The seven hottest startups of MidemNet 2009  - Blog from Cannes

It’s the highlight of MidemNet Day Two! I’m contractually obliged to say this. It’s the Music Ally / MidemNet New Business Showcase, which spotlights seven of the hottest new music startups, and gets the audience to vote on which is most exciting.

Or, as I’m renaming it this week, it’s the ‘can six innovative music startups possibly prevail in an audience vote against a lightsaber-shaped gadget that lets you scratch Jimi Hendrix tunes?’ contest. You’ll see what I mean.

The startups are Catch Media, Passionato, SoundCloud, The Echo Nest, MPTrax, Instinctive, and a device created by an industrial design student at the Eindhoven University of Technology. That’s the lightsaber thing…

First up is Catch Media, and its Play Anywhere service. It’s a system they’ve been working on for some time promising “convenience for the consumer and profitability for the industry - monetizing consumption to drive acquisition”. I’m sure you’re nodding your head in agreement.

“Why after 13 years do 65 million households in the US not have an MP3 player, and why do only 4% of cellphone owners use their cellphone as a video or audio player?” asks CTO Boaz Ben-Yaacov. “We’re trying to create a convenient way for people to listen to digital music so it’s totally seamless.  ”They want to ditch all the acronyms - MP3, WMA, AAC etc - and just let people listen to music, he says. So Play Anywhere comprises technology, licensing, a clearing house structure and a business model, all in one.

How does it work? It’s a licence that, when Play Anywhere deems a piece of music to be in a consumer’s possession, they can supply it to them on whatever device they choose. “Mom might have bought an album on iTunes, Dad may have bought a CD… all of this metadata is put onto the system, so I know what these people have. It’s all metadata. And then we go to a licensed content distributor and distribute it to any device that is in that family - mom’s Sony Ericsson, dad’s BlackBerry or Junior’s LG phone.

”They have some major label deals, and are hoping to have the full set by the end of next month. And Play Anywhere can also deliver music to car stereos and TV sets / home entertainment systems.  It’s launching in Q2 2009 with some major mobile operators in the US - “we need to see change in the music industry, and go from short-term solutions to long-term solutions that will last 10-15 years,” he says. So yes, in short, you buy music somewhere in some format, register it with Play Anywhere, and then they’ll deliver it to all of your devices.

How much do consumers pay for this, and how does Catch Media make money? It’ll be subscription-based - “On AT&T you would pay $5 to have all of your content show up on all your handsets,” he says, although that could be subsidised - for example by advertising.  Doesn’t the availability of DRM-free music downloads make this kind of service less necessary? Ben-Yaacov says not. “It still leaves the confusion of the different formats. If you buy a song on iTunes, you cannot play that song on your Sony Ericsson phone, because it doesn’t know how to play AAC files.  ”And that’s them. 

Now it’s Passionato, and CEO James Glicker. It’s a “site for people who love Classical and Jazz”. He says he developed it out of frustration from being a jazz and classical fan unsatisfied at existing digital stores. “We want CD-quality, we want better metadata… and we need to have deep catalogue. We like to find very obscure recordings by people who are undiscovered, or were discontinued by the labels 20 years ago.  ”Also he says it’s a clear business opportunity - there aren’t the same kind of publishing hassles, and the consumers are a.) well off, and b.) don’t tend to steal music.

Passionato has signed the four biggest classical labels - DG, Decca, EMI and Naxos. It’s also working on self-publishing deals - for example with the London Philharmonic. It was the first UK classical site to sell DRM-free tracks from the major labels, and also the first in the world to offer lossless tracks.  He says they have 2-3% of the classical market in the UK after four months. It also has blogs and forums, and composer pages. They’ve also just introduced a Passionato Player - it came out last month and is designed for classical fans, identifying 98% of classical albums and providing better metadata. That’s a software player, I mean - a RealPlayer type thing.

The team are drawn from companies like Disney, Britannia and Napster, and the company plans to expand internationally “shortly”, because most of its licences are global. “We’re not reinventing the wheel or looking for some strange new revenue source. We’re going to charge people for downloads, it’s a straightforward business, but it’s a business that hasn’t been met yet,” says Glicker.

Isn’t it expensive and labour-intensive building your own player and improving the metadata? And how will they compete with iTunes and Amazon, who are doing quite well selling classical, even though they don’t really push it or serve it that well.  Glicker says Passionato has been “frugal” in its spending, including the player. “I think that we only project to get maybe 10-20% of the world classical and jazz market, which would be a huge revenue source for us. We expect iTunes and Amazon to take the lion’s share of the market, especially the light users. But we’re going after the specialists.

