Startups and Streaming: An Interview with the Founders of Beathey

The startup culture in Argentina is still growing, but Julian Sorsaburu, CEO and one of the founders of Beathey, feels they are entering at just the right time. Based in Buenos Aires, Argentina, Beathey is a music streaming service, record label, and booking agent for emerging electronic music artists in Argentina. I have been interning with Beathey for a few weeks now here in Argentina, and I recently had the chance to sit down with the three founders, Gabriel Santana, Miguel Warlies, and Sorsaburu, to discuss not only the company’s objectives, but also the music culture and startup culture that is rapidly expanding in Argentina.

Beathey was born in 2017, and each founder stressed that it is a company tailored towards the artists. Sorsaburu feels that for music artists today, Beathey offers unique services. “Today music is more accessible, and there are more opportunities for artists to be discovered,” Sorsaburu said, adding, “There is a need for the music industry to change, and to reinvent itself, which is good for emerging artists.”

A Changing Industry

In recent years, the music industry in both Argentina and the United States has seen positive growth, with most people pointing to music streaming as a main driver of this growth. Cary Sherman, CEO of Recording Industry Association of America (RIAA), expressed similar sentiments as Sorsaburu, saying, “The pace of change embraced by record labels is staggering. Just two years ago, digital downloads was the largest format, and streaming was only beginning to take hold. Fast forward a few short years, and the business is already dramatically different.”

music graph

Argentina music streaming saw $43.7 million (USD) revenue in 2017, and 2018 revenue is expected to exceed $50 million. Average revenue per user was $5.78 last year and will likely exceed $6 this year. While this is a far way off from US streaming numbers, which by far leads the world with a staggering $6.4 billion in expected revenue for 2018, both predicted growth rates are nearly identical, with Argentina at 5.4% and the US at 5.5% for 2018-2022.

What do these numbers mean for music? For one, it means upcoming artists are more likely to be discovered. Today, streaming service users have access to millions of songs, with many of them offering clever algorithms to help you discover new music that you’ll like. Despite this, the Beathey team feels that their model helps upcoming artists in a way that the bigger streaming services cannot.

Beathey: Fostering the Music Community

I asked the founders of Beathey to describe their company, and Miguel Warlies said, “Beathey is a streaming platform for emerging electronic music artists. This year we launched ‘Beathey Recordings’ because of the possibility to find new talents, and to bring these talents to the world.” Beathey Recordings is expected to have 30 tracks by September, all from the most talented artists discovered on the streaming platform. Sorsaburu added that Beathey also produces events and is a booking agent for artists as well. Incredibly, Beathey’s model allows its artists to retain 100% of the music rights and 100% of income from music sales.

I asked how their services differ from those of a traditional music streaming site, and Sorsaburu explained, saying, “The major difference is that the majority of music platforms for artists require you to be a recording artist. If not, you have to work with an organizer to be added to platforms or events. Here, the artist can have a channel to increase his or her material, and to be able to keep all the rights. The artist can work with our system to have the possibility for other people to know them and support them, without the intervention of a middleman.” An emerging artist at Beathey can not only be discovered easier but has more opportunities. Traditional record labels in the music industry typically only discover new artists with big investments and with a big team, whereas Beathey’s platform supports any artist.

1568-2446-2

For non-artists, listeners can stream music for free, or, subscribe to Premium for $10 a month. This allows users to participate in their Vinyl Contest. The Vinyl Contest allows users to vote for their favorite electronic tracks, and the top 4 songs with the most votes every 4 months will have their own vinyl produced by Beathey, and all Premium members will receive copies. Premium members also receive benefits at events and on their online store. Of course, you must also be Premium to be able to post your own tracks to the site. Currently, over 850 tracks have been uploaded to Beathey, and there are over 1,000 registered users and 250 subscribers.

The thing the Beathey team seemed most proud of was their sense of community and collaboration. “We are a community that is talking about collaborative concepts, because the community that we have can begin to decide who has potential,” Sosaburu added. He feels the existing music industry is not as collaborative, and that they can use the community they have formed to analyze information and detect talent.

A Rich Platform for Electronic Music Culture

To find out more about this music community and why Beathey specializes in electronic music, I talked to Beathey artist and contributor Nico Beldi. Beldi described electronic music in Argentina as massive, and that it has a “very rich platform,” although he also acknowledged that “maybe there is a connection that lacks culture, that lacks information.” He feels that Beathey enters into the industry well “because it is not just a record label, it is a community where artists can get to know each other and collaborate.” He has investigated the scene for a long time and says that with Beathey you will see a different community.

