Our quest to find good alternatives to Muxtape, which has been taken offline by the RIAA, brought us to 8tracks – a similar service that plays by the rules and pays small webcaster royalties to SoundExchange.
We asked 8tracks founder David Porter about where the idea for the site came from, how it manages to operate legally and where Muxtape went wrong.
Wired.com: How did the idea for 8tracks occur to you?
David Porter, 8tracks: This has been a long time incoming. The original idea – basically, a music-oriented socialnetwork – occurred to me in fall of '99 while I was in businessschool. Napster had just come out and the single coolest thing I
noticed was the "Hotlist" feature that allowed me to find other musicfrom a person that had a few tracks I wanted. It was primitive,
unorganized social discovery, but it occurred to me that the value ofan organized system of social discovery could well become greater thanthe value of the music itself, based on where things were heading withP2P (and the oft-quoted point that the price of digital goods movestoward its marginal cost = ~$0).
Also, I'd just moved back from 3 years in London, and I was a hugefan of DJ culture and electronic dance music. One of the cool thingsI'd noticed was that most folks paid little attention to the artistproducing the music (apart from the big names at the time, likeUnderworld, Chem Bros etc) but rather followed the *DJ*. I lovedthis. With so much "faceless" dance music being produced in myriad,
ever-changing genres, the scene needed human filters to organize thegrowing catalog on offer. It seemed to me that this same concept couldlikely be applied to all genres, with the music aficionado as "tasteintermediator" (or whatever).
I wrote a business plan based on these concepts (called Sampled& Sorted, now the name of my blog) and then shelved it when thingscrashed in spring of 2000, shortly before graduation. At the time, I
talked with a couple of VCs who thought the idea novel but who said "goget some real world experience" (as I'd just worked at Andersen in theyears prior) and "wait for the market to turn around". So I joined theonly game in town that was similar to the concept – Live365 – andtried to realize my ideas there. As all things turned web 2.0 in2005-06, I decided it was time to (finally) make my move.
So, armed with a better understanding of what worked and what didn'tat Live365, as well as the licensing issues involved with streaming (I
testified in the CRB hearings in early '06), I founded 8tracks in Fall2006 and looked for a team to build the service.
Wired.com: What steps does 8tracks take to comply with the wishes of copyright holders?
Porter: We've filed our "Designation of Agentto Receive Notification of Claimed Infringement" with the US copyrightoffice and our "Notice of Use of Sound Recordings under StatutoryLicense" with its licensing division. We've signed and submitted theSmall Webcaster term sheet offered by SoundExchange and paid theassociated $2,000 minimum for 2008. In accordance with the SmallWebcaster terms, we have to track what we play and submit these logs toSX each month. If we go over certain minimum thresholds for listeninghours or revenue, we'll have to pay the same royalty rate as otherlarge webcasters, like Pandora.
Wired.com: From what I understand, the RIAA has used the factthat users make an unauthorized copy of a work when they upload it inorder to shut down services like this. Have they changed their stance,
and now it doesn't matter where the file came from as long as theproper royalties are being paid to SoundExchange?
Porter: We're taking the same approach thatLive365 has taken since 1999. Users upload MP3s to create a stationthat's then accessed by others in a non-interactive manner, like radio,
and consistent with the various rules of the compulsory license. Thecompulsory license provides for an extra "server copy" to supportstreaming.
Wired.com: Have you gotten any feedback from the labels about this yet? If so, how have they reacted to 8tracks?
Porter: I've gotten positive feedback fromfriends at the labels (majors and indies) and indepedent labelaggregators. Indies are generally the most enthusiastic as they haverelatively fewer channels for exposure. One indie aggregator isinterested in using 8tracks to allow artists to create mixes that couldinclude both their own material as well as favorites or influences.
Not a new concept (we did this with Trent Reznor at Live365 in 2000)
but pretty cool if executed right.
In general, we'd like to provide a compelling alternative to justposting MP3s on a website or offering on-demand streams on Myspace. I
think there's little question that the former results in lesslikelihood of a fan purchasing that MP3, on balance. The latter isarguably less cannibalistic athough becomes more so in a world ofubiquitous broadband wireless, to which we're getting ever closer.
It's clear in any event that labels and artists need to generaterevenue from more than just the sale of music – and do so off asmaller, smarter marketing investment.
Wired.com: Do you think Muxtape's going to come back online? If not, where did they go wrong?
Porter: I love the user experience ofMuxtape. However, there really was no "gray area" regarding thelegality of the service. It's an on-demand offering, and that requiresdirect licenses.
They could come back online, but they'll need to either (1) do dealswith the majors and indie aggregators for on-demand streaming, therates for which are around $.01/stream and require fairly substantialupfronts, or (2) re-fashion the usability of the site to make itcompliant with the compulsory license for webcasting, the rates forwhich are (while still very expensive) roughly 1/7th the on-demand ratein 2008, and 1/5th that in 2009.
Wired.com: Can you give me some sort of idea how widely/quickly 8tracks is being adopted?
Porter: 8tracks is still very small butgrowing rapidly. According to Google Analytics, we've attracted some16,000 uniques over the last 30 days, the vast majority of which hascome since Aug 16th, when Silicon Alley Insider ran a story on us.
Wired.com: What's the business plan? Will there eventually be advertising?
Porter: We'll have 4 primary sources of revenue, rolled out in phases:
- Visual advertising. We'll run Google AdSense in our headersoon, and then work with an ad rep firm for relevant placements on thesite. Once we're large enough, we'll bring the ad sales role in house(as Pandora has done).
- Commerce. We'd hoped to have commercelinks in place for launch, but we'll include a buy button that takesthe listener to Amazon (most likely) so he or she can buy anunrestricted MP3 of any song they like.
- Audio advertising. Atsome point next year, we'll run short, relevant ads between mixes. I
think this is the killer model for internet radio; consider that thetotal annual revenues from advertising on radio is ~$20bn in the US
alone, twice the size of the recorded music market in the US. As moreof our listening migrates to handsets, living room devices andeventually the car, the only logical model is audio spots. It's likelywe'll work with NYC-based Targetspot to do so (full disclosure: I
consulted with TS for about 6 months last year).
Subscription. I'm still skeptical about a mainstream Rhapsody-stylemodel, but I do think we can take a cue from Flickr and offer aquarterly or annual subscription based on the ability to upload morethan some X threshold/month. We've some other ideas around this, butthe business objective is to provide sufficient incremental value for"power users" that they'll be willing to upsell.
Ah, and one last point: we think most 8tracks listening will happenon third-party sites. As a start, we're introducing this week anembeddable Flash player (code drop) so those with the requisitetechnical savvy can add a mix they create (or another DJ's mix thatthey like) to their Myspace page or blog.
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