It’s the warmest day so far this year, almost 90 degrees in the Mission, and David Porter sits comfortably in a buttoned down shirt and pants. He rests his elbows on a picnic bench in the backyard of 8tracks’ headquarters, a beautiful, lofted space on the ground floor of a house somewhere between the Mission and the Castro. His small, rounded glasses bring clarity to his friendly, bright eyes, which light up as he begins to tell what he likes to call the “extended dance remix” of the beginnings of 8tracks.
In its infancy, 8tracks was David’s admissions essay to Berkeley’s Haas School of Business in the 90s. He wrote about starting a social, online music streaming company, which later turned into a full-fledged business plan.
Over the next few years, in the early and mid-aughts, Porter would work with VCs and a small team to pursue and develop this idea into the modern creation that is 8tracks: an online music streaming service, perhaps similar to Pandora, but filled with a library of user-generated playlists.
There’s definitely a soul to 8tracks that’s driving this young company forward. Porter has a knack for romanticizing his brainchild in a way that makes you believe in the power of the human spirit. “It’s, on one hand, the depth of discovery because people are passionate about music. But it’s also the fact that it’s a human communication achieved through a set of songs. Every playlist tells a story. There’s an opportunity for dialogue around the music between listener and DJ. That’s something that is fundamental. We’re not just some big index of music you draw upon when you think of a song. It’s really much more of a community.”
Anyone can create a playlist using uploaded tracks from their own library or choosing from an ever-growing library of songs that 8tracks licenses as they cut deals with music distributors. Playlists are categorized with tags that define the gist of the playlist—moods, activities, seasons, emotions, genres or a host of other categories. Type in “gym,” and “electronic” and you’re set to work out. Combine “summer” with “day-drinking” and a bevy of poolside playlists appear for your selection. Choose “break-up” and “indie” and Paramore comes running after you. The list of tags is endless creating infinite ways to assign meaning to a playlist. Best of all, it’s social and anyone in the community can like, share or comment on your playlist.
At the onset, what truly helped the service take off was exposure on StumbleUpon. Users took to upvoting two playlists in particular. One was called “Music to make you feel better.” “Happy music for recessionary times,” as Porter likes to put it. The other was “The ocarina of rhyme,” a mixtape of mashups between classic hip-hop tunes and the music of Zelda. “Those two playlists blew up on StumbleUpon, and we went from 30k unique visitors to 300k in one month,” Porter recalls. That’s when they knew they were onto something. With some angel investing, they were able to build a team and keep everything legal within the realms of music licensing. This year marks their fifth anniversary of being in business.
Now 8tracks boasts over 5 million active monthly users and is three times the size of its competitor, Rdio. Surprisingly, only one percent of those users are playlist creators, while the other 99% happily share and consume. This brings up the question, why are the creators/DJs taking time to do this labor of love? 8tracks is definitely not paying them. Porter attributes it to “the intrinsic reward of being able to promote artists that you think deserve a larger audience, and at the same time having the ego satisfaction of having people regard you as a tastemaker by liking your playlist, sharing it or leaving you a comment.”
As far as the music goes, about two-thirds of the music on 8tracks is from independent music labels, in contrast to services like Spotify where it’s about two-thirds major labels. It’s been a haven for the electronic music community, especially with its former integration with Soundcloud. Porter explains, “We wanted to help provide additional exposure to the independent artists who use Soundcloud, by leveraging our DJs to tap into that and promote it. The artists upload the music but our DJs did the packaging and merchandising of that music through their playlists.”
Yet as Soundcloud dealt with their own struggles of unlicensed, uploaded content, 8tracks sadly had to shut that feature off, leaving creators solely with the options of using their own mp3s or an expanding library of tracks licensed from certain labels.
8tracks is augmenting this cloud-based library and has already cut direct deals with INgrooves, CD baby and TuneCore, all of which aggregate and distribute music on behalf of indie labels and artists. “The goal is to have direct deals with everyone so you don’t have to upload tracks. The problem is that over time, people who interact with music aren’t downloading music anymore, they stream it from the cloud. Given that approach, we need to make adjustments and have that cloud-based library for our DJs. The exciting thing is that means we can bring playlist compilation to our mobile app, instead of only being able to do it from the website.” As their user base shifts increasingly to mobile, being able to access and build playlists from an online library as big as Spotify’s would be huge for this growing company.
Simply put, accessing and licensing music online is a complicated and tangled web of legal issues. Issues that can cost a lot of money to stay in front of. That’s why 8tracks recently announced something unique, a crowdfunding campaign unlike many others.
Last June, equity-based crowdfunding from investors who are not accredited (most people) became legal. Essentially what that means is that 8tracks can raise money by selling equity in the company en masse to average people who are interested in supporting the company. They’re doing this through the platform SeedInvest.
Porter explains the reasoning behind this bold move. “Fundamentally our chief asset is our community. It’s the community that creates the programming and the community that promotes the programming. Even today, the most of the reason we get most of our traffic which is through organic search on Google, is the result of having so many links that have been established by sharing playlists on social media. So why shouldn’t that community essentially sponsor that programming? It fits our DNA of leveraging ‘the crowd’ to create great musical experiences.”
“The music streaming world is incredibly competitive. You have Google and Apple that have virtually unlimited resources, and you have Spotify and Pandora who have each raised a billion dollars. But at the same time, no one is making any money yet. The profit margins are razor thin, and so it’s not a great industry. Unless you are number one or number two, it’s not interesting for a lot of the top VCs. So now we need to tap into individuals to fund the company at scale, and the way that makes the most sense is crowdfunding.”
Investors would get shares in the company, and from the standpoint of someone who really loves what 8tracks offers, “it helps support us so we can do the things we need to do to make the service better and bring it to a broader audience, with the possibility of a nice financial outcome as well,” says its CEO.
8tracks’ Seed Invest campaign is underway. When they put out feelers to gauge interest in backing the company, users pledged a combined 30 million dollars. Although this figure may drop to as low as half when all is said and done, there is a backbone to this adopted family that will hopefully give them enough capital to continue to be the rebels that they are, in a world of streaming titans.