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The streaming music business is getting more crowded and competitive. Get ready, start-ups: A shake-up is coming soon.
Stereomood CEO Eleanora Viviani doesn’t mince words on how she plans to make money off her start-up: "We want to get acquired."
Unless she invents a new business model--and a way to conquer music licensing fees--she's dependent on a corporate giant that does it all. If a deal comes through, Stereomood--a free music streaming service that curates playlists by moods and has a $1.5 million valuation--would become part of a larger, more visible app but be lost to history.
"It's not easy to monetize and have a strong business model if you just have music streaming," says Viviani, who resides in Italy. "Acquisition is the solution for a small company like ours."
A Perilous Business
Dozens of would-be Pandoras and Spotifys have launched in recent years, with varying degrees of success. Some spawn from corporate giants such as Google Music All Access and Apple’s forthcoming Pandora killer that's expected to be revealed at its Worldwide Developers Conference Monday. Others like Stereomood, Rdio, and Grooveshark have millions of monthly users, but struggle to turn a profit.
More established streaming companies like Spotify, which received a $100 million round of funding and is valued at $3 billion, say they’re focused on growth, but refuse to share numbers. Pandora, which went public in 2011 and counted 70.8 million users as of last May, has yet to reduce its royalty burden and has never had a profitable year in more than a decade as a company.
"The music industry is inherently a 'sword in the stone' story," says Grooveshark CEO Sam Tarantino. "No one has really been able to succeed in streaming yet, and the prize for winning is very 'sexy.' Who doesn't want to work with rock stars and pop stars?"
But while passion drives his business, that hasn't sustained it. As he told Mashable in April, the majority of 2011 and 2012 was spent laying off employees or watching them go, and fighting legal battles with all four major record labels.
David Pakman, a venture capitalist and former CEO of eMusic, says he isn't surprised: "There is no start-up that is profitable and doing music streaming today."
Despite enviable user numbers, neither Spotify nor Pandora have turned a profit because of the cost of music royalties. Pandora generates revenue through a mix of paid subscriptions and ads, but licensing fees eat up a huge chunk of that revenue. In 2011, the company paid $149 million in content acquisition costs out of $274 million in total revenue--that's 54 percent of its revenue. Spotify reportedly posted a loss of $57 million in 2011, largely because of high licensing fees.
"When you are totally dependent on the music rights and on the licensing, that's where all your money goes," says Vincent Reinders, CEO of 22tracks, a music discovery service based in the Netherlands. "I think it's really hard to be a viable distribution platform. You can see them struggling all the time."
Why Apple Will Win
While numbers like these might keep an entrepreneur up at night, corporate giants like Apple and Google have less to worry about.
By virtue of being an established brand, both have a better chance of negotiating good deals with the major record labels. Apple reportedly negotiated its deals directly with three major record labels (instead of acquiring a "pureplay" license negotiated by the third party Copyright Royalty Board). Billboard suggests the move could help the company save $39 billion on the $156 billion it earned last year. But in going the direct route, Apple cut a deal to share 10 percent of its ad revenue with Warner Music Group. Pandora pays out just 4 percent, but unlike Apple, cannot precisely target users based on all their entertainment tastes, in addition to their sex, area code, and other listening habits. Google was able to launch All Access so quickly because it agreed to pay advances to some of the major copyright owners. A small, fledgling start-up couldn't possibly pull this off.
According to Ted Cohen, a digital entertainment executive who's worked for Napster and EMI, tech giants also have the advantage of using music as a loss leader, something a single-purpose start-up can't do. Apple has a whole ecosystem of products to fall back on, while Amazon, who is reportedly eyeing the music space as well, can sell music subscriptions so long as customers keep shopping on its site.
Beyond that, none of these companies have to deal with operational costs since all their offices, staff, and equipment are in place. "Apple has never been concerned about the economics of licensed content," says Pakman. "They just want you to use their device for consuming all media. They've got fantastic profit margins on that."
