Jim Wilson/The New York Times

Drew Larner, right, is the chief of Rdio, a subscription music streaming service. Standing next to him is Carter Adamson, chief operating officer.

- $100 million IPO planned for Pandora
- $100 million in investment rumored to be in process for Spotify so it can launch in the U.S.
- Apple and Google are rumored to introduce "cloud-type" music services in 2011
- Andy Rubin, VP of Engineering at Google, who was the main force behind Android is now in charge of developing Google's digital music service

Venture capital investments in start-ups
- $57 million in venture capital since 2009 to digital music start-ups
        - Rdio raised $17.5 million in early Feb 2011  
        - SoundCloud €12.5 million
        - RootMusic $2.3 million 
        - Slacker $3 million
        - Songkick $6.5 million
        - Tuneup $9.3 million
        - FanBridge $2.35 million
        - 3G Multimedia $1.7 million
        - See the whole list of 163 online music startups here

Subscriber counts
- 80 million registered users for Pandora (but how many are paying subscribers?)
- 750,000 subscribers to Rhapsody, started in 2001 
- 400,000 subscribers to eMusic 
- 10 million subscribers to Spotify but only 750,000 pay $15 a month (rest are free subs) 
- 20 million subscribers to Netflix and Sirius XM each prove to investors that "consumers are willing to pay for streaming content"
- 200 million iTunes accounts with credit cards 

Pandora data
- 80 million registered users up from 46 million 12 mos ago 
- 50% share of all internet radio listening time among the top 20 stations and networks in the United States, according to a November 2010 report by Ando Media
- 50 million downloads of the Pandora app for smartphones
- Pandora app is a top-5 app across the four major smartphones according to Nielsen
- 1.4 billion Pandora stations created since 2005
- 8 billion "thumbs" collected since launch of service (listeners give a song a "thumbs up" if they like it)
- 3.9 billion hours of music streaming in fiscal year ending January 31, 2011
- Accumulated deficit of $83.9 million since inception in 2000
- Subscriber revenue increased from 9.1% of revenue to 13.6% of revenue from fiscal 2010 to first 9 months of fiscal 2011 (fiscal 2011 ended January 31, 2011 - but the prospectus was issued in early February 2011 so they did not have full year numbers for fiscal 2011)
- Main problem:  Pandora has not been able to generate enough revenue from its growth in listeners to cover its continuous operational costs

iTunes
- 10 billion songs sold by Apple in the iTunes store since 2003 
- 200 million accounts with credit cards now on iTunes (according to Steve Jobs iPad2 launch talk) 
- Apple, however, reports it has made no profit from iTunes 

Labels
- Record labels are tough negotiators - it took Spotify one year to come to agreement on American distribution with Sony and EMI 
- They are making it tough on a number of these startups 

Veterans are skeptical 
- “People are tantalized by the notion that all music is going to be digital, and that there’s a massive global demand that is not being met,” said Dave Goldberg, a former general manager of Yahoo Music who is now chief executive of SurveyMonkey, an online survey company. “But I don’t know that there’s a good solution out there for anybody who’s rationally looking at this as an investment.” 
- “A number of the investors have not invested in digital music before,” said David Pakman, a venture capitalist who is the former chief executive of the download service eMusic. “Usually the ones who have, have learned over the decade that it’s an impossibly hard place to make money.” 

Phil's take: I met Dave Goldberg, then CEO of Launch, in 1998 at the Harvard Business School. We disagreed about Launch's business prospects then (which he later sold to Yahoo). We agree today about the business prospects for music streaming services. There's no rational case for investors for most of these startups. But I do like listening to Pandora.

Resources:
Momentum Index 163 Music Related Companies
February 16, 2011
http://momentumindex.com/?p=452 

Quora: Social and Online Music Startups
http://www.quora.com/Social-Online-Music-Startups 

Pandora S-1 Prospectus filing with the SEC
February 11, 2011
http://www.sec.gov/Archives/edgar/data/1230276/000119312511032963/ds1.htm 

Articles
Investors Are Drawn Anew to Digital Music 
The New York Times 
February 28, 2011 
http://www.nytimes.com/2011/03/01/business/media/01music.html?_r=1#

Google Music: Meet The Executive Team
Billboard
February 15, 2011 
http://www.billboard.biz/bbbiz/industry/digital-and-mobile/google-music-meet-... 

Songkick raises $2 million to help people track, catalog live music
TechCrunch
February 15, 2011 
http://eu.techcrunch.com/2011/02/15/songkick-raises-2-million-to-help-people-...

Will Pandora IPO be a Threat to These Well Established Companies?: CVC, SIRI, RRST
These Radio & Satellite Industry Stocks are Shielded from Pandora's Wrath
SmallCapNetwork
February 14, 2011 
http://www.smallcapnetwork.com/Will-Pandora-IPO-be-a-Threat-to-These-Well-Est...

With $2 Million In Fresh Funding, FanBridge Buys DamnTheRadio
TechCrunch
January 8, 2011
http://techcrunch.com/2011/01/18/2-million-fanbridge-damntheradio/ 

RootMusic Raises $2.3 Million To Help Bands Build Spectacular Facebook Pages
TechCrunch
January 5, 2011
http://techcrunch.com/2011/01/05/rootmusic-funding

Musicians – This Is How You Create A Great Looking Facebook Page (RootMusic)
TechCrunch
June 27, 2010
http://techcrunch.com/2010/06/27/facebook-musicians-page/ 

TuneUp Brings Order To Your iTunes Library (For a Fee)
TechCrunch
May 12, 2008
http://techcrunch.com/2008/05/12/tuneup-brings-order-to-your-itunes-library-f...