Decoding 8tracks' demise, and what it reveals about the state of music streaming

Happy holidays, everyone!! Hope you’re enjoying these last two days of 2019.

I know I said that my piece on music-tech predictions would be the last one I published this year. But I nonetheless wanted to publish a serendipitous analysis on an important piece of news that was just announced — namely, that the music-curation platform 8tracks will be shutting down tomorrow, on December 31, 2019.

In a lengthy, revealing blog post, 8tracks’ founder/CEO David Porter outlined the company’s tumultuous history — from its early successes with Tumblr and StumbleUpon, to its difficulties in competing with Spotify on music discovery, to its struggles in paying the proper performance royalties to SoundExchange, to its two failed attempts over the course of four years to find a buyer, leading to its eventual shutdown. (Side note: Porter now also serves as President of, a company that offers a suite of digital-marketing tools for the music industry.)

Dozens of music streaming and digital-download services have shut down over the past decade. In joining that list, 8tracks’ plight feels familiar: It was an early mover and innovator in certain features that seem commonplace in the music landscape today, from contextual playlisting and hashtags to more decentralized, fan-driven mechanisms for curation and recommendation.

But the company ultimately struggled with transitioning from download- to streaming-first consumption habits, and couldn’t afford to pay the proper royalties to songwriters using their primarily ad-driven business model. Meanwhile, larger companies like Spotify and Apple with more capital on their hands successfully cannibalized users away, further lowering 8tracks' revenue from ads and later from subscriptions.

The level of transparency that Porter offered in his blog post is so, so rare in the music and tech worlds these days. I wanted to dig deeper into all the insights he provided and flesh out what I think they reveal about running a music-streaming company, plus what the streaming sector can expect in general going into 2020.

A brief warning: The next section is a bit mathy. If you’re not interested in the nitty-gritty of the data and instead just want to learn about higher-level trends and takeaways, you can skip to further down in the article and I won’t take it personally. :)


I want to start first at the bottom of Porter’s post, which reveals several interesting data points around 8tracks’ revenue and user base, both historically and currently. I’ve screenshotted that section here for your reference:

Based on these numbers, I was able to do some back-of-the-napkin calculations that revealed interesting elements of 8tracks’ recent business struggles.

Only around 5% of 8track’s registered users were monthly active users (MAUs).

The math: 19.6 million registered users, versus 927,000 MAUs in November 2019. To the company’s credit, the fact that 8tracks still had nearly a million users logging in to the site every month actually exceeded my expectations.

But the general takeaway here is to scrutinize, with abandon, any company that refuses to share additional information on their users apart from the number of registered accounts. When presented alone, that metric is ultimately meaningless for understanding a given company’s actual performance.

The typical “monthly active user” on 8tracks streamed only 40 minutes of music every month — or only 1.3 minutes a day.

In contrast, multi-device Spotify users stream for an average of 2.5 hours daily — i.e. over 100x longer than typical user activity on 8tracks.

In other words, even the “active” users on 8tracks weren’t that active at all. This low engagement had significant negative implications for the company’s advertising business — let alone for the potential value that users would see in converting to a paid 8tracks+ subscription.

Only around 4% of 8tracks’ registered users have ever made a playlist.

8tracks calls a user who makes a playlist on their platform a “DJ.” According to the above list of data, 8tracks had 750,000 total DJs, which was only 4% of the company’s 19.6 million total registered users.

This implies that the remaining 96% of registered users ended up being just lurkers or listeners, without actually contributing any new curation to the platform. (I’m one of these lurkers: I made an 8tracks account in 2011, but have yet to make a playlist on the platform.)

In other words, engagement was prohibitively low for 8tracks not just on the listening side, but also on the content-curation side. In fact, this distribution is even more skewed away from content creation than what the tech world is used to seeing with other online platforms (e.g. the top 10% of accounts on Twitter account for 80% of tweets, according to the Pew Research Center).

At most 2% of 8tracks’ monthly active users were paying subscribers — but they generated nearly 90% of the company’s revenue.

