CB Insights, a relatively new site that’s building a database of startup and VC investment information, recently took a look at music startups and noted, that though the kinds of deals they’re tracking have risen in the last couple of years, a smaller percentage of them have been for U.S.-based companies. Though they seem to be confusing licensing hurdles with government regulations, the discussion does raise the question: What would happen if the music industry managed licensing in a way that allowed for early experimentation before facing prohibitive fees?
Is U.S. Government Regulation Negatively Affecting Startup Investments?
CB Insights points out a streaming music startup investing trend:
“If we look at the percentage of deals made in Music startups between 2010 and 2011…the US was responsible for 77% of all deals, while the remaining 23% was spread across 8 countries. Total funding share was lower, with US music startups taking 47% of total funding, as the $166M invested in Spotify gave the previously pirate-friendly country of Sweden a 29% funding share.”
Though CB Insights discusses such topics as the Stop Online Piracy Act, potential U.S. legislation that could have been a concern for investors, they point to a post by famed VC Fred Wilson that discusses streaming music startups and the effects of licensing negotiations.
The Mismatch Between Early Licensing Fees & Product Testing
Wilson points out that the big problem with facing upfront negotiations with labels or publishers is not the fairness of the fees being requested but the fact that investors don’t want to cover those fees for startups that haven’t demonstrated user demand.
The problem with CB Insights’ use of Wilson’s post is that they’re actually discussing two different issues and all the non-U.S. companies on which they focus, Spotify, Deezer and SoundCloud, face the licensing hurdles Wilson references.
But …read more
Source: Hypebot.com
