Jason Ball's TechBytes

Technology & Venture Capital. Early stage venture capital news mixed with personal views and comments

Big Music is still a Big Fat Monopolist.

Here are a few excerpts from a recent article in the International Herald:

“At 99 cents, it’s difficult for all of us to make a decent living,” he conceded, but added, “It’s a fair way to begin the business.”

“The way this business is structured at the moment,” said Christophe Cuvillier, vice president for development at FNAC, the leading French music retailer and the operator of its own digital music store, “there’s no way today to make money.”

Thomas Hesse, president of the global digital business group for Sony BMG Music Entertainment, called it “an introductory offer.”

“In the longer term, we believe music is worth more. And we should resist the temptation to price music down to zero just because we’re competing with free,” said Hesse, underscoring the position of the major music content owners.

“Is that the right price point?” Conte asked rhetorically. “It’s a stake in the ground. It will find its own level.”

Several executives said they wanted to move consumers toward signing up for monthly subscriptions that let them download music selections at will or “stream” songs like a radio station over their Internet connection.

“It’s the difference between pay-per-view and basic cable television,” said Dan Sheeran, senior vice president for international operations at RealNetworks, whose Rhapsody service operates on a subscription model. “We have done a lot of pricing studies. They spend more money using subscriptions.”

Pretty bold statements for an industry that is being crippled by digital innovation. Obviously these executives still believe that their High Street sales cash cow is sustainable. I can’t believe they are even considering making music even *more* expensive.

Digital music sales have no manufacture, wrapping, shipping, stocking, inventory, retail, costs, etc. Period. If the record labels have been making money all this time selling CDs in stores at $15.99, then with no cost associated with the delivery of their product, they should be making profit at $9.99 on the iTunes music store.

I expect music to be *cheaper* digitally. If it isn’t cheaper, then I prefer the shrink-wrapped jewel box with my music, thank you.

I will say it again, like many others have, LOWER THE PRICE TO $0.50 for online music. The flood gates will open, and all those “lost sales” to “piracy” will turn into sales. The peer to peer networks will disappear. Kill the store distribution, eliminate the channel conflict.

The music industry needs a serious restructuring, and it means loosening the death grip the monopolist-inspired music industry has on pricing. Every time I read comments like those above, it literally makes me want to steal music.

(And they call us “Vulture Capitalists”…I would say VCs pale beside music industry execuitives.)

Filed under: Other

Europe saw IPO recovery last year

This is a “is the glass half full or half empty” report. Personally, I don’t find 34 companies for ALL of Europe to be that exciting (the US had 67). Thirty-four companies for the UK alone would be a respectable number.

Yes, things have improved since 2003’s paltry 9 IPOs, but there is still plenty of room to grow. Additionally, if the £3 million “IPO” on London’s AIM and OFEX markets are included in those figures, then I am truly dissapointed with last year’s figures.

More at (free subscription req’d): PrivateEquityOnline.com.

Filed under: Venture Capital

Red Herring’s Top 100 Innovative Companies

In RedHerring’s Top 10 Trends issue they include the “Top 100 Innovative Companies”. I had a good laugh when I saw AuctionDrop included in the list.

AuctionDrop “simplifies the Internet auction proccess by providing drop-off points for anyone who wants to sell their items on eBay”.

I have looked at similar businesses here in London and passed on them without a second thought. Not because I don’t believe there is a market for this type of service, because there is, or they will not make money, because they will. I simply find it hard to justify backing a company with several million when there are absolutely no barriers to entry to that business.

AuctionDrop has raised $17.2 million from Mobius Venture Capital and Draper Associates in the US. Sorry guys, these are the type of investments that got the VC industry in trouble to begin with. For you to get your IRRs that company is going to need to be a $100 million business in 5 years. That adds up to a lot of trinkets and Star Wars figures…

And Red Herring, what kind of medication are you guys on? Surely you can find better companies out there to include in a Top 100 list, and if you can’t, then make it the “Top 50″ list.

Rant off.

Filed under: Other, Technology, Venture Capital

Red Herring’s Top 100 Innovative Companies

In RedHerring’s Top 10 Trends issue they include the “Top 100 Innovative Companies”. I had a good laugh when I saw AuctionDrop included in the list.

AuctionDrop “simplifies the Internet auction proccess by providing drop-off points for anyone who wants to sell their items on eBay”.

I have looked at similar businesses here in London and passed on them without a second thought. Not because I don’t believe there is a market for this type of service, because there is, or they will not make money, because they will. I simply find it hard to justify backing a company with several million when there are absolutely no barriers to entry to that business.

AuctionDrop has raised $17.2 million from Mobius Venture Capital and Draper Associates in the US. Sorry guys, these are the type of investments that got the VC industry in trouble to begin with. For you to get your IRRs that company is going to need to be a $100 million business in 5 years. That adds up to a lot of trinkets and Star Wars figures…

And Red Herring, what kind of medication are you guys on? Surely you can find better companies out there to include in a Top 100 list, and if you can’t, then make it the “Top 50″ list.

Rant off.

