first loves

My first guitar, and still one of my first loves

New and Different Tastes

My parents are such lovers of music that it was just as valid to them to hear me say I wanted to be a rockstar as saying I might want to be a doctor or lawyer. It was natural, and I believe that because their love of music extended well beyond what they were familiar with, they could understand my obsession with something that spoke so deeply to me.

While other parents continued to find comfort in their Zeppelin and Beatles albums, my parents took a trip with me through my teen-year discoveries; Simple Plan, Sum 41, Yellowcard, My Chemical Romance, and Eve 6 were just as valid and exciting to them as Fleetwood Mac or The Who. In fact, I saw Eve 6 with my Dad just a couple summers ago on their 2013 U.S. tour.

Me and Dad at Eve 6's summer 2013 tour

Me and Dad at Eve 6’s summer 2013 tour (notice I’m wearing one of my Bowling for Soup shirts)

I’m not sure how many other people out there were (are) lucky enough to experience these same dynamics, but I can’t imagine too many. Most probably experienced the brush-off that so many people get. But I was lucky enough to escape that. My parents share my love of music and discovery, and that drives me every day.

Days As a Journalist and DJ

When my rockstar career ended (yes, pause for dramatic effect), I decided my next adventure would be as a music journalist. Actually, I completely fell into music journalism, but that’s a story for another day. And even as I was starting to find my way in that cutthroat industry, guess who was beside me, editing my pieces to make them tighter and better? That’s right, the parents.

And when the journalism turned to DJ-work, there was a desire to push my drive yet again. I’ll never forget the first time I was on the air on my college show in Boston, doing my broadcast with my parents streaming from home in Atlanta. They listened to the whole thing (2 hours worth), and when he called me after, I believe my Dad’s words were, “man that was so fucking cool.”

Me on my show, Underground Takeover

Me on my show, Underground Takeover

I took my Mom out last summer to a little indie show to see a band I’m good friends with. The band, mind you, is a little on the screamo side; not exactly what most people my parents’ age would be interested in listening to. But during the course of the show, what really stuck out to me was when my Mom noted, “wow, they are incredible performers.” That level of appreciation for something so far removed from her own tastes is something that I think makes my Mom so special. Many times, it’s my parents who are the first to hear the new artists I find and give me feedback. They really haven’t steered me wrong yet.

Me and Mom at an alternative/scream concert last summer

Me and Mom at an alternative/scream concert last summer

Music Entrepreneur

And now, as I’ve changed my path yet again, it’s paved and bridged by a mutual respect and insatiable love of music. Many parents wouldn’t understand their kid when they hear the words, “I think I want to be a music entrepreneur.” What does that even mean?! I’m still not totally sure, though I’m figuring it out every day. What I am sure of is that my parents are behind me yet again. They continue to help me navigate, all the while partaking in the amazing music scenes that I’ve become privy to.

So as I sit here on their birthday night, I think about how I’m thankful not only for a good relationship in general, but for a shared love of something that is and has become so important to me. Music is freedom and in it lives a certain amount of respect and love; it’s that respect and love that exacerbates the excitement of sharing new music with one another. It’s what draws us together and creates the paradigm we live in. So when I listen to Cream or The Who, I think of my Dad. And when it’s KISS or Def Leppard on the radio, I think of my Mom. Even when it’s Bowling for Soup I can’t help but think of my first concert with my parents. And I can’t look back at anything I’ve done in this business without thinking of them collectively.

I think that’s a good thing.

Blogging: One Month In—A Retrospective

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Today marks one month since I started blogging every day, and man has it been a long month. Though long doesn’t necessarily mean bad, and in the last few weeks I’ve found myself able to talk about a number of topics that might not have occurred to me otherwise. True, a lot of my posts have been on topics like music and tech that I continually follow, but the desire to write every day has enabled me to streamline my thoughts into a more digestible format.

In the last month, I’ve discussed numerous things in the music and tech space, including:

Yet I’ve found myself able to write about things that otherwise would seem unimportant, had I not had a goal to write every day. I’m not sure writing posts on writer’s block, on singing, art, and on concepts of passion would ever have occurred to me without the goal to produce new material:

Perhaps the most intriguing thing that’s happened though is how my desire to write has only become more engrained in me. I’ve always been a writer—essays, journalism, poetry, and research papers always came fairly easily to me, and even provided a sense of enjoyment most times. But now my writing has taken on a whole new dynamic in my life.

