I recently received an email from the guys at MixApp. MixApp was the first collective listening web app. It was founded at the beginning of 2010 by a group of friends who wanted to build the product for themselves, like Foursquare's story. Now, they are closing shop:

"Dear all,

"At long last the MixApp adventure is coming to an end. We'll discontinue the service the evening of August 27, and hope that everyone will take this coming week as an opportunity to say their good-byes."

Veronica Picciafuoco was a lawyer before leaving the legal world to pursue her passion for music and technology, where she wrote for Italian music site Onda Rock. For her Masters Degree at University of Pennsylvania, she wrote a paper on the ownership model vs the subscription model in online music, which she is currently translating from legalese.
They continued:

"In future we may post a more entrepreneur-focused post-mortem to go into detail about why MixApp didn't find its path to financial success (or at least stability), but to summarize the crucial factors in our decision to shut down: 1. Quite simply, we can't afford the hosting costs any more! 2. With several newer services now available to offer shared listening experiences (check out http://listeningroom.net/ http://turntable.fm/ and http://mumuplayer.com/), we're confident that the concept of listening together will survive, and thrive, even without MixApp continuing. Thanks very much to everyone who encouraged the team along the way, helped shape the product with their ideas and feedback, and especially to those who played so much great music."

Are Group Listening Services Doomed?

Clearly MixApp turned out not to be economically viable. Does this mean that the other listening rooms are doomed? Does this mean that Turntable.fm success is killing competition? What are the real challenges of monetizing this business?

To find answer, let's have a look at MixApp. It's pretty different from Turntable.fm, although they fix the same problem (building collaborative playlists to listen together with friends, remotely). Interface is very "engineer-style", with a minimal, but not quite usable interface. Searching for music to add opens a pop-up window which gives access to YouTube, your hard disk, or friends' shared hard disk. (Accessing third parties' computers is a very Napsterish approach, pretty common in the pre-streaming era, and I must admit I like it. Nothing tells you more about a person than his/her music collection.)

Turntable.fm does not stream or connect to YouTube. The ability to watch video while listening to music is actually a frequently-requested feature that only MixApp had. In MixApp, everybody is a DJ, and everybody could add songs to the room's playlist. They could even move them up in the queue. Chat is in central position. In Turntable.fm, the DJ stand and the song data scrolling are in this position. Let's talk about the similarities: same technology, same Facebook Connect access to speed up the social experience, same purchase and share buttons, same price: free. You could become "premium user" for $3 a month. They came up with this number to cover costs:

"(T)he machines and bandwidth for our production system (on Amazon EC) cost ~$650/month. Development host, domains, and other services run another ~$100/month. Add to that various administrivia (e.g. annual filings) and some unpaid bills, and you get another $150/month, for a total of $900/month."

Clearly MixApp turned out not to be economically viable. Does this mean that the other listening rooms are doomed? Does this mean that Turntable.fm success is killing competition? What are the real challenges of monetizing this business?
Note that licensing is not a cost for MixApp: they let users upload their own stuff (or use YouTube) and cover the legal liability with the classic DMCA disclaimer. There's a top bar in MixApp which constantly monitors what's left for the $900 break-even goal, Wikipedia-style. On average, they raised around 700 per month, accounting for around 230 paid customers. The churn was probably heavier in the latest months (for August they only raised $630). Interestingly, the premium users did not have access to any additional features (and MixApp needed a lot of extra features).

The Wikipedia Model

The "Wikipedia" model did not work well for MixApp. They chose to rely on a freemium model, without advertising, and they could not convert a sufficient percentage of the user base. They could have tried something similar to Spotify, whose free version is partially subsidized by advertising, which acts also as an incentive for users to go premium and get rid of the ads. They didn't. They also did not have any of the game mechanics of Turntable.fm, that might justify paywalls. Another competitor, Listening Room, is more similar: focused 50% on chat and 50% on music, no games, user-generated catalogue, no public rooms. (They used to have a couple, but I don't see them anymore, and I suspect they were killed because there is no system to boot users.) But they pay a non-interactive license, $2,000 annual minimum to SoundExchange.
(T)he huge difference is not in the cost, nor the pricing. It's the public vs private choice. The success was inhibited by the crowded, messy public rooms full of strangers. "Listen with your friends" might sound good, but it is very hard to scale and monetize. After all, the friends who you share music with are not many, because, let's admit it, most of your friends have terrible musical taste.

If this does not make sense to you, don't worry: you are not alone. Listening Room has ads, too, but they are not working that well: the ad rate was cut from $5 to $2.50 per 1,000 impressions. Very unobtrusive ads do not pay well. Some people like Listening Room: people who want to focus on music and listening with real friends, rather than playing games in something that's very close to a disco room. Even in terms of personal interaction, former MixApp users are more likely to flock to Listening Room than Turntable.fm.

It's Not the Price, It's the Choice

Takeaways from this analysis: the huge difference is not in the cost structure (MixApp had the lowest costs by far, but it was the first to fall), nor the pricing (which nobody has figured out yet): it's the public vs private choice. Although you can make private rooms there, the success was inhibited by the crowded, messy public rooms full of strangers. "Listen with your friends" might sound good, but it is very hard to scale and monetize. After all, the friends who you share music with are not a lot, because, let's admit it, most of your friends have terrible music taste. If I have so many "music friends" to need a place like MixApp, I am a music nerd, and you are in a niche market. And that's bad.

Prediction: Listening Room is falling next.

LP photo by Ian Burt