Napster Nazguled the Music Biz, but What the Internet Tooketh Away, the Cloud Giveth Back

Once upon a time, there was a wonderful land of music, joy, and love. This land was known as “The Music Biz” and it was inhabited by handsome guy troubadours and gorgeous girl chanteuses who every day woke up and warbled beautiful songs into recording devices, which then transferred the tunes onto eldritch playing apparatuses made of tape, plastic and vinyl. If the people who listened to the tape, vinyl, and CDs found it pleasing, they bought large numbers of the musical devices, enriching the grateful music makers. More treasure was paid to the musicians when they appeared at clubs, auditoriums, and sometimes even entire parks, to be mesmerized by rich melodies and memorable lyrics sung live. Legendary are the artists and groups who became wealthy in this long ago, faraway place. Frank Sinatra. Elvis Presley. The Beatles. Rick Astley.

The guardians of this happy land were various record label executives, agents, recording studios and sundry many other personnel. These stewards of the Biz were tasked with dispensing rewards and incentives to the composers of songs and the writers of lyrics, including limousine trips, flights on private jets, luxurious recording studios situated in mansions, opportunities to meet many winsome lads and lasses and drugs. Lots and lots of drugs.

Then one day an evil Nazgul named “Napster” entered the golden realm. Napster used the evil power of its special Palantiri…errr…remote servers to allow trolls and gremlins (who turned out to comprise most of the golden land’s population) to bypass the special apparatuses and listen to the troubadours’ and chanteuses’ music for free. The land began to wither. The tires on the limousines went flat, the musicians had to fly coach, recording studios were relocated to cheap warehouses, and drug budgets were cut drastically for all. (This last was probably a good thing.)

But, what the evil Nazgul took from the music business, SaaS is showing sign of returning, to some degree. After all, one man’s Palantir is another’s Spotify. The Cloud has democratized music as it has software distribution, print publishing, media distribution, the press (CNN and the New York Times can tell you more about this) and on and on. In this ongoing and continuous Brave New World of Continual Disruption, we sat down with Music Gateway CEO Jon Skinner to discuss how the industry is coping with over 15 years of rapid (and most cases, unwanted) change and to see how the music is being reshaped by the Cloud.

Company Profile

Company:	Music Gateway
Company HQ:	Surrey, England
Market/Industry:	Music Industry, Media
Company Principals:	Jon Skinner CEO / Founder, Andrew Pepper (Chairman), Harvey Shulman (Director), Reynold D’Silva (Director)
Founded/Years in Business:	May 2011 / 3
Company Development Type:	Private Limited Company
Number of Employees:	13
% of Revenue Growth Over Last Years:	135% revenue growth
Notable Customers:	Dave Stewart, Red Bull Media House, Universal Publishing Production Music, Sizzer (Amsterdam), CORD Worldwide. Over 35,000 registered users are currently on our platform including over 3,000 companies. 30% US, 30% UK, 40% ROW global demographic.

Softletter: OK, let’s first obtain some background information on your company. Your firm is Music Gateway and you’re located in Surrey, England. What does your firm do and who are its primary customers?

Jon: Music Gateway’s primary business model is to create a B2B marketplace for musicians equivalent to the ones Freelancer and other services created for designers, programmers, business writers and other professionals.

Music Gateway is a SaaS system and consists three parts, Music Gateway, a private portal service, and now Sync Portal.

Why did you create Music Gateway?

As you know, the music business was blown up in the early 2000s, first by Napster and the other file “sharing” systems, then by the various streaming offerings. Music has been digital disruption’s poster child. We were the first major consumer market to be “overthrown” by the power of the bit.

The result is the influence and revenue of the record labels shrank and they’re now unable (and unwilling) to spend the type of money they used to on new and upcoming artists. But that hasn’t stopped people from creating music. Garage bands still form at a furious pace, independent singers are seeking new opportunities to perform, and songwriters and lyricists are still churning out new tunes.

Also, the demand for music by media is increasing. The number of new shows being created for public consumption isn’t going down. Let’s look at TV. Decades ago, three networks provided the bulk of demand for new programming. Then cable showed up. Then new networks formed. Independent syndicators entered the market.

Today Amazon, NetFlix, Hulu, Flipkart and others are entering the market with original content, all of which need music, some of it quite specialized. In the U.S., the new NetFlix series, Stranger Things is very popular, right?

Yes. We watch it. It’s set in the 80s and the plot and look of the series remind many people of Steven King horror films and books of that era.

Precisely. And the music supervisor for the series, Nora Felder, will only play 80s music from that period on the show. The music doesn’t have to rise to “greatest hits” level, but it does have to be authentic. An opportunity for some of those “also ran” bands to finally make some money.

Also, don’t forget games. Movies still need music, but so does the gaming industry, which is now bigger than Hollywood. Not to mention the advertising industry, which isn’t going anywhere.

So, new music is being created and there’s a market that needs and will buy it. What Music Gateway is doing is providing the connectivity the labels no longer can.

