If you want major artists from major labels, be prepared to pay multi-millions of dollars for it. And it may take years to finalize those deals (just ask Spotify).
If they don’t make you give away a percentage of your company, I’d like to meet your attorney.
I just got off the phone with a young, talented, and very smart entrepreneur who has a great idea that really addresses a lot of problems with Instagram, Facebook, and Twitter. But he was clueless about music licensing. And unless he can raise a giant pile of cash or radically change his business model, he’s f—ked.
I’ve found that only the extremely wealthy companies (like Google and Facebook) can effectively make licensing go away. But even Google and Facebook have to worry about it. And if Spotify’s IPO is endangered by licensing, your startup will definitely have to deal with it, guaranteed.
I won’t get into what’s fair and what’s not. Major labels invested to make artists like Rihanna and Coldplay into superstars. But there’s actually a substantial group of investors who won’t finance anything reliant upon major label licenses. They don’t think it’s a good financial bet.
2. The goal was to ‘save the music industry’
The music industry is a brutally unfair place. That doesn’t mean it’s a worthwhile mission to ‘save it’. But that’s a huge part of a lot of music-focused business models. Most have some variation of the following:
Digital is killing artists — this model saves them.
Great artists aren’t recognized by the major labels — this startup solves that.
Music is bad and people don’t even know it — we will make music better and help the world change.
That’s not to say there aren’t lots of music startups solving very real music industry problems. But big mission, highly-philanthropic startups with fluffy goals are usually failures. Instead, companies that attack more targeted problems are oftentimes more successful. Take these examples:
Patreon helps artists establish a direct-to-fan revenue channel.
Innovative Technology Electronics Corp. figured out a way to sell stylish turntables to people who didn’t have a ton of cash.
CD Baby helped artists create and sell CDs affordably, then helped them digitally distribute their music when CDs died down.
Source3 addressed persistent issues related to IP identification and protection online (and Facebook needed that).
See the difference?