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Digital Music is Dead, Long Live Digital Music: The Case for Spotify

Back in the 1990s, there was Napster. I mean, the original Napster not the shadow of a brand that is part of the Best Buy electronics offering.

Napster effectively eliminated optical media by making people realize that the digital format was the only long-term, effective, space-saving way of having music that was portable.

Sure there were MP3s before Napster, and yes, some people had decent libraries of music that they carried around on their portable MP3 players. But Napster made it mainstream by making it easy for anyone to find any music they wanted and download it.

It was illegal and rightly so. There was no way to monetize the music underground economy and intellectual property belongs to someone. So Napster got sued. A lot.

Someone along the way suggested that perhaps a more amenable for Napster to provide digital media to fans and give the record labels a reach around at the same time was the unlimited music for $9.99/mo. Napster balked saying no one would pay that kind of subscription fee.

The lawsuits became so much that the music service had to shut its doors. In an attempt to resurrect themselves just a year or two later, they finally adopted the music subscription model but it was too little too late.

Other music subscriptions came along such as Rhapsody but never gained any kind of real market share. Rhapsody is still open and charges a monthly fee but it just never gained the traction needed.

Spotify Arrives!

In 2008, a new music service, Spotify, launched in Europe. The model was of the subscription type where consumers could pay a monthly fee for the ability to stream any music in their catalog.

The service gained huge popularity in Europe while consumers in the United States clamored for access. Month after month, year after year, the rumors surfaced that Spotify was preparing their U.S. launch and it never came… until last week.

In the meantime, consumers have been inundated with cloud-based web apps. They use Gmail from the web, Facebook for interactions with friends and family, Twitter for persistent real-time communication. Consumers have lost their desire to want to own their own data, and as such, the droning drumbeat of Spotify in Europe as a music subscription service is now arriving in the U.S. past the tipping point of data ownership needs.

That’s a long way of saying – people don’t care if they own their music anymore if they’ve got everything they need in a music service that doesn’t provide ownership.

The Case for Physical and Owned Digital Media

Through the years, I’ve always been a proponent of having my music in a digital format as opposed to a streaming service. I’d rather buy the album on iTunes or Amazon MP3 and know I have it than just stream it from somewhere.

I’ve wanted to play music on demand and not have to rely on a faux-radio service like Pandora to get it done. I like Pandora. I pay for Pandora. But I can’t listen to the songs I want to on demand as part of their licensing agreement with the labels.

I like having dick-measuring competitions about how big my music library is. The bigger it is, the better I am. I must be a more serious music lover. Or so I’ve felt.

With the ownership model, I could take my music everywhere. Hell, even cars have iPod jacks in them so that 50GB library can be taken on the road. I could go for a run and listen to an assortment of playlists for just such an occasion or I could have my library with me for when I need to drum up an impromptu karaoke song and can’t remember how the song starts.

I thought.

In fact, I thought until last week when Spotify launched in the United States. Now… I don’t care about my digital music library. Every argument for it has been shattered into a million small (yet suitably sharp and jagged and “hope you’re wearing sandals so you don’t cut your feet”) pieces.

Spotify is the Music Messiah

At one point, I thought it was important to take my music with me wherever I go. I still do. Spotify has apps for every major mobile device (and if you don’t have a mobile strategy in anything, you lose) and they all tightly integrate with the web service and related desktop apps for both Windows and Mac. Everything is synced. And you can listen to music offline!

At some point I was very concerned about how big my music library was. I feared a catastrophic data loss that would wipe out my years of music collection, purchasing and playlist assembly. Of course, there were backups but that took forever over a network or to an external hard drive.

Spotify solves this by integrating with all your DRM-free music on iTunes or other music player, importing them, making them available in the cloud or offline. It also eliminates the need to have music library. Who needs a music library when every major label is signed on to provide their catalog to the service. I have the entire music world as my music library. My dick, by definition, is therefore bigger.

But the real killer in Spotify is the ingenious social aspect. Sure, you can have a lot of music. Sure, you can have playlists. Sure, you can have subscription models. Sure, you can have mobile availability.

Spotify put the biggest teenage-era “I love you” method in digital format by allowing the mix tape to be replaced by playlists… that are sharable with someone, some service or the world.

Queue up your Bieber-esque bee-bop feel good technosailor dance-esque songlists… the mix tape has gone digital!

It’s the End of the World as We Know It… And I Feel Fine

Spotify will undoubtedly continue to evolve. Launching in the United States gives them a much larger audience to tap into for feedback and expectations. I would like to see the social integration tighter and more obvious, but all in good time.

Rarely does a game changer come along. A lot of people think they have the game changing app… but it never happens. This is, in fact, the revolution that we’ve been waiting for. I no longer even think about my iTunes library, Amazon MP3 purchasing or other digital media. Everything I need is right there in my dick-sized music library.

Photo by Cerebro Humano

money

Venture Capital Irony, Bubbles and Booms


Photo by epsos

Late in 2008, after the rest of the economy crashed and burned due to the housing crisis, the tech sector seemed to be fairly resilient. Maybe it’s the nature of the industry… less money at stake, generally, in tech VC deals than other industries. For instance, Biotech.

