Venture capitalist, Roger McNamee, co-founder of Silver Lake Partners and Integral Capital Partners, is interviewed by Tony Perkins of AlwaysOn and has some interesting comments. The whole interview is spread out over 4 pages, but I’ve selected the areas that were most interesting to me:
McNamee: It’s really easy to see the big things coming, but really hard to get the details right. I don’t know about you guys, but I did not see the iPod coming. The notion of a thousand songs in your pocket was just brilliant. Those guys are so smart, right? And how they came up with it, I’m not sure.
But the notion that content is now location-independent has been going on for a long time. And it’s the reason why the music industry is getting killed by piracy. People have to have a way to pay one license and be able to use it wherever they want to. And the industry has resisted that like crazy.
So one of the things that you discover is that the early guys in there, like Rio, they got the basic idea right. But they didn’t follow it all the way through. And Apple sat back and recognized two essential things. One was that Rio wasn’t right, and secondly that brand could be a big advantage, and that their brand was transportable. And this is not good news for the venture community, right, because there are going to be certain markets where incumbents have a second-mover advantage, and you have to be very thoughtful when you’re starting up a business to ask the question.
If you go back to the original Pen computer stuff, the problem that Go had, and you guys probably have cases somewhere in the dusty archives about this, but they basically replicated Microsoft’s DOS strategy and IBM’s hardware strategy in one company. It was like painting a bullseye on their forehead. It took Microsoft about three months to do what took those others two and a half years. And just don’t start a company where that’s possible. You’ve got to do something where the business model of the incumbent gets in their way.
See what’s really interesting about music today is that guys like Apple and Yahoo and AOL cannot afford to own a record label, because it would totally mess up their business model. Microsoft can’t own one either, which means there are no natural strategic owners of recorded music. If you’re in the private equity business, that’s kind of an interesting thing to know. That’s what you want to look for. Look at business models first. Make sure if you’re starting something up that there isn’t somebody whose closure rate is at Mach 3 when your “build the company up rate” is at Mach 0.5. Because it’s just hard.
Is there really no such thing as a “natural strategic owner of recorded music”?
The Perfect VC :: AO [alwayson-network.com]