Tuesday, April 22, 2008

Sonfic Silenced By Catch 22

Sonific is shutting down its site on May 1st, the site provides an explanation of this decision in which it describes the online music industry as 'certifiably dysfunctional' with all the available business options being unacceptable to the company.

The document also includes links to other sites which labels and artists can use to promote its music. Notably absent are the 3 biggest players - myspace, imeem and last.fm - sites which sonific has complained about in the past. I'm sure they're devastated about being left out of the will and I expect their respective CEO's to be out at the local dive bars crying into their drink.

A message by Gerd Leonhard, Co-Founder & CEO
As a consequence of a the unworkable music licensing situation and the resulting lack of solid revenue modeling Sonific's founders and investors have decided to temporarily take Sonific.com and Sonific.net offline. While we are looking for other ways to realize our vision we are also open to talking to any interested partythat may have use for Sonific's user base, content relationships, technologies or distribution network (please contact us anytime to find out more). Together with some other partners, we may also investigate the concept of making Sonific a paid-for service that is provided to artists, record labels and other content providers on a white-label basis.Here are some background details on our decision:

1) There are countless startups providing access to any and all music streams without any license whatsoever. However, when we approached the major record label decision makers in order to obtain licenses for some of the music in their catalogs we have routinely faced demands for very large cash advances and fixed per-stream minimum payments, pressure to give them 'free' company equity, and requirements of utterly bizarre usage restrictions. It seems that the industry's major stakeholders still prefer this turf to remain unlicensed rather than to allow real-life, workable and market-based solutions to emerge by working with new companies such as Sonific. This is not the way forward.

2) We therefore had to realize that a company that wants to provide interactive streaming music services must either a) risk the constant complaints of their users, due to the lack of hit content b) proceed to use any and all music (this is routinely done by allowing users to upload their own MP3s) without the required licenses, and therefore be at the total mercy of the record labels at some point in time, and c) build a huge audience very quickly, based on having the content available - permission or not -, and then very quickly sell themselves to a large company that will take care of placating the labels while the money is plenty and the pockets are deep.

Unfortunately we don't like any of these choices.

The bottom line is that this industry is certifiably dysfunctional and that we do not see a plausible path to take at this time. We neither want to engage in so-called copyright infringement nor do we have millions of dollars available to buy our way in when it is abundantly clear that doing business under the existing rules of the major labels will simply amount to economic suicide.

Almost a billion people now use music to stream on their blogs, social network pages, home-pages and user profiles – this is indeed a veritable gold mine for music marketing and selling, and it can make serious money for artists and composers. Yet, the established players in the music industry are still looking to simply squeeze 'permission fees' from companies that want to serve this market, instead of building new opportunities together. Maybe, just like Radio over 100 years ago, a plausible conclusion may just be that this must apparently be done without permission while the industry catches up - but we shall leave this for others to explore
this theme.

We want to thank all our partners and the many artists, independent record labels as well as the few major label new media people that dared to try us anyway, and the leading music aggregators that have provided the over 200.000 songs that Sonific has offered until now. We also want to thank our faithful users that played our music every day, and the over 80.000 people hat have signed up for our service, and we apologize for having to pull the plug on you. We hope to return in a different incarnation; please stay tuned via our blog.

Gerd Leonhard
Co-Founder & CEO

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