Industry Profile: Seth Goldstein
By Larry LeBlanc (CelebrityAccess MediaWire)
This week In the Hot Seat with Larry LeBlanc: Seth Goldstein, chairman and co-founder, Turntable.fm.
Seth Goldstein creates companies.
One day earlier this year, his partner in several ventures, Billy Chasen told him about an idea for a chat room with avatars and music.
Goldstein’s reaction was, “Hey, that’s genius.”
As a result Turntable.fm was launched by the pair with a single tweet on May 19th, 2011. With little fanfare it hit 140,000 users within the month.
Today, the service is attracting 50,000 unique visitors per day, and is hitting a million songs a day streamed.
Meanwhile, Goldstein has raised $7 million in support of the service from such luminaries as Guy Oseary, Troy Carter, Jimmy Fallon, members of the Roots, former Myspace Music executive Courtney Holt and venture capitalist Fred Wilson of Union Square Ventures, who is also a member of Turntable.fm’s board.
Just unveiled is an iPhone app that, unlike the web-based version of Turntable.fm—which requires users to be Facebook friends with a turntable user to access the site—is open to all comers. Any Facebook user can access Turntable.fm.
Chasen has said that Turntable.fm was spurred by "the need to bring the social value back to digital music."
Turntable.fm is, in fact, a formidable communal online music service in which users can create or join rooms where music is played. There, they can take turns spinning tracks for one another from one of five DJ spots represented by their avatars.
Rooms are equipped with a chat box, and users can rate the songs they hear, as well as purchase them through iTunes or Amazon’s music store or add the songs to the Spotify queue.
Navigating the maze of rooms is simplified by Turntable.fm‘s integration with Facebook. When users enter the site, they start at a lobby. At the top of a list of rooms are the ones in which their Facebook friends can be found.
Turntable.fm enables listeners to follow other users and receive emails when they start DJing. DJs earn points when listeners approve of their songs.
An entrepreneur and investor, Goldstein has long focused on the business and design of social applications on the internet.
After receiving a B.A. in Dramatic Literature from Columbia University’s Columbia College school in 1993, he started Riverbed Media that created interactive projects with contemporary American artists Robert Wilson and William Forsythe.
In 1995, Goldstein founded Sitespecific, which pioneered online advertising solutions for companies like Duracell and Travelocity. It was acquired by CKS Group in 1997.
In 1999, he became an entrepreneur-in-residence at Flatiron Partners, where he built a practice in “pervasive computing,” investing in companies Kozmo, Modo and Vindigo.
In 2002, Goldstein created Majestic Research, the first Wall Street research firm to mine primary data for hedge funds to forecast the financial performance of public companies. Majestic Research would be acquired by Investment Technology Group in 2010.
In May 2005, Goldstein handed over the reins of Majestic Research to a new CEO in order to focus on Root Markets with trader Lew Ranieri and the Chicago Board of Trade, creating the first financial exchange for online mortgage leads.
Two years later, he moved in San Francisco, started SocialMedia.com, a leader in online display advertising. SocialMedia was acquired by LivingSocial this year.
In 2010, Goldstein and Chasen launched Stickybits which connects digital media to real-world objects via barcodes. But after it failed to connect with consumers, they switched to Turntable.fm.
Turntable.fm is headquartered in New York, where Chasen, its CEO and co-founder, is.
Living in Marin County, California, Goldstein regularly commutes to New York, and Los Angeles.
You start companies?
Starting any new business is exciting.
It’s like having a kid, though it’s not nearly as important. But, it’s hugely exciting. There’s a period where you are planning, and you are plotting; and you have huge ambitions and expectations. Then you put it together, and you launch and the reality seeps in terms of what you have brought to the world, and what people think of it. To a certain extent, like your children, you think that your kids are the cutest things in the whole world. It doesn’t mean that everybody else always thinks that.
So, as it relates to Turntable, what’s been nice is that everybody else does think it’s the cutest kid in the world. We are not bragging about it because other people seem to be so excited about it.
Have you been involved with other music-related ventures?
God no. Why would...the history of music startups is littered with bodies. Going into this is the last thing that we wanted to do—or the last thing that I would want to do as an entrepreneur would be to get into the online music business. Every entrepreneur I have met along the way that has done various forms of music startups, they looked like they came out of World War II or Viet Nam.
It’s a dicey time to invest in a music-related service. The music industry is at a crossroads, and there are rights issues. Where’s the money for an investor?
