Sitar Teli, Managing Partner at investment firm Connect Ventures, didn’t come to Cannes to play that game.
Teli is one of the bosses at London-based Connect, which has helped fund music brands Boiler Room and Auxy, as well as a range of other startups.
Her credentials in the world of digital investment are impressive: Teli was previously with Doughty Hanson Technology Ventures, where she led their Series A round in SoundCloud.
At Midem on Friday (June 3), Teli appeared on the innocuous-sounding panel discussion ‘Startups & Corporations: from Competition to Coopetition’.
“Music’s been a really shitty industry to work with for years.”
Sitar teli, Connect Ventures
It began with a simple question about whether the relationship between tech and music companies has now reached a more helpful place for both parties – a query welcomed with a spot of self-congratulation.
Mark Piibe, EVP Global Business Development & Digital Strategy at Sony Music, pointed out that his company was early to license both Spotify and Next Big Sound – clear examples of how things have improved.
Then Teli decided to speak her mind.
“I’m going to say no, it’s not – and [music’s] been a really shitty industry to work with for years,” she said.
The entire panel visibly shuffled slightly in their seats.
Teli went on: “[Music] was hit much harder by a lot of the early internet stuff that happened – particularly file-sharing – than other content industries. And the reaction to that was to [become] distrustful of technology companies.
It’s become really difficult for startups to be PROFITABLE.”
“So while there has been a history of trying to work with [labels], and some of the deals done have [involved] collaboration, it hasn’t been in a way that’s sustainable for the startup – and has led to the startups being quite dependent on the labels for much, much longer.
“It’s become really difficult for startups to be profitable.”
Teli pointed out that the structure of the music industry placed ultimate licensing power in the hands of a few companies – ie. the majors – and they therefore had “a lot more bargaining power than a startup ever will”.
She also accepted there were practical limitations working against music companies, like the fact Netflix can hire a well-known actor to make an original film, but artists typically wouldn’t be able to record a second album in a year for a digital service.
“As a VC, to define success you think about companies that have scaled to the point where they’re independent and profitable. I can’t think of a music tech company that’s done that.”
But surely the likes of Spotify prove that music’s relationship with technology companies has improved?
Teli remains unconvinced.
She said: “As a VC, to define success you think about companies that have scaled to the point where they’re then independent and profitable, and I actually can’t think of a music tech company that’s done that. Which is very worrying, right?
“If you’re a VC and you’re looking at different industries, music is one which VCs generally avoid.
“Because even the largest, most successful company in the sector – that’s a venture-backed startup… is Spotify, and it lost a couple of hundred millions of dollars last year.”
You can watch the Midem panel below, with Teli’s blunt opinions about the music biz kicking off at around 4 mins 28 seconds.
Later in the discussion, Teli also pointed out: “YouTube is actually the biggest player in the music industry that isn’t a label – it’s the bigger distributor of music there is.
“I don’t know if they’re internally profitable or not, but when you look at what the music industry is you have to look much broader than just the companies you traditionally associate with being in the [business]. YouTube’s one of the most influential players there is.”
She delivers an inarguable point, there. And plenty of food for thought elsewhere.Music Business Worldwide
