Broken business models again...

In a tenuous link with several previous blog postings (this one and this one), the latest BBC dot.life posting by Cellan-Jones discusses the future of the music industry. It's an interesting summary of recent research on the music habits of the British public. Surprisingly, CDs remain by far the most popular music format, even amongst teenagers. This pleases me because – although I am a man that enjoys his eMusic downloads - I am also a chap that enjoys the CD, its artwork, its liner notes, its aesthetic qualities, etc.

Of course, the big finding that people have been latching onto is the large reduction in illegal file sharing. This is indeed good news; however, whilst many of these music fans will have switched to legal download services (e.g. iTunes, eMusic, Amazon, take your pick....), many have reverted to legal streaming services like Spotify. The trouble is, as Cellan-Jones points out, Spotify is another service lacking a robust business strategy. Advertising doesn't bring home the bacon and Spotify is relying on users upgrading to their pay-for premium service. Unfortunately, nobody is. Without this revenue stream Spotify is doomed in the longer term. Nothing new in this; Spotify simply joins the growing number of Web 2.0 services that are failing to monetise their innovations.

By coincidence Guardian columnist, Paul Carr, authored an article a few days ago entitled, 'I'm calling a 'time of death' for London's internet startup industry'. The article laments the failure of London based Web 2.0 companies to experience any modicum of successful or profitability. Many of his arguments have been applied elsewhere, but the London focus makes it compelling reading, particularly because Carr was around during the first dot.com boom and has personally witnessed the mysterious nature of revenue within new media. His book, 'Bringing Nothing To The Party: True Confessions Of A New Media Whore', says it all. Like Cellan-Jones, Carr also singles out Spotify, although professing to be "discreet with names". Says Carr:

"You see, the sad but true fact – and I've said this before, albeit in less aggressive terms – is that the London internet industry is increasingly, and terminally, screwed. I'll be discreet with names so as not to make things worse but since I've been back in town, I've met no fewer than three once-successful entrepreneurs who admit they're running out of money at a sickening rate (personally and professionally) with no prospect of raising more. I've seen two businesses close and one having its funding yanked suddenly because, basically, it was going nowhere fast. Everyone I speak to has the same story: investors aren't investing, revenues aren't coming, founders are being forced out – or leaving of their own accord – and no one seems to have the first idea what to do about it. Even Spotify, the current darling of London startups (which is actually from Sweden), might not be doing as well as it appears. The company says it's projecting profitability by the end of the year, with a senior staffer boasting about that fact to the geeks at the Juju event. Unfortunately, when one blogger challenged him to provide numbers to back it up, he was forced to admit that the profitability is less "projected" and more "hoped for". Meanwhile, rivals (and fellow London poster-children) Last.fm just saw all three of their founders depart the company leaving a huge hole at the top during a time of massive uncertainty. However you dress it up, that's not good."

No - it's not good; but when is the madness all going to end? Like many others, I keep on thinking the end is 'just round the corner', but it never comes. How many insane venture capitalists are left? Will it be a house of cards, and, if so, which card is going to be removed first? Perhaps a little schadenfreude is order of the day - shall we have a sweepstake?