Investors Talk Disruption in Digital Music at Internet Week New York

5/17/12Follow @jpruth

At a time when companies such as Pandora and Songza are trying to change the way listeners discover music, some hurdles continue to stand in the way of the industry’s evolution. In a relatively short timespan, music has graduated from digital downloads to live streams curated for listeners’ individual tastes. The pace of change may be stymied, however, by copyright laws and, in some cases, outdated ways of doing business among established incumbents.

A panel of backers of new ideas in digital music spoke Tuesday as part of Internet Week New York about what gets them excited—and worried—about innovation in the industry. The discussions ranged from how audiences discover new music online to new ways for connecting fans with their favorite bands at live shows and beyond.

Panelist Jalak Jobanputra told Xconomy she sees the presence of major record labels in NYC, as well as emerging artists from the local music community, giving rise to innovative ideas in digital music. Jobanputra is managing director of RTP Ventures, a $120 million fund in New York founded last year by Moscow-based technology investment company ru-Net.

However New York is not alone when it comes to new technology changing how the public connects with music. Jobanputra points to the established media industry in Los Angeles and innovators in San Francisco as hubs for emerging companies in digital music. “If you’re looking at fusing technology, platforms, and distribution with content, some of the platforms are being built out there,” she said. Other cities such as Atlanta and Austin, she said, also see up-and-comers leverage technology to change the way the music industry works.

That said, the panelists seemed to agree that all aspects of the music market are up for grabs. Panelist Noah Rubin, vice president of music at record label and production company Decon in New York, talked about Legitmix, an Ottawa-based startup he backs, which created an online marketplace that lets users access remixed music from deejays. “If I go to Spotifiy, Rdio, or other streaming platforms, these [remixes] are not easily accessible in a single place,” he said. He said finding remixes of songs can typically require visiting multiple sources such as SoundCloud and Mixcloud.

Andrea Harrison, director of digital engagement at PepsiCo, mentioned startup Roqbot in Oakland, CA, which makes an app that lets smartphones function as jukeboxes. She said PepsiCo invests in Roqbot and uses its app in conjunction with a customer, Wahoo’s Fish Taco. “[The app] enables you, when you go into Wahoo’s, to choose the music that’s playing,” she said. Other patrons at the venue can vote through their smartphones on the songs they’d like to hear.

The latest wave of innovation may shake up some incumbents in music, but technology can also help well-established companies adapt to audience preferences. There are opportunities for disruption, Jobanputra said, through discovery, recommendation engines, and algorithms that help listeners find tunes they want to hear. Technology that puts music directly in the hands of fans may also streamline the market for new music. “The music industry is entrenched and needs to be disintermediated, but there is a lot of value and expertise already there,” she said.

Ticketmaster, she pointed out, has a near-monopoly on ticket sales for music events, but independent company Ticketfly in San Francisco is making waves by selling tickets through its social-marketing platform. Jobanputra says that shows there’s plenty of room for new players to make strides in the music industry alongside the mainstays. ”Ticketmaster’s not going away any time soon,” she said.

Having a novel platform, however, is not enough to make a startup viable in this sector. During the panel, Jobanputra said venture capitalists demand that most companies aim to serve large markets and establish a path to revenues within about five years.

Jobanputra hopes to see several ideas emerge in digital music in the coming years. For example, she says, smartphones should be enabled to access personalized music on demand. Though some apps offer ways to discover and curate music, there are limits to the content they can access. Millions of digital songs may be available for streaming through official channels, but Jobanputra says many titles are still not made available for streaming by record labels. “We still have issues around copyrights,” she said.

The universality of music, Jobanputra said, helps make the industry somewhat recession-proof. Nevertheless, the mainstays in this market must embrace change, as artists continue to use technology to bypass record labels and reach consumers directly. The music industry, she said, “is taking baby steps.”

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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