I don’t think they are looking at investing in music per se because there are huge taxes (costs) in terms of overheads of labels, in the licensing, and everything else associated with it. However, what investors have been trained to do in recent years is (understanding) the value of engagement. You see it with Facebook, right? You see it with Twitter. You see it with these services that have really captivated the attention of the consumer. Since a lot of these companies don’t monetize day one, the proxy for monetization is engagement. How long is a consumer staying on a service, and how often are they coming back? Then, in the case of social media, how viral is it? Can the (service) market itself by the virtue of the fact that friends are telling friends about it? So, when you factor in those different perimeters, music is really an important glue that can hold people together in a sustainable kind of media service.
But the revenues generated…
I would say that Pandora has made a number of investors wealthy who had no ulterior motive other than making money. Pandora doesn’t have direct licenses. They are not hanging out with the stars. Spotify is doing quite well. It is raising more capital in increasingly high valuations. YouTube is not a music service per se but there’s a ton of music that goes through it. I think that there are more startups that have figured out how to incorporate music as a key engagement mechanism.
For Turntable.fm, you have raised $7 million. That doesn’t sound like much.
Considering the fact that we only have eight people (as employees) and that our costs are modest, it’s plenty. The thing that I have learned, and the people around me have learned, is that the more people you bring on, and the more complicated things get, the more product development slows down. So we are trying to be very mindful of doing as much as we can with as little as possible. We want to make sure that we have a decent runway. As we scale our costs in terms of licensing; in terms of international expansion; in terms of infrastructure build out; those (costs) will increase, and it wouldn’t surprise me if we raise more capital down the line.
Was it you who brought in Guy Oseary, Troy Carter, Jimmy Fallon, members of the Roots, and former Myspace Music executive Courtney Holt as investors.
You also brought in Fred Wilson of Union Square Ventures, who is now also a member of the company's board.
Billy is in New York, and he has long wanted to work with Fred. They are only a couple of blocks away.
How did you and Billy meet in 2005?
I met him because I came across one of his interactive art pieces on the web that really fascinated me, so I reached out and we built a relationship. It was an online art project that kind of visualized peoples’ click streams. I thought it was beautiful, and I tracked him down.
We started spending time together.
We worked on a project called Downfly in 2006 that was a mechanism for people to pass down websites that they liked to their friends. The more time they got passed down, the higher they would rate. It was kind of a new way of surfing the internet.
[Downfly, a Firefox extension, allows users to email webpage links to one or more friends, without having to cut-and-paste the URL in their email message. Downfly can track where those links go, if friends forward them to others.]
Then I decided to move out to California with my wife and my kids, I had wanted to live out in San Francisco for awhile, and my wife (Tina Sharkey) got a job opportunity to run BabyCenter (as its chairman and global president) for Johnson & Johnson. I went to California to start SocialMedia, and Billy and I put things on hold. He went to an incubator called Betaworks, and became the founding engineer. The two of us took our project, and we merged it into Betaworks, which is very, very popular and successful. We are both investors in Betaworks.
Billy built Chartbeat (Chartbeat.com), which is a fantastic product. He was there for a couple of years. Then as I was building out SocialMedia, I brought in an executive, and Billy and I re-connected in 2009, and plotted the concept of Stickybits.
[Chartbeat is a real-time analytics service that enables people to understand emergent behavior in real time and exploit or mitigate it. It is used by some of the most popular sites on the web, including the Onion, Mahalo, Pitchfork, and DailyKos.]
What went wrong with Stickybits?
We didn’t have the consumer adoption. It was a little early in the market as far as bardcode scanning.
[Stickybits launched in March, 2010. The Stickybits app allowed users to scan bar codes of purchased products, or develop bar codes of their own, in order to connect physical objects with online content and contests. Basically, the first person that attached to the code was considered the moderator, and could delete anything added afterwards.
Prior to Stickybits, Billy Chasen, who has a Batchelor of Science in computer science from the University of Michigan, co-founded Betaworks, where he created Chartbeat.com, a real-time analytics service, and Firef.ly, a chat service.]
What impressed you about Turntable.fm when Billy brought it to you?
Of course, I’ve had had a long-standing relationship with him so I know that he’s extremely talented and visionary. I am very open to his ideas, and we have been collaborating for awhile. I guess in February, he talked about this idea that he had been sitting on. We talked it through. It seemed promising as a small project. It didn’t seem like it would turn out to be the big play that I think we have in front of us now.
Why did you think it would be only a small project?
