I was talking to an executive at a major label the other day. We were talking about startups and he noted that they either sue these companies out of business or legitimize them out of business. That is not far from the truth. How many legitimate, standalone digital businesses can you name that rely on licenses from the labels for their primary business and are profitable? Let’s categorize by business model:
E-Commerce/Transaction-based: iTunes immediately comes to mind. It may be profitable on its own, but we all know that Apple’s main business is to sell iPods and now iPhones. eMusic is the other one, and I think it has a real business on its hands — of course the vast majority of its repertoire is non-major label.
Music Subscriptions: This segment is dominated by Rhapsody and Napster. Neither is solely a music subscription service, but that’s what both are best known for. At any rate, neither is profitable. RealNetworks’ music business lost $1.9 M in the second quarter of this year. Napster? Well its stock chart kinda says it all; it’s currently trading for a little less than the cash it has on its books. Read More about Face the Music: It’s Time To Fix Licensing