In fact, it mirrors what artists tell me when I ask why they choose the tough path of day jobs and long nights on the road: “I do it because just like I wake up every morning and need to breathe, I need to play music.” And that’s how writing is to me now. I wake up ever morning and need to breathe, and then I need to write.

The Typhoon Keeps Coming for Tidal

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It’s not been an easy couple of weeks for new music service Tidal. A slew of bad press and criticism during and immediately after the service’s launch is continuing to be a thorn in the side of the company’s leadership. So much so that a major restructuring was just announced; things aren’t about to get easier any time soon.

I was first a little skeptical of Tidal during its much-hyped launch, then again when it enjoyed a spate of criticism from mainstream band Mumford & Sons, and most recently when producer Steve Albini piled on to the already bruised service. Things have just been really bad for Tidal since it emerged in the last few weeks. Now it seems that the service itself is intent on rubbing salt in its own wounds.

Business Insider broke the news today (as did other sources like Digital Music News) that Tidal was being strongly shaken up; 25+ people on the Tidal team were being fired to make room for a new direction. Of these, the name that surely drew the most attention was And Chen, the now-former CEO of the service. Maybe it’s just me, but firing your CEO just a couple weeks after your very public launch seems to say a lot about a company’s fortunes, at least in the short-term.

Former Tidal CEO, Andy Chen

Former Tidal CEO, Andy Chen

Chen’s removal will make room for Tidal’s former CEO Peter Tonstad (who was the former CEO of Tidal’s parent company Aspiro Group). In an statement to BI, Tidal commented on the impending change:

TIDAL’s new interim [sic] CEO is Peter Tonstad—a former CEO of parent company Aspiro Group. He has a better understanding of the industry and a clear vision for how the company is looking to change the status quo.

Correct me if I’m wrong, but did Tidal just admit that their now-former CEO—Chen—was basically unqualified for the job? Because that’s essentially what I heard. After all the fanfare that Tidal inundated the press with around its launch, I thought for sure that they at least had a concrete plan to try and accomplish their goals. As critical as I was at the time, I at last figured that their leadership had sufficient experience and vision to make the Tidal brand somewhat competitive for a little while. Clearly that’s not the case.

I was critical of Tidal before because I thought (still think) that they’re attempting to sell a product (service) that essentially is very expensive and not wanted by enough people to offset the expenses to provide it. I was critical because the artists who I saw standing up on stage during the launch don’t need any more money in their pockets, and it came across to me as greed.

Now I’m critical of them because changing your CEO and firing 25+ employees ~20 days after your very public launch is not a good way to start the spring. It shows both a lack of preparation for your business market, and frankly a lack of appreciation for your prospective audience and their thoughts. Actually, you come off as socially tone-deaf.

We’ll see how this progresses, but I must say, I am really not impressed with Tidal’s handling of this entire situation. This is not the way to build trust in an industry that is basically overrun with distrust, and filled with people who are used to getting taken advantage of. This is not a good start; not a good start at all.

Tidal’s Choppy Waves Keep Rolling

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The choppy waves keep on coming for Jay Z’s streaming service Tidal, as today it was hit again with another round of criticism. I myself outlined my thoughts on the Tidal service first in a post when it launched, and then again in a questioning follow-up post earlier this week. This time, though, the critique comes not from disgruntled music streaming fans or competitive services, but from Steve Albini.

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Tidal logo

Tidal logo

For those unfamiliar with Albini, he cut his teeth in the mainstream spotlight producing albums for artists like Pixies and Nirvana, and has become an outspoken critic of many of the streaming services in the last decade. A criticism from Albini can’t be as easily dismissed as it might otherwise be particularly because he has both the industry experience and insider knowledge to call those in the industry on their bullshit.

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Steve Albini; Photo courtesy: Jordi Vidal, 2014

Steve Albini; Photo courtesy: Jordi Vidal, 2014

Albini has been critical of the mainstream music machine even before Kurt Cobain’s death, jumping into the mainstream music business debate in 1993 with his piece entitled The Problem With Music. He’s done the math and lived out many of the results, and so when Albini takes aim at your service, you better realize that other people in the music community will take notice (even if the mainstream isn’t).

