8tracks shuts down after 137 weeks due to royalty costs and dropping listenership

By Emmanuel Legrand
 
Music streaming service 8tracks has closed at the end of 2019 after a 10-year run. Founder David Porter explained in a blogpost that the decision was based on the cost of content combined with a drop in ad revenues linked to a decreasing audience. "To state it simply, we’re shutting down because we can’t generate enough revenue, at our current scale, to cover royalties that continue to increase," wrote Porter.

  He added: "Given the magnitude of music royalties, the only way to field a enduring streaming music service (if music from the major labels is to be offered) is through money and scale. We're nearly out of cash and can't afford to pay current and past royalties."

  8tracks launched on August 8, 2008 with the ambition to provide highly curated playlists by top DJs, and with attractive visuals. In November 2019, it had 927,000 monthly active users.

  Porter explained in the blogpost that raising sufficient financing proved difficult, and while the audience was growing, so did fixed costs. Initially operating under the Small Webcaster license, where cost of content is based on a percentage of revenues paid to SoundExchange, 8tracks switched to the Large Webcaster license, with set rates per stream, as the business grew.

High pay-per-play rates

  "We now had to pay high per-play rates as a Large Webcaster, taking us out of profitability," explained Porter. "Given our primarily ad-based business model in which revenues can fluctuate significantly from one month to the next, it was hard to predict profitability." Porter also said that the development of Spotify's free tier with on demand access to a large repertoire, and the development of curated playlists affected 8tracks' business.

  Overall, he added, 8tracks was hurt by a combination of Spotify’s growth in listenership and the mainstream adoption of on-demand streaming, which impacted listenership and CPMs. In October 2019, subscription revenues reached $47,000 while advertising revenues were a mere $6,000, far from the $500,000 it generated during its best month in 2013.

  "The reason we fell behind in royalties is because we steadily lost the scale of listenership necessary to sell advertising with a direct sales team at CPMs that would cover compulsory royalty rates with a solid margin," wrote Porter, who invited users with playlists to migrate them towards their "second-favourite music streaming service."