It seemed very niche. If you described it in a vacuum, it’s chat rooms with avatars and music, right? So there’s no sense that this is going to be the next great online music platform. It was more about this is more of a novelty. People will think it’s kinda cute. But clearly it taps into something so much deeper.
What online models are you following? Obviously, Facebook.
The models are clearly with Facebook and YouTube, Twitter, fourSquare and Instagram consumer services. We are totally committed to the consumer experience. We just grew organically with minimalist advertising.
It started with just a single tweet on May 19th.
There was a single tweet. Basically, that’s how it started, and it just grew. It was very much organic, and viral and all of those good ways of marketing a service very authentically. So we weren’t talking to the press. We weren’t advertising, obviously.
Why has Turntable.fm caught fire so quickly?
One (reason) is that people like to promote their tastes. Not everybody, but certain people. When they start DJing, they like to promote what their tastes are. Their intent is based on their own ego to tweet it, and share it by Facebook. Secondly, the more friends that are on the service, the better it gets. If you are in a small room with five friends, and you are listening to music together, it is an extremely compelling experience.
How many visitors per day?
We have around 50,000 users a day. We are streaming a million songs a day. We cover a lot of people. If you start playing a song on Turntable, and if you Facebook that out to your newsfeed, it will show up in front of 100, 200 or 300 of your friends on Facebook. So we have great coverage that way. It doesn’t mean that 60 million people (from Facebook) are using Turntable. Far from it. But we have an audience (at Facebook) that we can go after.
What is the average time for a user on the service?
I don’t have a session line. There are people who spend 10 hours a day, but I don’t think that is our average. Our challenge is that we need an experience that is both intensive for those who want to spend hours but also something that is more passive for those that really use us as a music service, as a radio service.
There are already complaints of user burnout which you are going to have to address.
Absolutely. People sort of throw themselves into it for a couple of weeks; they lose a ton of productivity; and they just shut it down. So we have the high class problem of how do we turn down the addictiveness, and stretch it out so that we titrate the engagement as opposed to requiring people to interact so intensely.
These are still early days for Turntable.fm. As you build on different features, it will change.
I think so. We are going to be very careful about things like advertising monetization. We are very focused on—first and foremost—respecting the audience that we have; making them feel like we are listening to them; and that we are committed to supporting the kind of experiences that they have had and want to continue to have. At the same time, we want to expand the audience and introduce new people into the service. We have some ideas this Fall for activating college campuses who aren’t on the service and who don’t read TechCrunch or read Billboard.
The audience remains quite exclusive.
It is small. It is the sort of sophisticated, urbane San Francisco, New York, and L.A. music and technology scene. It’s a great place to start. A lot of the key influencers are there. We are fortunate to have as investors some great leaders from the industry—celebrities, record company executives etc.—and we’ve got great venture capital behind us. We are making solid progress in our conversations with the (music) industry in terms of licensing. That is going well, but (the service) is still niche. We have ambitions to have tens, if not hundreds of millions of users. But that is going to take a fair amount of time, and it will require that we cross the chasm.
An iPhone app is just now available.
It has done exceedingly well.
When will an Android app be available?
We are working on it.
With the emergence of digital, music virtually stopped being a social experience.
It is just an evolution. Music was always social. Then, with digital, it was more convenient, but it could also be much more individualistic.
We put our headphones on to hear music, and we ignore what is around us.
Originally, music was social, whether it was Mozart playing in the chamber of his patrons or concerts or us playing vinyl in our living rooms. It always had a social component. Then digital music arrives, and it is more convenient but that also led to a certain kind of isolation and alienation. You’ve got this great technology. You’ve got music you can bring anywhere. It is incredibly convenient. You can download it, etc. But you get these images of people tuning out to their surroundings on a train in Manhattan with listening (to music) with their ear buds in. With Turntable, I think we can make the digital music experience social again.
Turntable.fm is like having a great record and inviting some of your best friends over saying, “You’ve got to hear this album.”
Yeah, I think that’s very consistent. The other thing happening in some of these rooms is that there are some great fun games. During Hurricane Irene, there was a hurricane room and people had to play everything from Bob Dylan “Hurricane” to “Here Comes The Rain Again” (the 1984 hit by Eurythmics).
There’s been rooms where you share the music you first heard the lyrics to. I was up (on the site) and somebody played A Tribe Called Quest—it was clearly someone younger than me—and I chose between Blondie’s “Heart of Glass, and the Rolling Stone’s “You Can’t Always Get What You Want.” I chose the Rolling Stones, and I chatted a bit, about that is what my parents played for me when I was asking for things (as a kid). It created an emotional connection that transcended the music itself.