Filed under: Other, Technology, Venture Capital

Red Herring’s Top 100 Innovative Companies

In RedHerring’s Top 10 Trends issue they include the “Top 100 Innovative Companies”. I had a good laugh when I saw AuctionDrop included in the list.

AuctionDrop “simplifies the Internet auction proccess by providing drop-off points for anyone who wants to sell their items on eBay”.

I have looked at similar businesses here in London and passed on them without a second thought. Not because I don’t believe there is a market for this type of service, because there is, or they will not make money, because they will. I simply find it hard to justify backing a company with several million when there are absolutely no barriers to entry to that business.

AuctionDrop has raised $17.2 million from Mobius Venture Capital and Draper Associates in the US. Sorry guys, these are the type of investments that got the VC industry in trouble to begin with. For you to get your IRRs that company is going to need to be a $100 million business in 5 years. That adds up to a lot of trinkets and Star Wars figures…

And Red Herring, what kind of medication are you guys on? Surely you can find better companies out there to include in a Top 100 list, and if you can’t, then make it the “Top 50″ list.

Rant off.

Filed under: Other, Technology, Venture Capital

The Dragon’s Den on BBC2, January 4, 2005

I just caught an episode of the Dragon’s Den on BBC2. Firstly, I think investors should never address entrepreneurs the way those guys do. Investors should be critical without being cynical and certainly not rude. Granted, one of the entrepreneurs was very rude to the investors, but, two wrongs don’t make a right.

For the designers from Glasgow: I realize getting funding for your type of business is difficult. The start-up costs are high and the potential return for an investor is minimal. I think you would have an excellent opportunity to set up a “store within a store”, i.e. setting up shop in the Glasgow equivalent of Selfridge’s on a revenue-share basis. That cuts your overhead to zero out of pocket expense, gives you the type of high profile environment you need and gets your business rolling. Once profits are there, you can open your own boutique. Who knows, maybe your next investor will decide to invest after trying out your designer wares. Good luck!

The only deal that went through was £150,000 for 40% of the Umbrella company disguised as an advertising business for the London Tube. The entrepreneur was very reluctant to move from the original offer of 20% for £150,000… My main question was how much has he put into the company? The equity investors are essentially taking all of the risk, and if the business gets sold for £1 million, the entrepreneur goes home with £600,000 with an initial investment of £0 and the investors get £400,000 after investing £150k. Who is the dragon in that scenario?

I look forward to the next episode…

Filed under: Venture Capital

The Dragon’s Den on BBC2, January 4, 2005

I just caught an episode of the Dragon’s Den on BBC2. Firstly, I think investors should never address entrepreneurs the way those guys do. Investors should be critical without being cynical and certainly not rude. Granted, one of the entrepreneurs was very rude to the investors, but, two wrongs don’t make a right.

For the designers from Glasgow: I realize getting funding for your type of business is difficult. The start-up costs are high and the potential return for an investor is minimal. I think you would have an excellent opportunity to set up a “store within a store”, i.e. setting up shop in the Glasgow equivalent of Selfridge’s on a revenue-share basis. That cuts your overhead to zero out of pocket expense, gives you the type of high profile environment you need and gets your business rolling. Once profits are there, you can open your own boutique. Who knows, maybe your next investor will decide to invest after trying out your designer wares. Good luck!

The only deal that went through was £150,000 for 40% of the Umbrella company disguised as an advertising business for the London Tube. The entrepreneur was very reluctant to move from the original offer of 20% for £150,000… My main question was how much has he put into the company? The equity investors are essentially taking all of the risk, and if the business gets sold for £1 million, the entrepreneur goes home with £600,000 with an initial investment of £0 and the investors get £400,000 after investing £150k. Who is the dragon in that scenario?

I look forward to the next episode…

Filed under: Venture Capital

The Dragon’s Den on BBC2, January 4, 2005

I just caught an episode of the Dragon’s Den on BBC2. Firstly, I think investors should never address entrepreneurs the way those guys do. Investors should be critical without being cynical and certainly not rude. Granted, one of the entrepreneurs was very rude to the investors, but, two wrongs don’t make a right.

For the designers from Glasgow: I realize getting funding for your type of business is difficult. The start-up costs are high and the potential return for an investor is minimal. I think you would have an excellent opportunity to set up a “store within a store”, i.e. setting up shop in the Glasgow equivalent of Selfridge’s on a revenue-share basis. That cuts your overhead to zero out of pocket expense, gives you the type of high profile environment you need and gets your business rolling. Once profits are there, you can open your own boutique. Who knows, maybe your next investor will decide to invest after trying out your designer wares. Good luck!

The only deal that went through was £150,000 for 40% of the Umbrella company disguised as an advertising business for the London Tube. The entrepreneur was very reluctant to move from the original offer of 20% for £150,000… My main question was how much has he put into the company? The equity investors are essentially taking all of the risk, and if the business gets sold for £1 million, the entrepreneur goes home with £600,000 with an initial investment of £0 and the investors get £400,000 after investing £150k. Who is the dragon in that scenario?

I look forward to the next episode…

Filed under: Venture Capital

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