About This Episode
On this episode of Insiders, we talk culture-specific streaming, African music markets, and the place of the local music and cultural heritage in the globalized industry, with Catherine Lückhoff.
Currently, Catherine is the CIO of Swipe iX, one of the leading digital agencies in South Africa, and back in 2015, Catherine founded NicheStreem, a white-label startup, that has set out to power niche streaming services from all around the world and bring people the content they really want.
Topics & Highlights
02:10 — On her first experience in the Music Industry
It was about 2004–2005, just before social media really hit. When I started [Mango] everything worked on referrals, and I happened to be dating someone that was in rock’n’roll. And there was a big music festival that in Cape Town called Rocking the Daisies — they had about 1,5k people in their first year. Someone came up to me and said "Hey, I hear you work with media”. [...] And we basically took over their account and helped them grow to 10-15k people festival. We were doing some really cool stuff with Levi's and Red Bull. We had all the bloggers come on board and we put Wi-Fi out at the festival — and none of that existed at the time and people were like "that's insane!".
It was completely different: going from services where you're charging times and material, into a startup where there's a dev-team, there's a product owner, there's investors, that you have to keep happy. There's constant funding rounds, you're building a product — which means you have to also create a market for it. Bozza was building an app for talent discovery across Africa. So musicians, filmmakers, poets — anyone who wanted to self-publish. So, I was spending a lot of time in sub-Saharan Africa with the OEM's and the telcos, trying to see how could we take localized content and both help generate money for the telcos and the artists. So, where in services you're paying people [on contract], here you're trying to create a market, and hope that you can monetize it. You constantly have to prove your existence, and your reason for existence. So it was a very different setup. It's interesting because I ended up building a platform- or kind of a product-based business myself, but first, I switched back into services. I seemed to switch between the two: have a service business — make some money, you a product business — lose some money... [...]
16:49 — On NicheStreem
So I really wanted an authentic vision of music and content services on the African continent. For those who don't know, we have eleven official languages in South Africa which Afrikaans is the third largest spoken language, [...] and 58% of domestic music sales is attributed to Afrikaans. So it's not a genre, per say, because you have Afrikaans Rock and Afrikaans Gospel and Afrikaans Pop and everything in between. So having worked with Bozza [I understood] how important are all the different pockets of content out of East and Francophone Africa, and Mali and every other place. And where are those people are going to find the content that they love? It was also the time in which Nigeria was starting to push for very big quotas around Nigerian content and an entire country had changed its culture to be less Westernized, from a music perspective. The Big Brother TV show, the Nigerian version of it, [for example] was only allowed to play a Nigerian content.
One of the big ideas when NicheStreem started was that [in Nigeria] 80+ million people are Christian and they are avid lovers of Nigerian gospel. [...] So my question was: “well, if you if you're into Nigerian gospel — you're not going to find that on Spotify. Or any of the other services. And in fact, at the time, Spotify was putting everything under one playlist because it happened to be Africaans. Now I always joke that it’s like putting Red Hot Chilli Peppers and Britney Spears on the same playlist because they sing in English. That's just not logical. So, how could you give people a platform where they can find content they love, and how could you allow artists to start making money from streaming?
Content revenue pools are not necessarily advantageous for local artists: as a local artist, you have to compete with the Taylor Swift's of the world, and your [share of listenership] compared to her’s is always going to be so small, that the payout you're gonna get is going to be minuscule. [...] I wanted to figure out a way that you could compare apples with apples. How Afrikaans artists can compete with one another, and not with an international pool? And then, for the users themselves: if they only listen to a small percentage of a catalogue, why should they paying so much? Can I make it cheaper and therefore open up the market a little wider? [...] The intention was to build one platform, which [can power] a number of streaming services, [so that each service can be] targeted at a very specific audience. So, the content, the marketing, the price point, the labels — everything about that streaming service would be curated — yet it's running off the same stack. So every stream you launch it becomes cheaper and cheaper technology-wise.
24:39 — On Lidjie
David Weiszfeld: So NicheStreems was the backend architecture, the white-label. And the first actual service that you launched, [NicheStreem] even allowed you to name the service locally in the language of the market.
Catherine Lückhoff: Yes. It's called Liedjie.com and so NicheStreem was the IP, and Liedjie was the brand that we made TV ads for. We did deals with Sony and Universal and Gallo and Orchard — and I swear I have grey hair under all the blond hair from doing deals with labels. It was super tough, because we were the first guys to say "hey surely our content revenue share should be better, it should be a lower price point". We only want this catalogue, we need more support, you know, we're going to open up local markets for you". But we ended up getting really good deals. [...]
We wanted to make sure that at a playlist level it was curated right down to cultural curation. We had a Head of Content, and his job was chat to artists, think of new ideas, come up with playlists that are culturally relevant, get artists to put playlists together, to make you feel like you're at home [when you open the playlist]. Our next plan was to [...] ingest [market-specific] content such as Persian music — because Persia is a big market. We were looking at all developing markets, that had large diasporas or large segments of content that people would want to access.
[...] But, in fact, what I knew about Persian music or Nigerian gospel music was super small. So [we wanted for] people bring their own content and [let them] spin off a streaming service. They're responsible for the music curation, and the brand, and the marketing behind it — and we just become the people that powers them. The ultimate goal was to [provide that] for $2000 dollars a month. You just had to bring right-cleared content to the platform.
34:11 — On Streaming Market in Africa
So Spotify, Apple Music, all the big guys are here now, which is fantastic — finally there's someone else spending marketing budget, teaching people what streaming services are, and how you can listen online. The market was growing so fast in the last two years, that it seemed ridiculous that the percentages could be that high. Now that’s certainly leveling out. I think that — as with every other market — they're definitely having some issues with retaining customers. With Liedjie, we chose Afrikaans market because we believed people had credit cards and they'd be willing to actually put those credit card details online — and that wasn’t true. [...] Getting someone to actually pay a monthly subscription is a tough thing to do — so the conversion rates are super-low. [...] So, I think [the future is] the ad-supported services [...] And the artists need to start [understand that] streaming is not where I make my money, but streaming [gives] me an opportunity to engage my audience in a more meaningful way. [...] I think more and more, if the brands and the content creators are going to start seeing [streaming] for what it is, which is what radio used to be: a great promotion tool and an opportunity then to sell tickets and engage further.
