With Loudcrowd, Nabeel Hyatt Sees Mult-Billion-Dollar Opportunity in Music Gaming: “This Thing Is Ours to Screw Up”

I don’t care whether I’m good enough at Dance, one of the online games that’s part of the new music site Loudcrowd, to impress other users. What I want to know is whether I dance better than Massachusetts Governor Deval Patrick.

As part of his January 30 tour of the Cambridge Innovation Center, the Govinnovator stopped by the offices of Conduit Labs, the software startup behind Loudcrowd. Co-founder and CEO Nabeel Hyatt sat Patrick down at a computer and invited him to try Dance, a simple video game where you try to click on directional arrows at the exact moment that a rotating marker passes over a symbol. Your performance determines whether your avatar dances more like Fred Astaire or Jerry Lewis in a little video that’s shown to your game partner.

I was in Patrick’s press entourage during the visit, but I couldn’t see how well he danced. Given that the tour was a bit rushed, he couldn’t have been too fleet-footed—nothing close to his impressive performance in a table-tennis match against Google’s Steve Vinter during a visit to the search giant’s Cambridge office last May.

I’ll probably never be a good dancer, but after playing about six games of Spin, another game on Loudcrowd, I can report that I’m the proud owner of one virtual goodie—the track “Underwater” by Mock & Toof. (Never heard of them before.) Alas, I haven’t earned enough decibels—i.e. credits—to play my track for other Loudcrowd users.

Dance screen from LoudcrowdAs you may have guessed by this point—or as you may have read, if you’ve been following the news from the South by Southwest Interactive Festival, which just wrapped up in Austin, TX—Loudcrowd is a music-driven casual gaming community, finally launched this week after about 18 months of behind-the-scenes labor at Conduit Labs. In technical terms, Loudcrowd is a Flash-based website with a continuous shared soundtrack, where registered users create social networking profiles and customized avatars and then play music-related games. Playing the games wins users points that they can eventually use to become DJs and choose the music other users hear.

At least, I think that’s the goal. But it may be that the competition is beside the point. In the language of Web marketing, Loudcrowd is designed to keep users entertained, engaged, and on-site, the better to sell them Loudcrowd points (the site’s virtual currency), iTunes and Amazon tracks, and other products that Conduit may have up its sleeve. In fact, the company boasts in a press release distributed yesterday that “user engagement on the site has…been over twice the average session length of leading online music sites such as Last.fm, Project Playlist, and Pandora.”

Back in August 2007, when Conduit announced that it had collected $5.5 million in venture funding from Prism VentureWorks and Charles River Ventures, Susan Wu, then a partner at CRV, told me she liked the market Conduit was entering, because “it marries the design philosophies of creating lightweight, zero barrier applications that are geared towards mass market audiences with very emotionally engaging, immersive environments.”

Wu wasn’t able to describe Conduit’s plans in greater detail at the time, but she did say the startup hoped to build on the growth of social networking sites like Facebook by making online socializing more shared and synchronous. “Like the Wii and Guitar Hero reinterpreted what it meant to experience social entertainment in a living room environment, there’s a new type of entertainment waiting to be invented using a Web-based form factor,” Wu said. (She has since left CRV to start her own company, a stealth-mode massively multiplayer online game company called Ohai.)

Now that Loudcrowd is out, it’s finally becoming clear what Wu was talking about. The site is obviously aimed at teenage and twenty-something music fans—a slightly more MySpacey crowd than a Facebooky one, from what I can see—and makes use of cartoonish avatars and line-drawn graphical settings reminiscent of the cover art for the Grand Theft Auto video game series. The artists Conduit has signed up to supply songs for the site’s music stream are on the indy side, meaning if you hang out on Loudcrowd long enough, you’ll probably hear a lot of cool new music. (The groups currently being played on the site include Friendly Fire, Justice, Phoenix, Santigold, and The Twelves, and the labels Conduit has signed up include Beggars Group, Domino, DFA, Downtown Records, and Modular.)

The pitch to artists and labels is that Conduit is a new way to monetize their recordings, by introducing tunes to listeners in a social context—more like music used to be before the iPod made listening a passive and solo act, in Hyatt’s view. “Our goal as a company is to create engaging experiences that people will pay for,” Hyatt says. (See the full interview below.) The existing experiences, which revolve around Dance and Spin, are just the tip of the iceberg, he says. Conduit will roll out new games regularly, some complex and competitive, others light and easy, but with music as the constant element.

The ultimate goal, Hyatt says, is to reenergize people around music in the same way that MTV did in the 1980s—except that Loudcrowd has an easier path to monetization than MTV did, in Hyatt’s view. Conduit may have to work out a few bugs before Loudcrowd can climb to MTV’s heights—the site gave me a female avatar even after I’d clicked “male,” for example, and apparently there’s no way to change genders without re-registering under a different e-mail address. [Update, March 18: With help from the folks at Conduit, my avatar’s been turned back into a dude.] But the site does have the smell of something big.

Here’s the whole text of my interview with Hyatt.

Xconomy: What kind of reception has Loudcrowd been getting so far at South by Southwest?

