Digital Music Startup Failures -> Lessons Learned

Over the course of the last year or two, I have seen plenty of articles hyping up innovative digital music startups like Muxtape, Qtrax & Soundpedia. All of them were relatively novel ideas that had serious potential for growth. Yet, these days you will find all three barely treading above water.

I have attached above an image of Compete's most recent traffic counts for all three startups. It's striking to see their rapid ascents and how quickly each has fallen (all in a ~year's time). Each company has it's own story behind it, and I believe there are some good lessons to be learned.

Qtrax got some great early publicity for attempting to become the first advertising-supported free peer-2-peer network. Early being the key word. They jumped the gun with announcements of completed deals with the 4 major record labels that delayed their launch. Unfortunately, consumers (and just as importantly reviewers) are not always willing to give second chances, and Qtrax has been fighting an uphill battle ever since. 

Muxtape was a huge (relatively speaking) success story for it's first few months in existence. Started by just one random dude, Justin Oulette, Muxtape allowed users to upload mp3s, and create their own playlists to share with the world.  I bet he never envisioned the onslaught of traffic that would ensue. Users quickly gravitated to its simplicity and ease of use (two components that are successful for all successful startups these days).

Unfortunately, this quick ascent led to the attention of the RIAA. The RIAA can only focus on so many things at a time, but they were not going to allow a popular "illegal" streaming site to remain afloat despite promoting music discovery and subsequent purchasing. Thus, as quickly as it went up, it came down.

Then there's Soundpedia out of Singapore. They claim to be a music discovery community. You heard of that before? Yeah, it's called MySpace for some. Last.FM for others. It's a tough space to be in with the ever-increasing digital music population.

Soundpedia's demise has been the most gradual of the bunch. They are still kicking...but barely. Soundpedia has never really been able to differentiate themselves or find their own niche in the digital music space. They had their traffic peak back in November 2007, and it's been downhil ever since. Considering they rely on advertisements for revenue, they are in serious trouble with a unique visitor count that continues to dwindle down (at ~10k in October '08).

These stories  reminded me of discussions held at the Digital Music Forum East (coming up February 25-26, 2009) this past February in New York. Multiple panelsits were talking about how difficult is was becoming to create a legal music discovery platform because either the laws just can't keep up with technology or the labels increasingly difficult demands. I agree these barriers could use some work, but I firmly believe their are solutions without pulling an Imeem and going "illegal" before settling to go the "legal" route (and royally screwing their margins in the process).

I think we got one in mind...until then...