Free Business Plan: The Digital Music Pipe... and making music ads more music

The latest shiny sparkly thing in the web world is Muxtape.  For those of you who don't know, Muxtape is a music sharing service that allows users to upload and share a playlist of music though a simple interface.

The only problem is, technically, it's illegal.  Artists are supposed to get paid when their music is played.  While the fine print says that you're only allowed to play music you have the rights to play, we all pretty much know the deal...  The company will throw their hands up and say "we can't be responsible for what people are uploading" and then after they actually do get sued, they'll be forced to scramble to sign deals with the labels--the terms of which you know will somehow kill the user experience.

The path of innovation in the music startup world is horribly inefficient.  To do anything interesting, you basically have to start out doing something illegal, or nearly illegal, or something that will dig yourself in a royalty hole before you even get started.  Sing it with me, "FAAAAAAIL."

What we need is a set of APIs, not just to get legal music, but multiple ways of paying for it, that would allow innovaters to build on top of.  Getting and paying for music should be similar to other types of commodity stock market data or player stats for my fantasy baseball team.  I don't care who gets me Metallica's upcoming album, so long as I have choices as to its form and the ways I can pay for it. 

So instead of having a long line of startups trying to sign deals with labels,, which is horribly inefficient and slow, there should be one company that handles digital delivery, rights management, compensation.  Labels should be purely evaluation, business, marketing, and publicity machines.

This company would have a flexible set of delivery APIs... Every song could be streamed, downloaded, previewed, even sampled.  It would be like the Yahoo! Pipes of music.  So, Muxtape could just stream from this company instead of requiring user uploads and doing the storage themselves.

What's even more useful is that these APIs would have liberal grace periods for new companies related to time and volume.  Give them time to prove out interest in their service, get funding, etc., without fear of prosecution or a big royalty bill.  Frankly, the data on which startups are taking off, who's being played, and by who should be worth it for labels to give the companies using this API a long leash and see where they go with it.

When it comes to payment, the APIs should be equally flexible:  Allow premium subscriptions for various types of all you can eat services.  Make insertion of ads from companies like TargetSpot drop dead simple. 

How about allowing users to buy concert tickets through the service and essentially build up credits for free music in the system?  How many times have you heard, "The artist makes more from the concert, so I'd rather spend money that way and download from Limewire and have it go to the labels?"

I easily spent $1000 on concert tickets last year...  and I'm likely to spend that much every year with easier access to free music--and great tools to help make recommendations to me. 

One breakthrough business model that a more startup-friendly model for music distribution gives you is the ability to buy the attention of the influencers.   If you have standardized data about who's listening to what, and when, you have data about where the influencers are, and you could sponsor their streams with more music.  If I was an indy band, I think I'd pay for placement on Fred Wilson radio if I felt like my stuff was appropriate for that station.  Certainly if I was a record label, I'd do that as well.  It's sponsored content.  Labels spend millions of dollars a year to promote bands--why not use that money to just put the right music in the hands of the right people?  Isn't that the premise of music based social networks like MySpace--only MySpace never built out a reasonable toolset that allows bands to analyze and make marketing decisions around reporting, nor a away to offer music to a targeted set of the right people.  Instead, they just had to spam everyone with friend adds. 

Imagine if you got an e-mail saying, "Metallica would like to sponsor your Muxtape.  If you would like to select a different band to be included as the bonus track on your Muxtape, click here, otherwise Metallica will be added."  You could do that with live streams, full-circle data about who's listening to what, and what else they're listening to, and the right set of business tools to allow Metallica to make that buy at scale when their new album comes out.

Ok, so shread this idea to pieces... why wouldn't this work?  Anyone else doing anything like this?

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