Startups Are Saving the Music Industry: Here's How

by Fares Ghandour, January 17, 2013

Startups and the Music IndustryOver the last decade, classic players in the music industry tried- and failed- to prevent the explosion of digital sharing from affecting their business. In the aftermath, small, agile startups are owning the day with a new industry model, taking music from product to service.

As prior giants Universal, Warner, EMI and Sony find themselves with less control over the industry direction, newcomers like Spotify and LiveNation, and those previously unassociated with music (Apple, Amazon, and Google), are driving the technical changes that are disrupting the industry.

A New Model

It would be ignorant of anyone to assume that the business model works differently in the Arab world than it does elsewhere. Here, we too were once pawns playing the major record label’s game, consuming what Melody, Rotana, and Alam Al Phan fed us. Compared to 10 years ago, these labels are now doing poorly; their roster of artists is shrinking as artists realize they can market themselves and distribute thier music more effectivey online.

Artists who still want to entertain the masses are beginning to realize that they need to trust startups to do so. Companies like Anghami and Vinelab are at the forefront of a shift in the Arab world towards agile, social media-driven platforms. Anghami, the region’s first mobile streaming platform, launched a few months ago and already made it as the top free app in 12 Arab countries. Vinelab, which offers digital solutions to artists by building their apps and websites, managing their audience and distributing their content, represents a growing roster of artists like Ragheb Alama, Myriam Fares, Magida el Roumi, and Najwa Karam.

Outlook on 2013

When I asked Abed Agha, the founder of Vinelab, how he thinks the industry will evolve in 2013, he responded, “We are going to start seeing more positive echoes about digital being the new sexy kid on the block… we’re also going to start seeing revenues from digital sources on the balance sheets of stakeholders.” This trend highlights the critical fact that music is now being positioned to consumers more as a service rather than a product.

Fans no longer need to own a CD or cassette to listen to music; you can now buy or stream music without actually owning a physical medium that contains it, freeing the artist to focus on building and monetizing themselves as a brand.

Finding multiple revenue streams for these artists is where startups can get creative. Stars and smaller artists depend less on record sales and touring to make money today, so they must figure out how to sell their identity as a brand through merchandising, crowdfunding, and other methods that do not necessarily involve their music.

Startup Opportunities

For startups to succeed in the music industry, they must focus on convenience to win over customers. Piracy is a problem, no doubt, as are complicated licensing laws that allow users to enjoy a service in some countries but not others. But selling users an experience they cannot get from piracy websites or YouTube streams, which is Spotify’s key selling point, will get them to open their pocketbooks. 

There is no need to speculate either. Numbers show that 2012 was THE year for music streaming (see the views of these top 10 streaming company CEOs); subscriptions to these services have quadrupled in the US in the past two years. In Norway, music streaming services like Rdio are said to be the reason behind the 7% increase in music sales in 2012, which marked the first rise in sales since 2004. New services such as these are driving users to buy a digital album rather than download it illegally, because they integrate music sales conveniently into their platform. 

The future of the industry is in the hands of startups. There are programs all across the U.S. today, like Music Startup Academy, which are designed to specifically teach entrepreneurs, startups and developers about the music industry in order to enable them to break through barriers of entry into the market.

We need to build the foundations of this new model that rewards openness, flawless integration and a better overall user experience.  Music discovery sites, Spotify Apps API, Facebook Apps, and Open EMI are all examples of tools that are building an ecosystem, not just an industry. When all players, big and small, start playing the same game and adapt to these new technologies, that’s when the industry will settle down and get comfortable once again- until a new invention in the tech sector re-disrupts the industry that is.

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