I’ve been using Songza recently, and I wanted to write down a few thoughts about the company and the music application space, in general.

First, I believe that 80% of music application listening is passive, and 20% is active. Passive music listening refers to the times in which you are listening to music while working out, doing homework, driving your car, or even walking down the street. You can think of active music listening as the times where you seek to discover new music or pick what you want to hear. 

Songza very much fits into the category of passive music listening, which includes services like Slacker and Pandora. (The active category includes: Spotify, Rdio, HypeMachine, etc.). I’m unsure which of the two listening types is more profitable, but it’s obvious that you can create a big business by gaining market share in the passive space.

Particularly, Songza’s traction is very impressive. They’ve shown that the atomic unit of passive listening is the playlist, not the song or the artist. Furthermore, by organizing these units around moods and activities, Songza creates a taxonomy that reminds us why we listen to the things that we do.

With that being said, my biggest concern with Songza and other passive services is that I’m unsure how these services scale beyond their current size. Much of this growth is dependent upon agreements with labels (if they even have any) and how the audience behaves when the service introduces advertisements (assuming they will, but who knows). 

As big as the passive listening market is, I’m also unsure if consumers will find loyalty and only stick with one of these services. If these services are economic substitutes and people often switch between them, do these businesses grow much larger? Or if there is a real network effect hidden somewhere, the next question becomes: how can they achieve it while monetizing their audience? Only time will tell.

On Wednesday, I hosted an event with the Music Startup Meetup at USV. I’ve been a co-organizer of this meetup for the past year with Frank Denbow. The goal is to provide support for entrepreneurs building innovative companies in the music space.

This week, Larry Mills, the VP of Strategic Marketing at Sony/ATV publishing was our guest speaker. His talk discussed the current way of things in the music industry as they relate to startups, which offered a good reality check for the entrepreneurs. It was interesting to understand the thought process of “the other side” of publishing, particularly as it pertains to making deals.

Among many things, I found his most interesting point to be that “Hip-Hop is the new Metal” and that “Electronic music is the new Hip-Hop.” He cites the two Odd Future album releases as his prime example. In spring 2011, Tyler the Creator released Goblin which sold 180,000* records. In the spring of 2012, the entire Odd Future collective released The OF Tape, Vol. 2 which also sold 180,000* records. There was no growth. He recognizes that this is the same thing that happened to Metal in the late 80s.

He then stated that electronic dance music, unlike Hip-Hop, is the genre most prime for disruption. It is made up of many smaller labels that are “raising their hand” to be incorporated in new companies. Furthermore, the Dance audience is much more “tech-savvy,” net-native, and affluent than the audience of other music genres.

So there you go — if you’re starting a music technology company, look at electronic dance music to bootstrap it. The publishers want your business, and the audience is waiting for you. I don’t completely buy the argument that Hip-Hop is dying, but I absolutely think we should think outside of the box when it comes to starting new music companies. 

*The 180,000 records number is one that Larry provided. I haven’t double-checked it.