Project Playlist raises more than eyebrows

26Sep07

Just caught this on Digital Media Wire:

Project Playlist Raises $3 Million for Social Music Sharing
Submitted by Mark Hefflinger on September 26, 2007 – 7:31am.

Beverly Hills, Calif. – Project Playlist, a service that lets users share music playlists on blogs and social network profiles, has raised $3 million in its first round of funding, PEHub.com reported, citing a regulatory filing. No investor information was disclosed.

Beverly Hills, Calif.-based Project Playlist’s technology allows users to add their music playlists to blogs and profiles on social networks including MySpace, Facebook, Friendster and Gaia Online.

As regular readers of S+S will recognize, Project Playlist has emerged over the last 18 months or so to become arguably the largest music 2.0 web service. I think PP is compelling to consumers for 3 reasons:

  1. It’s an easy way to tune into artists/songs you already like, or would like to hear. If I read about a new band, or hear about a band from a friend, there’s a reasonable chance I can search for that band on PP and find at least a few tracks to check out, which are readily (albeit illegally) available for on-demand streaming.
  2. It’s relatively trivial to download any track that shows up in search results, eliminating the need for purchase.
  3. I can use the “+” button to add searched-for tracks to a playlist, which I can then attach to my personal webpage (e.g. MySpace) to share my tastes with others in a meaningful way (i.e. other people can actually hear the full tracks).

On the other hand, PP suffers from a few shortcomings in UE:

  1. Tracks that show up in search results may not always be available, or may disappear at some point in the future (this is because all tracks are hosted in various places on the internet, similar to recently-shuttered Webjay).
  2. Certain artists or tracks may not be available at all, if PP’s MP3 crawler hasn’t located them somewhere on internet (Berkeley-based Seeqpod, a similar service, counts improved crawling as its differentiator).

From an investor’s standpoint, PP is interesting because:

  1. Aforementioned growth. On the back of its popularity as a MySpace widget, PP has emerged from nowhere and is now, in less than 2 years, 3X-4X the size of Last.fm and Pandora.
  2. Little or no marginal costs. Because the MP3s streamed or downloaded through PP are not centrally hosted, it does not have to incur the big bandwidth bills of other streaming audio providers. Further, as far as I’m aware, it doesn’t pay any music royalties (which, other than salaries, is by *far* the largest component of cost for any digital music service).

Conversely, I suspect some investors may have passed on PP because:

  1. There’s little question that PP, as currently configured and sans direct licensing, will get sued.
  2. Migrating the existing distributed service to a legitimate platform seems, on the surface, challenging.

But then again, I just heard that imeem signed up another Major (SonyBMG) for a direct license, and its talks with EMI are ongoing. So perhaps there is hope for a licensed version of Project Playlist down the road.

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