Learning the hard way: music service Wahwah.fm killed by license costs

It was an innovative idea. Wahwah.fm was going to bring pirate radio into the social age through its smartphone app, which let users turn their iPhone playlists into live web radio broadcasts. Users could message each other and list broadcasts as Facebook events. The service peaked at 50,000 users. And then…

… Wahwah.fm collapsed.

Earlier this week, the company said it was going offline for the summer for a technical overhaul and licensing rethink. As CEO Philipp Eibach put it to me, Wahwah.fm is “making a step to the side”.

The reality is, the model didn’t work – and the reason for that failure is instructive to anyone trying to make the whole music-tech thing viable in the current climate.

After all, this is a company that tried to create a new music business model, and to do it legally.

Unsurprisingly, it all came down to licensing. At the heart of Wahwah.fm was the streaming service of UK firm 7digital. Armed with 7digital’s catalogue, Wahwah.fm still had to get the rights to play the songs in the U.S. and Germany, where it operated.

The company’s clever idea was to adopt a radio licensing model. Effectively, it said that, since it did not provide interactive or on-demand streaming, it should be able to pay lower royalties.

“We licensed the whole thing as non-interactive streaming – a radio license – but it was not enough to provide the user experience we envisioned,” CEO Philipp Eibach told me. “People could only tune in to listen to something live but they couldn’t listen to the song afterwards, or skip tracks. People really liked it being a radio station and the possibility of broadcasting your own music to friends around you, though.”

It wasn’t just a problem with user experience, though. As Eibach painfully discovered, the radio model meant constant renegotiation with the labels and collection societies – few of whom are well-disposed towards new business models in the first place.

“Once you have a license, it’s valid for a few months and you have to negotiate again and again. We realized it’s a huge overhead, the whole licensing and legal thing,” he said. “There’s so much grey zone. You talk to them and they don’t have a clue about new models, and are suspicious of new things.”

“There should be more competition, so there is a need for them to look into new models. Maybe more collecting societies would increase the pressure.”

So now what? Eibach says he and the six staff that are still “more or less loosely connected” intend to make a comeback later this year. The plan is to “hook up” with an existing on-demand service of the liked of Spotify or Simfy, so Wahwah.fm can “effectively outsource the whole licensing thing”.

Apart from that change of base, the company still wants to continue with its live web radio idea. “We still believe in the basic concept of Wahwah.fm,” Eibach said. “We didn’t find our way in the first step, but we’re still on it.”

One of the really intriguing possibilities with the service has always been its potential for letting people broadcast their own content – both recordings and live, radio-station-style talking – alongside or over the licensed songs. Is that still going to happen?

“It’s under discussion, but then again you stumble into this licensing thing. The big labels are really suspicious about user generated content.”

Any advice for other startups wanting to get into the music biz? “Overall, don’t do music,” Eibach laughed bitterly.

“Really have a closer look if it’s worth going into this legal struggle. Sometimes you have more freedom if you do the legal stuff on your own, but it means more hassles.”

“We tried to do it legally from day one, but maybe this means it takes longer.”