1568-2495-2

The Startup Culture in Argentina

Of course, in its current state, Beathey is still just a startup. I spoke to Beathey investor Antonio Macadam about startups in Argentina, and he expressed a lot of optimism, but did say the system is still being constructed and needs more time. “There are events in the world that are happening in Latin America for the first time,” Macadam said, adding, “but there is a long way to go.” He said that lots of businesses here are advancing quickly, and he has seen a lot of projects like Beathey that have created a big impact. To help startups in Argentina, Sanguinetti said the number of people and the level of investment needs to be broadened. He also added that contributing what you can helps a lot, saying, “there is always the power to contribute something.” Warlies had similar thoughts, commenting, “There are more advanced systems with investment and more possibilities for startups here.”

Luckily for startups and entrepreneurs in Argentina, the Argentine Senate passed the ‘Entrepreneur’s Law’ last year, designed to open up the country’s economy and place the country back on the global market by providing new approval and financial procedures. This included measures aimed to increase investment activity, providing reasonable tax breaks for those hoping to invest in startups. It also makes crowdfunding platforms easier to register, which should help, as Sanguinetti highlighted the importance of crowdfunding to startups in the area and around the world.

Image result for buenos aires

I also had the chance to ask the General Coordinator, who for publicity reasons cannot be named, of IncuBAte, the official incubation program of Buenos Aires City Government to which Beathey is a member of, a few questions about new and innovative businesses in Argentina. IncuBAte today has ten distinct categories such as Social, Design, and Technology and can offer new businesses benefits such as financial assistance, mentors and advisors, networking, and in some cases a working space. I asked what the most common problem is for these new businesses, to which they said, “the most common from my point of view have to do with prioritizing and focusing on which questions to start answering, and the link to market.”

IncuBAte is a program that lasts eleven months, but the idea, according to the Coordinator, is to stay connected, saying, “we consider this to be very valuable for networking.” For now, IncuBAte is still growing, but they said, “in the future we will see IncuBAte as a great community where lots of businesses are included.”

IncuBAte has seen many examples of businesses, such as Beathey, that have grown a lot under the program. Fivi, another IncuBAte startup, provides “virtual lines” for businesses that can alert clients when the product is ready. Initially believing restaurants were their target, during the incubation process they realized it was banks and medical clinics. IncuBAte validated the proposal and helped Fivi define these clients. Today they have evolved into a much larger company and work with two medical clinics.

The Coordinator says IncuBAte works as a multiplicator. “We believe in great team founders with concrete and scalable projects that resolve actual problems aligned to the sustainable development goals, and we help them thrive.” However, they acknowledged some difficulties, saying, “As a public incubator, we are in the first stage, where risk is the highest.”

The community and family culture is the major difference between Argentina’s IncuBAte and the United States’ Small Business Association (SBA). While on the surface, SBA provides the same services; capital, information, and assistance, it lacks the true ability to connect people with similar ideas together. While admittedly there are plenty of other incubation programs in the United States, none are funded by the US government. That being said, SBA was founded in 1953 and is well established, and IncuBAte is still relatively new, so it will be interesting to follow its growth.

While the cultures of Argentina and the United States may be different, I have seen that both countries have people with brilliant ideas trying to take the next step forward amidst similar challenges. While the current US government appears to be more protectionist at the moment, I hope to see more collaboration with other countries such as Argentina in the future.

 

If you are interested in learning more about Beathey, you can visit their website at beathey.com/en or find them on Facebook and Instagram at @RevolucionBeathey.

 

Sources:

https://medium.com/@RIAA/the-state-of-music-mid-way-through-2017-7e90cad298f9

https://www.forbes.com/sites/hughmcintyre/2017/09/21/streaming-continues-to-power-the-music-industrys-growth-at-2017s-halfway-point/#1975ec1a404e

https://www.statista.com/outlook/209/114/music-streaming/argentina#

https://techcrunch.com/2017/06/21/argentinas-government-is-wooing-entrepreneurs-with-a-new-law/

 

 

London Buses Run on Bio-Bean

Bio-Bean, a British startup, has started to partner with companies such as Shell and Argent Energy to create a coffee-based diesel fuel to be used in London’s various busses. In 2013 the company was founded by Arthur Kay and is the first company that aspires to industrialize the process of recycling waste coffee grounds into biofuels and chemicals.

The company does not believe in waste; just misplaced resources that they strive to produce into clean fuel. On their website, Bio-bean states that “spent coffee grounds are highly calorific and contain valuable compounds, making them an ideal feed stock from which to produce clean fuels.” The startup saw potential to create this fuel from the 500,000 tons of coffee grounds in UK landfills and an opportunity to help save the environment by reducing the amount of methane, a greenhouse gas, from the atmosphere.