That all went out the window when Valley-based VC behemoth, Sequoia Capital, gathered a now-infamous meeting of all its portfolio companies and gave them what can only be described as a “the sky is falling” lecture.

In that lecture (that presentation is shown below), they advised their companies to buckle their seatbelts, lay off employees, and get rid of non-essential expenditures. They said it would be a dangerous ride ahead and that only the companies that had enough forward-thinking prowess to survive, would do so.

The presentation opened with an ominous title slide with the words: “RIP Good Times”. The presentation instructed CEOs to look for M&A deals as quickly as possible, raise new cash now (i.e. late 2008) if they were looking to raise a new round, and have at least a year of cash in the bank.

Pretty ballsy move that, frankly, spelled the beginning of the tech sector decline. If Sequoia was instructing their companies in this way, then something must be severe, thought many other VCs who followed suit with their respective companies.

In some ways, Sequoia was correct. It would be a long road to recovery. In other sectors of the economy, the recovery is ongoing or is just beginning.

The tech sector is not that way, however. In the past year, we’ve seen huge investments in 2010. Twitter raised $200M+ on a $3.7B valuation. Zynga, the social gaming company, raised $147M on an estimated $5B valuation. Tumblr raised $30M.

The bubble has been gaining full steam. And then there was yesterday.

Yesterday, you might ask? Yes… yesterday. Yesterday it was announced that Sequoia Capital led a $41M Series A round (Yes, you heard that right… Series A!) for new mobile social photo sharing company, Color.

I’ll let you read about what Color is because, though it’s a bright, shiny object that is interesting in some ways, it’s not, to me, a $41M play.

Sequoia seems to be taking the approach that many smart VCs these days, including Mark Suster from GRP Partners, said last week when describing investment strategy relating to teams and not products.

Whatever you’re working on now, the half-life of innovation is so rapid now that your product will soon be out-of-date. Your existence is irrelevant unless you continue rapid innovation. Your ability to keep up is dependent on having a great team of differing skills. Individuals don’t build great companies, teams do.

And while I fully agree with Mark, I do have to question Sequoia making a $41M play less than three years after they virtually single-handedly drove the nail into the coffin of the tech sector. To me, it seems Sequoia made an opportunistic opportunity to drive the market rates down on valuations, to eventually make a big play like this at lower valuations (Disclaimer: I don’t actually know the terms of the Color deal). With a lower valuation, they can throw more cash and own the lion share of the available stock ownership. You know… waiting for a slam dunk, as it were. Mission Accomplished!

However, it’s notable that the Color team is truly a notable team. The former Chief Scientist at LinkedIn. The guy who sold Lala to Apple in 2009. Five other notable experienced entrepreneurs and successful startup people.

I’m sure Sequoia knows what it’s doing. It’s certainly interesting to watch investors defend them. There’s just very practical questions about how the company that started the tech recession could come out guns blazing on this one.

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Ambient Findability

Mobile phones. They are the future. I’ve been saying that for awhile and giving no mulligans to those companies who are not embracing mobile or who are embracing it in a singular fashion (i.e. a company built on an iPhone app).

Most of us use iPhones, Android devices or Blackberries. Maybe a few odd people have a Palm Pré. We are mobile. We do email, stay in contact with friends and lovers via text message, Twitter, Facebook, and get driving directions via Google Maps. We find restaurants, bars, shopping and bus stops – all from our mobile devices. We play games, leverage the “nose down in the phone” as a “get away from me” messaging tool.

We use our phones for everything, don’t we?

Relatedly, I don’t even like to watch TV in real time. My shows are consumed via the web, and have sometimes been viewed on my phone.

Gone are the days of the traditional approach to media and findability. In an information now era, it’s important to have ambient findability… the ability to discover exactly what I want, at exactly the right time and on the right device. This is not a new concept either. Peter Morville wrote about it in his book Ambient Findability: What We Find Changes Who We Become (O’Reilly, 2005). He defines ambient findability as:

  • The quality of being locatable or navigable.
  • The degree to which a particular object is easy to discover or locate.
  • The degree to which a system or environment supports navigation and retrieval.

This morning, I commented about how I wish the Black Keys, one of my new favorite bands, were coming to Austin. Of course, my omnipresent Twitter following were sure to inform me that the Keys were just at ACL Festival and had done off-ACL shows.

I would have known that had I Googled, but I didn’t.

Here’s the problem: With ambient findability, I should not have to proactively find out when my favorite bands are in town. This information should be delivered to me via text, email, or other notification. I should not have to remember to pick up the Austin Chronicle to find out where these shows may or may not be.

In a different world, if I’m walking around in downtown Baltimore, for instance, it would be awesome if I recieved some sort of notification when I’m in proximity of something that may be of interest to me. Foursquare recently announced some new initiatives that notify a user when they are in proximity of something on their to-do list. This is an excellent step in the direction of ambient findability.

These are the premises of findability that need to be included in every consumer-facing product and startup. It is the next generation of the web.

Photo Credit: Paul Veugen