On Money, Music Startups and Failure: Imeem Tells All
Dalton Caldwell, one of the co-founders of Imeem, spoke recently at a Y Combinator event about lessons learned from Imeem’s depreciation and subsequent firesale. The lecture was a revealing discussion of a number of topics, including music business models, tools for independent musicians, download stores, subscriptions, and revenue models.
Of course, the issues that Caldwell dealt with during his time with Imeem still very much impact entrepreneurs today. We are frequently approached by startups that have built amazing products premised on the ability to stream, download or otherwise include music. The inability to effectively and affordably secure those rights can lead to a failure to launch or a failure to create a viable business. VentureBeat has a great article summarizing the pifalls discussed by Caldwell:
For one thing, each licensing deal with the music labels tends to include a minimum quarterly payment that startups have to pay, even if their revenue doesn’t meet expectations. Also, in most models, Caldwell pointed out, the costs are high enough and the margins are low enough that you’d have to sell an unrealistically high amount of music to break even. Plus, most of these offering types are already saturated with competition. Finally, even if you want to sell your startup to another company, there’s a big problem: In every licensing deal Caldwell said he has seen, the record label has the right to renegotiate or pull out of the deal if you get acquired.
All of this reminds of a recent infographic outlining the operating costs of Pandora, created by former MP3.com CEO Michael Robertson.
