October 25, 2016:Techstars Music: ‘Our goal is to create a real centre of gravity’

“Let’s broaden the definition of what makes a music company, rather than just investing in companies that require a licence. And let’s invest in companies up and down the entire stack.”

Former Yahoo, Topspin and Twitter executive Bob Moczydlowsky has some clear ideas about how to give the music/tech startups ecosystem a shot in the arm. A good thing, since his latest role is running the Techstars Music accelerator program.

Announced earlier this month, it’s part of the well-respected Techstars program, with plans to choose 10 music-related startups a year and invest $120k in each, including taking a 6% equity stake.

With partners including Sony Music, Warner Music, Sonos, Harmonix and Q Prime, Techstars Music will be one of the highest-profile music/tech accelerators. And Moczydlowsky is determined to cast his net wide.

The program’s website lists nine categories of interest: new music experiences; creation and collaboration; marketing and e-commerce; content infrastructure; rights and royalties; data, machine learning and AI; artist discovery and curation; music education; and social platforms and games.

It’s important to have a broad definition of what makes a ‘music company’ for our investors and also for entrepreneurs, to say ‘hey look, when we say music companies, we don’t just mean licensed’,” Moczydlowsky tells Music Ally.

It has taken a year for Techstars Music to put together its model, raise money and establish its first set of partnerships, although Moczydlowsky says there are “a couple of other deals in the works now” with additional backers.

“A lot of people have given music companies a hard time over the years, but they should appropriately give credit here. The fact that they are actively supporting and funding a program like ours is evidence of their willingness,” he says. “These companies wrote me cheques! It’s hard to argue with music companies writing cheques…”

It’s true that some of the prevailing chatter about music/tech startups has been negative in recent years: first because of suggestions that rightsholders were difficult to work with, and second – often related – that music-startup business models often unworkable.

Moczydlowsky offers a twofold riposte to this way of thinking. First, the characterisation of music rightsholders is false, or at least out-of-date. “Music is now a very, very technical business, and those companies are willing to work much more closely with startups,” he says.

Second: that point about there being many business models around music that don’t involve licensing, and which thus may be more appealing to investors in the long-term.

Music is still less than 3% of the invested dollars in the mobile ecosystem. That’s under-invested: music is the second most engaging activity you can do on a mobile device behind chatting to people. But part of that under-investment is for very good reasons,” says Moczydlowsky.

“It’s been very hard to put together a profitable business with licensed content. But if you extend that definition [of a music startup] there are going to be AR/VR companies that will be – quote – ‘music companies’. There are going to be e-commerce companies that will be music companies.”

“There’ll be data-mining companies, and AI and machine-learning companies that use music-preference data to create interesting offerings for people. If you’re broadening that definition, you’re in a place where there are really interesting companies to invest in… Our goal is to create a real centre of gravity: this should be a program that very quickly and publicly moves the needle on attracting more dollars to this sector.”

Techstars Music categories

Moczydlowsky stresses that there is “no rule” on what does or doesn’t make a startup a music company, but adds that as Techstars Music moves towards its 11 December applications deadline, he is looking for startups that “solve real problems” for music.

“I’m actively recruiting companies, not just sitting back and watching the applications flow in. But in the two weeks that the program has been public, we’ve gotten hundreds of applications,” he says.

“We’re definitely looking for things that move the needle and solve problems… The selection process will be the most rigorous in music-startup history, when it comes to the skills of the people we’ll have looking at these companies.”

Moczydlowsky adds that Techstars Music’s net is geographically wide too: within 24 hours of the program’s announcement, he saw “not one but two really cool companies” from Africa, for example.

That plays in to the bigger picture for Techstars Music and its first cohort: the growth of the big streaming services like Spotify and Apple Music, but also the regional players who are helping to grow the global base of subscribers.

“For years we’ve been talking about ‘if we successfully transition this industry, theoretically there’s 100 million, 150 million subscribers’. But all of the ifs around that have been removed: it’s about when we hit 100 million, 150 million, 200 million,” says Moczydlowsky.

“That transition creates an obvious need for a lot of other companies in the ecosystem: marketing, artist discovery, ancillary revenue, ticketing… There are a lot of areas where we have 30 or 40 year-old best practices. That’s opportunity.”

Moczydlowsky’s view is that as the base of music-streamers – and subscribers – grows, the industry will need more data-mining, marketing and e-commerce companies. But WiFi in venues, wearable and biometric tech and self-driving cars are also trends he highlights as providing opportunities.

“A lot of it comes back to how bullish you are on the number of subscribers. We used to think if we could get to 150 million people, that would be equivalent revenues to the CD era. Now I think you have most people assuming 150 million subscribers is going to happen,” he says.

The question is more about 300 million or 400 million subscribers, or even what are the price points that will get us to half a billion subscribers? At those levels of music subscription, it’s a bigger gross industry than ever just from the streaming. And that’s a lot of people who are now directly accessible, and a lot of data being created.”

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Talking of people, what about musicians? Is there a role for artists and songwriters in a program like Techstars Music? Often in the past the relationship between the tech and music worlds has been between startups and labels, rather than between startups and creators.

That’s been changing in recent times, for various reasons. Some bigger artists have turned angel investors, putting their money into tech startups. Some programs like Marathon Labs in London have made an effort to get managers and artists more involved. And some artists – Imogen Heap being the obvious current example – have gone out and found startups to work with.

What about Techstars Music? “We haven’t talked about this, but we’re going to have an artist-in-residence program. We’re going to have across the program, for set amounts of time, artists to come in as employees of the accelerator and work with the companies,” says Moczydlowsky.

“We’re not quite ready to say who they are, but we’re working with artists at various levels of notoriety who have something to offer as mentors. But we’ll also have a pool of independent mentors of trusted music and tech professionals who’ll give advice and open doors, and inside that pool will be artists of all sizes: from planetary-level stars to two guys in a bedroom just starting out.”

The involvement of artists – we’ll await news of which ones – is a positive aspect for Techstars Music, as it tries to build more bridges between the tech and music worlds.

“Music is increasingly a technical business. The next 15 years in music require a technical skillset for the most part. The days of just being able to use your gut and make decisions are over,” says Moczydlowsky.

He suggests that the same is true for most of the entertainment industries, where the creation and distribution of content is increasingly digital.

“Music will experience that first and experiment with it, for better or worse. In general it’s a technical business, and getting more technical by the day,” he says. “That’s a positive thing.”

Why? Moczydlowsky suggests that the market for music is essentially “the number of alive human beings on the planet”, and as more of them get connected, particularly through their mobile devices, they’ll be looking for music. He comes back to an earlier argument to expand on this.

The opportunity is really massive, if you broaden your definition of what makes a music company to companies all the way up and down the stack: how we find and invest in artists, to how we monitor and get the most out of data, to AR and VR and e-commerce, to rights management, to education even,” he says.

“The opportunity is really gigantic, but the trick is to broaden your definition, and be willing to work at it for a few years. With a bit of early-stage capital and more collaboration, we think we can fill a void there.”

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