8tracks: Crowd-Curated Net Radio Service Experiments With New Investment Strategy [INTERVIEW]
Here we talk with David Porter, the founder of the new human-curated internet radio service 8tracks, about their new equity-based crowdfunding strategy, and how the service stands out form other internet radio offerings.
Guest Post by Chris Robley on The DIY Musician
If you’re digitally distributing your music through CD Baby, we will deliver your music to 8tracks, the indie-friendly internet radio service that’s curated by humans, not algorithms.
Have you checked out 8tracks? If not, you should; it’s a cool platform.
Recently 8tracks has been experimenting with a new crowdfunding-inspired investment strategy, allowing their users to actually own a share of the service, and they’ve generated tens of millions of dollars in indicated interest. Opening up funding to existing supporters first — as opposed to chasing high-dollar investors — seemed kinda punk rock (or as close to it as a startup can get in 2016) to me, so I wanted to ask 8tracks founder and CEO David Porter about the process.
An interview with 8tracks’ David Porter
For any of our readers that don’t know about 8tracks, can you tell us a little about the service? What differentiates it from Pandora or Jango?
DP: 8tracks is crowd-curated internet radio. We provide a way to connect people through music and explore music through people. Our DJs share a moment in time — an experience, an idea, a feeling — in the form of a highly personal playlist — an online mixtape, in effect. Listeners benefit from thoughtful selections packaged for “lean back” consumption.
Two key things differentiate us from Pandora and Jango. First, there is a person, not an algorithm, behind the programming. Each playlist tells a story, and the playlists are organized in human terms like activity and mood (e.g. study, workout, happy) as well as by genre. Second, the programming runs deep, spanning every imaginable style, ensuring a greater degree of music discovery and less repetition.
You recently started testing the waters on a new funding process. What’s your vision for that process — and how did you decide to go that route?
DP: 8tracks is driven by our community — it’s our community that creates, shares and consumes the programming. Many of our users already feel psychologically invested in the 8tracks platform. Accordingly, it made sense to allow the community to actually own part of the company in economic terms.
Equity-based crowdfunding for non-accredited investors was introduced last June, allowing retail investors to invest in private companies through a “general solicitation” for the first time. As a first step, we sent an email survey to our 17m registered users to gauge interest in investing in 8tracks. Over 35,000 people responded, resulting in an aggregate $33m in interest.
We’ve filed with the SEC, and on June 8th, we’ll open our crowdfunding round — limited to $11m in total — to the public. This funding will help us improve the product, pursue direct deals with labels and aggregators to populate our DJ Library, build out our ad sales team, and undertake marketing in a meaningful way.
I see parallels between this process and the way in which independent artists rally their fans to crowdfund a new album, video, or tour. Is that a fair comparison, and if so, what do you think the connection is?
DP: Yes, I think there is a real parallel. The economics of the music business can be challenging at all levels. Among the biggest challenges for a medium-size Internet radio company like 8tracks is the cost of royalties that we pay to artists and labels. The royalty rates that we pay are more affordable as we grow our audience and become more interesting to brands and agencies, and community support enables us to grow to a size at which we can sustainably return a large portion of our revenue to artists and labels.
Another thing your company shares in common with independent musicians is that you’ve recognized there’s a lot of opportunity when you’re okay operating at a level below the superstars, beneath the radar of the major labels and powerful music gatekeepers — or in your case, finding a profitable niche without trying to woo the billion-dollar investors. Can you talk about that mindset and how it’s helped 8tracks move forward?
DP: 8tracks is the most indie-skewing internet radio service in the US and Canada: fully two-thirds of the music we stream comes from independent labels and independent artists. This unique composition has emerged organically because our DJs are passionate about sharing music they’ve discovered, that often cannot find an appreciative audience on more mainstream outlets, with our rather more musically-adventurous community. A core ethos of our community is digging deep to deliver an audience to indie talent.
Is there an advantage to NOT being the sensational flavor of the month in the tech world? Does it allow you to be more nimble?
DP: I think that’s probably true. As a result of rapid growth and the large amount of funding raised in pursuit of “unicorn” ($1bn+) exits, some digital music companies have undoubtedly been forced into product and business model decisions that may not be in their long-term interests. 8tracks has raised a small amount of money ($3.5m over nearly a decade) but never so much that investors have put those kinds of demands on us.
So what’s next in this funding process?
DP: About $4m of the $11m we’re seeking to raise has been reserved in advance by roughly 4,000 users, and there are many more reservations in process. People who reserved shares can invest as of June 4th; we’ll open up the round to the public on June 8th.
As a service committed to the independent music sector, we’d welcome your investment! You can get started at https://www.seedinvest.com/8tracks/series.a. The round will remain open until we hit our $11m target.
How can artists get their music onto 8tracks?
DP: 8tracks has deals in place with most of the larger independent distributors including CD Baby, so your music will automatically find it’s way onto 8tracks if you are a CD Baby member.
“Radio” is a broadly defined term these days (terrestrial, satellite, internet, customizable, etc.)… Where do you think radio is headed in the next five years, and where should indie artists be focusing their efforts when it comes to finding new fans through radio?
DP: Some 80% of radio listening is still delivered “over the air” by traditional radio, but we think internet-based delivery of radio is going to increase rapidly as the user experience for in-car and at-home listening gets easier, and as more people gain faster mobile access. The lean-back experience of radio has always been one of the primary drivers of music discovery, and we believe it’s essential for independent artists to be represented on internet radio services like 8tracks.