47:37 — Catherine’s advice to 19-year-old self.
Catherine Lückhoff: Even if I knew it was coming, it's still hard to answer. I think the big thing is not to take yourself so seriously. Not to let fear decide your fate because so often you're too scared to take the next leap, too scared to do that thing that you feel is right. Throughout my career, I’ve really tried to be brave — not just for me but for the people I work with and the teams I formed. Because I think at the end of the day it's bravery that's going to push you through the tough situations and that's the grit that gets you there. And bravery comes from understanding that things aren't always going to stay the same. I've gone from running an agency to doing business development to running a music streaming platform, and I've now started a cloud innovation unit, and I've just completed a course through MIT on A.I. and implications for business strategy. And I just want to learn about what's next and what's possible.
And so that lifelong learning? Being brave enough to know that it's OK even if you do badly — you'll probably end up doing well. And don't think that the thing you're doing now is the thing you're always going to be doing, because, I promise you — it's gonna change 50 more times. I just hope that's something they'll start teaching at schools, that ability to be adaptable and to be OK with failing. The worst that can happen is you fail, right? That's it. It's interesting, because the only person attached to the failure is you. It's remarkable how few people actually care. They love you and people care about you but they don't necessarily care that you fail. They just care whether you're OK or not.
David Weiszfeld: So maybe the morale is do stuff because actually people don't care.
Listen as a Podcast
Full Transcript
David Weiszfeld [00:00]: All right. Hi everybody! We're here with Catherine Lückhoff. Hey Catherine.
Catherine Lückhoff [00:05]: Hi David.
David Weiszfeld [00:06]: So, Catherine is currently the CIO at Swipe iX. Swipe iX is an agency that builds digital solutions: software, platforms, apps — and is at the forefront of tech in South Africa. More relating to music, Catherine launched and is the founder and CEO of NicheStreem which is a Platform as a Service so, essentially, a white label solution to build streaming platforms on top of it, that was specialising in niche music. Catherine comes from South Africa so obviously she was focusing on Africans music, originally. So, again: Hey Catherine! Nice to have you on the program.
Catherine Lückhoff [00:44]: Lovely to be here, thanks.
David Weiszfeld [00:45]: So, when I was preparing the interview, I actually realized that before tech and before music you owned a PR firm that was called Mango. Can you tell us a bit about the story of this PR firm, and how the hell do you go from PR to do BD and tech?
Catherine Lückhoff [01:01]: Yeah, sure. So I actually finished school in 1999, and took a gap year, and I was supposed to come home and do BCom law (Bachelor of Commerce in Law), because I come from a family who really values university degrees and so forth. And I came back a year later and realized there was absolutely no way that I wanted to study law — I just didn't want to fight with people for the rest of my life. So I did a late entry for a degree in Strategic Communication, and part of that degree was to do an internship. And so I did this internship in my third year. And by the time I was done, I was managing about five or six accounts for them in the PR space. And then that was my first lesson in how to stand up for yourself, because by the time my internship was done they asked me to stay on permanently but they offered me a salary of less than $150 a month. I was like "not going to happen". So I basically said to them "Well great. That's fine. Keep going." And I went back to study some more. And in my fourth year I actually had one of my ex-clients reach out to me, and it turned out that I had no restraints of trade, and I started a PR firm. It it was in about 2004–2005. That's just before social media really hit, and Facebook wasn't even a thing yet, and Twitter didn't exist. And so, when I started the company, everything just worked on referrals, and I happened to be dating someone at the time, who I later married, that was in rock’n’roll. And there's a big music festival, that was hosted in Cape Town called Rocking the Daisies. And they had about a thousand five hundred people in their first year. Someone came up to me and said "Hey I hear you work with media. And I was like "yeah kinda". And we basically took over their account and so from there we helped them grow to 10-15 thousand persons music festival. And we were doing some really cool stuff at the time with Levi's and with Red Bull, and we had all the bloggers come on board — it was kind of the era bloggers — and we put Wi-Fi out at the festival. Just none of this stuff existed at the time and people were like "that's insane!". And we're making use of Facebook events and... Yeah, we just got to really play around, and we ended up building an agency that was really focussed around online and offline CONs, and ended up working with some very big blue-chip clients. And, of course, naturally, as mobile became a thing, we grew into the mobile space. And truth be told, PR is probably the most boring job in the whole world. You know, with all respect to PR people out there. But, yeah, I kind of got into the space of mobile, especially when we launched Red Bull Mobile in South Africa. And at the time one of my very good friends had secured funding from Omidyar and Google Ventures for a company called Bozza. And she came to me and said "hey, don't you want to start doing something new? It's been seven years”. I said "Sure". And because I was kind of leading the BD side for Mango it was kind of just a natural switch to move over into Bozza. That became my second and actual first real job, because it was the first time I had ever been employed by someone.
David Weiszfeld [04:07]: Yeah it must be very different. Even if you start a PR firm and it becomes a pretty decent sized PR firm, to go from a self funding company that you literally open, because you actually already had a first client, which is always a great way to open a business. It's not like launching a business, and then hoping to get a client, eventually. But anyway, going from a self-funded, organic growth company to a Google-backed startup — do you remember the first moment you realize you're like "whoa this is not the same at all"? Not that it’s better or worse, but just completely different.
