The future of local transportation startups: Is Uber doomed to follow in Napster’s footsteps?

A few weeks ago fellow entrepreneur and friend John Wolpert sent me a link to his thought provoking blog post, Is Uber the Napster of Transportation?

His article is definitely worth reading in its own right, but I wanted to post some reactions of my own and build a related discussion here, especially as recent events in just the past few weeks have changed my opinion quite a bit.

On first reading I didn’t agree with John’s conclusions. I was worried he was being sensational in the allusion to “Napster” and grinding an ax given his previous role in founding an Uber competitor. John was the founder and first CEO of Cabulous, now Flywheel, a mobile app that lets users find, hail and pay for taxi rides. Cabulous/Flywheel has found considerable success in its own right, and more than a year ago John handed over the reigns to a new team after a $10MM funding round and is no longer involved day-to-day with the company.*

However, in just a few weeks my opinion has changed considerably after seeing significant legal and labor challenges now facing Uber from all angles — drivers, passengers and regulators alike bringing strikes and suits against the company in multiple cities across the US. The more I read, the more I’m thinking that John might just be right: Uber is playing a crucial role in the disruption of local transportation but may ultimately be doomed to regulatory dismemberment in a very similar fashion to the rise and fall of Napster.

Here’s a quick list of a few of the legal and labor issues facing Uber:
Striking drivers protest against Uber policies in SF¬†(Does this remind anyone else of Metallica’s response to Napster?)
Class action lawsuit by taxi driver in Boston, Class action lawsuit by taxi drivers in San Francisco, rider lawsuit in Chicago

PHASE CHECK – Where are we now?

Feel free to disagree with my admittedly over-simplified take on the history of online music distribution, but I’ll be so bold as to broadly classify digital music disruption into three distinct phases marked by brand names that typify for me attributes of those phases:

  • “Napster” – Anything goes — consumers “win” and artists “lose”. Unsustainable.
  • “Rhapsody” – The pendulum swings too far to the artists at the expense of the customers. Rhapsody was a clunky attempt at marrying artists’ revenue goals with customers’ demands for flexible licensing. (Yes, I know it still exists today but I’m referring to the original iteration launched by RealNetworks.) Artists “win” on paper, but don’t really benefit since consumers “lose” given the inconvenience of silly DRM and fragmented music libraries spread across proprietary services. I’d even classify iTunes in this category, it has never been an ideal service for music distribution in my view given the relatively high cost per song and proprietary DRM. Sustainable but not optimal for consumers.
  • “Spotify” – True sustainability – consumers “win” and artists “win”. Pandora, SoundCloud and others also join this category of innovative music distribution services loved by customers and respected by artists.

So where does local transportation stack up? I believe we’re witnessing right in front of our eyes a slow motion transition from the “Napster” phase into the “Rhapsody” phase of local transportation startups. Significant backlash is starting to surface that may very well lead to frustrating curtails in feature sets that benefit consumers. We all agree that drivers need protections, just as musical artists do/did, but my fear is that we may swing the pendulum a bit too far in the direction of over-protection as we have seen in the past with music.

What comes next?

What will the “Spotify” of local transportation turn out to be? Can Uber, Flywheel, Sidecar or Lyft survive consumer market forces and regulatory squeezes that we’re starting to see en masse? If the music industry is any guide, here’s the unsatisfying but likely most accurate answer: we have *no idea* what the “Spotify” of local transportation will be — it hasn’t been invented yet.

One thing is for sure, however: buckle up, it’s going to be a wild ride.

*(Full disclosure: I also helped John raise the first round of funding for Cabulous from angel investors and advised the team for about a year as they created the first version of the product, including earning the title of first driver hailed on the system. At the time I was a part-time taxi driver in San Francisco and also working on my new startup VidCaster prior to its first round of funding. I have not been involved with the company’s operations for over 3 years but follow transportation startups very closely and am still very active in transportation advocacy.)

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4 Responses to The future of local transportation startups: Is Uber doomed to follow in Napster’s footsteps?

  1. Well. You’re right about Napster. I don’t know about rhapsody or spotify.

  2. I remember in ~2002 or ~2003 you called that the high bandwidth would change the game as far as music distribution. (No longer need to download or “have” songs–just stream as I now do from last.fm, ex.fm, spotify, rd.io, ….)

    I think I said at the time that I would always want to hold albums on HDD.

    (Maybe I would still do that if I hadn’t spent the latter half of the decade shifting from computer to computer and, like now, often not owning one at all.) But beyond just me– I think you in general called it right 10 years ahead of time.

  3. It would be interesting to push this comparison into a pre-internet domain. It seems like you’re talking more generally about “linkers” who overly favour the delivery point (consumer) or overly favour the provision point (supplier). Maybe it happened before bandwidth as well.

  4. kfarr says:

    Another cease and desist popped up from SFO Ground Transportation: “Sidecar, Lyft, Uber, And Other Ridesharing Companies Get Cease And Desist Letter From San Francisco International Airport” http://sfappeal.com/2013/04/sfo-nixes-ride-sharing/

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