”Now to Eindhoven University, and the industrial design students, with their mustick device - the result of a one-week project on music interaction - allowing non-musicians to perform songs. On a lightsaber. (I’m saying lightsaber - they’re not using that word).  Guitar Hero and Rock Band are influences, but Mustick isn’t about competition or goals like those games - it’s about performance and enjoyment. You use it to manipulate playback of any song in real-time by moving, shaking or swinging the device.They show a video. It’s marvellous.“We believe this delivers instant music experiences. As soon as you get the device, you feel a direct link with the music. It’s as if you’re performing Jimi Hendrix’s song yourself,” says presenter Wouter Kersteman.

Is the aim to create a new version of the song, or to discover the movements that might make the song play as you’d expect to use it? And could this product actually be made commercially available?  “On the first question, there are different movements for each song, so you are creating your own version. The goal is to play with the dialogue, and it’s context-dependent. So you can picture this product as being the music player for an entire group [at a social gathering].  ”And commercial development? “This is really a conceptual product. Of course, we see it working as a standalone product in audio or hi-fi stores. But when we are playing around with the idea, this could definitely be a Wii accessory or an iPhone app.”  And that’s done.  I’ll YouTube the video later today.

Fourth up is SoundCloud, from Germany. CEO Alexander Ljung kicks off the presentation with a voice message from MC Hammer. Ace. SoundCloud is about making it easier for people to share music - but in the legal industry sense - labels, artists, producers and media who need to send large files to one another.  “We’re trying to help people send and receive music, and eventually remove that whole concept,” he says. “FTP, email, IM, whatever ways you have of getting your music across, you’re probably spending a bit too much time on it, and you’re sending it from desktop to desktop every time you need to do something. It’s not efficient.”So the model is everyone uploads their stuff to a central cloud, instead of sending it to each other. Users have a dashboard which lets them check what they’ve received, and share tracks with their contacts. And there’s a music player built in to play those songs, with the ability to leave comments on them.MC Hammer is using SoundCloud’s widget to post his new tracks online, and labels are using SoundCloud’s DropBox widget to allow bands to send them their music (for example, A&R submissions). So in short, it’s an online platform for sending, receiving and distributing music. 

What’s the competition - are they a digital distributor like The Orchard, or a B2B company? Who’s the big market - established labels or unsigned artists? “To be completely honest, we’re looking a bit at what happens,” says Ljung. “Everybody has the same problems. The whole platform is based on somebody being able to do it themselves - you don’t have to go via another company. You could be a big-selling artist or not, but the problem you’re trying to solve is the same.”  About 3,000 labels are using it at the moment, but he says SoundCloud is seeing what happens. And that’s a wrap for them.

Next up is The Echo Next, and CEO Jim Lucchese. They’ve built a “music intelligence” platform, and he’s talking about one of the applications making use of it: Promobot. The Echo Nest tracks blog posts and other online data - “there are thousands of writers out there on the web, but no way to sort them and find the ones who care about your sorts of music,” he says.  So PromoBot addresses that problem of finding music bloggers and connecting with them - it recommends to artists the writers who may be most interested in them. “We’re analysing every piece of text about music, everywhere on the Web, all the time,” he says.

So the idea is to tell artists the best place to promote their music on the Web, using The Echo Nest’s database of artist info, as well as detailed info about tracks, with a whole bunch of different metrics (tempo, etc). And then they have a huge database on music writers and what they like / write about. And then matches all this up, giving artists a report on who they should be pitching to.  It’s not just for indies, although that was the original idea - but they’re now working with a couple of major labels - Willie Nelson and Alison Krauss are testing it for their new releases. And Promobot is just one service powered by The Echo Nest’s APIs.  So PromoBot is what’s up for the award, rather than The Echo Nest per se (I think).

Question: where’s the money coming from, and could this be seen as a luxury for smaller artists? And has the database got all music out there, not just stuff you’re dealing with? On the money thing: “We charge for this. There are two categories of marketing we are going after. For an artist like me, we’re pricing a small premium above what you’d pay for The Indie Bible [a promotional directory book].”Above that, labels would pay “a couple of grand” for a subscription to the service. And the database is built from music everywhere on the Web, not just those who are working with PromoBot and The Echo Nest. And that’s them.

