Desi Journalist Bearish on Music Startups

Desi journalist Rafat Ali, a respected figure in U.S. digital media circles, put out a blog post yesterday that sees little hope for music startups.

An engineering graduate from the Aligarh Muslim University in India, Ali is the founder of PaidContent and other digital media blogs that were sold last year to UK’s Guardian Group for $30 million.

Here’s an excerpt from Ali’s post:

The more I think about it, the more I see the music start-ups space as a dog that won’t ever bark..err…sing. The MySpace-iLike deal—and the price that iLike got—is a perfect example of what will continue to shape all of the online and mobile music startups. As I see it, there are endemic structural and cultural reasons for it. The first part, something that has borne out over the last few years, is obvious: that margins in music downloads are horrible for anyone without iTunes scale (and even that’s not growing rapidly), and that music labels are the choke point for most of the startups in the download space. Then, the other part about ad-supported music startups that we all instinctively know: too little ad money sloshing around for too many startups and the economics of ad rev share don’t work out well. Plus, there are too many interested parties trying to leech off money at every stage of the value chain for this to ever scale.

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