Facebook is trying to evolve; Turntable.fm will evolve as well in time.
Well, yeah. I think that the most important thing is getting broader market appeal, that people find it and they stay engaged. On the monetization side, there are some really good examples out there like Zynga in terms of virtual goods that have figured out ways of making money that not only don’t hinder the consumer experience but actually enhance it.
Can this service get too big? Is that a concern?
It is something that we try to manage with regards to room size. We don’t allow more than 200 people in a room. Even 200 is a rather noisy experience. I think that the best experiences are with 20 people; not 20,000 people. So our challenge is, how do we scale to become a truly mass market music service while at the same time maintain the level of intimacy and vulnerability and emotional conversations that happen in these smaller rooms?
You are an expert in advertising on the internet. How will advertising playing a role in monetization of the service?
I don’t think that it (monetization) will take the form of ads. I think it will be in the form of sponsorships. I think that brands will have an opportunity to bring great artists into Turntable to sponsor their music, and their DJing to our audiences. It’s good for the consumer because the consumer will get access to musicians; and it’s good for the brand because it will be associated with that good experience. Then the artist will be able to get paid.
What type of brands?
I’m thinking more like traditional advertisers as how it relates to record companies and the agents and the managers, working with all of them (artists) first and foremost to share some of the best practices that other artists are doing to stay in participating on the platform. The other week Lady Antebellum, through Borman Entertainment, had their new album ("Own the Night”) coming on Tuesday (Sept. 13th) morning, so Monday night they were all in a room playing music from the new album to 200 fans. Everybody in the room was giggling and talking about how they couldn’t wait the album the next day at Wal-Mart.
You are talking to labels on several levels: the promotion and marketing departments; and the business affairs department for licensing.
Yeah. The business affairs, and the legal conversations preempt a lot of the creative marketing conversations because we really can’t go down the path of integration with the labels until we are on solid footing, and until we’re all on the same side of the table. The relationship with the industry is very constructive. We definitely want to continue to make our service more interactive, and introduce new features that might require direct licensing. So we want to pursue that, but at the same time we have got the service that we have that is compliant with the DMCA, and can be thought of as an internet radio service.
[Turntable.fm operates under the U.S. Digital Copyright Millennium Act which enables companies to stream music from content libraries without charging for it, but does put some restrictions in place.
Under the DMCA, non-interactive webcasts, and online simulcasts of terrestrial radio can play music without directly negotiating licenses with labels and music publishers.
Instead, they can play music under a statutory license that requires them to pay rights-holders a per-stream royalty through SoundExchange, the sole entity designated to collect royalties operating under the Section 112 and 114 of statutory license.
To be considered non-interactive, a service must satisfy certain requirements, including that listeners not be allowed to pick songs to hear on-demand.
If a service streams records where the customer can choose what is to be heard—which would constitute an interactive or an on-demand transmission—or provides advance play information, the service operator must get permission directly from the sound copyright owner, and negotiate a fee.]
Turntable.fm had to pull down its international service because of licensing issues.
Exactly. DMCA doesn’t cover international territories. So it was cut and dry. Frankly, I think that one of the overriding interests on our behalf of securing direct licenses is to have access to international markets.
Turntable.fm has to be international. What are your plans?
I think that it is going to be tied to securing licenses. One of the benefits of building direct relationships with the labels is being able to secure international access which you can accomplish through being a statutory rate.
What has to be in place for Turntable.fm to offer international licensing? Besides needing direct licenses, you would have to have significantly more revenue.
It really depends on how we do it. There’s structuring. Without getting too much into it, I think that the labels are aggressive. They believe in the full value of the content that they own, and they want full value for it. That being said, they are reasonable. They don’t change their minds. They are not irrational. They just believe that what they own is extremely valuable.
So it is really an economic conversation. In so far that we are succeeding in growing, and they don’t want to kill the goose. As they want any kind of promising online music service—they want them to grow and prosper so they can pay more money to them down the line.
Are labels more accepting of new online businesses? Is there a new attitude?
I don’t know if it’s new. It’s an insider industry. So if you work with the right people who have worked with the right people before…it’s almost like a family business. I think that it’s a lot about trust. They have been taken advantage of in the past. Companies have come in and really tried to fleece them or they have agreed to things, and then regretted it. There’s a cautiousness from where they are coming from.
