Vadio ceases operations after burning through $11.8 million in 4 years

Vadio, a start-up focusing on streaming music video monetization, called it quits and officially ran out of cash. EReportedly, the Portland-based startup burned through nearly $12 million in just four years before closing down.

According to Vadio CEO Bryce Clemmer, the company failed because there wasn’t enough cash.  “We didn’t raise enough money out of the gate”, Clemmer said. “The economics are somewhat unique to the music business, which requires quite a bit of upfront investment to secure the rights from the labels globally”.

It looks like Vadio burned through a substantial percentage of their funding on upfront licensing fees. Extreme licensing demands have created crushing overhead burdens for company like Spotify, who are struggling to survive despite billions in financing.

The music industry already has an elevated rate of failure among startups, and licensing costs remain a major issue. In fact, many investors are flatly refusing to invest in music-related startups that hinge on expensive licensing.

Perhaps Spotify is offering an enormous cautionary tale. The company is currently trying to renegotiate its burdensome licensing deals with the ‘big three’ major labels.  At present, the company is paying more than 70% of its top-line revenues for recording and publishing rights, with some estimates poking as high as 80%. And here’s the problem: any one of those labels could shut down Spotify tomorrow, simply by refusing to license their content.  That’s called leverage. And it may explain why Vadio was forced to commit a large percentage of its energy towards raising fresh rounds.  And, burning the existing ones.