Nabeel Hyatt: We’ve been very happy with the reception. This is the perfect place for us to start talking about Loudcrowd, because obviously there is this strong mix of Web and consumer folks, and today is the start of the music festival as well. We have a booth set up, and it’s pretty crowded. We’re having a launch party tonight. It’s been great to walk by the lobby of the Hilton and see people playing Loudcrowd.

Loudcrowd Spin gameX: It’s interesting that you should put it that way—“playing Loudcrowd.” From what I can see, Loudcrowd is more of an environment or a community, with games that you can play embedded in it.

NH: I think that’s exactly how we talk about it ourselves. I just happened to look at those people and see them dancing for other people on the site, and if you watch, it’s a form of play. But Loudcrowd is definitely a community first. If you don’t care about music, then Loudcrowd isn’t the place for you. I think what we really boil down to is people who care about music enough that they actually want to do more than just listen to it; they actually want to interact with it. We’ve seen a general trend with music in the last 10 years that it’s become more isolated and passive, and those things are not good. It’s become more iPod earbuds, and typing “White Stripe” into Pandora and leaving it to play for two hours. I think the gaming helps to raise the level of engagement, so that you’re actually paying attention to the music. That’s a general trend of going back to what music used to be—something that you attended to, instead of something that’s just Muzak.

X: From the consumer’s point of view, Loudcrowd may be about attending to music, but how would you describe the commercial proposition? Isn’t the underlying goal here to get people to spend more time on the site and ultimately see more ads and buy more tracks?

NH: I think the aspect of music that is completely underutilized in most businesses and online companies is that people are absolutely willing to pay for music—they feel a real passion for it, and it’s still one of the big cultural drivers. But they are not willing to pay for a commodity product, which is what music has become. Even last year, well into the recession, you saw that Rock Band and individual Rock Band downloads were selling very well, and that concert revenues were up. All of those things point to the fact that music is more important than ever, and even more of a driver of commerce than ever. It’s just that recorded music isn’t the way to drive it.

Our goal as a business is to create engaging experiences that people will pay for, and of course those experiences are proprietary. They are ours. They are unique experiences that you can’t get anywhere else. We are using that [to make money]. By the way, we don’t focus on advertising at all. We feel like consumers will pay for this if it provides enough value to them. So it’s a virtual-goods-based mode. We aren’t trying to make it interesting enough that Coca-Cola will get involved. We’re trying to make it interesting enough that consumers will pay.

X: Right now there are only two games on Loudcrowd—Dance and Spin. I’m assuming those are just the tip of the iceberg. Can you talk about what else is coming?

NH: It is the tip of the iceberg. I think we regard the building of this product much like anyone would try to build a great Web startup, which is to get the smallest nugget of the product that you thought was appealing, and get it out there for users to test, versus building it in a big room for a long time. As it happens, the product is of a large enough scope that it took us a long time to get it to this point. But I think what you’re seeing right now is 10 percent or less of what the potential profile of the product is. We’re releasing a new game next month and very regularly after that. These will be very different types of games. Some will be competitive, some will be light. The constant element with all of them is that they will help you to engage and interact with the music in interesting ways. That is where we are staking our claim.

We analogize that back to the kind of value that MTV brought to consumers and the music industry early on, by really being the pioneer in combining video with the music background. We don’t want to be just a game—which is what most of the companies that are making music games are doing today. We want to be a place that you come back to when you think about engaging with music.

Loudcrowd Front PageX: From the design choices you’ve made with Loudcrowd, it seems that you’re trying to spin the site toward an audience of teens and twenty-somethings. Do you hope that it will also appeal to a somewhat older crowd?

NH: Our look and feel went through heavy iterations and early alpha testing. As we got feedback, what we found was that the music that was playing influenced the audience more than anything else. As we started to play certain types of music that would appeal more to a 30-year-old, they seemed to imbue the avatars and the look of the site with a little more of that feeling. With the music we’re playing now, it’s slightly more independent but sophisticated popular music. It’s not aimed at 12-year-olds. It’s really more of a college age and slightly afterward.

The ultimate goal of Loudcrowd, even though we’ve aimed at the college crowd today, is to be a universal service. We just know from our background in community-building that you can’t be all things to all people when you start out. Look at Facebook and the way it started out just at Harvard, or MySpace and the way they started out with the LA music scene. We expect to follow a similar trajectory of focusing on a small community and getting them very passionate about it. We’ll be watching our statistics and metrics very closely, and as we start to feel like the product is hitting its stride, you’ll see Loudcrowd expand its scope and move out, over the next year and a half.

X: Does Conduit Labs plan to come out with other games and products, or is Conduit essentially becoming Loudcrowd?

NH: We left how many products Conduit was going to make as a somewhat open question at the beginning. It became very obvious very early on that the potential for this product was that it was a multi-billion-dollar company, if we executed it right. I would say that if you compare Loudcrowd and MTV—Viacom was built on the back of MTV, and they had a worse path to market and a worse monetization model than we have. This thing is ours to screw up. We happen to be very well placed. We’re in a position where consumers have shown a willingness to buy, and the Internet is a mass medium. We’re also in a position where the record labels are looking for new revenues, and they’ve been surprisingly supportive and excited about this. So this is the project that, we think, is Conduit Labs.

Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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