direct licensing negotiations with music labels. (Pandora pays royalties under statutory licenses managed by the U.S. Copyright Royalty Board.) “The business of actually selling music is a very difficult one,” Marcus says. “The labels still haven’t figured out how to support an early-stage company ecosystem, so for the most part investors aren’t handing over VC money toward up-front licenses. I’m more interested in technologies and services that are going to help connect users—the fans—with the music and the bands they love.”
San Jose, CA-based SoundHound is a case in point. The company’s iOS, Android, and Symbian apps helps users identify a tune by singing, humming, or playing it into their mobile device’s microphone. A new variation of the SoundHound app, simply called Hound, uses speech recognition technology to retrieve songs instantly when the user speaks the name of an artist, band, or title. “The vision of the business is to make sound and voice the interaction mode with the device, to make that the way you search for music,” says Marcus. With a business model mixing advertising and music purchases, SoundHound could eventually be as successful as Kayak in the travel business, Yelp in restaurant search, or Zillow in real estate, Marcus asserts.
San Francisco-based RootMusic, meanwhile, is helping bands make the move from MySpace to Facebook. Using BandPage, groups can set up a page where fans can listen to their music, watch videos, see concert dates, share tracks to the walls of other listeners, and buy tickets, merchandise, and music downloads. “It’s the top social music company,” says Marcus. “BandPages and Facebook are becoming increasingly interesting as a platform for discovering music. The music [bands] want you to hear is there, and they are increasingly launching media campaigns there.”
So while Apple seems to have a stronger and stronger lock on music downloads, Marcus says there’s plenty of room left for other music companies to innovate. Some choice quotes from our interviews:
- “There are going to be some very interesting opportunities around music education and even learning an instrument. Digital signal processing using the iPad as both processor and interface is going to replace a lot of hardware.”
- “The other really interesting battle is going to be over cloud services and whether people should be buying music and keeping it on the iPod or subscribing to a service where they can go and get it on demand. Those services have been a real challenge to date, but there is a lot of energy going into those, so that the functionality and the ease of use get so great that people are really willing to shell out subscriptions.”
- “I’m very bullish on products and services that take unique advantage of the smartphone’s capabilities. It could be using the cameras, the gyroscope, the touch screen.”
- “In a world where you have access to everything, what really matters most is the thing you want. So curation and personalization are the real value-added features.”
Expect to see Walden invest in more music technology startups in the future. Marcus says he’s “getting a lot of music deal flow, because it’s not an area that that many people have invested in or had success in.” And if Pandora gets its widely expected pop on the stock exchange today, Walden’s flow could increase even more.
