Another Music Tech Startup Killed By Licensing
Wahwah.fm was a cool concept – turning the music stored on your iPhone into an online radio station that got broadcasted out to the world (or to just those near your location), and allowing users to create Facebook events to list their broadcasts for others whom they could interact with via the app. It was a cool idea, until the German company struggled with licensing issues so much that it ended up crippling them.
Wahwah.fm, peaking at 50,000 users, was powered by the streaming service from UK’s 7digital. Despite having their entire catalogue at their disposal, Wahwah.fm still had to obtain the rights to play songs in the U.S. and Germany. In doing so, the company adopted a radio-licensing model that effectively meant that it should pay lower royalties because it did not provide interactive or on-demand streaming.
“We licensed the whole thing as non-interactive streaming – a radio license – but it was not enough to provide the user experience we envisioned,” said CEO Philipp Eibach in a report first published by GigaOM. “People could only tune in to listen to something live, but they couldn’t listen to the song afterwards, or skip tracks.”
The radio model approach, while initially a clever maneuver, also brought with it the headache of constant renegotiations with labels and PROs. Eibach mentions obtaining licenses, but only having them valid for just a few months and having to renegotiate over and over again.
“There’s so much grey zone,” he said. “You talk to them and they don’t have a clue about new models, and are suspicious of new things.”
As the struggle with licensing continues to wave many tech startups away from entering and sustaining themselves in the music space, visionaries like Eibach are left with a bitter taste in their mouths and are discouraged from helping to advance a space that so desperately needs people like Eibach seeking to create new models.
Eibach intends on returning later this year, but this time plans to collaborate with an existing on-demand streaming service such as Spotify or Simfy – looking to “effectively outsource the whole licensing thing”. As advice for tech companies looking to enter the music space, Eibach simply said, “Overall, don’t do music.”
He suggests that a company look closely and gauge if it’s worth going into an ongoing legal struggle to make their product work.
“Sometimes you have more freedom if you do the legal stuff on your own, but it means more hassles,” he said.
Many feel as though a positive change is on the horizon for our industry, but as long as old mentalities continue to persist and penetrate into new innovations, we’ll only be left with more Wahwah.fm’s – companies seeking to innovate, to help advance the space; only to be shot down by the ways of yesterday.
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Hisham Dahud is a Senior Analyst for Hypebot.com. Additionally, he is the head of Business Development for Fame House, LLC and an independent musician. Follow him on Twitter: @HishamDahud
I have an idea for an innovative new car dealership, but BMW won’t sell me cars at prices I think are innovative. Instead, BMW wants to sell cars for the boring old, non-innovative prices they have set themselves.
Another New Car Dealership killed by licensing!
A weak analogy.
BMW = A physical single-user machine that carries no downstream revenues.
Song = a multi-tenant cultural (shared) digital media license with loads of downstream revenue opportunities (which wahwah.fm was trying to help maximize through engaging technology).
Music is digital now. The attention economy rules. Foolish to crush an innovative company like this, rather than leverage it.
I have an idea for a contemporary new car shop, but BMW won’t provide me automobiles at expenses I think are contemporary. Instead, BMW wants to provide automobiles for the boring old, non-innovative expenses they have set themselves.
Constant renegotiations with labels shouldn’t have been a problem in the U.S. — they were using a statutory license for webcasters, rights?
I don’t think this is necessarily a bad outcome. Outsourcing licensing to a service such as Spotify has the potential to open the door for a lot of innovation (EMI is trying something along these lines with its Sandbox initiative with the Echo Nest). It frees the startup from having to deal with rights owners who “don’t have a clue about new models,” to quote Eibach, while reducing the work load of labels’ biz dev departments.
I’ve always wondered why anyone would want to pay to tune in to an online radio station when conventional over-the-air radio is free. There’s a difference between broadcast and narrowcast models, in terms of reach and cost. Ultimately it must be a viable business where revenue exceeds cost.
Good. It should have failed. And kudos to the music companies who are starting to get wise. It is not in a music company’s best interest to offer their entire catalog for anything less than a fair price. Exclusivity is more valuable than being everywhere for peanuts. The day publishers stop giving away the entire farm to tech companies is the day music becomes more valuable.
This is the harsh reality that a lot music start up’s face when they are not connected and funded. I interviewed WahWah earlier this year and I loved what they “were doing.”
Just because they did something many think its cool, they should still pay what the price is. It doesnt make sence that you can skip songs and then just pay a standard radio license. You should however have the possibility to pay a slightly higher fee to do such things.
“You talk to them and they don’t have a clue about new models”. And maybe he didnt have a clue about the musicbusiness?
Why? Maybe in 6 months time a just as innovative company make a service AND a businessmodel which is acceptable for everybody?
You’re way to naive…
Eibach simply said, “Overall, don’t do music.”
Eibach should take his own advice.
Matt – At my dealership, BMW had the nerve to ask me to pay for their cars after I sold them ! You would think they would be so thrilled at the free promotion I gave them, they just don’t understand the new model.
Pay musicians what they are worth. Stop trying to use them as a product to make money off of and claim “they will get promotion” for giving away their product for free while you go and sell to advertisers for larger amounts, while you make a six figure salary, and collect huge investor benefits. Obviously someone is getting paid here and its not the talented artists who are creating music for you to use. Take a cut in your six figure salary or raise more capital before you go out and exploit. There are plenty of companies who pay the artists out for the use and its a LOT more promotion. Press sites overall are in the thousands to million hits range and they don’t give away their product but they gain exposure and benefit from this.
“Overall, don’t do music.” – yes, if you don’t get how much it costs to make a record or work an artist and think you should be able to just use for free, please don’t do music.
Melissa
Also, if you think its an ‘Old mentality’ to want to get paid for something you spent a lot of money to produce and create, then why don’t you work for free?
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