Turntable.fm's Licensing Future: 'We're Trying to Do the Right Thing,' Says Co-Founder (Q&A)

As the service gains in popularity, Seth Goldstein explains why licensing remains "a sensitive topic," how his company was able to raise funding during a recession and Turntable's end goal: "to add social value back to the music equation."

After staying largely quiet all summer and letting the service do the talking, the founders of Turntable.fm have finally started talking. Last week, they confirmed a long-rumored $7 million round of funding. They began addressing their plans for establishing music licensing for the service. And they began dropping hints as to where the service might be going.

Seth Goldstein, chairman and co-founder of the company, will be presenting a keynote case study at Billboard's FutureSound conference, taking place Nov. 17 -18 in San Francisco, where he will be joined by investors and partners to showcase what's next for the hot digital music service.

Billboard caught up with Goldstein to discuss the company's progress, its current activities, and plans for the future. The transcript of that interview is below, where he talks about the surprising lessons learned from Turntable.fm's usage to date, how licensing will change the service in the near future, and why having a Turntable.fm room is just as important as a Twitter feed or Facebook profile for artists.

Billboard.biz: You originally started a company called StickyBits, which morphed into Turntable.fm. How did that transition come about?

Seth Goldstein: We built something in StickyBits that was a little bit ahead of the market. We anticipated that consumers would use their mobile devices to scan physical products. The reality is that market is a couple of years away. We had some patient long-term investors. So around the beginning of this year, my co-founder and CEO Billy Chasen had this idea for a collaborative social music game that he called Turntable. We thought there would be faster adoption of that than StickyBits, so we pivoted the team to focus on it. Within like two or three months, Billy and another engineer finished the prototype. We then plugged in an integration with MediaNet so people could choose music from that library. It was clear early on there was something compelling about this way of listening to music.

Did you expect it to blow up the way it did?

Goldstein: None of us came out of the online music business, for better or for worse. We didn't have any expectations around this. We were focused on creating something that would get people to engage in a meaningfully social way. Turntable.fm is not purely music. There's gaming aspects, avatars, charts. Music is a key ingredient, but it's not the only ingredient.

Is it more of a music service or a social service?

Goldstein: That's semantics. Some might say you go into it for the music, but you stay there because you're chatting with friends. Others might say you go there to find friends and you wind up listening to music. Clearly music is an essential ingredient. I don't think it would be successful without music. But I also think that if we didn't have chat we would be seeing the kind of engagement that we've seen.

What has the experience of running Turntable.fm taught you so far?

Goldstein: We've noticed people are driven to share their tastes with their friends. Think about how the service went viral: We didn't market it; it marketed itself. When people are DJing, you want to tell your friends on Facebook and on Twitter that you're DJing. It naturally markets the service, and that we didn't fully expect. We built the social hooks into the service, but we didn't know the extent to which people naturally want to promote and share the music that they're playing.

We were also surprised at the large international [audience] for this. We had to turn off international usage very soon so we could be compliant with the DMCA, but very early on there was an enormous market in Japan and Brazil. It's clearly not a U.S.-only phenomenon.

We also noticed that the conventional notion of [genres] is a relic of a bygone day. The most interesting rooms on Turntable.fm is the mashup room, where the only theme that ties people together is the fact that people have to mash up two songs. There's things like ocean rooms, where you can play anything you want so long that it has something to do with an ocean. There was a Hurricane Irene room where one guy played "Hurricane" by Bob Dylan, and another girl played "Here Comes The Rain Again." One of my favorites is there's an "orange bear indie room" where the only caveat is that you have to wear the avatar of the orange bear. It's interesting to see how people categorize things themselves and create communities around their own categorization schemes. I was one of the original investors in a company called Del.i.cious, and the whole point was that peole would tag things however they wanted to. Whereas Yahoo would call it "sports" website, the user would tag it a baseball website or a Red Sox website. So I think we're seeing how powerful it is when users are given the opportunity to organize their own music.

Are you pursuing music licenses?

Goldstein: It's a sensitive topic. We are respectful of the rightsholders, and we're really trying to do the right thing across the industry for artists, labels, publishers, managers and agents. We understand there are a number of constituencies. We believe the service we have built is fully compliant with the DMCA, and we've been paying through SoundExchange. That being said, we understand the value of introducing more interactive features to create an even more compelling user experience. To that end, we've had some good initial productive conversations across the entire music ecosystem.

What kind of interactive features do you have in mind?

Goldstein: I would say the DMCA specifies a certain kind of listening experience that tends to be very passive. It's primarily read-only. We believe over time, there are opportunities to introduce even more interactive social features. We believe that users will want that. It will become more and more natural to share and interact with music with your friends beyond simply listening to it like passive radio.

When do you expect to emerge from beta and what will that look like?

Goldstein: We're now open for access. We've taken a lot of the velvet ropes down. We've introduced an iPhone application that takes the online experience and moves it offline. It's not a joke, but imagine three of us walk into a bar and essentially command the audio system of the bar to take turns DJig if they're using a jukebox. We're working with some events and concerts where imagine the opening act is a turntable platform where people in the audience can take turns DJing with people on stage. Music started very social with concerts and listening parties. With the advent of headphones and iPods, music became digital. And while that made it convenient, it also made it very isolationist. We're trying to add social value back to the music equation.

How important is mobile to Turntable.fm?

Goldstein: What mobility does is allow you to create a party wherever you are. You can combine an offline social experience with an online social experience. We're socializing in the real world and we're connected digitally.

How do you intend to maintain the momentum of Turntable.fm to keep it from being yet another digital music fad?

Goldstein: We just focus on creating a great product that everyone will enjoy. There's no world domination plans. We've been very fortunate to have artists like ?uestlove from the Roots and Lady Antebellum come on the platform and build relationships with fans. I think you'll see that continue. I think you'll see more and more artists use this platform organically, and more labels and managers and agents programming talent within Turntable rooms so you have your Facebook account, your Twitter account and you have your Turntable room. You can kind of create new kinds of promotional programming that really hits those different platforms. We hope to be able to extend Turntable internationally. There are more platforms than just the iPhone. There are distribution partnership with other music services and other social networks we anticipate working with. We think Turntable is fundamentally a discovery service. By engaging with Turntable, you're going to come across music you enjoy but didn't know about that you can then purchase in the iTunes store, or put in your Spotify queue. It leads naturally to other services.

You've been one of the few digital music services that's landed VC funding. How'd you pull that off, and what's the plan to monetize Turntable?

Goldstein: We build a consumer experience that people love. The feedback we get from the rooms is that it's something people really love. We're not having U2 perform. It's just people love it. People are connecting with friends and staying on it for a long time. And when you create that kind of fun, engaging, delightful experience, a lot of good things happen. The ability to attract financing was driven by the fact that anyone who uses Turntable loves it. As for monetization, when you have the level of engagement we seem to have, there are a lot of ways naturally to drive revenues off of that kind of experience. You'll see us experiment with different kinds of virtual goods and virtual transactions, sponsorships where certain rooms with certain talent might be brought to you by certain brands. But it's important to us that all the potential monetization techniques will add value to the consumer experience.