Sixth up is David Sherbow from MPTrax in the US. They’re launching “the world’s first user generated viral booking utility” - it’s launching today in fact. So it’s about getting a band’s gigging calendar into the hands of anyone who might want to book them - including private parties, venues and so on.  Anyone booking bands can log in, search using a variety of criteria, and listen to music / watch videos of likely bands. And artists upload their info and content, and what their requirements are for gigging.  It’s NOT a social network, though, they say. Artists can embed their MPTrax calendar anywhere they want - on their site, MySpace profile or booking agents. And they can even overlay a ‘Book Us’ button on a band’s YouTube videos, which sounds very clever.MPTrax takes a $10 fee for arranging gigs, paid by both sides ($5 each?), and they’ll handle the contracts and payments side of things if you want. But they take no cut of the actual performance fee. So yes - it’s a booking utility, not a social network. The calendar and Book Us buttons are completely portable and embeddable, and artists keep the performance fees. And they say they’re not a booking agency - but that booking agencies can use it.

Question: is the $10 really enough, will there be premium services above that? And is it just about venues? Sherbow says there’s a huge opportunity in house parties, frat parties and other private events. “It will ultimately encompass venues, because they can use this to see who’s playing in their area and doing well,” he says. And they can also use MPTrax to book bands at short notice for support slots if they need to.  So it’s as much about bands travelling across town to play house parties for $100. And Sherbow would love to see the likes of Aerosmith using the service. Quite. It looks very cool though.

Final startup is Instinctiv and CEO Justin Smithline. They’re offering personalisation technology to help consumers navigate their large libraries of music better - something that’s increasingly relevant in the age of unlimited music services, which can be frankly daunting in the depth of available songs.The product up for the award is Instinctiv Shuffle, which replaces random music shuffle on devices or players with a ’smart shuffle’, which “understands the mood you’re in based on the songs you listen to and skip”. It’s launched already on iPhone and iPod Touch, but before the App Store (i.e. for jailbroken iPhones).

He says that when people are listening to random shuffle, they skip a track approximately every two songs, but with Instinctiv Shuffle it’s every 31 songs. And that on people’s iPhones with this tech, 61% of the music they listened to was through the feature, while 8% was through random shuffle.  So yes, you basically start playing tracks in a shuffle, skip the ones you don’t want, and Instinctiv Shuffle figures out what mood you’re in, and serves up relevant tracks instead of a random shuffle. It’s about “creating mood maps of your personal library” says Smithline.

The tech is also being used for music recommendation, which he says increased sales in iTunes by 400% among people who used that - presumably it served up songs they might want to buy.  Smithline says he’s keen to talk to MP3 player makers, mobile operators and other device / services about including the technology.

Questions: what happens with the App Store now? “We are not in the official App Store… it is unclear whether you will ever see us in the App STore,” he says. “But I want to announce here that we’re launching our Android player next week.”

And that’s it. Now questions from the crowd. First up, how will SoundCloud make money? Ljung says it’s a freemium model - the basic version is free, but more features costs you money. And then there are subscription models from 9 to 59 Euros a month for professional users. 

One for Catch Media. How does a user, having bought a CD, import it into the Play Anywhere system? And if they have a huge collection of music, how can they easily import it? On the former, the retailer at the point of sale can alert them - Best Buy is a partner in some way to do this. So in theory, as soon as you walk out of a store having bought a CD, you could turn on your phone, connect to the server, and play it there and then.  And also the software can crawl a user’s PC collection and upload the metadata all at once. But what if they haven’t been acquired legally? “The crawling system doesn’t differentiate between ripped CDs or stolen CDs, but the licence we have from the major labels says we are allowed to redistribute content that may be stolen. We are not legalising the stolen content, but we are legalising access to the stolen content.” Interesting…

For Passionato - any possible partnerships with hardware firms? He says they haven’t done as much as they could have - they’re talking to people like Sonos to help the site’s users move their downloads across to their hi-fis. How about subscription services, or all-you-can-eat?  Glicker says no, “our user tends to be a collector, they like to collect the music themselves and own it”, but he say the subscription model does work well for classical - especially when there’s dozens or hundreds of versions of a particular work available. But it hasn’t caught on with consumers yet. “We’re ready to offer them, and we’re asking our customers if they’re interested, but right now they want to own them.”  He also says that another reason not to launch a subscription is that “labels want huge advances for subscription services, and for downloads they don’t”.

And that’s it for questions. Now the audience vote - we’ve all got remote control things with seven buttons on, to vote for our favourites. It’s closing, and the overall winner is…SoundCloud! With 25% of the vote. Followed by PlayAnywhere (18%) and MPTrax (17%). All seven are winners, of course, but congratulations to SoundCloud for being the winningest winner of the lot!