Venture capitalist (and former eMusic boss) David Pakman has ruffled a few feathers with his latest post on Medium.
Pakman criticised the music industry’s approach to working with startups, and suggested that if it is left with a digital market dominated by Apple, Google and Amazon, rightsholders have only themselves to blame.
“I am unaware of any standalone digital music company or webcaster who has achieved profitability. This is a direct result of the high royalty rates required by startups who wish to license digital music for use in their apps,” wrote Pakman.
“Whether you negotiate voluntary agreements or avail yourself of the existing compulsory licenses, you will not turn a profit. At least, no one ever has… Given these facts, digital music startups are unlikely to survive and thus unlikely to attract meaningful investment.”
Pakman supports his argument with data on the amount of funding going into music/tech startups, as well as on exits / failures within the sector.
“The only companies who can afford to be involved with digital music are the internet giants prepared to subsidise their digital music services with profits from their other businesses…”