*Maybe naming themselves "8tracks" was a harbinger of a brief lifespan. Quite technically interesting here, though; this is the Silicon Valley venture capital business talking, rather than just any music service.
They ran out of money for a remarkably large number of reasons
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WHY WE’RE SHUTTING DOWN
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. One could blame “the music industry” for the travails of 8tracks — the path to the grave has been well trodden by many digital music startups these last 20 years. But the challenges run deeper, and I think it’s instructive to consider the perspective of the artist and label. As technology has advanced, the atomic unit of consumption has shifted, from prepayment for consumption of all the songs in an album (the CD), to prepayment for use of a single song (the download), to pay-as-you-go for an individual song (the stream). With each step, the artist (and anyone who represents that artist, like a label) gets paid less and later; with each step, the listener gains more flexibility in paying for and consuming what they want, when they want it.
While the resulting pressure on margins suggests a shift away from the traditional label structure, toward an artist services model, the fact remains that it’s not easy for most artists to generate meaningful revenues through music streaming — particularly as streaming consumption has spread “down the Tail” to DIY artists, independent labels, back catalog at major labels, and even AI-generated music. More than 40,000 tracks are added to Spotify every day, and myriad forms of digital entertainment and information — the rabbit hole of YouTube, games, apps, blogs, newsletters and more — compete for the attention of the youthful demographics that traditionally consume the most music. It’s unsurprising that royalties remain expensive and will continue to increase.
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, which we expected we’d be able to pay off in whole or in part through the ABC process mentioned above. But 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. And the steady decline in our free, ad-supported audience resulted in a smaller base of active listeners that might eventually be converted to 8tracks Plus, our ad-free subscription offering....