In an interview with Vulture.com, Albini used phrases like “little streaming fiefdoms” and the “budget version of Pono” when referring to Tidal. While the latter comment is a critique on the mainstream listener’s ability (or even care) to distinguish between lossless quality and normal mp3 audio quality, the former is almost a little more telling. “Little streaming fiefdoms” is pretty telling in and of itself; it’s dismissive of what Jay Z and company say Tidal is (and purportedly will be), instead asserting that the service is yet another little city-state vying for validation in the greater streaming landscape.

Perhaps the most intriguing thing about this particular thought process is what it means for the dynamic of the current landscape; as Albini (and others) become increasingly critical of services that act like little principalities, the traditional walled-garden approach to music seems to be under siege. And there are those of us who rejoice in that. The walled-garden concept works well in numerous areas of tech and business—it’s great for security, healthcare, and finance. But it is not good for media, and music specifically.

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Criticisms of Tidal on Buzzfeed the day after its launch

Criticisms of Tidal on Buzzfeed the day after its launch

Music is freedom, and needs to be treated as such. To constrain music to the dynamics of a walled-garden system is to take away so much of the actual discovery and freedom that is associated with it in its purest form (though many would argue that there’s still plenty of “discovery” to be had). Regardless of this fact though, it remains an important fact to note that people of Albini’s caliber are taking aim at people like Jay Z and services like Tidal.

One might even argue that they—whether they intend to or not—are clearing the path for new music services yet to be launched. Only time will tell in that regard. For me though, this does not go unnoticed. Anyone interested in the future of the music industry would do well to keep these criticisms catalogued and fresh in mind. It’s precisely by graphing these grievances that we will begin to see how the future of the music industry will unfold.

What Does It Say When Mainstream Artists Start Criticizing Tidal?

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I’m not much of a Mumford & Sons fan. I have nothing against them as musicians; I just find that my taste in music to be a little different. But I respect the hell out of them for the statement they put out today.

Pulled by Digital Music News from other sources this morning, M&S were reported as disliking Jay Z’s new service Tidal. They’re not alone; other mainstream artists like Lilly Allen and Mariana and the Diamonds have voiced distaste for the service. And that’s not even taking into account the near biblical response from music fans over the service, all of which I spoke about in my coverage of Tidal’s relaunch a couple weeks ago.

But what makes M&S’s statement so stark is the candor with which frontman Marcus Mumford explained the band’s view of the service:

We wouldn’t have joined it anyway, even if they had asked. We don’t want to be tribal. I think smaller bands should get paid more for it, too. Bigger bands have other ways of making money, so I don’t think you can complain. A band of our size shouldn’t be complaining. And when they say it’s artist-owned it’s owned by those rich, wealthy artists.

Wow, some pretty powerful words from the neo-folk rock frontman. I rest my case. I may not be a major fan of M&S’s music, but I for damn sure am a fan of how they see themselves and their fans. They know what they are, and they know what they’re not. And what they’re not is dying for money in the same way an independent artist is. What they are, according to this, are a group of artists who recognize their good fortune. They assert that other artists on their level should recognize similar good fortunes and stop “complaining.”

If this isn’t telling of the splitting we’re starting to see in the music industry, then I don’t know what is. It’s a big day when even mainstream artists are standing up and articulating the difference between themselves and independents. It’s a whole new world.

Today Was Saturday, Wasn’t It?

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This morning I woke up, showered, made some coffee, and sat down to work. Only I couldn’t focus.

I sat looking at my computer screen and reading some emails that had come in last night. I responded to a few, but couldn’t quite get “in the zone” to really like I was being productive. After a couple hours I started to wonder why that was.

As I took a break and went for a walk in the sunshine, it hit me: today was Saturday. I’d completely forgotten. So that’s it, I thought, I’m probably burned out from the week. And I was; it’s been a super long week.

On a day which most people take off, I’d woken up as I do every day: ready to work. Maybe it’s a hazard of being in the startup world, or maybe it’s that I love what I do so much that work doesn’t really feel like work (or at least, what “work” is supposed to feel like). Regardless, I work pretty much every day; there’s always something to get done. And most days I enjoy what I’m doing, so I tend to go without noticing the fact that I’m taxing my mental capacity (as any job does). I even find my mind whirring with new ideas as I try to sleep at night.

