The Digital-Music Business Blooms Where It Was Planted, Right Here

By REYHAN HARMANCI/ NY Times 03/05/11

The recording industry is dead. Long live digital music.
That statement is especially true in the Bay Area, where the list of digital music companies is long — and growing.

Nurtured by a constant supply of engineering and musical talent, these companies range from big consumer-oriented outfits like Rhapsody, Pandora and Apple’s iTunes to start-ups that work on mobile karaoke, make apps for musical instruments and create multi-user playlist management systems.

Brian Zisk, who has been running the semiannual SF MusicTech Summit for the past few years, estimates there are thousands of music technology outfits in the area and about 200 that attend his conference.

“They are popping like ants. They are everywhere,” Mr. Zisk said. “I think the Bay Area is the best in the world for this industry.”

Pandora, in Oakland, the subscription-based service founded in 2000 that creates playlists according to users’ musical tastes, filed for an initial public offering in February, hoping to raise $100 million. That same month, iTunes sold its 10-billionth song.

But it’s not only the high-profile companies that are in the news. David Hyman, who founded the subscription music and blog advertising sales network MOG in Berkeley in 2005, released MOG’s mobile app last summer. The company announced recently that Verizon would be pre-installing MOG on all 4G Android phones.

The surfeit of companies makes it hard to generalize about the industry’s direction. Some are consumer-focused, like the subscription-based services Rhapsody, MOG and Rdio. Others, like the social media start-ups Bandcamp, Topspin and RootMusic, are intended to help musicians market themselves.

Other kinds of companies include the file-sharing service SoundCloud, a European company that recently opened an office in San Francisco, and Ioda, also in San Francisco, a distributor of independent digital music and video.

Digital-music entrepreneurship is not a new phenomenon locally. Mr. Hyman, for instance, founded his first company, Addicted to Noise, in San Francisco in the dot-com-boom days of 1994. He remembers occupying an area known as Audio Alley in the Mission district, spilling into South of Market. Mr. Hyman estimated that 20 to 30 music companies sprang up in the neighborhood at that time. Most have since folded, but they provided the foundation for today’s strong scene.

The challenges are different now than when the first wave of digital-music companies opened up shop. It took a while for people to get used to uploading, creating and listening to music online, and intellectual-property issues were murky. And now, Mr. Hyman noted, smart money is betting on the cloud. Music collections on home computers are being rendered obsolete in favor of services that stream sound into people’s homes, mobile devices and cars.

“The hard drive was an anomaly,” Mr. Hyman said. “It will be seen as a weird, short-lived period.”

Subscription-based solutions are especially hot. A popular service in Europe, Spotify, seems poised to arrive in the United States this year, and Rdio opened its doors here last August. Created by the founders of Skype, Rdio charges roughly the same as MOG ($5 a month for streaming music on a computer, $10 with added mobile service) but has enhanced social network features, so customers can track friends’ musical tastes.

According to Malthe Sigurdsson, vice president for product design at Rdio, the challenge is no longer to find music online but to sort it. “We have all the music in the world, and there’s a wide-open, blank search field,” he said.

Music technology may be growing up, but it’s still a chaotic time for business owners and consumers.

“The industry still has a lot of evolving to do,” said Tim Westergren, founder of Pandora.

Even those with a vested interest in keeping up can become overwhelmed. “Honestly, there seem to be too many of these ventures,” said Lynne Angel, who plays in a band called Tartufi, writes online record reviews and books live music for a Mission bar.

Ms. Angel said she found herself pining for an unlikely source of nostalgia. “MySpace has one of the perfect band profile setups,” she said, “but it’s so irrelevant now.”

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