Catherine Lückhoff [04:44]: It's completely different. So having gone from services where really you're charging times and material, to going into a startup where suddenly there's a dev team, there's a product owner, there's investors that you have to keep happy. There's constant funding rounds, you're building a product which means you have tools to create a market for it. Bozza was building an app for talent discovery across Africa. So musicians, filmmakers, poets — anyone who wanted to self-publish. And so I was spending a lot of time in Nigeria and Kenya — just basically sub-Saharan Africa — with the OEM's, and the telcos, and really trying to see how could we take localized content and both help generate money for the telcos, but also, specifically, generate money for the artists. And so, you're constantly trying to make these deals, but then your product isn't quite ready yet, or you have to get some more funding, and your team is growing. So whereas in a services business you're paying people from contracts that exist, here you're now trying to create this market, and hope that you can monetize it. And constantly you have to prove your existence, and your reason for existence. So it was a very different setup. It's interesting, because the bug bits, and I ended up building a platform — or kind of a product-based business myself. I first switched back into services, and I seemed to kind of switch between the two. Have a services business — make some money, start a product business — lose some money... And move between them. But it certainly — I didn't think one or the other is better, I think the bottom line is that you ultimately always have to pay people, right? And so, as much as I've worked with the most incredible teams in the world, I think the most stressful thing for me about running a business is always making sure that you do it with empathy, and that you're aware of the fact that other people's lives are affected by it. So just because I have crazy wild-brained ideas, you always have to have it rooted in something and ensure that, you know, at the end of the day, whatever you're creating has to mean something. And also that someone else who works with you or for you is going to have to pay rent, and health insurance, and bonds and, you know — lives depend on it. So, I guess it was more just a lesson between Mango and Bozza, you know, how money flows, and sometimes the one is better than the other — but not always. Services businesses don't have a chance to become the Moonshot, I guess. It's an interesting switch.
David Weiszfeld [07:07]: You can't really scale an organic business as fast as you can scale of venture-backed. That just doesn't happen. Or you have to be crazy and literally reinvest every single dollar that you generate for 10/15/20 years. Hopefully, at one point, to make something — and that's a huge risk personally. Investing venture money into a business is another type of stress. It's different, and at the end of the day you're completely right — the people who work at the company might not be as entrepreneurial spirit, as cowboy, rock ‘n’ roll, like carpe diem as a founder. You know, they have kids, and houses, and mortgages, and so forth. And you have to be actually as thoughtful, if not more, because there's a sense of organized chaos in the startup. Every employee knows that you are losing money, and sometimes even haemorrhaging money. But every employee also knows that you are way too funded, compared to the size of the business. There is that kind of fake reality that you have to be accustomed to if you work inside a startup, I guess.
Catherine Lückhoff [08:16]: It's an interesting thing — I think Joel Gascoigne from Buffer gets it right, and it's certainly something I've tried to do with NicheStreem — is that, ultimately, people are following a dream, and they're buying into that dream. And so, in a way... You know, how much of what you're selling is true, and how much of that can people really rely on? Because, in a way, you have to sell people on a dream that hasn't happened yet. You've got to convince them that there's this market, and this massive opportunity, and that this is just the best thing that's going to happen to them. All while knowing, that like 99% of startups fail. So it's a very fine balance that you walk in. I think one of the biggest lessons I've had — in all the businesses I've started, and some of those I've been involved in — there are three things: people are looking for autonomy and they're looking for an ability to master what they're doing and they're ultimately also buying into a vision — and I think that's so true. And often I think services businesses forget that, because it becomes all about clients, and all about chasing the next big contract, and how much money can we make, and are we billing for every minute of every day — which isn't particularly scalable model. But then, also, with products it’s like "well, we're the boldest thing that doesn't exist yet. We kind of hope people will like it right. Let's just see what happens! And we'll collect champagne bottle corks along the way, and hope that that shows that we've been successful".
David Weiszfeld [09:44]: Yeah. There's always multiple layers of reality in the startup: it's what your vision is, what you have in your vision, what the product actually does today, which is usually not at all what the vision is. And then there are also two different realities: one is what you tell to your clients — people who are about to subscribe, or about to pay. If you work in B2C, I guess the product is the reality, and people will judge you for your product. You're not going to onboard manually people paying $4.99 a month. If you do B2C there's a lot of back and forth, and people are asking you about your product roadmap. They're usually doing maybe annual subscription — if you're doing CRM or sales type of software. And so they want to know that if they subscribe for a year… What they're hoping is that in a few months, they get more value for the same buck, and that you're not going to start adding a feature, that you'll charge on top. And so you have to create technical debt by giving a bit of your roadmap away, hoping that you can deliver, knowing that if you don't deliver you might have a client that is not AS happy. But as a sales or CEO you need to close the client. [...]
So, yeah. As a CEO, or Sales, you have to sell something to your clients that is not completely reality. But this is the same thing internally. Internally, you have the salespeople asking the tech people and the product "what is this feature? when is it going to be delivered?". The salesperson is hoping for that to close the deal. The tech person feels the pressure, even though he's not really talking to the outside world. And there is this sense of like: what is the company actually really doing? And most of the time you're talking about half what you are, half of what is in the pipeline, half what is about to be pushed. And there is some kind of very hopeful talk that you have to maintain. That can be the hardest part of a young CEO, I guess... Getting everybody on board, and everybody aligned for a long period of time.
Catherine Lückhoff [11:56]: And helping people feel they've made decisions to be there, and that they trust in the process right, and then they contribute meaningfully to that process. So yeah, it comes with its own challenges. It's certainly very addictive — not for everybody — but running your own thing is super addictive.
