We’ve all read the reports, after years of decline the music industry is going through unprecedented growth thanks to streaming and the major labels are all showing double digit growth and profits. All of which lead Goldman Sachs to predict that the sector will be worth $28 billion by 2030. Canny. Although I think it will be more like $50 billion.
Anyway this also means that VC’s who don’t really understand the sector are starting to throw big money into music startups.
First of all you have United Masters who have had $70m investment from Alphabet, Andreessen Horowitz and others to “replace record labels” – yeah right. If you watch their introductory video on their site, they make a big deal about “translating data into actionable guides in plain English”. So in other words exactly what Spotify, Kobalt, Stem, Bandcamp and even Topspin before it was acquired by Beats in 2014. yes 4 years ago, nothing new to see here folks. If you read this blog post from investor and now board member, Ben Horowitz you will see it starts with some Kanye West lyrics then rolls into a Steve Soutre story about him seeing Run DMC 30 years ago. All very rock n’roll. I can’t help but feel that this whole investment is just an opportunity for the Silicon Valley VC’s to hang with the cool kids in the music biz and I dunno, maybe get a photo with Kanye or someone.
Then last week it was rumoured that L.A. Reid has raised $75m from private equity sources to start a new record label. You don’t need $75m to start a label, even if you are L.A. Reid who has an undeniable track record of success. The rumours are that he’s opening offices in one of the most expensive parts of LA, Beverly Hills and he’s looking for hires. My betting is that half of the $75m at least is going to go on salaries, bonus structures, office space and other luxuries. But then again if someone is going to give you a big pile of cash then it’s better than spending your own right?