Toronto-based stealth music startup Tunezy announced today that it has received funding from Intertainment Media, a publicly-listed venture company on the TSX Venture Exchange that lists its mission as “developing, nurturing, and investing in technologies.” Intertainment will take a 20 percent ownership stake in Tunezy as part of the deal, the specific terms of which weren’t disclosed. Though they wouldn’t disclose the specific amount, Tunezy founder and CEO Derrick Fung told BetaKit in an interview that it was a six-figure deal, and that Intertainment will also be acting as a sort of incubator for the young company.
Tunezy made waves when it won the National Business & Technology Conference Entrepreneurship Competition, where they competed against 32 other companies across North America. The platform isn’t scheduled to launch until May, but the founders outlined their plan to build a site where users can not only listen to music by independent artists, but also reward those artists for their efforts via a clever virtual currency setup that requires no financial input from end-users, but can still result in paydays for artists.
“People don’t want to buy music anymore,” Fung said. “You have these record labels where their whole business model is based on people buying music, and when people don’t want to buy music, they come up with ways to squeeze more money out of musicians.” One way to do that, Fung says, is to create so-called “360 deals” that entitle labels to a percentage of proceeds from all of an artist’s endeavors, including touring and merchandise, instead of just from record sales alone.
As a result, Fung says artists are increasingly opting to stay independent, and the opportunity to help those artists take advantage of lucrative online trends like gamification and crowdsourcing helped the concept behind Tunezy take shape.
On Tunezy, users gain credits (which the site calls Notes) through use of the free site and its tools, and they can then “tip” artists using their accumulated stock of virtual currency. Bands and artists can then in turn exchange their stockpile of Notes to fund real-world rewards, like licensing contracts, studio time or discounts on gear.
Despite the fact that users don’t have to pay to listen or get Notes, and that artists can trade said Notes for paid goods and services, Fung says Tunezy has a three-part strategy to help it drive revenue. First, the company intends to make some content available to fans, like exclusive streamed live performances. These will be accessible via an exchange for Notes, but Fung says they’ll be out of reach for many users, who’ll have the option of paying real money to top up their Notes supply.
Tunezy is also working on partnerships with the businesses and brands it’ll be helping musicians connect with that involve revenue sharing agreements, and, as a third option, opportunities that could arise from the massive amount of data it intends to collect from user interaction with the service.
“This type of information is really valuable, to both a musician and to other companies who’re interested in knowing exactly how to better market their product,” Fung said. The Tunezy team is considering selling branded virtual goods, like Fender guitars for their online profile for example, to users as a way to help target that data for businesses looking for marketing insight.
In terms of competition, Tunezy’s biggest challenge won’t be in attracting a talented pool of musicians, its primary competition will actually likely be general-purpose funding sites like Kickstarter who don’t offer the marketing and customer service-provider relationships Tunezy does. But getting users to come on board when they’re already entrenched in streaming services like Spotify or industry-leading ecosystems like iTunes will be difficult. There are also sites like Bandcamp that let musicians sell music and merchandise directly to fans, but Tunezy is appealing to fans by offering music for free, while still rewarding musicians. One of the company’s advisors is a former product manager at Myspace Music, and with musicians looking for the next big music marketing vehicle, Tunezy is clearly hoping to fill that void.