David Weiszfeld [12:13]: You mentioned being involved and having input. I think that's also... Most of the time the product department that says "no" because you just can't build 20 things at the same time. And you want everybody to have input in the product, and at the same time you don't want to say "no" to 10 inputs from the same engineer, because at one point he's gonna think that the input is a more symbolic input than the real one. And so like when do you ask for people's opinion, when do you try to push your vision on people, when do you like flip back into a democracy more, and you get everybody to discuss? When does the client become the ultimate priority and just goes everybody else? There is always the CEO's feature that everybody has to do, because the CEO asked, and nobody really understands it. Hopefully I don't have one. You and I know, probably, we have more than one, but, yeah. That's a huge challenge in a startup, especially when you are trying to find a product market fit, trying to find the market. People are having doubts at the company. You talk, you put things back into perspective. It's a lot easier to say no to a suggestion of a product, if all the indicators are up and to the right, because you're like "We don't want to break something that works". But if you're still in the process of trying to find your “zen”, trying to find the balance and the product market fit. It can be frustrating if you have an idea, and the company doesn't try it, and you see the company struggling.
So at Bozza you basically did BD for this tech/music company. As a listener of what you were talking, I can kind of see why you arrive at NicheStreem. You worked a bit in tech, you worked in BD, you're going around the continent, you're starting to understand how the market is organized, who are the content owners. Maybe, by that point, you actually looked at a lot of streaming platforms, and realized that the music you like, and the music that people want to listen to where you're from is not automatically available. Can you tell us a bit about the thesis behind NicheStreem? Obviously, in the name, half of the story is there, it's a good name. But can you tell us about how you got the idea? What was the first kind of team? What was the original approach? How the hell did you start from zero to something?
Catherine Lückhoff [14:35]: Sure. So the best way to start something is just to do it, right? And to not know enough, because then if you actually knew how big and how scary it is, you probably wouldn't do it, right? At Bozza — I was there for about two years — the one thing is absolutely that tension you were talking about, between sales, and product, and what's being delivered. And one thing that's very very important to me is to keep my promises, and to not make promises that I can't keep. And so one of the things I was really struggling with was that we have these telcos, you know, massive telcos across Africa, who really want to do these deals with me, and I keep having to kind of rein it in, and pull back. And I was struggling with that a lot, because, at the end of the day, monetizing a platform that really, ultimately, self-published artists was a tricky thing to do. Especially in a time where YouTube was starting to take over on video, and, you know, dumb-phones were still predominantly what we were building for and so forth. And so, I think we all forget how far we've come in the last ten years, you know, just in mobile tech and what's possible. Now, smartphones is kind of a normal thing to have. Back then, it certainly wasn't, and data was super-expensive. So, I gave my notice, and I decided that a really good thing to do would be to take a look at all the contacts I've made in the last couple of years of being an adult — or pretending to be an adult. And I went around for four months, and my goal was to meet smart, interesting people. And so I took my life savings, and I travelled, and I met with everyone from Facebook, to Twitter, to the Institute of Play in New York, to some of the early streaming services guys, the guys who got bought out by Google in the end, etc. I really wanted to understand, what was the role and goal for all these players in the future. What were they going to do for Africa?
David Weiszfeld [16:24]: That's a great state of mind too... Usually people quit their job and start the company, or they quit, go around the world, and take a break, and then start. You actually went on a four month learning experience trying to meet founders and people in music and tech. That's very cool.
Catherine Lückhoff [16:42]: Yeah it was super fun. I could do it again. I wish someone would pay me to do that full-time. That would be great. But, yeah. So, I really wanted to understand what was the vision for music and content services on the African continent. And so maybe, by way of example: for those who don't know, we have eleven official languages in South Africa, which Afrikaans is the third largest spoken language. So it's derived from Dutch and it kind of was a kitchen language and very much a part of the cultural fabric here. And 58% of domestic music sales is attributed to Afrikaans. And so it's not a genre, per say, it's because you have Afrikaans Rock, and Afrikaans Gospel, and Afrikaans Pop, and everything in between. And I just had this idea that with mass-market streaming services, Spotify and so forth — how are they talking to people locally? So, having worked with Bozza, and understanding exactly how important Nigerian gospel is, and how important are all the different pockets of content out of East Africa and Francophone Africa and Mali and every other place. Where are those people going to find the content that they love? And so it was also the time in which Nigeria was starting to push for very big quotas around Nigerian content, and how an entire country had changed its culture to be less Westernized, from a music perspective, and definitely more kind of... Every club you went into in Lagos was paying predominantly Nigerian content.
David Weiszfeld [18:13]: I had no idea. Usually the quotas are from countries that are not Anglophone, like France. Here we have quotas, they have some in Quebec. But to have a local Nigerian or African quota in an Anglophone countries, I think it's the first time I hear about something like that. And you felt that rule and that law really pushed the country to actually play a lot more local music, and that impacted the culture of the country?
