Wednesday, April 23, 2008

VCs want 'disruptive' Music ventures

A music entrepreneur with an idea that "potentially blows up companies like Sony, BMG and Universal" just might attract the interest of Bay Area VCs like Chris Fralic (at left) of First Round Capital and Paul Santinelli of North Bridge Venture Partners. Yesterday, Santinelli told attendees at Leadership Music's Digital Summit at Belmont University that anything less than disruption is unlikely to earn a meeting. In addition, Santinelli said he's not interested in businesses linked directly to the fortunes of performing artists, music production or services. But, he is interested in "enablers" that improve business processes. Chris Fralic agreed, explaining that while "sexy" entertainment businesses will never be in short supply, most such ventures cannot produce the kind of returns VCs seek, largely because digital production and Internet distribution have diminished the advantages of big labels and other intermediaries and social media have democratized marketing and promotion. Santinelli said the only direct music play he'd be interested in would be in the music-subscription space. In fact, he'd gladly pay a monthly fee to have music and video entertainment he selects continually on tap through online storage. "If my music lives in the cloud, I'd be willing to pay them a monthly fee," he said. Even so, he suspects that lack of adequate online "discovery" capability -- the natural-language search technology that would enable consumers to find easily what they want -- may thwart new ventures. Other constraints cited by the two VCs included shallow song catalogs, lack of universal licensing and the risk of litigation, and subscription portability. Both men said they regularly meet with entertainment entrepreneurs, but seldom hear anything 'disruptive' -- and often walk quickly away from deals that seem likely to trigger lawsuits over copyrights and licenses. North Bridge has invested in, which connects fans, artists and friends via mobile messages, among other plays. First Round is in, an advertising entertainment network. Silicon Valley Insider Managing Editor Peter Kafka moderated yesterday's VC discussion and blogged about related issues. blogged portions of the event, and The City Paper advanced it. Update: May 5, 2008 - Thanks to an anonymous reader who pointed out I had Fralic and Santinelli's respective affiliations transposed in the original text.

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