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I thought of Leonhard's rant while various music industry reports and announcements came rolling through these past few days. He's right. The industry really is loopy. Venture capital and private equity continue to throw serious money into all sorts of digital music endeavors while previously seeded companies flounder and die with great regularity. The majors, which often continue to act like a combination of General Custer and Marie Antoinette, must shoulder some of the blame. But part of it reflects a herd mentality among the moneyed. They all seem to be chasing that next big thing out there. Right off the cliff. Investors obviously hope Friedrich Nietzsche was right. So far, however, the only thing to come out of the music industry's current state of chaos is more chaos. On Wednesday, a music-sharing site for musicians called SoundCloud announced it had raised €2.5 million ($3.3 million). That same day, Macrovision Solutions Corp. said it was paying $16.5 million in cash for Muze Inc., which calls itself a media-preview and discovery service, with an emphasis on music. A day earlier, a new Internet radio service called Goom Radio announced it had raised $16 million in Series A money from a trio of venture capital firms. Especially young listeners are flocking to streaming music. Yet economic viability is so far completely elusive, as Leonhard and his partners discovered. Even the most popular offerings, like Pandora Radio, are having a tough time surviving. Meanwhile, add another body to the graveyard. According to reports from Digital Music News, PassAlong Networks is winding down and will attempt to sell various businesses. Good luck. The Nashville-based digital-media company offers online music services, just like dozens of competitors out there. Founder and CEO Dave Jaworski didn't return phone calls and e-mail requesting further comment. A spokesperson didn't get back, either. PassAlong had raised $35 million, according to Jaworski, when I interviewed him almost two years back. To keep the company alive, Jaworski was trying to raise an additional $30 million, according to an interview with Venture Nashville Connections late last year. -- Matt Miller See related story about Goom from Dealscape Matt Miller covers distressed investing for The Deal.
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The music industry "is certifiably dysfunctional," wrote an exasperated Gerd Leonhard last year. Leonhard had just shut down his streaming music service, Sonific, after it became obvious that the fees demanded from the four major record companies were unsustainable. "Doing business under the existing rules of the major labels will simply amount to economic suicide," he concluded. So, along with Sonific's other backers, Gerd, whose day job is to roam the world as a technologist, pulled the plug.
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