Catherine Lückhoff [18:51]: Yeah. So Big Brother Nigeria was mandated that they were only allowed to play a Nigerian content. The Big Brother TV show, but the Nigerian version of it. You know, one of the big ideas when NicheStreem originally started was that Nigeria is a very Christian country. So 80+ million people are Christian, and are avid lovers of Nigerian gospel. And so you only have to google megachurches in Nigeria to understand kind of the volume of people. I mean some of these churches have millions and millions of followers and, you know, congregation sizes. And so my question was: well, if you if you're into Nigerian gospel you're not going to find that on Spotify — Or any of the other services. And in fact, at the time, Spotify was listing Afrikaans content, but they were putting everything under one playlist, because it happened to be Afrikaans. Now, I always joke that's like putting Red Hot Chilli Peppers and Britney Spears on the same playlist because they sing English. That's just not logical. And so I was starting to think on a couple of levels: how could you give people a platform where they can find content they love — not necessarily exclusively — but that is focussed on that, so very similar to, I guess, what Tencent is doing with QQ Music and so forth. Secondly, how could you allow artists to start making money from streaming? So, as everyone probably knows, content revenue pools are not necessarily advantageous for local artists, right? So, as a local artist, you have to now compete with the Taylor Swifts of the world for the content pool. And your percentage compared to her listening and her listenership is always going to be so little, that the payout you're gonna get is going to be minuscule. Yet, in South Africa you might be selling platinum CDs. And you're making more money from CDs, but you're seeing this wave come along... So, I wanted to figure out a way that you could compare apples with apples. How could Afrikaans genre-artists compete with one another, and not necessarily with an international pool. And then, thirdly, for the user themselves, like how could they... If they only listening to a very small percentage of a catalogue, why should they be paying so much? Like can make it cheaper and therefore open up the market a little wider? So, with NicheStreem we landed in a situation where we were doing most of the education around what streaming services are, because it was still very much a pay-to-own a product. People wanted to own the CD, and so music ownership was important to them. But, yeah, I pitched a panel for South by Southwest in 2013, around music and content services in Africa. And, on my four months trip prior to that, I met Stephen White and Vadim Brenner who were at Gracenote at the time, and we've become really good friends. I met them at MIDEM, where I did have a talk on localized content services in Africa. And they decided that they were going to take care of me. And so I was sitting in a restaurant with Stephen one day over, we were drinking pornstar martinis, and I said to him "Hey I think that we should start a niche music streaming platform, because, as much as video is segmenting, I believe that music is going to segment". And up until that point, a couple of people had told me I was just crazy, like that would never happen and, you know, music listeners want to listen to everything. And I was like "Well, I don't know. We'll see". And Stephen kind of looked at me and he said: “You should do it!” And so Vadim helped me put the original product roadmap together, and he actually introduced me to Ralf Mueller. Ralf is that guy in the company, who is our product owner, eventually who is like "no, you cannot have this — but you can have that". And that's the thing I think that every tech startup needs right, like that product owner who listens to everybody's story, who kind of look at what is the most essential thing, and what's the next best thing to build. And Ralph had been involved with Ampya, which was a German music streaming service that Deezer acquired. And Ralph — to his credit — I met him in Munich one day in 2015, and I said to him "hey, I want to start the streaming service" and he's like "cool, I'm in!" And he was purely for sweat equity. And that was my first lesson in “ always work with people smarter than you”. Ralph was the guy that could tell me what I can and can't have, and hence I laughed — I don't think I had a CEO feature, because well, he wouldn't let it happen. But I was super lucky — I worked with one of the best tech guys out of South Africa: Johan Jacobs, who became my CTO. He was the technical team lead for a company called MXit, which had grown to 40-50+ million users. They were the first guys to develop IM (Instant Messaging). And so this kind of birth of WhatsApp, and Facebook Messenger, and even BlackBerry was kind of out of MXit. And so Johan, being self-taught kind of became this absolute guru when it came to just coding, and, eventually, a Solutions Architect for the AWS stack. Then, the marketing person we appointed was Head of Marketing for the largest Afrikaans TV channel in South Africa, and our Head of Content was actually an artist herself, and had been curating all these massive shows. So the intention always was to build one platform, of which you could spin a number of streams — but each stream is targeted at a very specific audience. So the content, the marketing, the price point, the labels, everything about that stream is curated — yet it's running off the same stack. So for every stream you launch it becomes cheaper and cheaper, technology-wise.
David Weiszfeld [24:33]: Yes. So when we were briefing you mentioned that NicheStreem was the backend architecture, the white label. And the first service that you launched — it allowed you to even name the service locally in the language of the market that you were launching in.
Catherine Lückhoff [24:53]: Yes. So it's called Liedjie.com, and so with NichStreem in itself… We had a brochure site, but NicheStreem owned the IP and Liedjie was the brand that we made TV ads for. We did deals with Sony and Universal and Gallo and Orchard. And, I swear, I have grey hair under all the blond hair, from doing deals with labels. Because, everyone's like “it's going to be super-tough” and I'm like “No, it’s going to fine”. It was super tough! Because we were the first guys to say "hey, surely our content revenue share should be better, it should be a lower price point. We only want this catalogue, we need more support. You know, we're going to open up local markets for you". And so we did end up getting really good deals, and we were very fortunate. We worked with MediaNet, who ingested all the content for us and did the reporting, and then tagging, and metadata, and all that jazz. And so it was really about how do we find the best in class to be advisors. So the Gracenote guys became advisors. Chris Carey, who was, at the time, the Global Insights director at Universal, and we had a guy from Nicholas, who was ex-eBay. I just made sure that I was surrounded by people who knew more than I did, and that I employed people who are smarter than I was, and I was just like "Here's the idea. Make it happen".
David Weiszfeld [26:11]: As a CEO you can be the dumbest person in your own boardroom. That's a good one. If you like “Whoah, everybody is really smart, and I feel really like the stupidest person. How the hell did all these people arrive at my company, and why are they working for me?” You know, imposter syndrome is something that every CEO goes to a one point. And apparently — my company is not that big, yet — but, apparently, the bigger the company — the bigger the syndrome. It doesn't get better with time, because after a while there's like 50 people and they're literally all smarter than you. And then one hundred people. And as the company grows, you still feel you are the same: twenty one year old person with an idea. So yeah. That's usually a good sign. And so that's interesting: you were ingesting catalogue from the majors, not every single audio, but you were selecting the genres that would be interesting for Liedjie, or, after, for the other vertical-based platforms. And then I also know that some of the content just wasn't online, and you had to actually go, and get the audio files, and digitize them, and that would allow you to have an exclusive offering of catalogue that would not be existing. But it must have been — already launching a streaming platform, in Africa. Like two incredible things that seem incredibly hard to do. And then doing that on a genre of music that are not online. So one is how the hell do you get the files and contact the people? There is no continent syndicate of record producers, that all have a clean e-mail address you can contact. And then, the second is how they held you report money, when there are splits, there are metadata problems, there is no centralized label copy. Can you tell us a bit about that technical mayhem that it must have been?