Yet what today highlighted for me is that it’s important to step back and let your brain breathe, even if you do love the work you do. The reality is that we can’t be on 100% of the time, and even if we try, the quality of our works suffers anyway.

I would love to say that in the future I’ll make sure to keep my work habits under control. Except it’ll probably be a lot more difficult than that. Even when I’m not “working,” I’m still emailing artists, setting up call times, looking for new music, working through new thought processes—this is just what I love to do. I don’t see that changing anytime soon. Perhaps I could benefit from a break over the weekend, but the truth is, if I could be at a concert tonight, “working,” I would be.

It may not even be as extreme as that; maybe I just need a Netflix-binge tonight to purify the system. Then back to work tomorrow. It’s a good thing Family Guy and Friends all on for instant stream. Break well deserved.

If You’re an Independent, Kiss SoundCloud Goodbye

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The Partnership with Zefr Isn’t the Real Story

News broke today both on The Verge and TechCrunch that SoundCloud is looking to step up its drive towards revenue by signing a deal with Zefr. For those unfamiliar with Zefr, they’re the same partner who works with YouTube to track content and brands. Part of what makes Zefr so helpful to YouTube is that they are able to track media files as well as specific brands like Nike or Coke.

But that’s actually not the story here. The real story is buried deep in the TechCrunch article. Helpful though Zefr may be to and for SoundCloud, they can’t help with the larger problem that SC has created for itself. No, that has to do with the licensing quagmire that SC is increasingly encircling itself with. It goes like this.

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SoundCloud, now a platform for major labels and advertisers

– SoundCloud, now a platform for major labels and advertisers

SoundCloud blew up as an independent-driven engine way before major label music was even a thought. It was the place for the singer/songwriter in his basement, or the newly formed doom metal band, to post their recordings and attempt fan acquisition. It was beloved by independents the world over because it was a free, easy way for them to distribute their material and make a name for themselves. That’s where SC started, but it’s not where they now find themselves.

Legal Problems That Were Never Solved

Of course SoundCloud’s rich environment of remixes and covers led to a legal quagmire that saw them losing material as complaints were brought against them from the original sources for copyright infringement. While Zefr does help specifically with this, it’s effectiely irrelevant, as independents will begin to migrate away from SC amidst a new major label focus anyway. I can imagine it was a major headache for SC as remixes and covers are particularly popular in certain genres of music. Thus began the drive away from remixes and towards “more mature” content. For those who care, this is basically code for major label content.

soundcloud_logo

And thus, instead of solving the more challenging problem (the legalities associated with remixes and covers) SC rather decided to chase the major label route to better compete with services like Spotify and Rdio. (Again, as noted above, partnering with Zefr does help, but will essentially become irrelevant in the bigger picture). In doing this, they basically told their grassroots fanbase (you know, the people who gave them love and support (and traffic) before anyone else) that they didn’t need them anymore.

Rather than spend the few million dollars of their funding figuring out the legalities they were faced with (which probably couldn’t have amounted to more than ~5M), they made the choice to look towards the major label paradigm for music content. Frankly, the partnership with a company like Zefr which helps in the copyright arena may not be too little, but it is too late. Let’s examine how this worked out for them.

Buying Into a Broken Business Model

Back in November of 2014, SoundCloud signed a licensing deal with Warner Music Group (one of The Big Three) to bring onto SC’s platform the music which Warner controlled through itself and its subsidiary labels. My assumption was (is) that SC is looking towards the other two big labels (Universal and Sony) to sign similar deals, and step up to the same level as a service like Spotify. Here’s why that was a bad business decision:

1. A Bad Business Model 

SoundCloud already had a dedicated userbase of independents who used it, without demanding licensing money upfront. To put this in perspective, the deal which SC signed with Warner most likely cost them ~45-50M for a 1-year contract. This means that they paid somewhere in the neighborhood of 50M to license music content from Warner for a year. This in turn means that they will most likely need to renegotiate sometime later this year; those licensing contracts are not static agreements. It also does not account for the royalties which they will need to pay on the backend. So, to recap, multi-million dollar expense on the front-end (which will need to be renegotiated eventually) and multi-million dollar expense on the backend.