A Feature, Not a Business
Apple doesn't have much to lose the way a single-purpose start-up does. And that's why so many of these companies will either be acquired or lost to history.
Spotify proved it could do what Pandora was doing by adding a radio feature last year. It also introduced a Discovery tab in May, proving it could recommend songs just as well as Twitter Music, 22Tracks, and the French service Whyd.
Today's listeners want to make playlists, share songs, and stream stations. They also want to be local, which is why Clear Channel's iHeartRadio service, with its news, weather updates, and hourly traffic reports is winning. A single-purpose start-up can't do all of that, though it can make a useful accessory.
The Road Ahead
Up until now, small music services were competing with the likes of Spotify and other start-ups. But now that it’s Google and Apple, it's hard to tell how they'll fare in the long run.
"I think that there are way too many ships on the ocean, and you will see in the coming years, a couple of companies really winning and the rest of them will go away or be somehow acquired by other companies," says Reinders.
"These companies have a big structure, they have the market," adds Viviani. "We are a small company; we are Italian. If we are not acquired, I do not know what the future will be."
Sick of the daily grind? Streamline everything from your schedule to your expenses.
Though there's an app for almost everything, the app marketplace is so crowded you might not know which are the best fit for you. Here are 10 apps that will make running a business much, much easier.
1. Evernote. One of the most popular apps on the market, Evernote has evolved way past just classic note-taking. Evernote's extended family includes Penultimate, a hand-writing app for taking notes on tablet; Web Clipper, which allows you to clip web pages coupon-style; Peek, a notecard-like study aid; and Skitch, an image mark-up tool. Cost: Free, $5 per month for premium features. Platforms: Android, iOS.
2. Tempo AI. Think of it like a personal assistant for your smartphone. Tempo AI goes above and beyond the typical paper calendar. It links calendar events to relevant emails and attachments for pending appointments, queues up directions to your next meeting location, and pulls up email and phone info for last-minute coordination with your contacts. Cost: Free. Platforms: iOS.
3. Xero. Xero is more than just a Quikbooks lookalike; its an accountant for the cloud. The money-managing web app allows you to link with banks, customers and online payment systems like PayPal--as well as monitor payroll and budgeting software as you grow. Cost: $19 to $39 per month. Platforms: Android, iOS, OS X, Windows.
4. Feedly. Don't worry about Google Reader's impending retirement. Feedly, a news-aggregator app, compiles the latest articles from your favorite blogs and web publications--plus any podcasts and YouTube channels you subscribe to. (Ahem. Don't forget to add Inc.) Cost: Free. Platforms: Android, iOS or on your web browser.
5. Sleep Cycle. You know those days when a snooze button just isn't enough? Sleep Cycle helps with that. This alarm clock app uses motion sensors to analyze your sleep patterns, and wakes you up during the lightest phases of sleep. You just pick a half-hour window in which you want to wake up and the app takes over from there. Cost: $0.99. Platforms: iOS.
6. Brewster. What Tempo is to your calendar, Brewster is to your contact book. This contact-organization app pulls from your various social profiles--and your phone's address book--to compile a comprehensive list of everyone you know. Then, it helps you keep in touch with them. Using a priority ranking system based on your own interactions, Brewster lets you know when you've maintained radio silence for too long. Which lets you balance it all, from reaching out to potential investors or customers...to remembering your grandmother's birthday. Cost: Free. Platforms: Android, iOS.
7. Seatguru. Perhaps this is a familiar scene: You're in a plane 35,000 feet off the ground--and your phone's about to die. In addition to helping you nab the best possible seat on your flight, Seatguru solves that pesky outlet problem. The app's detailed plane maps--created by travelers like you--point out mile-high perks, like in-seat outlets and extra leg room, for your specific aircraft. The only thing this app can't predict, it seems, is your seat mate. But then again, it's only in beta. Cost: Free. Platforms: Android, iOS.