Catherine Lückhoff [28:12]: So sure. There was actually two parts, or three parts. The first is we started with a market that was a bit more sophisticated, so that we could prove that there is appetite, and that any service could work, etc, right? You can't build Rome in a day. I think you have to start small and kind of extend a process of proving it can work. So, with the artists who didn't want specifically online, or digitized — we basically just directed them to CD baby, and Distrokid, and TuneCore, and so forth and said "There you go! Go load up your content: here are our recommendations, and then make sure that you ticket for availability for Liedjie” — so that's the first thing. And then with those artists who are really kind of — especially with back catalogue, we ingested an enormous amount of back catalogue and we would just do our own drops through MediaNet custom ingestion. And that was super important, because we wanted to make sure that at a playlist level it was curated right down to cultural curation. And so we had a Head of Content, who’s full job was: chat to artists, think of new ideas, come up with playlists that are culturally relevant, that people could contribute to, get artists to put playlists together, like make it super... When you open it up — you feel like you're at home. And it has to be music for every moment. Our next plan then was to start looking at if we're going to ingest content such as Persian music, for argument's sake — because Persia is a big market. We were looking at anywhere that was developing markets, that had large diasporas or large segments of content that people would want to access.
David Weiszfeld [29:47]: So Middle East, North Africa, sub-Saharan Africa, South East Asia maybe even.
Catherine Lückhoff [29:56]: Even Brazil. I mean if there's so much content in Brazil that was just flying, you know. And everywhere, I figured that at some point you'd be able to get a Heineken, for argument's sake, to sponsor streaming service, because of the relationships they can build with the clients. And so for us our next step was going to be: do we build our own ingestion platform? And then, how do we start using — and I hate using this phrase — but how do we start using blockchain technology to help people to upload that content, right?
David Weiszfeld [30:25]: Why do you hate it?
Catherine Lückhoff [30:28]: Because it just feels like every startup in the world is like "oh, we use blockchain".
David Weiszfeld [30:31]: Of course! And we make the world a better place.
Catherine Lückhoff [30:35]: I just felt that there must be a better way to help authors identify that it is their content. But that also meant that we needed to start looking at fingerprinting, and what we first wanted to solve was recommendation. We wanted to see, whether with a content we do have, could we build graph databases that could connect you to the content you really love, but also surprise you? We did some really fun stuff, where we took the Google ranking algorithm, and we kind of updated their secret sauce bits to our own, and it allowed us to rank authors differently, and we got the labels to accept those rankings. Because one of the challenges we kept facing is if you put someone on a playlist, especially if they then get into the top-10 playlist, of the last week's plays — they would just stay in the top-10. And so I was adamant. How could you prove that there is engagement with an artist? Because I wanted to build out on services like — and it sounds silly now, because this was five years ago — but we wanted to do ticketing, and merchandise, and meet-n-greets. How could you create a deeper experience? And so, for that, we needed to really look at what that data meant, and how we could recommend, what services we could build? And that's really where this concept of a white label came from, because we could do the tech really well. And, in fact, when we got some great outside validation on just the platform we built. But, what I know about Persian music or Nigerian gospel music is super small, like it’s slim, right? So, how can you get people to bring their own content and spin off a stream, and they're responsible for the music curation, and the brand, and the marketing behind it. And we just become the people that powers them. And so, basically, I guess like WordPress — you could just skin your own stream and spin it up. And the ultimate goal was to do that for like $2000 dollars a month. You could run your own streaming service — you just had to bring right-cleared content to the platform. And we almost wanted to ensure that the responsibility was moved away from us, because it would allow us to scale. But, yeah, we were suddenly looking at how do you get all that content in, and how do you get the kids in the backwaters of Nairobi to be able to upload his or her content, become the next Ice Prince, the next big-name artist from Africa, where there's so much talent and opportunity here — it's unbelievable. So, yeah, that was the goal.
David Weiszfeld [32:51]: It's funny, how a company with a name Niche, when you start digging in a little bit, you understand that the potential was to try to literally create invisible streaming companies for the rest of the world. In the majors they call it "Non-US/Non-UK", when they talk about repertoire that is from France or Germany or South Africa — and this would have been like the Non-US/Non-UK music platform. In terms of revenue today Non-US/Non-UK is actually getting bigger than US/UK. Just because there's so many expats and internationals, that people in the US — for example, all the Latino community are responsible for a big drive of Latino music. So, fast forward, five years later — we're gonna talk a little bit about Swipe iX — what is the landscape right now in Africa in terms of music streaming? Have the American platforms now come and dominated the market in the last two years? I think there's a platform from Nigeria that is doing OK. Can you explain, just very quickly, what do people do when they think about music streaming in South Africa or Nigeria — to talk about the big Anglo-market.
Catherine Lückhoff [34:09]: So Spotify, Apple Music... Kind of all the big guys are here now, which is fantastic: finally there's someone else spending marketing budget, teaching people what streaming services are, and how you can listen online, etc. I think it's a market that was growing so fast in the last two years, that it seemed ridiculous, that the percentages could be that high, and that's certainly leveling out quite a lot. I think that — as with every other market — they're definitely having some issues in retaining customers. You know, one of our biggest challenges is that we chose Liedjie — which was an Afrikaans market —because we believed people had credit cards; and they'd be willing to actually put those credit card details online. And that's not true. So, you know, being able to hook someone in, get them to actually pay a monthly subscription is a very very tough thing to do. So the conversion rates are super low. That said, everywhere you go now, someone has some form of a streaming service. And I think that what's going to happen more and more, is that you're going to have more — especially in this continent — more branded, kind of brand-paid-for content streaming services, with premium being an option when you don’t have to watch ads.
David Weiszfeld [35:21]: So when you say branded, you essentially mean the Coca-Cola streaming platform, that everything is free, but you get a Coke ad — that would be a lot of Coca-Cola ads — but you get a Coke ad every five songs and it's powered by Coca-Cola? The app is red, and you're in their environment?
