But where is the Google of the space? No one knows.
The reason is simple. For all the talk of a revolutionized industry with digital distribution, Internet streaming and social sharing, music is a business struggling to make money.
Consider this: Americans spend more time listening to music than watching sports, yet the music industry is roughly $70 billion in size while the sports industry is about $441 billion, says Hany Nada, a partner at GGV Capital.
“I just think (the industry) is way under monetized,” says Nada. He is not alone. Nada found broad agreement Tuesday from a panel of venture capitalists at the MusicTech Summit in San Francisco.
The challenge facing investors in this somewhat nebulous space is finding the right revolutionary business model and overcoming the irony. Music is an attractive place to invest, they say, but not if a startup’s business is selling music.
Interest continues to run strong among VCs with an eye on the space. “We are active music investors and looking for new deals,” says Pat Kenealy, a managing director at IDG Ventures.
GGV Capital also is actively looking for investments and sees the music business as a good opportunity, says Nada. But “don’t try to monetize the content, monetize your fans,” advises Nada, offering a glimpse of his approach.
People engage with music, but companies haven’t learned how to really monetize that interest, he says. “We haven’t figured that out yet.”
When it comes to interesting investment areas, Larry Marcus, a managing director at Walden Venture Capital, offered several targets. Selling songs is not exciting, he says. “I think it is all about the other stuff,” including education, content creation, discovery and services for bands.
Nada views the space through a similar lens. Coming up with a better way to handle concert ticketing is not interesting, he said. What he is focused on are ideas for engaging with fans and super fans, perhaps through live shows or events that enable fans to meet artists. “That’s where I think the big opportunity is,” he says. Possibly a billion dollar opportunity.
If the past is a guide to the future, here is an example of how theory translates into practice. Walden, IDG and GGV are investors in BandPage, a site that lets musicians publish music, videos and band information on Facebook and elsewhere.
Check out the BandPage site here.
Photo of Larry Marcus taken by Mark Boslet.