Muzooka goes after the recording industry, a market too tiny for Pandora

By Erin Griffith , written on December 12, 2012

From The News Desk

It is no secret that Pandora has been at odds with the recording industry for, basically, its entire existence. The digital radio company was at odds with Big Music's counterpart, traditional radio, too, until recently. Now Big Radio, aka, Clear Channel has, under the leadership of Bob Pittman, revived its iHeartRadio streaming service and added some lobbying heft to Pandora's pet legislation. The companies both stream whatever music they under a government-mandated royalty fee structure, labels be damned.

But, if they were friends, Pandora's goldmine of data could be very useful for the music industry. Since it is digital, it can calculate regional demand for, say, an artist's tour, because many users in a region have played that artist's station. Pandora also knows its users' ages and genders. It knows what time of day they tune in and for how long. It knows which songs they like best and which ones they hate. Terrestrial radio has none of that.

Pandora recently used this data to help the band All American Rejects map its next tour. The band discovered it had a huge fan base in Salt Lake City but had never once played there. So they played a huge, sold-out show there over the summer. Incredibly, the music industry has no such tool besides gut feeling to estimate this kind of demand. What an incredible business opportunity, right?

Not so much. Pandora CEO Joe Kennedy said on the company's latest earnings call that he's not interested in serving the labels. Advertising is a much bigger opportunity.

"We have the opportunity to sell into a $16 billion radio advertising market and a mobile advertising market that's projected to be comparable in size in a few years," he said. "We don't see the data as even close to that. It's many orders of magnitudes less than that…. It's not material from an economic standpoint."

For publicly traded company that's valued at $1.4 billion, sure. Fair enough.

But the thinking is the same for Spotify, a privately held startup, which was valued in its last round at $3 billion. The company hasn't had the same contentious relationship with the record labels. Spotify has had to beg the labels to get the rights to stream their music, and it wants to stay in their good graces. Daniel Ek said at a Spotify press event last week that the company wants to make its listening data more useful to the artists. The company's latest slew of products will include tools that let an artist see when users are listening to their songs. But Spotify will not charge the labels for those tools because that's not its core business.

All of that is to say that there might be an opportunity here. Muzooka, a new startup launched today, aims to jump on it.

The site's goal is to bring A&R execs, producers and new talent together. My first reaction was, "Surely these people have plenty of places to find rising talent." It is, after all, their only job. But it's the classic problem of signal to noise. How many times has a manager with a stack of resumes in hand leaned over and asked their cubemate, "Know anyone who'd be good for this job?" Unemployment rates have been up for several years now, and the tech world has a hiring problem. It's no different in music. Muzooka's filters help music execs sift through the digital equivalent of desks piled high with CDs.

It does that with its Reddit-style rankings based on listening activity within in the site. Unsigned artists can use the site to promote their music and get 100 percent of proceeds on any digital sales. Meanwhile, if they gain enough momentum, they could catch the eye of an A&R exec.

That is who Muzooka will rely on for its monetization. The bootstrapped company will next year roll out a subscription model to its product. Artists use it for free but get extra features for analytics and promoted positioning within the app similar to Twitter's Promoted Tweets. Heavy listeners on the consumer end will be charged a nominal fee to use the site as well. And producers will have a tier of enterprise-level tools that they'll pay several hundred dollars a month for. It's not a far cry from a reality: At the moment, producers like Walter Afanasieff, Babyface, David Foster, Leonard Brooks, and Tony Mardini are using the product.

Last week I lamented that consumer-facing music listening apps were a dime a dozen and doomed for failure. Muzooka has taken a B2B approach. If enough labels find it valuable, could become a real business very quickly. It still faces the problem of scale, but the prospect of 100 percent of music sales and the marketing opportunity should be enough to attract the artists it needs.

[Image Credit: Images_of_Money on Flickr]