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What the major label industry really looks like; The Big Three

– What the major label industry really looks like; The Big Three

2. You Can Only Have One Priority #1

Business 101: You can only have one priority #1 in the morning. SC’s priority #1 used to be its independent artists/users. Now it’s not, and it can’t be. How do I know? Because Warner now holds the power in the relationship. In providing SC with major label content, they have eventually shifted the paradigm of SC’s focus from independents to Warner’s major label artists. This means that, eventually, independents will begin to understand that they are no longer the priority, and will migrate elsewhere. That’s not a guess, that’s fact. Look at the migration patterns:

MySpace==>Purevolume==>Facebook==>SoundCloud==>?

The reality is that independent artists are loyal only insofar as they are the priority customer base. Why would they be loyal beyond that? They don’t have major label deals and massive radio play on FM radio to fall back on. And they’re not signed to a powerhouse like Warner or Universal. Which means they don’t need to settle for anything; they’re free to do whatever the hell they want.

3. You Should Never Depend on Anyone Else

SoundCloud has basically tied itself to the major label paradigm, which could cost it. It’s never a good business decision to tie your company’s future to the company structure and revenue of someone else. You should never be dependent on another company’s good fortune for your own upward trajectory. But in signing a deal with Warner, that’s effectively what SoundCloud did.

It goes like this: As the independents begin to see that SC has shifted its focus from their desires and needs to those of Warner’s major label artists, they will begin to look for other options. SoundCloud can’t really do anything about that because they’re now tied to Warner (and searching for deals with Universal and Sony). That means that as the independents begin to trickle out, they can’t market any sort of real campaign to woo them back; Warner wouldn’t let that happen. And if I was Warner, I wouldn’t either. Why would I? I want all the focus on my artists, not some independent artist who might be taking ears away from my stable of talent.

Once the independents start to trickle out to somewhere else, SoundCloud is essentially locked in to the major label paradigm. It will effectively need to renegotiate with Warner (and the others) because their major label content will become its lifeblood. If Warner decides not to renew their contract with SC (which they could do, since they have Spotify, Rdio, Deezer, etc. to fall back on), one could see the music-life sucked out of SC in a heartbeat. With no major label content, SC could become a shell of its former self, begging the independents to come back (which takes years, if it ever happens at all, just look at Purevolume and MySpace).

4. The Big Kicker

Now here’s the big kicker for SoundCloud: they have not yet been able to secure deals with Universal or Sony—only Warner. This means that they are effectively straddling two completely different music industries moving in opposite directions: the major label machine and the independent arena. Precarious though this may be, it’s not a secret. And the independents know it. Artists I’ve spoken to are already looking for more alternatives because they recognize that SC will soon become the same sort un-level playing-field as Spotify or Rdio, where they essentially stand no chance against the Taylor Swift’s and One Direction’s of the world.

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SoundCloud only has a deal with Warner as of now

– SoundCloud only has a deal with Warner as of now

If I’m SoundCloud, I’m driving hard at those Universal and Sony deals because I can’t backup. If I try to, that will send a message to Warner that I’m not really invested in their business model, and since Warner essentially now holds the keys to my content, that could be a major mistake. But if I continue to pursue those deals with the other major labels (which I can pretty much guarantee is what SC will do) I will lose that attractive quality that made me popular among independents to begin with.

Except these aren’t really the thoughts going around in SoundCloud’s head; they already made their decision when they inked that deal with Warner last November.

SoundCloud’s Independent-Focused Days Are Over

The options for SoundCloud as I see them now are really only to double-down on the major label paradigm and business model. They need to out-Spotify Spotify; and that’s going to be very difficult. Rather than sitting pretty as king of the hill with the ever-growing base of independents, they made the decision to move towards the major label content arena.

Does this mean that they are destined for failure? Of course not; they may in fact find a way to play the major label game better than even Spotify or Rdio. That’s entirely a possibility. Really only time will tell if that is what becomes of SC’s new business trajectory.

But it does mean that SoundCloud will play less and less of a significant role in the independent sphere, possibly moving mostly out of it in the next few years. It makes no economic sense for them to stay, now that they are pursuing the major label route. They may host independent material, but the independents will never be their bread and butter again—those days are coming to an end.

Independents aren’t stupid; they go where the best opportunities are for them. They don’t stick around too long where they’re not wanted or cared for. I wouldn’t, not if I was free to do what I wanted. Which begs the question: where will they go next?

