High-cost licensing may have kept investors and entrepreneurs from launching music services this year

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Issue Date: 
Dec 20 2012 - 12:45pm

From Issue:

Some industry observers and investment experts have said the high cost of sound recording royalties is an obstacle to investment in startups that need to license music from major labels (see RAIN here).

Tech VC David Pakman (a New York Venrock partner) testified before the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet regarding the state of Internet radio licensing and the Internet Radio Fairness Act. Although he co-created Apple's Music Group and was CEO of eMusic, he's vowed not to return to nor invest in digital music until the licensing climate changes. As he testified, "Although we have met many great entrepreneurs with great product ideas, we have resisted investing in digital music largely for one reason — the complications and conditions of the state of music licensing." (Read his full testimony here).

So, what might it say that Billboard's Ten Most Internesting Startups of 2012 "doesn't have a single service on the list that requires licenses from record labels to operate?"

Note that it's not likely that poor ad revenue is keeping services from launching. The IAB says (here) Q3 2012 online ad revenue is the most ever for a single quarter. And eMarketer just revised their U.S. mobile ad spend projections, saying it will grow 180% this year (see our coverage in today's issue here).

Whatever the reason, 2012's startup roster lacks some of the bang of years past (Rdio, Spotify, iHeartRadio in recent years). Billboard's list does include a couple of firms that make apps for Spotify and are "radio-related":

Sounddrop: adds a social media element to Spotify radio listening
Tunewiki: synchronizes lyrics with music.

Musically's list was more extensive (40 startups), so it included more companies that are doing things along the lines of Internet radio. Musically's list includes:

Senzari: (which we've covered) Customized radio streams for European markets 
Audiogalaxy: "radio-style mixes," now owned by Dropbox
MPme: iPad app suggests radio stations based on user's listening habits and music collection
Piki: app which builds radio-style playlists based on friends' song recommendations
SpotOn Radio: Spotify app which makes Spotify radio listening more like Pandora.

See Billboard's "Ten Most Interesting" here. See Musically's "40 Music Startups and services to watch" here.

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