This post is part of the How To Launch a Music Startup series by Brenden Mulligan, which focuses on building a company that creates online products for musicians. Mulligan founded ArtistData, which was recently acquired by Sonicbids, and can be found on Twitter at @bmull.

As mentioned in the previous post, I'm going to start out this series establishing key metrics to think about when building a music startup. The first of our three integral metrics is market size.

  The question "how many artists are there" is often debated. I've gone over it time and time again over the past few years and the truth is, there's no exact way to tell. People are starting to play music every day. Bands are forming. Bands are breaking up. It's an ever fluctuating number, so my strategy was to make a logical guess that I felt like I could back up.

Before picking a number, I thought "what type of musicians am I defining?" Am I looking at any human who is playing an instrument? Or just people who want to make it their career? Or just musicians who tour? This is where the subtleties of your product's vision can come in, but I generally define my target market as musicians who are serious enough about music to consider paying for a service that will help them build a music-focused career.

Then I moved to looking at numbers claimed by services and products that serve the needs of the artist market. This was tricky because each service I looked at had to be weighed:

• MySpace claims something like 13 million artists, but we all have seen "artist" pages for restaurant, companies, etc... And it's free. So that number is way out of proportion with reality.
• Reverbnation claims 810,000+ bands. That sounds a lot more reasonable. But again, this is a free service that no one needs to cancel if their band breaks up. So it's probably a bit high as well. Plus, they might consider every member of the band an artist, so if a band has 4 members, that's 4 artists.
• Sonicbids has around 250,000 registered artists. It's typical that Sonicbids would have a smaller number because they don't offer a free service. So Sonicbids' number is lower than the real market size.
• Yahoo Music has about 500,000 artist pages, but that number is low because indie artists can't create their own profiles there. At the same time, it's high because they list a lot of legacy acts that aren't still active.
• CD Baby claims 230,000 artists, which is a great metric because these are bands selling albums through their service, so you know they are motivated to pay for a service to move their career forward. But these are only indie artists, so they're missing a big chunk.
• Next Big Sound tracks 720,000+ artist profiles. They key word here is "profiles", so if an artist has 10 profiles, they count 10, not 1. Plus, they are most definitely grabbing band pages of acts that are no longer active.
• Bandcamp's full artist index lists about 484 bands per page and has 109 pages, which puts their community above 50,000 bands.
• Services similar to ArtistData and Bandzoogle are all in the 5,000 - 35,000 range. These are just smaller companies, and I didn't think were relevant for this number.

In the end, it's a judgement call. The way I've always described it is a lot less than MySpace but plenty more than Sonicbids and CD Baby. So the number I chose, and have always used for this, is 500,000. I believe that there are at most, 500,000 relevant artists who could potentially find a internet service valuable enough to pay for. And since these services generally don't geographically discriminate, that's the worldwide market potential.

I know, some might think that's really low, and others may think it's way too high. Well, you might be right, but this is where I ended up and I think it's both reasonable and justifiable. And to be honest, I ran this number by people doing similar analysis at much larger companies, including MySpace and Yahoo Music. We all thought it was reasonable when we discussed it.

The problem with this number is that in the grand scheme, it's tiny. Even if you double it, it's still a very small total available market (TAM). When investors want to see market sizes, most want to see the TAM in the tens to hundreds of millions. They want to know there are tons and tons of potential customers and as the product improves and the footprint widens, the site will grow exponentially to millions of people. The artist market isn't attractive to most investors.

Unless, of course, that small niche market has a high willingness to pay.

We will cover that in the next post. Until then, I'd love to know your comments about the reasonability of this market size analysis. Pass this around to people, and let's get some good conversation going around this number. Tear it apart, only if you build it back up.

Previous Post In Series: Establishing Key Metrics.