In previous years, the company produced various products such as the “Coffee Log”, (£7.99 or about $10.75) a product used to sustainably heat homes. The log works by packing together 25 cups of ground coffee into a block of material that has been measured to produce “about 20% more energy than wood” (Bio-Bean). Currently, the startup is taking its goals a step forward and is planning to turn coffee waste into a clean fuel to be tested in  the public transit network of London.

As of November 20th, 2017, The company has produced a total of 6,000 liters of coffee oil and, with the help of the London Transit Authority, planed to power one London bus for a year to test for efficiency. Bio-Bean collects coffee waste from various cafes, restaurants, and factories in the area, then sends the wastes to a recycling plant. There the grounds are dried before the coffee oil can be extracted. The coffee oil is then blended with other fuels and oils to produce B20 Bio-fuel (20% bio-components) which can be used in diesel buses and vehicles without additional modifications. Use of this fuel costs significantly less than the use of traditional diesel fuels and allows for a cleaner environment.

It is always interesting to see how a small project such as Bio-Bean develops and progresses with time. The creation of the coffee log was unique as it introduced recycled coffee as a way to heat a home. The new deal with Shell and Argent takes this small startup to the next level. As they create this futuristic fuel, many could call into question its ability to be used in society. There are many other alternatives that attempt to reduce the emission of harmful gases, such as electric cars, but unfortunately are making small changes in the environment. Thus, it will be fascinating to see if Bio-Bean will be a leader in making the planet healthier

Bio-bean is not the first company to pursue an interest in alternative fuel sources. Many other companies have seen the potential for the successful adaptation of bio-fuel and have implemented it in many ways that are both similar and different to what Bio-Bean attempts to do.

In 2017, a company by the name of Fiberight began construction on a facility with the intention of converting “trash and in some cases corn stalks or wheat straw” (Barney)  into a form of bio-fuel. This company, while also focusing on recycling, has set a goal of “transforming… solid waste and other organic feed stocks into next generation renewable bio-fuels with cellulosic ethanol as the core product” (Barney).

Another company working towards a similar goal is Plastic2Oil. This company, while doing essentially what the name entails, combats liter while producing an “ultra-clean, ultra low sulphur fuel” (Barney). The company is able to take on two problems with one solution. This is done by utilizing liter and other waste in their production of fuel. In doing so, there is an “economic benefit” for the government and other organizations as litter becomes less of an issue. The company tends to have around an 86% success rate when creating this fuel from litter and for every 8.3 pounds of litter collected one gallon of fuel is able to be produced.

Despite London’s goal of an emission-free transport network by 2050, as of time of writing, Bio- Bean has no formal agreement to continue using its coffee based fuel in London buses. The company is currently looking for new markets and for ways to continue to innovate. Recently in a written statement, the company set its sights on America as “there is huge potential to expand the project into the U.S, which drinks the most coffee on the planet, 400 million cups a day” (Bio-Bean).

Sources:

www.bio-bean.com/

https://finance.yahoo.com/news/shell-bio-bean-coffee-drinkers-103200063.html

http://money.cnn.com/2017/11/20/technology/coffee-fuel-bus-london-bio-bean/index.html

https://www.budgetdumpster.com/blog/5-companies-turning-trash-fuel/

The Experience Economy Strikes Again

If the death of traditional retail shopping were to have a martyr, Toys R Us might be the perfect contender for such a role.  Once the go to place for toys, games, and children’s electronics, the brick-and-mortar retailer finds itself saddled with $5 billion of debt and depleted cash flows as Amazon, Walmart, and Target sap up market share like taking candy from a baby.[1]  The general public finds itself asking, “How could this happen?”, but I think we all know the answer: When was the last time Toys R Us was at the forefront of anything? When were we talking about Toys R Us like we were Amazon or Walmart or Target? The answer was decades ago, and it is not hard to see why.

Death by Innovation

The last time I walked into a Toys R Us, the lonely building sat by itself on a hill surrounded by a sea of empty parking spaces.  The year was sometime around 2006-2007, right after Bain Capital took the toy giant private in an effort to make some quick profit in a 3-5 year turnaround (more about that later).  The store, right outside of Lancaster City in Pennsylvania, is pretty big, but has a strange effect on shoppers: the colorful toys and games are dimly lit, and the slight twang of a pop song follows you around the store.  Here and there you hear a child scream, hopefully in delight, but the store is devoid of customers and maybe even salespeople. If I happened to find something in the store, I could not recall for you today what it was, just another example of the sorrowful show Toys R Us had on display.  I could describe for you the terrible experience, but not the actual toy I bought.

