MONTREAL The Globe and Mail Published Thursday Apr - PDF document

TURNING POINT Montreal startup built an empire from castoffs JOSH O’KANE MONTREAL — The Globe and Mail Published Thursday, Apr. 25 2013, 5:00 AM ED T Last updated Wednesday, Apr. 24 2013, 4:42 PM ED T In a 19th - century building on the edge of Old Mon treal, 25 people are b ecoming the 21st century’s musical tastemakers. They’re part of a team of 80 worldwide who program Stingray Digital’s television and streaming music stations, which reach millions of households around the world. They build playlists that include the latest in Canadian indie rock, ‘80s pop smashes and contemporary Farsi hits. Across the building, another team is listening for the world’s next pop hits, re - recording and licensing them for Stingray’s multiplatform karaoke business. The Karaoke Channel and Gala xie – a series of unassuming music - playing stations that look more like screen savers than money - makers – were among Stingray’s first acquisitions, and today they serve as anchors to the company’s extensive global reach of nearly 80 million homes in 71 cou ntries. Less than a decade old, the Montreal company leveraged the unwanted properties to become one of the world’s leading multiplatform music providers, with a goal of reaching 400 million households in Eric Boyko is Stingray Digital’s co - founder and chief executive officer . (Christinne Muschi For The Globe and Mail ) the next two years. In the age of Netflix, traditio nal TV might no longer be top of mind, but Stingray has used it to take advantage of its customers’ most natural of human behaviours: laziness. “They put Galaxie on for background music,” says Eric Boyko, Stingray’s energetic co - founder and chief executive officer. “It’s easy.” Stingray’s executives, focusing on the simplicity of that human desire, have built a business - to - business company by licensing music and partnering with cable providers. They chose this path rather than enter the more complex busines s - to - customer world, which includes Internet browser - and mobile - device - based music streaming services such as Spotify, Rdio and Deezer. “Those are much more difficult to license than a broadcast service,” says Eric Albert, Stingray’s executive vice - presid ent. The company is also looking for competitive advantage in the increasing interactivity of television. Stingray offers apps for a growing number of Internet protocol television (IPTV) providers, such as Bell Fibe TV. Later this year, the company will la unch interactive “VIP” apps that will let listeners skip tracks and browse other music stations within the Galaxie ecosystem using their remote. So while Galaxie has built a core audience of passive listeners, it’s paying attention to the active ones, too, allowing them to turn their trickle of music into a flood. “We’re not just a traditional TV service,” says Gary Pelletier, Stingray’s vice - president of marketing. They are, instead, content providers – their apps, both on television and mobile devices suc h as the iPhone and iPad, have “much more rich information.” The company was founded in 2007 when Mr. Boyko and his partners scooped up the Karaoke Channel from a North Carolina company in dire financial straits. Later that year, it took over the Galaxie channel series from CBC. Being independent meant Stingray was able to do far more with Galaxie than CBC ever could; the company could fund research and development without issuing requests for proposals, and could expand internationally with ease. “I’m not sure CBC is too happy after selling that asset,” Mr. Boyko sa ys. Stingray has also swallowed up Max Trax (Corus Entertainment’s Galaxie equivalent) and the video - on - demand service Concert TV – which, like the Karaoke Channel, reaches 45 million homes worldwide. Stingray’s vast expansion is largely thanks to nine suc h TV acquisitions in the past seven years. Mr. Boyko says he has an additional seven in the pipeline, including one Canadian acquisition that could be announced shortly. Stingray has thus become the largest music provider of its kind in the world. While th e U.S. market for audio music channels is dominated by Music Choice, which is partly owned by cable providers, Stingray acquired its European division in 2011, giving it access to 17 additional countries and securing its dominance in the world – minus the United States, where Music Choice reaches 55 million households compared with Galaxie’s 2 million there. The North American audio - television market is obviously saturated, but these services don’t have the same reach elsewhere in the world. That’s where St ingray makes its moves – away from crowded markets and toward countries such as Turkey, Guatemala, Costa Rica and Uganda. The company, while proudly Canadian, needed to look beyond its borders to reach the needed scale. “If you need to have tens of million s of subscribers, Canada [alone] no longer becomes an option,” says Stewart Thornhill, head of the Richard Ivey School of Business’s entrepreneurship institute at the University of Western Ontario in London, Ont. That’s easy for Stingray, he says – because of its digital nature, all it needs to do to expand is “send the electrons where they need to go.” Not a bad deal for a company co - founded by a dot - com millionaire (Mr. Boyko started eFundraising.com and sold it at the height of the Internet boom). He pri des himself on his business acumen, but trusts his company’s tastemakers to determine which electrons the company is sending. “I wish I could tell you we’re music experts, and that I’m the next Ginette Reno or Céline Dion,” Mr. Boyko says, “but we became t his way because we had technology put together, and [we] have the scale.”