In an internet and social media oriented world, the traditional music label 'push' model is in what can only be described as a death spiral. Like it or not, at its core, recorded music is now essentially free.
But for Wellington-originated MusicHype, it’s a case of yesterday New Zealand, today the United States, tomorrow the world as it makes its play to reward fans, provide returns for bands and share a slice of the action in the process.
MH aggregates and makes sense of the huge amount of data coming out of Facebook and Twitter with relation to music, rewarding fans of bands and providing a no risk means for those bands to make more money - usually through merchandise or concert ticket sales. The start-up operates under the premise that there are better ways to make money from music than the music itself, and that people want to be recognised for their love of a singer or band.
New Zealand has been used as a 'table top model of the world', where our relatively tiny economy with all the elements of a really big economy has been used to prove the model. (See sticK's original MH story from 2010 here).
What NZ has demonstrated is that about 15% of first time visitors to MH's website sign up as members, and about 15% of those members go on to purchase products from the site.
"These are big numbers," says MH's recently appointed New York-based chief executive Kevin King. King's had a 15 year career in the digital, media and music industry, noting that "since I was a kid I've made most of my consumer purchases because a friend recommended it." The Facebook and Twitter friends 'recommendations' and 'likes', interpreted by MH's 'Appreciation Engine' will in turn act as the driver for company's American expansion.
"This is the big opportunity in the music space," King says. "Mobile and social networking's taking off and the challenge is to connect the dots, with MusicHype's database making sense of the chatter."
Through the MH platform music fans (of particularly bands) are rewarded, much like Airpoints or loyalty schemes. Through Twitter and Facebook such fans already have conversations around music, and MH adds elements such as competitions to further engage them.
For example Kiwi group Katchafire has more than 140,000 fans via MH. King envisages big name American bands having more than a million fans signing up through MH, and if 15% of these people purchase products…..well, the numbers and revenues start to really add up.
"The technology we've developed is highly scalable, and because we're a technology-centric business, we don't have to have a particularly high touch, person to person interaction," he says. "Technology does the heavy lifting."
For bands, MH helps deliver value to fans and everyone is able to make money. However, unlike traditional music labels, MH has no philosophical, commercial or moral need or requirement to own the band's intellectual property (i.e. the music) – they believe the artists’ work should be owned by the artist.
"We allow fans to make educated decisions about concert tickets and merchandise; around actions that were occurring anyway," says King.
MH's growth sees co-founders Jeff Mitchell and Annabel Youens locating to west coast America in May, joining King who remains in New York. Under its growth model, MH's software development team and customer service will remain in Wellington, and North America the company's corporate headquarters and business development centre.
The company isn’t adverse to being an acquisition target but is looking to have massive
"In five years time we're shooting to have millions of members," he says. "We also want to be a significant channel of revenue for larger music acts. We see that they'll want to come to us and with us because we'll be generating value for them."
In the fast moving world of music, media and digital enterprise, MusicHype's play is obtaining
MH has been backed by seed investment from Wellington's WebFund, and Christchurch angel investors Rutherford Innovation Fund.
Last year it was a finalist in the NZ Open Source Awards in Business, and was selected to present in Cannes, France at the international music event, MIDEM.
For many older people, (sticK included), the amount of time and effort put into Facebook and Twitter by their users is mind-boggling. But, as pieces of information, the data generated by these users, stripped of its chatter and interpreted for meaning, can be a goldmine.
This is where MusicHype's engagement with fans and bands could be very valuable. Given the internet's speed, it shouldn't take long to see whether it has struck the mother lode.