It's Time for Another Turntable.fm Pivot
Turntable should have taken that buyout offer from Spotify when it had the chance.
Six months in, it may be time to admit it: Turntable.fm is a novelty company spawned from another novelty company. It started as Stickybits, a fun QR code sticker company. Even with VC funding, StickyBits didn't translate into a viable business, so founders Billy Chasen and Seth Goldstein abandoned it, launching Turntable.fm with even more VC money.
The problem is, for all its hype, Turntable is proving to have the same problems as Stickybits. It's really cool. No one is denying that. Stickybits was cool too. But ultimately, it's a novelty.
Last summer, for a few months, Turntable was all anyone talked about. It went viral and blogs called the pivot "epic," and "an overnight, multi-million dollar success." (For the record, do not expect Pando to ever publish a vom-worthy phrase like the latter…)
Turntable parlayed that hype into $7.5 million funding at a $37.5 million valuation. The company was so hot it turned down a buyout offer from Spotify for something like $40 million at the time. (That's a bummer--I could totally see Turntable as an app within Spotify's app layer.)
The company benefitted from last year's free music free-for-all, too. The stateside arrival of Spotify triggered a flood of free streaming options. Once Spotify finally launched, all of the music streaming services scrambled to launch something--anything--that was free to compete. Rdio, Rhapsody and Mog did it. Clear Channel's iHeartRadio revamped its offering. Pandora even increased the number of hours users could stream for free.
Turntable's service is entirely different from all of those, and yet, by proximity, it continually got lumped in as part of this wave of The Next Big Thing in free music streaming. People behind other streaming music sites grumbled behind the scenes that Turntable wasn't a real business and shouldn't be included in the buzz about their new offerings.
They're right. Turntable.fm is not part of The Next Big Thing in music streaming. We've always sort of known it was a novelty (haven't we?). Now the latest traffic numbers confirm it.
Turntable's traffic has fallen off a cliff and stayed down. Of its million registered users, the company has said 20,000 to 40,000 use it every day. That's fine for a six-month-old startup, when it's a growing number. When it's stagnant, it may as well be dead.
In general, it seems like the whole idea of group listening isn't really growing. Is anyone really listening along with friends in their Facebook feeds, as promised with the media integrations announced last year? If I see someone listening to a song I like, I open up my iTunes/Pandora/Mog/Spotify and listen there. Not to mention the lack of peeps we've heard from all the group listening sites that launched last year like Outloud.fm, Mumu Player or Listening Room.
Part of the problem is that group listening, and Turntable in particular, is too intensely engaging--if you're using it, you're in an active chat room that demands full attention. Goldstein admits this is a problem with the service:
“I wish it was more background,” Goldstein replied. “In a way I think there are a lot of passive services that aim to be more engaging. We have the opposite problem. It’s really engaging for a small community. Because typically, if you use Turntable, you go in and you get addicted, and spend four days of your life not doing much of anything else. And then you say, ‘I just can’t do this any more. I’ve got to get back to my life.’ Right?”Being too engaging isn't always a bad thing. After all, engagement is the goal of pretty much every ad dollar spent on the web. The company's touted its unique, VIP artist interactions as one possible business model. Brands and labels could get in on that action and provide a source of revenue for the company.
The problem is the size of the opportunity. Engaging 20,000 to 40,000 users isn't much of an opportunity, and there are only so many unique, VIP listening experiences you can sell before they're not very unique or VIP anymore. I don't imagine brands wanting to pour money into a dead end platform, especially when there is always a new next big thing around the corner. The same argument goes for selling virtual goods like avatars or private rooms to users. It's a flat opportunity. When I reached out out to Goldstein for comment, he would only say Turntable is "heads down at work on some new features."
Goldstein and Chasen obviously realized the limited opportunity of a novelty product when they abandoned StickyBits. Turntable is much bigger, and a second pivot wouldn't be simple. The first one was remarkable enough. Goldstein and Chasen had a tough time appeasing new and old investors when the company changed over.
Turntable's new investors, who included Union Square Ventures (plus several angel investors... and Jimmy Fallon) wanted to invest in a new company without legacy equity holders, which makes sense since the StickyBits and Turntable products are like night and day. But Stickybits' original investors, which includes Polaris Venture Partners, Mitch Kapor, First Round Capital and Lowercase Capital, argued that they invested in a team--Goldstein and Chasen--and deserved to hold on to their equity, so they stayed on.
With a $37.5 million valuation, the pressure is much higher than with Stickybits. And with all the licensing fee fun that goes along with a streaming music business, the company has to be burning money. Turntable has plenty going for it: it's users, while few, are loyal. And I'll say it again--it is a cool product. Chasen and Goldstein just need to somehow make it a business. Otherwise, hey--third time's always a charm.