Digital music suffering from entrepreneur drain

PASADENA, Calif.-Of all the losses suffered by the music industry, one of the biggest may be the fact that nearly all of the investors that once were building digital music services have moved on.

"There are not a lot of entrepreneurs involved in this space," said David Pakman, a music industry veteran and now venture capitalist at Venrock Associates.

MySpace Music President Courtney Holt (left) listens on as venture capitalist David Pakman (center) speaks at a panel on the future of the music industry.

(Credit: Ina Fried/CNET)

By Pakman's count, there have been 109 venture-backed digital music start-ups. Fewer than five, though, produced a substantial return, he said.

"Investors lost a lot of money in this space," he said, speaking on a breakfast panel at the Fortune Brainstorm: Tech conference here. The loss for the industry, he said is that entrepreneurs have moved on to areas like Twitter and Facebook.

Those two services both have an application programming interface that allows anyone with an idea to connect to their service using generic terms. That, Pakman, said, is missing in music.

"What the music industry never encouraged or even allowed was building an ecosystem around its product," Pakman said.

For his part, MySpace Music President Courtney Holt said he thinks a big part of his opportunity is in providing new tools for music artists, building on MySpace's existing strength of helping connect musicians with their fans.

He also wants to make more of the "social music leaders" on MySpace.

"There are people at MySpace that curate music that have audiences that would rival terrestrial radio," Holt said. "I'm trying to figure out how I can give them more power."

Pakman agreed that such influencers are a key factor. "Bloggers are the music critics (of today)," Pakman said.

[kgsbca]

Maybe there are no more music service providers because it's not a good idea. People do not need a service to provide music, they can buy songs and then own them, and play them whenever they want. They can store thousands of them cheaply, more than they can ever listen to. What value does a service provide, other than relieving you of $10-15 each month?<br /><br />RIP, music parasites.

[AndrewSGoodrich]

To suggest that there are "not a lot of entrepreneurs in this space" is complete hogwash. There is a huge entrepreneurial community in the music business, most of it happening under the radar. Let's not confound investors with entrepreneurs please.

[dirtyball]

investors may have lost money in the digital music space, but that doesn't mean there's not room for opportunity. if anything, the playing field is a bit less intimidating because these true "entrepreneurs" have decided to focus their time on different spaces. <br /><br />i'm still in the digital music space after two years (www.gorankem.com), and we're excited about our future prospects!

[TravisRStorch]

I put this on the labels. the fact that it's so difficult to strike deals for content, licensing etc., it's just ugly. To scale in this space is near impossible with bandwidth costs, and more the cost of content. Labels are not in the business of allowing "Kids to make millions off the backs of their artists", and they're really sticking to this. You do see this starting to shake out, I see articles now conveying how labels are making more 'friendly deals' with start-ups. Reality is that until the old regime is ready to stop fighting to keep petroleum based medium (CDs) the mainstay, they will continue to quash new distribution and 'promotional' channels that are viewed to cannibalize these sales profits. <br /><br />Note: It has historically been difficult to monetize revenue streams that are inherently more valuable to the artists.. Tickets, Merch, Ancillaries etc. Companies that focus on these revenue streams, I think are the ones who still have a real chance at success in this space.

[INSOso]

Personally, i just think there is too little exposure for young talent,specially in South Africa,music is something that will never die or go out of fashion.......the cake is big enough for everybody to eat that loves making music, share the loVe.<br /><br />While u @ it have a listen to this link and tell me what u think!!!!! [ www.reverbnation.com/carlaj ]<br /><br />my mail is: [e-mail]