TECHCITYINSIDER100: The increasing digitisation of music has created its fair share of winners and losers. As one of the former, 7digital’s CEO and co-founder Ben Drury tells Nico Franks why collaboration has been a key part of his company’s success.
The magnitude of what 7digital has achieved since launching in 2004 is evident in the reputations of its three biggest competitors- Apple, Amazon and Google.
“Our role in the world is to compete with those giant companies,” Drury tells me in the Shoreditch office of the digital media delivery company.
But he’s just as quick to emphasises that, as a business-to-business company, 7digital doesn’t directly compete with those aforementioned giants of the tech world, it merely helps their rivals.
Drury describes the “collaborative” approach 7digital has with its partners, sitting in front of a cabinet filled with electronic devices that utilise the 7digital service.
“We’re very partner friendly,” Drury says. “We also look for our partner’s enemies and partner with them.”
Essentially, 7digital allows third parties to host media on their devices, bringing together suppliers and consumers of digital media, connecting users with their content libraries anytime and anywhere.
Plus, it’s a market that has seen incredible growth- 44% of the company’s sales now come through mobile devices, compared to 1% in 2010.
4 million people interact with 7digital online and many more do so via other platforms. In the past six months, 7digital has made headlines via a succession of deals with big name companies such as Samsung, Microsoft and BlackBerry, all of whom have joined ranks with 7digital.
This is an approach that directly contradicts the ethos of the aforementioned ‘big three’. 7digital is completely open to working with as many different devices or operating systems as possible: or “anyone who’s not Apple,” as Drury deadpans.
Currently, 7digital employs 95 people across offices in London, Luxembourg and Los Angeles, with over 4 million registered customers and 19 million tracks in its catalogue.
By their nature, the origins of successful start-ups all tend to be tinged with the same romantic stories of days in shared office spaces spent toiling away for investment. 7digital is no different.
The story begins with a song – UK rock band Muse’s ‘Stockholm Syndrome’. It was the first track Drury made available via dotmusic.com, effectively “pioneering” music downloads, he says.
Drury went on to sell the company to Yahoo! in 2003 for £3.3m, co-founding 7digital alongside James Kane on an initial budget of £5000 in 2004. This was after Drury pounced on a gap in the market because, surprisingly, Yahoo! saw no future in music downloads.
The pair were subletting office space from a PR company on Argyle Street when theirs hosts wanted their desks back, forcing Drury and Kane to move their small team to Shoreditch in 2005. Investment from Benchmark Capital Europe, a leading technology venture capital now known as Balderton Capital, followed, raising £1.5m.
By September 2008, 7digital had become the first company in Europe to launch DRM-free MP3 downloads with all four major record labels. The year after, HMV Group acquired a 50% equity stake in the company with an investment of £7.7m.
What advice can Drury give the start-ups of today, just beginning their journey in Tech City?
“I’d say the F-word: focus. There are so many choices you have to make, such as which app platform to develop for, that I think the best way forward is to do one product for one platform really, really well,” he says, citing Instagram as an example.
“Plus, the costs of starting up are amazingly low now and the barriers to entry are far fewer. Many start-ups run on Amazon cloud, which is pay as you go, so if their service isn’t being used they don’t have to pay,” Drury says.
“But it’s a double edged sword, because you’re competing with the whole world,” he adds.
Location is key to get an edge on the competition, Drury says. A London office has been integral to 7digital’s growth as a music tech business, allowing them the opportunity to visit all the major record labels face to face in one day, if they so wished.
The three most important factors for a success story, Drury says, are “patience, persistence and people.”
“No matter how good the brand is or how good the logo is, everything will fall apart if a company doesn’t find and retain the right team,” he asserts. Working in Shoreditch has helped 7digital attract the latter, one full of individuals with a passion for music, according to Drury.
It’s no coincidence, Drury believes, that 7digital’s fellow start-ups in the music industry- such as Songkick, Soundcloud and Last.fm – are all based in east London, where bands play every night of week in venues across the area.
Comparatively, the “social wasteland” of Silicon Valley, as Drury puts it, has meant the success rate of music tech business on the other side of the Atlantic have been “abysmal”, with some “huge failures”, Drury says.
However, Drury concedes that although Europe is overflowing with vibrant cultural scenes, start-ups in the US are privy to an unrivalled level of potential financial support.
“It’s still very difficult to get money in Europe compared to the US,” Drury says. “The sums of money people raise over there seems to be 10 times what they could raise here.”
The lack of early stage venture capitals in the UK frustrates and disappoints Drury. “Even Balderston Capital, who came from a background in early stage technology venture capital in Silicon Valley, are tending to do later-stage deals with established companies,” Drury says.
As it is, venture capitals are only backing a few choice early-stage, high growth potential businesses, such as Sequoia’s $10m investment in Songkick earlier this year.
Developments such as these offer “green shoots” of hope, Drury says, “but there’s still not that much going on. It’s tough.” At the moment, for Drury at least, Silicon Roundabout is just “a name that’s caused the rent for office space to go up significantly.”
To counter this, 7digital has been focusing on the development of the open-source community, according to Drury. In the back of the Shoreditch office there’s an atrium area where the company has recently hosted talks, with beer and food, alongside Last.fm and Mixcloud.
It’s this willingness to mix with other companies, be it socially or professionally, that defines 7digital’s business plan. In the future, Drury hopes to expand 7digital’s presence in Shoreditch (rent costs permitting), meanwhile ensuring that the company is at the forefront of cloud-based media sharing via various different connected devices. From there, music looks set to only be the first chapter in the growing library of content that 7digital offers.
2004 to present
Cofounder and CEO, 7digital
Head of music services, BT Group/BT Yahoo!