Here’s the math I did to get there: Porter shared that in October 2019, 8tracks made only $53,000 in total revenue. 89% of that revenue ($47,000) came from paid subscriptions, with the remaining 11% coming from ads. It’s intriguing to me that the 8tracks+ subscription plan now drives the vast majority of the company’s business after being introduced just three years ago — in contrast to the eight earlier years (2008 to 2016), during which ads constituted 8tracks’ only revenue stream.

Now for the conversion numbers: an 8tracks+ subscription cost either $4.99/month or a discounted $29.99/year (~$2.50/month), depending on whether users preferred a month-by-month or year-by-year payment plan. To give 8tracks the benefit of the doubt, let’s assume that all of their subscribers were on annual rather than monthly plans. $47,000 of monthly subscription revenue ÷ $2.50/month (average monthly cost of a year-by-year payment plan) = 18,800 paid subscribers, or only 2% of 8tracks’ 927,000 monthly active users in November 2019. (Doing the same calculation with the month-by-month plan would give us half that conversion rate, or just 1%.)

In contrast, Spotify has accomplished a much friendlier conversion rate, with over 45% of its monthly active users paying for a subscription as of Q3 2019.

8tracks’ average revenue per user (ARPU) was only around six cents.

I arrived at this stat by assuming some similarity in 8tracks’ revenue between October and November 2019. 8tracks made $53,000 in revenue in October 2019, and reported 927,000 monthly active users in November 2019. $53,000 ÷ 927,000 users = $0.06 per user.

In general, ARPU has been a thorn in the music-streaming economy’s side for a while now. Spotify’s ARPU has been steadily declining over the past several years, as the company leans increasingly on discounted group subscriptions like Family Plans, on bundles with the likes of Hulu and Showtime and on lower price points and telco bundles in newer markets for the company across Asia, Africa and Latin America. Aside from having a potentially negative impact on company economics, declining ARPU has also significantly lowered the average per-stream royalty rates that many artists are seeing from streaming, given that these services typically pay royalties on a pro-rata basis.

For 8tracks, low ARPU might have been fine if they had solid engagement numbers as a safety net — but, as discussed above, those were nowhere to be found.


8tracks was officially incorporated as a company 13 years ago. That’s a long time in the tech and startup world — and especially for music-tech, given how much music-consumption preferences and habits have changed since the early 2000s.

There were four particularly important shifts from the past decade in music-tech that I gleaned from Porter’s blog post: The decline of music collections, the centralization of curation, the unsustainability of ads without scale and the stubborn obstacle of royalty payments.

The decline of music collections

One of the definitive nails in the coffin for 8tracks was the music industry’s wider shift from digital downloads to on-demand streaming.

Nostalgically named after the 8-track tape that preceded the compact cassette in the early 20th century, 8tracks’ foundational value proposition was providing an online resource for users to upload, consume and discover personal collections of digital downloads that they amassed from iTunes and other online music marketplaces. In fact, as of publishing this post on December 30, 2019, 8tracks’ website still put uploading individual music files at the center of their user experience (see screenshot below).

However, as I wrote a few years ago, on-demand, all-you-can-eat streaming services have largely eroded our inclinations to “collect” our music — not only by doing the collecting work for us through owned-and-operated playlist ecosystems, but also by convincing us that relinquishing ownership over music in the first place was worth it in the name of convenience. This meant that potential users could not (and probably did not want to) purchase or acquire the files necessary to create their own playlists on 8tracks.

“As early-adopting music consumers had shifted to on-demand streaming from downloads, many 8tracks DJs no longer had the ‘raw materials’ to craft playlists,” wrote Porter.

For me, that characterization of music as “raw material” underscored how that material is increasingly confined within, and fragmented across, the walled gardens of paid streaming subscriptions. That’s one small but significant way in which digital music today actually does not travel as freely from listener to listener as it once used to.

The centralization of curation

I didn’t think about the connection at first, but I’ve realized that the downfall of 8tracks is directly related to the downfall of the “celestial jukebox” concept for music streaming as a whole.