 

What I am getting at is that the last thing a consumer wants from a retailer selling something as exciting as toys is the experience I had as a child above.  Just like the products themselves, stores should mirror the type of experiences one has when using the product at home. Toys R Us wanted to do this after first filing for Chapter 11 bankruptcy protection last year.  The retailer had started to put Toy and Baby “labs” in some 200 of its stores, which would allow consumers to test and experiment with new products in creative games and showcases.[2] These types of experiences create positive memories for consumers to associate with a retailer’s offerings, bolstering their chances of buying the product or service and elevating the image of the brand.  However, debt servicing syphoned off much needed capital that Toys R Us would have used to modernize the brand and continue to innovate the consumer experience, so the retailer was handicapped from the start in competing with innovative giants like Amazon and Walmart.

The Worst is Yet to Come

When Joseph Pine and James Gilmore wrote their defining article for the Harvard Business Review in 1998 entitled “Welcome to the Experience Economy”, it is as if they were predicting the fall of retail right then and there.  Pine and Gilmore’s primary argument was that there has been a progression in economic value, from raw materials, to goods, to services, and now experiences as the highest source of economic value.

Progression of Economic Value

They go on to explain the implications: those organizations who do not enhance their economic offerings (for example, turning traditional retail shopping into retail experiences like those of Barnes & Noble’s partnership with Starbucks or Apple’s “town square” feel) are doomed to fail in this new economy.[3]

Toys R Us is one, but not the only brand, to fall under Pine and Gilmore’s prediction.  In the past we have seen the likes of Circuit City, Radio Shack, and others close due to this “experience” problem, and others including Sears/Kmart, Macy’s, Rue21, American Apparel, Bon Ton, and more are filing for bankruptcy and closing stores with the same set of problems: declining sales and poor brand images.[4]

 

Moreover, even brands built on experiences are struggling, as the recent bankruptcy of Claire’s demonstrates.  The teen accessory outlet specialized in combining products (earrings, head-ware and the like) with service offerings like ear-piercings.  But even Claire’s unique offerings are not enough to truly warrant the higher economic value in this day and age, and although they have reduced their debt by $2 billion in the past few years, it was not enough to save them.[5]

 

The story is similar to Toys R Us, which was saddled with $5 billion in debt from the Bain Capital buyout from early.  Payments on this debt amounted to $250 million a year and so what little cash Toys R Us did have coming in wasn’t enough to both pay down the debt and reinvest in new toy experiences.  Bain and others who invested in the company for their part weren’t able to turn the company around, a strategy which settled on growing the international portion of the business, cutting costs, and reconfiguring what stores they could [6].  It just wasn’t enough and the innovation and experiences weren’t there to lure new customers into the store.

 

So what does the future hold for retailers and service providers that do not shape up and adapt to the experience economy?  First and foremost, we will surely see more retailers file for bankruptcy and close, with the potential for huge consolidations in a variety of industries.  I am predicting grocery is ripe for disruptions and experience innovation, as evidenced by Amazon’s foray into grocery with their Whole Foods purchase and the aggressive expansion of Walmart’s “Neighborhood Market” grocery concept, both staging grounds for fantastic customer experiences.  However, it’s not just grocery; market players in brick-and-mortar retail in general need to put more emphasis on consumers experiencing their store and their products over simply getting in and getting out. I think we will see some retailers do this really well (Best Buy is a great example of both a business turnaround and an improvement to the consumer experience, with faster delivery and a better online interface)[7]  while others will try and fail or won’t try at all.

As consumers, we have come to expect more from our stores.  If brands do not give us the experiences we deserve, then they’ve doomed themselves already.

 

[1] https://www.usatoday.com/story/money/2018/03/18/toys-r-us-bankruptcy-liquidation/436176002/

[2] https://www.forbes.com/sites/neilstern/2018/03/15/toys-r-us-prepares-for-its-final-curtain/#760fbd232a0b

[3] https://hbr.org/1998/07/welcome-to-the-experience-economy

[4] https://www.cbinsights.com/research/retail-apocalypse-timeline-infographic/

[5] http://www.post-gazette.com/business/pittsburgh-company-news/2018/03/19/Claire-s-hair-accessories-preteen-ear-piercing-mall-chain-files-for-bankruptcy/stories/201803190101

[6] https://www.ft.com/content/02a5edbe-9d93-11e7-8cd4-932067fbf946

[7] https://www.reuters.com/article/us-best-buy-ceo/best-buy-ceo-says-turnaround-done-room-to-compete-with-amazon-idUSKCN1GL2Y8