8. Wi-Fi Finder. Perhaps even harder than finding an outlet when you need one: Finding a free Wi-Fi. The appropriately titled Wi-Fi Finder does exactly that. It provides you with a map of the nearest public Wi-Fi hotspots--so you can rustle up an Internet connection even on the go. Cost: Free. Platforms: Android, iOS.
9. SideCar. If you're still a ride-share skeptic, you may want to consider the perks: Vetted local drivers, faster-than-a-taxi service, and a donation-based payment system. Also, a smaller carbon footprint. SideCar allows you search for drivers, book a ride, and pay for your travel on one app. Cost: Varies. Platforms: Android, iOS.
10. Applause. These days, it seems like there's an app for just about everything--including, as it happens, finding the best apps. Applause is a web app that measures user satisfaction and app quality--helping to connect you with the latest and greatest software tools for all of your devices. Cost: Free. Platforms: Web browser.
Need to get more done? Take a cue from Mark Cuban, Barbara Corcoran, and more.
Whether it's Mark Cuban, Richard Branson, or Barbara Corcoran, the world's top entrepreneurs have their own little tricks for being super productive. Good thing Inc.'s talked to plenty of them about everything from task-mastering to broad productivity strategy.
Here's the best advice these maverick entrepreneurs have about getting more done.
"Find somebody else to run [your] business on a day-to-day basis. Don’t always try to sit in the driver’s seat yourself. Don’t always try to be the top person in the building. If you can, be brave... give them your title--and step aside. Then you can start thinking about the bigger picture."
--Sir Richard Branson, founder of the Virgin Group
"The productiveness of any meeting depends on the advance thought given the agenda, and you should never leave a meeting without writing a follow-up list with each item assigned to one person. And go outside. All the big ideas are on the outside. You’ll never have a creative idea at your desk."
--Barbara Corcoran, founder of Corcoran Group
"I carry my laptop with me everywhere. If I have any downtime during the day, I'll jump on my computer and answer e-mails. At least once a week, I log in to Ustream, a free video streaming site that lets you interact with people...I believe that kind of one-on-one engagement with people is key to growing my personal brand."
--Gary Vaynerchuk, founder of VaynerMedia
"I usually get up at 6:30 and go to a Pilates class near my house. Exercising helps me maintain calm. Before I leave for work, I have a cup of decaf coffee and spend 30 minutes reading...In the early days, I did everything. My biggest challenge has been letting go and letting people do their jobs."
--Trina Turk, fashion designer
"Meetings are a waste of time unless you are closing a deal. There are so many ways to communicate in real time or asynchronously that any meeting you actually sit for should have a duration and set outcome before you agree to go."
--Mark Cuban, CEO of HDNet and Dallas Mavericks owner
"In the morning I stand up, scratch a little bit, then I light a candle and I meditate. Every morning. I’ve been meditating for maybe 20 years. I meditate so I can make choices--so I’m not a sheep all the time. So I can see better than what everyone else is doing."
--Russell Simmons, founder of the hip-hop label Def Jam
"I don't have an assistant--no one at One Kings Lane does. I keep track of my meetings, phone calls, and travel arrangements in Outlook. I also carry a paper calendar with me everywhere, and keep a separate calendar at home."
--Alison Pincus, co-founder of One Kings Lane
"Follow Jeff Bezos’s two-pizza rule: Project teams should be small enough to feed with two pizzas."
--Caterina Fake, co-founder of Flickr
"If I think something is going to take me an hour, I give myself 40 minutes. By shrinking your mental deadlines, you work faster and with greater focus. I also schedule time every week on my calendar for quiet, concentrated PowerTime where I only work on my most important activities."
--Krissi Barr, founder of consulting firm Barr Corporate Success
"Cut down on sleep. Why would you sleep when it’s time to live? Sleeping isn’t living. You sleep when you die. I get up at 3:30 every morning and I’m at the gym by 4. Then I ride 25 miles on my bike before breakfast. Being in shape is what gives me energy."