8tracks’ core product assumed that music consumers would prefer to listen to music in an environment that prized social, decentralized curation of a seemingly infinite number of musical tracks. As Porter wrote in his blog post: “Our community creates our programming and has a psychological investment in the 8tracks platform.”

That’s a powerful phrase: “Our community creates our programming.” And in the mass-market music-streaming world, it’s rare, if even existent at all. As I wrote recently, the dominant streaming paradigm is now highly individualized, centralized and filtered through multiple levers of market control from incumbent music-industry gatekeepers as well as technological control from streaming services.

Building a social music strategy that actually works is hard. In the age of TikTok and ByteDance, it may also be more important than ever.

That said, I think the future of “social music” needs to expand beyond just sharing playlists with friends. In his blog post, Porter shared that 8tracks once considered a “Switzerland strategy,” in which listeners who subscribed to multiple different streaming services could still come together onto the 8tracks platform to share and transfer their favorite playlists.

“We further envisioned 8tracks could become a platform that could connect different services, so one DJ could use her Spotify account to publish a playlist into 8tracks, which could then be streamed by a listener using his Apple Music account,” wrote Porter. “While I still think this idea has legs, we simply didn’t have the resources to properly execute this vision.”

There are actually a ton of other apps out there already that accomplish the task of transferring playlists from one streaming service to another; some examples include Houdini, Soundiiz, SongShift, Stamp and TuneMyMusic. But the vast majority of them are free or freemium utilities around which it’s difficult to build sustainable, standalone businesses.

The unsustainability of ads without scale

To revisit a stat we discussed earlier: at most 2% of 8tracks’ user base accounted for 90% of the company’s revenue in November 2019, via paid subscriptions. On the flipside of that same coin, we can infer that 98% of 8tracks’ users — i.e. those who were ad-supported — generated only around $6,000 in monthly revenue.

This underscores the point, well-known by now, that ad-supported streaming is nearly impossible to maintain without achieving a massive amount of scale. Indeed, in his blog post, Porter wrote that 8tracks “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.”

Arguably the only companies that can achieve that scale are conglomerate-backed platforms like YouTube. Even Spotify, which seems to be ramping up its advertising megaphone in terms of what it communicates to the press, still makes under 10% of its revenue from ads.

The stubborn obstacle of royalty payments

2019 proved to be a bombshell year for the songwriting and music-publishing sector — from lawsuits involving the likes of Katy Perry, Lady Gaga and Lizzo, to Spotify, Amazon, Google and Pandora appealing a ruling by the Copyright Royalty Board to increase U.S. mechanical statutory rates.

Porter’s blog post shed some fascinating light on the financial perils of making the proper licensing payments for a music-streaming startup of relatively smaller scale.

For some context: Under the Small Webcaster Settlement Act of 2009, any online webcaster making under $1.25 million in annual revenue could pay a percentage of their revenue in royalties, ranging from 12% to 14%, instead of a fixed per-play rate as determined by the Copyright Royalty Board.

8tracks was considered a “Small Webcaster” until around 2013, after which they were required to start paying per-play rates, which were much more expensive and made it “hard to predict profitability” given the company’s “primarily ad-based business model in which revenues can fluctuate significantly from one month to the next,” wrote Porter.

The Small Webcaster Settlement Act expired in January 2016 and has not been renewed since, creating even more of a financial challenge for other small webcasters.

2016 also happened to be the same year 8tracks had to cut off streaming for users outside the U.S. and Canada, as royalty rates in other countries proved to be too high to sustain a primarily ad-based business model. According to Porter, this meant alienating 40% of its total user base, which then had a negative impact on the diversity of programming on the 8tracks platform overall.

What I think really sets Porter’s discussion of royalty payments apart from other similar ones in the past, though, is that he did not blame the music industry for 8tracks’ royalty woes, nor did he advocate in favor of making licensing fees and royalty rates more favorable for startups (i.e. lower).

Instead, he recognized the immense challenges that artists face of making a living in the streaming era as well, particularly as multiple forms of entertainment are competing for high-value consumers’ attention.