Catherine Lückhoff [35:40]: No, I think more so that within the streaming services the ads are going to grow, and kind of the... User engagement is going to grow. So, I don't think you're going to be able to segment... Whether someone would listen to just a Coca-Cola stream, I don't know. But I think more and more people are going to try and figure out ways to get content free, and that's the one thing.
David Weiszfeld [36:01] So, you mean essentially pushed to freemium more than... When you say a branded stream, you don't mean a streaming platform that has one brand on it — but the streaming platform that lives because of brands.
Catherine Lückhoff [36:14]: And it’s supported by brands, yeah. And so, I think where the real opportunity lies, is that switch that artists need to start making around “Maybe it's not going to be from streaming, that I make my money but, rather, streaming affords me an opportunity to engage my audience in a more meaningful way. And therefore getting the brand sponsorships for artists, who then can start becoming those ambassadors. I certainly think — especially in this environment, where data is dropping and people are still able to share content so freely. It's such an ingrained cultural thing to do — like share your CD with someone, or share a flash drive with someone. I think more and more, the brands and the content creators are going to start seeing it for what it is, which is what radio used to be. A great promotion tool and an opportunity to sell tickets and engage further. It's certainly flattening out, but I think more and more people are going to start pushing into the market and see an opportunity for revenue generation, using streaming as the backbone for it. Because CD sales certainly aren't growing. That's for sure.
David Weiszfeld [37:17]: Yeah. I was talking with a friend about Spotify entering India, and, as big as the market is,it could be millions and millions of streams, and millions of users. And because Spotify has a freemium offering, they can actually try to penetrate those. But I think the average price for subscription is $1.99. So that's a lot of stream to equivalent to an American person. As big as the market is, there’s a lot of local music. And if the local Indian people are paying $1.99 for that, the revenue pool for an Indian freemium stream, I mean if the premium is $1.99, the freemium ad/branded must be pretty low. And so yeah, a free stream from an India freemium user versus a free stream from a California user — the revenues are not the same for the artist. And so now we all see one stream count, everybody's like "Oh India is launching is going to be a lot of streams", but the price per stream is actually not the same, so you could have an artist essentially doubling the stream count, but doing plus 25% on revenue, because that additional stream count is paid a lot less.
Catherine Lückhoff [38:27]: I think, you know, if you if you consider the amount of data that's being gathered around each user, and also if you start taking users in clusters so... I can start recommending content to you as a user, because I can see what people around you are listening to by virtue of just proximity, or day of the week, or the day time of the day. I mean, I might not listen to EDM at 7 a.m. on a Wednesday morning, when I'm getting ready for work, but come Friday evening at 7 pm — I'm totally into it. So, just the behavioural patterns of users. And so I think, more and more, the advertising is going to become smarter, and the branded content is going to become smarter, and it's going to become far more relevant. Because that's what the market demands, and kind of what the new generation — not that I'm that old — but the Millennial market expects you to know more. To serve me ads in a time and a place that makes sense and that I might gravitate towards. And so I think that the opportunities for that is certainly opening up more and more, and therefore having branded or ad supported streams just isn't as offensive as it used to be. It's not taking up as much real estate, not costing as much in data, and it might actually, potentially, be something I want to see or buy, in the future.
David Weiszfeld [39:41]: And if you target as well — it's not as bad for the listening experience. I'd rather have an ad for a festival I actually like, that is like a friend reminding you of something that you actually wanted to do rather than, I don't know... I bought a plane to go to holiday. I keep getting plane ads. I already bought my ticket. It's been like a month, it's too late now. My marketing pixel is still travelling and all of the ads-generating things, and so I'm still getting like “cheap planes to Cancun”, and it's like that spend has been gone a long time ago.
Catherine Lückhoff [40:16]: I don't say that they're getting it right. I'm just saying the scope to get it right.
David Weiszfeld [40:20]: Yeah. It's definitely getting better, and actually... Some music artists can have positive ROI on marketing campaigns, especially on digital, when you're target it well. If you can target your hardcore fans,I don’t know. You and I listen to an artist more than anybody else, and we both get an ad about this amazing box set or a tour. The artist might be paying more money to target us, because it's extremely targeted, but the ROI, possibly on buying a hoodie, a concert ticket, a box set or whatever, is going to be much more higher. And there is a few campaigns actually, like few studies that came out, with extremely positive ROI on marketing. Now, you cannot keep spending, because at one point your fan base is just going to stop you. It's not like Coca-Cola, where if you have a positive ROI on marketing, it can just keep going because the world is your market. But for artists it's about targeting their fans. But if you target the 50k fans that really love you with a good offer, it's gonna be pretty cheap to target them. Because you kind of know where you want to go. You don't have to spread very thin. And actually you will generate quite a good interest. So if the price of the package — no matter what it is if it's, if it’s a box set, merch or a concert, it's usually like 30 dollars — you'll get positive ROI. If you have a 1% conversion on a 30-cent ad, but you sell it for 30 bucks that's a net zero on ROI. 30 cents to target a fan is pretty expensive, most Facebook ads are actually lower than that. So marketing online is interesting. There is a company called Feature.fm that actually does marketing of audio within Deezer. So if you are an artist instead of marketing like "Hey I'll come to the show, do you want to buy my ticket to the show," your song is actually the ad. And so the fan is listening to a playlist of Deezer, and track number 4 will just start playing and it will be an audio of the song, and you don't even know it's an ad, but if you like it — you’ll save it offline. And so as a result the artist is then getting free streams because you’re offline, you're in the recommendation engine. Maybe the person shares it with a friend. And that audio bit is actually a promoted song. It's not an ad, it's a promoted song. I completely agree with you, ads are getting better and better.