Lending Artists Millions of Dollars Is a Terrible Idea

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The Setup

This morning, Peter Kafka posted an article on a new company seeking to make its name in the evolving music industry: Alignment Artist Capital. The company, according to Kafka’s piece, wants to essentially work as a lending institution for artists who need the money. Except instead of doling out a couple hundred bucks here and there, it will have the resources to lend millions at a time.

money_bags

A Completely Outdated Business Model

This, for anyone who didn’t already think so by this sentence, is a terrible idea. It’s a rehashing of the same dynamic the record labels have had with artists for decades, sans the ownership percentages over artists’ creative material. Kafka is aware of this as well, noting that, “Alignment isn’t the first entity to advance money to artists…lending money to musicians is one of the core functions of music labels.” [1] That’s very true; lending money to musicians is one of the core functions of a music (record) label, and it’s one of the main reasons their obsolete business model is failing them now.

Don’t be discouraged, though. There’s still plenty of money to be made in the music industry. In fact, it’s on an upswing. But not in the major label space, or using any of the traditional business models of those labels. The new upswing is with the independents—that’s where I would lay my chips.

With all the tools now cheaply (or freely) available to budding new artists, the traditional artist/record label model doesn’t apply anymore (something which Kafka notes as well as “harder to justify”). The reality of the situation is that most artists can get the basic things that they need—access to distribution, access to recording equipment and programs, access to merchandising platforms, access to producers/promoters, etc.—without signing away anything. That begs the question of why they would choose to take a monetary loan if they can do most (if not all) of the necessary things themselves.

New Artists Don’t Need Millions (of Dollars)

And there’s something else: funding an artist (band or solo) like a startup is indeed a unique idea—but a misguided one. Artists don’t need millions of dollars out of the gate to be successful in today’s market(s). The sums of money are too large to apply to most of the new artists who might be interested in taking it, precisely because the economics don’t work in their favor; it’s highly unlikely that throwing a million dollars on your fire will create a lasting fanbase for you. Core fanbases are made on the road, sleeping on couches, driving crappy vans, connecting with your real fans—all things that can be done without a multi-million dollar loan on your shoulders.

In the startup world, there’s a delicate balance between taking VC money you know you’ll need to survive (to the next round), and not taking so much that you end up diluting yourself beyond reason. The same principle holds true here: the concept that new artists should take millions at a time is analogous to a startup raising a Series B when they only need a Seed investment of possibly a quarter of that.

Why Incur Debt You Don’t Need?

AAC cofounder James Diener is quoted in the article saying “We’ll give the artist and their entity financing so they can go build a record label.” That’s like giving someone financing so they can go invest in a line of new and improved floppy disks—i.e. obsolete and irrelevant. The fact that this seems to be one of the main drives behind AAC’s plan tells me that they are still mentally tied to the old model of the record label, only now they’ve decided to cut their prospective losses by dealing only with the financial side (and not the creative one).

Based on my years in the independent music arena, I see these sorts of monetary entities as having a very difficult time breaking into the independent spheres—essentially where they need to be in order to really thrive. Buying streaming services, record labels, summer homes—these are things most artists don’t care about and don’t think about. I suppose a few do, but the numbers of those people are well below anything you can build a real solid business model on. The Jay Z’s of the world are astronomically outnumbered by the independents who are on the rise, now with distribution at their fingertips.

I wrote last week that artists are becoming savvier business people, and I can see them steering clear of these sorts of institutions at all costs. They understand that injecting millions of dollars into their brand image doesn’t buy them fans—that’s a belief propagated by the major label industry. Rather, they know it has to be done by way of live shows, personal attention, and appreciation of core fans; all things which can be done on their own, and without incurring debt (remember my article on crowdfunding?). I suppose there will be some customers of course, but I don’t see this ever catching fire in the independent industry. And that’s the next growth phase of music.

So why would artists incur massive debt if they do’t have to??

I wouldn’t.

Would you?

 

Notes


[1] Notice here that Kafka used the term “music labels.” I have a friend who used to work for Warner Music who explained this phenomenon to me. The reason that the term “music” has replaced the word “record” is because the major labels have become so bloated with an obsolete business model, they need to start making money off of revenue streams that they traditionally never touched: live ticket sales and merchandise sales. Traditionally, their main revenue streams were from record (or CD) sales, hence the term “record label.” Yet in the wake of the massive disruption of their business model, they have taken to calling themselves “music labels” in order to explain their practice of now taking money from revenue streams traditionally left for the artists.