“The fact remains that it’s not easy for most artists to generate meaningful revenues through music streaming … It’s unsurprising that royalties remain expensive and will continue to increase,” wrote Porter, in a rather matter-of-fact tone. This drives home an argument worth considering, and that many in the industry would likely agree with: that royalty rates are an artist-payment problem issue long before they’re a tech-startup issue.


The complexity of startup M&A

One of the most educational aspects of Porter’s blog post for me personally was the transparency with which he outlined his multiple attempts to find a buyer for 8tracks.

While I’ve written about company mergers and acquisitions (M&A) in the past, I still am not completely familiar with the details of how startup/tech M&A actually works behind the scenes. Porter’s post taught me what it means to “run a process” — i.e. to engage an investment bank or other financial-services firm to shop an acquisition offer strategically across multiple potential buyers, to see if anyone will bite. (This is more proactive than, and essentially the opposite of, what happens in real estate, where sellers hang a “for sale” sign on their doors and hope buyers show up.) 8tracks ran a process with the help of Perella Weinberg (the firm behind PayPal’s acquisition of Honey and WeWork’s efforts to find an alternate financing lifeline aside from Softbank), but found no credible buyers.

Then this year, with the help of Armanino, 8tracks decided to pursue an “ABC” (assignment for the benefit of creditors), a more market-driven process in which the company’s assets are transferred to the highest bidder. They did find a buyer through this process, but they apparently pulled out fewer than two weeks ago, which essentially forced 8tracks to shut down altogether.

The mismatch between VC incentives and music's market size

Another illuminating aspect of Porter's post was the fact that many venture capitalists allegedly held off from investing in 8tracks because they thought the music-streaming market as a whole wasn’t big enough.

“We were on track to be huge, but it wasn’t clear we were on track for a >$1bn exit, particularly given the competition,” wrote Porter. “To paraphrase one VC: our growth was good and, as a result, it was likely we’d be acquired by a larger internet or music streaming company, capping their upside. While a reasonable thesis, this made it harder to raise funding elsewhere."

This description is consistent with recent statements that music-tech investors have voiced with respect to music still being a small niche compared to other entertainment industries like film and gaming, in terms of market size.

The death of decentralized media-curation companies from the 2010s

I was hit with a wave of nostalgic amusement when I saw that Porter’s post mentioned both Tumblr and StumbleUpon as key drivers of 8tracks’ early success.

Both of those companies have also faced their own struggles. StumbleUpon shut down in June 2018; Tumblr was acquired by WordPress in August 2019 for a reported $2 million, a tiny fraction of the blogging site’s $1.1 billion acquisition price from Yahoo back in 2013.

The best and worst “niches” for future streaming services

I’m planning on publishing a piece sometime in early 2020 that will look at the future of more niche music-streaming offerings, so I was interested to hear that that topic was incorporated into Porter’s post as well.

Porter opened up about how he was banking on 8tracks to thrive as a more niche service in the world of all-you-can-eat aggregators like Spotify and Apple Music — a plan that ultimately backfired.

“Executives at on-demand services note that, after a new user’s honeymoon period of building her on-demand library, she generally migrates to listening to her library (aka liked songs) on shuffle or to a lean-back program of music (playlist or station),” wrote Porter. “Nonetheless, easy, on-demand access to any song has proven to be a must-have requirement; it’s what people are accustomed to in the ‘ownership’ model, and periodic on-demand listening makes algorithmic lean-back selections ever better. The upshot is that the average music consumer wants all of his listening needs addressed ‘under one roof’” (emphasis added).

The main takeaway here is that the most powerful vectors of consumer behavior around which to build a future “niche” streaming service aren’t necessarily those of “on-demand” vs. “lean-back,” but rather those of specific use cases (e.g. meditation, running, focusing), genres (e.g. heavy metal, classical) and communities (e.g. online gamers).

The mass-market, aggregational forces that put 8tracks out of business will likely be unbundled into these above categories in the 2020s, as the streaming market becomes more saturated. In this sense, while it won't be around in a few days, 8tracks could still be on the right track.  🌊

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