Catherine Lückhoff [43:00]: It's also interesting I say that, because I definitely used to be very anti-banner ads and everything else. But, you know, that there's just another angle, that I wanted to just briefly touch on and that is something we considered especially with NicheStreem. Everybody is looking at this B2C model, that's either paid for by the user or paid for by buy ads. And so some of the opportunities we were exploring: one was with the Smithsonian Institute in the US, who sit on a massive catalogue, I mean they're a library of music. And they have these incredible playlists like Rap around the world, and Cherry Blossom Playlist, and the Civil War in music, and they sit with this. It's a government institution that is trying to preserve blues, and jazz, and Nepalese-throat singer sounds, and frog songs, and, you know, this is kind of this big cultural heritage side of it. And very much what we were doing with Liedjie was how much of the back catalogue could we digitize to ensure that this heritage wouldn't go to waste or be forgotten, rather. And then similarly, we actually put a pitch together that we wanted to speak to the U.N., so when the Syrian refugee crisis first hit, one of the things people forget is that the second biggest reason people use their phones — apart from connecting with friends and family — is for entertainment. So if you're a Syrian refugee who finds yourself displaced in Germany, for argument's sake, there are apps out there doing translation, and apps helping you find jobs, but where are you finding — within that environment, through Deutsche Telekom — how are you finding content that's relevant to me? Like news, and music, and poetry. You know, we had so many children's stories, spoken word children's stories on Liedjie, that, for people who had small children, who remember these stories when they were kids — they were just gripped by it, both them and the kids. So, how do you preserve that cultural side of things, and how do you allow people to connect with music and content that's relevant to them, and how do you get institutions like the U.N. and Deutsche Telekom to actually sponsor it? Because that has a humanitarian aspect to it and kind of, music transcends cultures and languages, and it connects people. And we were looking at those aspects too, so it doesn't necessarily have to be user- or ad-driven. I think there can be other uses for a streaming platforms to allow people to improve the quality of life for, you know, promote peace, if you like. So there are a number of other ways that we were looking at it, but sadly we had to switch NicheStreem off. We actually joined the Peace Tech Accelerator out of Washington D.C., and we had an investor who strung us along for over a year, and finally just went quiet on us and another startup, and by then we'd run out of cash, and it was a lesson learned: unless the money's in the bank — don't stop looking for money. And we weren't able to scale it in the end, which is sad, but someone will do it, and hopefully even better than we did.
David Weiszfeld [45:58]: So, one quick comment, I just realized when you were talking about stories, you essentially had podcasts and audio-books before Spotify did. Not even podcasts — you had audio-books, you had Audible on Spotify. So kudos for that. Yeah, you're completely right. I think when people go away from their home country, as well: they want to be in touch with the news, with the culture. And so the NicheStreem would be even more relevant, or as relevant, for somebody from Nigeria, who lived in Dusseldorf, and wanted to actually be in touch. I realized as a French person if I'm in the U.S. actually go on French news a lot more than what I'm in Paris, where I'm just bombarded by French people talking to me about the French news, and we love to talk, and comment politics. But if I'm away, I'm actually gonna go and read the equivalent of Washington Post or New York Times, which I never do if I'm here. So, yeah, same for music, same for culture. People tend to try to find their roots when they're going away from where they come from. So cool, that's been great. A couple of questions/words of wisdom, before I let you go. I ask this to everybody, that's a horrible question to get asked. So sorry about that. If you met the 19 year old Catherine today, what advice would you give her? What framework? What insights would you have loved to get when you were 18-20, just starting?
Catherine Lückhoff [47:38]: So you sent me this one before, and I appreciate it, and it's still hard. Even if I knew it was coming, it's still hard to answer. I think the big thing is not to take yourself so seriously. Not to let fear decide your fate, because I think so often you're too scared to take the next leap or too scared to do that thing you think and feel in your gut is right, but you're too afraid to do it, so you sit around waiting for it and it's the thing I've really tried to be throughout my career is that I tried to be brave — and brave not just for me, but for the people I work with, and brave for the teams I formed. Because I think, at the end of the day, it's bravery that's going to push you through the tough situations, and that's the grit that gets you there. And so the bravery also comes from understanding that things aren't always going to stay the same. So I've gone from, you know, running an agency, to doing business development, to running a music streaming platform, and I've now started a cloud innovation unit, and I've just completed a course through MIT on A.I. and implications for business strategy. And I just want to learn about what's next and what's possible. And so that lifelong learning? Being brave enough to know that it's OK even if you do badly, you'll probably end up doing well. And just making sure that… Don't think that the thing you're doing now is the thing you're always going to be doing, because, I promise you — it's gonna change 50 more times. And just I hope that's something they'll also start teaching at schools. That ability to be adaptable and to learn and to also be OK with failing sometimes.
David Weiszfeld [49:11]: I think also what your comment underlines is that you learn essentially a lot more from failures. So if you don't try anything you never fail you actually don't really learn much. And if you're always the fastest runner in the class you actually never run technique, because you just run faster. It takes a couple of runs and people to beat you to realize "oh, they have better form, better reflexes. That's probably the things I should be focussing on”. But you've got to try it and jump in the pool.
Catherine Lückhoff [49:40]: Yeah, and also the worst that can happen is you fail, right? That's it. And it's interesting, because the only person attached to the failure is you. It's remarkable how few people actually care. They love you, and people care about you, but they don't necessarily care that you fail. They just care whether you're OK or not.
David Weiszfeld [49:59]: So maybe the morale is “Do stuff because actually people don't care”.
Catherine Lückhoff [50:05]: Just get shit done!
David Weiszfeld [50:07]: Stop worrying about what other people think. Cool. Well thanks so much. I took you for 50 minutes, so thanks for your time, and I hope to talk again soon.
Catherine Lückhoff [50:18]: Yeah it's such a pleasure. Thanks for having me. I hope to speak soon. Thanks.
Founder & CEO, Soundcharts.com & bsharp.biz
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