Can you be more precise about what you’re connecting?

Yes. Via Music Gateway, musicians and service providers can connect and contract with each other for resources including:

• Video production
• Studio recording facility rentals
• Designers
• Remixing
• Session musicians
• Accounting (tracking and managing music rights can be complex)

There’s more. There are many moving parts involved in creating and distributing music.

How does the system work?

Our core system enables musicians and service provider access to an online project management system optimized for music services collaboration. If you’re looking for a service, you post up a project informing our subscribers about what you need. If you’re looking to sell your services, you can pitch to open projects. The project manager enables both parties to easily trade media files, as well as offering specialized functions such as the ability to drop comments into audio timelines. Our system makes extensive use of tagging to assist both parties to help focus on projects/pitches of mutual interest.

We also offer a service where companies who need music create specialized submission pages where composers, artists, bands, et al can submit their music and provide relevant details.

In addition, after we rolled out Music Gateway, we were approached by several music companies about creating portals for their companies. These portals use our infrastructure and systems but are privately branded and open only to the company’s partners and internal management.

The ultimate value our system provides to the market is increased speed of connectivity and increased means of distribution, particularly for new artists entering the market. The labels aren’t available to them, so new approaches such as ours are filling the gaps being created.

What’s your revenue model?

We have a tiered-pricing system. The first level is free, but when two parties exchange services, we charge a higher commission. Also, the number of pitches you can submit are limited as opposed to higher subscription levels. For premium plans, the commission rate is lower and the number of pitches you send rises.

Let’s move to Sync Portal. What is it and why does the market need it?

Sync Portal is designed to speed up the licensing and availability of music to the market, with a particular focus on indie producers and artists. In the music business, licensing can be a nightmare. Often, rights to a work can be split among multiple writers/musicians, the labels (publishers), heirs to a deceased artist and on and on.

This has always been a problem, particularly for music supervisors, professionals who you don’t hear much about but who buy a great deal of music for the industry and different media platforms. Sync Portal provides them and anyone who wants to “one stop” purchase licensing rights to music a place and means to do so. We’re working with the LA Guild of Music Supervisors to build out the system along with a partner in the U.K. Dave Stewart of the Eurythmics is on our board and is working with us to further develop the program and system.

Also, if a music supervisor or customer is looking for specific genres, we create and pitch playlists to portal subscribers. We anticipate the system will evolve to the point where it will be more self-service on both sides of the equation.

When was  Sync Portal introduced?

Early in January. Within a week, 200 contracts had been signed with publishers.

Any examples of indie musicians and organizations who are using your system to breakthrough to widespread sales and market acceptance?

We have several. Elizmi, Ashtar Cassini, 2020Vision and more. We have a blog that provides more news and information.

In creating the Sync Portal platform, what was the single biggest business obstacle you had to overcome?

Developing a very streamlined development process that matched our subscriber’s needs We had to work hard to ensure we captured all the complex metadata requirements involved in tracking music rights. To support this, we created a very lean and mean coding and domain specialist team, where the CEO (myself) was able to translate market needs into tangible solutions within our platform.

Was your development done via British resources and programmers? Of did you use an outsource model.

We used all in-house UK developers. My CTO Nick Barham worked with me at my last company, so we have an excellent understanding and communicate well.

What platform did you build your new system with and what tools did you use?

We built our own framework, as ones now available in the market were too restrictive for where we needed to go. We write natively in PHP, JS and use Bootstrap for the inner site. Everything front end is custom.

As someone closely involved in the music business, how do you think musicians will make musicians make money in the future. Up to the advent of Napster and everything that followed, the bulk was made via packaged music (albums), royalties from airplay, live performances and merchandising. How does this equation change in the future?

Last year, the industry grew by 3%, so we believe a rebirth is taking place. This link provides more detail on what’s taking place. We think it’s interesting that vinyl sales are growing.

We do too. We have a collection of vintage turntables whose value has grown nicely over the last three or four years. But how can a 100-year-old technology be relevant today?

In the last 10 years a throwaway culture developed in respect to music. The attitude was “It’s all free, don’t pay for anything.” The world recession shrunk disposable income. Movies suffered from this as well.

Now people have a bit more cash in their pocket. People value the visceral experience provided by vinyl and even, though to a lesser extent, tape. There’s also been something of a reaction to digital recording technology and increased interest reviving in some analog systems.

Vinyl can be a significant part of how an artist projects themselves and can fit in well with a merchandising strategy. It becomes part and parcel of how the musician projects their persona and brand. It’s a craft production that stands out and has intrinsic value because of that. Right now, vinyl cuts through the noise.

We think the Sync Portal model will become a key revenue driver, and live performances and merchandising will be core revenue.  The key with streaming music is volume plays. Artists also have to develop a more multi-media view of how their work can be consumed across many different markets, including advertising, games, and specialized opportunities (ring tones, for example).

SaaS systems can help open up these new opportunities. We’re proving that.

Contact info:

Phone: +44 (0) 203 143 3245

Email: [email protected]