Labels don’t want to build another business like they felt they built MTV.
Correct. And they built YouTube.
How did you come to focus on the business and design of social applications when you have a B.A. in Dramatic Literature at Columbia University?
It is a longer conversation, but I was a child actor, and I developed a real interest in directing, which is really all about engaging an audience and different forms of interactivity, onstage. From there, I started developing CD-ROMs with contemporary artists like Robert Wilson and Bill Forsythe. That was through 1993 and 1994. Then the web emerged, and I had good skills producing multi-media.
You started one of first online technology companies, Sitespecific.
I never thought of it as technology per se. I just thought of it as different forms of multimedia, and interactive media. It just led sort of naturally…Sitespecific, as a name, really refers back to avant garde of the ‘60s and ‘70s in terms of land art and performance art. That’s how I was raised. And I was always curious (about interactive media and technology).
Your father is a technologist.
He’s a software engineer. In time, I got more interested, not just in the human interaction, but how do investors work and operate? How do you make money to startup? How do you sell a business? That led me to work with Fred (Wilson) and Flatiron Partners as an entrepreneur-in-residence.
Was being at Flatiron a turning experience in your career?
It was an opportunity to get onto the other side of the table. I had been the entrepreneur that was always looking for capital. Initially I was an entrepreneur-in-residence there. Then I became an investor; and I became the investor looking to give capital. Deciding that was really interesting in terms of understanding the dynamic. It was also a totally bizarre moment, and probably an unique moment in our history in terms of being in internet venture capital in 1999.
[Founded in 1996 by Fred Wilson and Jerry Colonna, Flatiron Partners was the first New York venture-capital firm dedicated exclusively to the Internet. It invests in content, e-commerce, services, and software companies.]
Things were changing in 1999.
It was the tip of the bubble. I was investing all of the way up to the top, and I was watching things explode all the way down to the bottom. It was exciting, and it was one of a kind (experience) and I wouldn’t trade it for anything, but it wasn’t sustainable. I walked in and made money faster than I could imagine. Then I lost money faster than I could imagine.
Quite a jump going from being an entrepreneur to investor.
I didn’t have the patience for being an investor in the end. I was too young. Some people are built to be more patient, and really being able to enable other entrepreneurs. I still had a lot of entrepreneurial energy in me. And, it’s very important as an investor not to compete with your entrepreneurs; not to solve things, but to listen to their solutions. If they are wrong, let them make mistakes. I think that being a dad has probably made me a much better and a much more patient investor, and manager. And I am pretty active. I have been active as an angel investor and an investor in early stage venture funds.
An investor has to have patience, but he also has to be able to walk away from a project that is not working, and be prepared to lose an investment.
Yep. You have to be able to take risks.
Majestic Research was developed to mine primary data for hedge funds to forecast the financial performance of public companies.
There was a lot of data out there. Companies can’t say anything (about business) except at the end of the quarter, and Wall Street is kind of retracting so hedge funds are blossoming. So you put that all together, and say if you can systematically find and extract data about internet companies and consumers companies across the internet, and turn it into research, and there are more and more hedge funds out there with more and more money, it’s just good business.
Markets keep emerging due to the internet.
I am always looking for interesting problems out there. They are going to get bigger and bigger. You want to invest in markets that are going to get bigger, not smaller. So to be able to create solutions now for problems that are going to get bigger, you are by definition adding value.
Will the evolution at Turntable.fm be intentionally gradual so you can maintain, and better grow the service?
Yeah, we have had a lot of conversation about, “How do we stay cool? How do we stay authentic?” We want to grow because in order to build a business, we have to have ultimately millions of engaged users. But if we build too quickly, we are going to alienate the core audience that has been there for us.
Are you a music person yourself?
I think we are all music people.
C’mon, you are really a business person.
I love music. I have never been in the music business. I have never played music. And I am having a great time. Doing this when I am 41, as opposed to when I was 25, I’m not taken by the celebrities, and the personalities that I am meeting. I have met with the head of every label, and with many of the legends out there—both on the talent and the label side. They are great, but they are just like everybody else. In the end, I have to build a business, and return capital to my investors.
Larry LeBlanc is widely recognized as one of the leading music industry journalists in the world. Before joining CelebrityAccess in 2008 as senior editor, he was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-89. He was also a co-founder of the late Canadian music trade, The Record. He has been quoted on music industry issues in hundreds of publications including Time, Forbes, and the London Times. He is co-author of the book “Music From Far And Wide.”