--Jordan Zimmerman, founder of Zimmerman Advertising
Robert Browning said, "a man's reach should exceed his grasp." That, more than anything, separates successful people from the pack.
A lot happens between the day you come into this world and the day you leave it. If that sounds like one big understatement, then tell me this: Why do so many people lament that life is short?
Sure, some don't mean anything by it; it's just their way of saying you have to make the best of it. But others say it in a regretful way, like they missed out on something. I hear that sentiment often enough from fellow baby boomers: "It's like I went to bed a young man and woke up looking like this," they exclaim, "What the heck happened?"
I often wonder why I've never felt that way. To me, life has always felt long and full of twists and turns and possibilities.
The perception of time passing is a subjective thing. And it relates very much to how you live your life.
You see, what separates successful people from everyone else is surprisingly little. Certainly less than you might think. I'd even go as far as to say that the biggest difference between successful business leaders and the pack is that the leaders know there really is no difference.For the most part, success isn't predetermined.
Sure, some are born with privilege, but that's rare. Most of the successful people I know started with nothing. They're self-made. What really distinguishes them is that their reach always exceeded their grasp, as Robert Browning so aptly put it.
They always wanted more out of life, so they always strove to achieve more, at least until they felt they'd had enough. Sure, they also had the guts to take risks, but that's really no different from being willing to get on a really scary ride at the amusement park.
Just think about it. If you go to the amusement park and you're only willing to go on the boring rides, you can sort of sleepwalk your way through the whole thing. Then when nighttime comes, you wonder what all the hoopla was about. But if, on the other hand, you challenge yourself, face your fear, and get on those terrifying rides, you'll end up with loads of wonderful memories of an eventful and fulfilling day.
Life is the same way. So is your career.
Here's a great example. I've always been a slow starter. No, I'm not slow; it just takes me a while to figure things out. While I was hired into my first engineering job with great fanfare and expectation on the part of my employer, it took years for me to really start to shine. Even then, I got bogged down in middle management for quite a long time. And that just wasn't acceptable.
So I quit and tried something different: sales and marketing. It wasn't until my mid-30s that I finally reached the executive ranks. I could have milked that until retirement but you know what? I still had some other rides I wanted to try, if you know what I mean. So here we are. Am I done? No way. Not yet.Satisfaction and success are subjective.
Lots of people I know have had second or even third acts in their careers. Many have gone the entrepreneurial or venture capital route after decades of climbing the corporate ladder. Lots of famous people weren't satisfied with their original careers, either.
John Grisham was a criminal lawyer and a congressman for nearly two decades before his first book was published. Even then, he continued to practice law until his second book, The Firm, became a hit. Ronald Reagan was an actor for decades before getting into politics. It's a long, long list.
Look, I'm not going to sit here and tell you that anyone on planet Earth can be wildly successful. I know that lots of authors and coaches suggest they can help anyone unlock their inner potential to succeed. I'm not one of them. But don't think for a minute that anything is predetermined. It has more to do with you than anything else.
Mostly, I think it comes down to what drives you. If you're content with who and what you are, that's great. Stick with it and call it a day. If you're not, the message here is a simple one. Keep getting on those rides until you've had your fill. Then, when nighttime falls, I guarantee you'll feel like you've had one hell of a fun day at the amusement park.
And you'll never wake up wondering where the time went--or feeling like life is too short. It'll feel just about right.
Things are looking up for small businesses--those lucky enough to meet certain criteria.
By all accounts, it looks like the long-awaited economic recovery is finally under way for small businesses. But there's a caveat.
The stock market is back to pre-recession levels, housing prices are recovering nationally, the unemployment rate is trending lower, and business confidence is improving.
But things may not be as great as they seem. Just as the wealthiest were least affected by the economic meltdown, the recovery for small businesses is most noticeable for a narrow subsection of business owners who were positioned to benefit from gains in assets such as the stock market and, more notably, the run up in real estate prices. Mostly, that means business owners who already had the capital to buy into the desirable higher-priced markets that have recovered fastest.
"A very small proportion of the economy is benefitting from the rebound in home prices," says Mark Vitner, senior economist for Wells Fargo in San Francisco. While home prices are increasing, there are about 100,000 fewer home owners now compared to a year ago, Vitner says, adding that the small businesses most likely to benefit from the run up in stock prices are ones that cater to high-end customers.
One entrepreneur who has benefitted from increasing home values is Russell Lundstrom, who along with his sister Julia, launched Simple Smart Science, a supplement company that will sell brain nutrition products. The duo launched the Denver, Colorado company about a month ago, after they secured a $125,000 home equity loan from a regional bank.
Lundstrom says the value of his house, which he bought for $450,000 in 2007, has returned to its pre-recession value, with most of the increase--about a 10 percent jump--coming just in the past year.
And the home equity loan, with a rate under five percent, was a better deal than other sources of lending, such as bank loans, which would have been more difficult to get, Lundstrom says.
"The Small Business Administration does not do pre-revenue funding, and startup funding is nearly impossible," Lundstrom says.
Home prices in 98 of the 100 largest cities increased 9.5 percent year over year for May, according to Trulia Price Monitor's latest survey of cities with asking price increases. Increases in the 10 most affordable cities, including Atlanta, Dallas, and Detroit, rose about seven percent.
While entrepreneurs with sterling credit ratings, full-time jobs, and money in the bank have continued to secure loans and credit lines, banks have been pulling in their home equity lines of credit for years. Home equity balances at all commercial banks decreased by more than eight percent to $498 billion in April 2013 compared to the same month a year earlier, according to the most recent Federal Reserve Board data.
And at large banks such as Bank of America, home equity originations fell 23 percent to $2.8 billion for 2012 compared to the previous year. Quarter over quarter, outstanding balances for home equity loans fell 4 percent to $105 billion for the quarter ending March 31, 2013.
"Going back to 2010, the home equity loan market has been collapsing, and it's been down significantly in every quarter" since then, says John Dunham, managing partner of John Dunham & Associates, an economic consultancy in New York.
Home equity loans are traditionally a major source of capital for small businesses--making the last few years' declining values a double-whammy for business owners tho are also homeowners. Those who managed to secure credit lines before the crash began have held onto them tightly. During the tepid recovery, the majority of small businesses have either started up or done what little expanding they've accomplished using personal resources or free cash flow, rather than loans, experts say.
Bruno Francois, founder and chief executive of Cycloramic, a smart phone application development company, based in Atlanta, applied for a home equity loan about a year ago from the Private Bank of Buckhead.
Francois was fully employed at the time as a computer scientist for a private company. The bank extended him a $250,000 line on a house he'd bought in 2010, and the line allowed him to leave his job and start his company. Cycloramic, which has three employees, is profitable and on track to have $750,000 in revenue this year, Francois says.
"I could not have done this without the line of credit," Francois says. "I had to live without a salary while I was developing the product, and I had to pay for programmers."
Similarly, Tim Murphy, the co-founder of Motion Works Physical Therapy, in Neenah, Wisconsin, recently tapped a home equity line he and his wife got when they purchased their house for $415,000 in 2009.
Home values in the area soon dropped by about 10 percent. Though Murphy says he hasn't recently had his house appraised, he said he thinks values are rising, as owners are starting to sell houses in the area and more houses are being built in the area.
They've used the $50,000 line, plus a $125,000 loan from SBA, to help build out their new office space, including adding treatment rooms, computer equipment, and other items necessary to run the business.
The terms on the home equity line of credit were better than SBA loan, Murphy says, with the former offering a rate around five percent and the latter charging about seven percent.
"We have been doing really strong business pretty much this whole year, form January to now, so we are cautiously optimistic that things will stay strong through the summer," Murphy says.