Muxtape Founder Gives A Glimpse Of The Major Labels’ “Negotation” Tactics

A month after his playlist-sharing site Muxtape was shut down by the RIAA, founder Justin Ouellette has broken his silence, with a detailed timeline of what led up to the closure on Muxtape’s front page, along with a note that the site would be relaunching as a way for bands to share their music in the immediate. In the wake of the lackluster launch of MySpace Music, this inside look at how the major labels make (or, I should say, try to make) deals is, at the very least, insightful as far as helping one realize just why so many sites with licensed music are, shall we say, less than satisfying. An excerpt from Ouellette’s story after the jump.

In May I had my first meeting with a major label, Universal Music Group. I went alone and prepared myself for the worst, having spent the last decade toeing the indie party line that the big labels were hopelessly obstinate luddites with no idea what was good for them. I’m here to tell you now that the labels understand their business a lot better than most people suspect, although they each have their own surprisingly distinct personality when it comes to how they approach the future. The gentlemen I met at Universal were incredibly receptive and tactful; I didn’t have to sell them on why Muxtape was good for them, they knew it was cool and just wanted to get paid. I sympathized with that. I told them I needed some time to get a proposal together and we left things in limbo.

A few weeks later I had a meeting with EMI, the character of which was much different. I walked into a conference room and shook eight or nine hands, sitting down at a conference table with a phonebook-thick file labeled “Muxtape” laying on it. The people I met formed a semi-circle around me like a split brain, legal on one side and business development on the other. The meeting alternated between an intense grilling from the legal side (“you are a willful infringer and we are mere hours from shutting you down”) and an awkward discussion with the business side (“assuming we don’t shut you down, how do you see us working together?”). I asked for two weeks to make a proposal, they gave me two days.

I had to make a decision. As I saw it I had three options. The first was to just shut everything down, which I never really considered. The second was to ban major label content entirely, which might have solved the immediate crisis, but had two strong points against it. The first, most visibly, was that it would prevent people from using the majority of available music in their mixes. The second was that it did nothing to address the deeper questions surrounding ownership and usage for everyone else who wasn’t a major label: mid-size labels and independent artists who have just as fundamental a right to address how their content is used as a large corporation, even if they don’t carry quite as big a stick.

The third option was to approach a fully licensed model, which I had been edging toward since I met with Universal. I knew other licensed services so far had met with mixed success, but I also knew Muxtape was different and that it was at least worth exploring. The question about whether or not the labels saw value in it had been answered, the new question was how much it was going to cost.

It was June. I approached a Fifth Ave law firm about representing me in licensing negotiations with the major labels, and they took me on. Two weeks later I met with all four, flanked by lawyers this time, and started the slow process of working out a deal. The first round of terms were stiff and complex, but not nearly as bad as I’d imagined, and I managed to convince them that allowing Muxtape to continue to operate was in everyone’s best interest. Things were going well. I spent the next two months talking with investors, designing the next phases of the site itself, and supervising the negotiations. A big concern was getting a deal that took into consideration the fact that Muxtape wasn’t a straightforward on-demand service, and should pay accordingly less than a service that was. Another reason I liked the licensing option from the outset was that it seemed like a uncommon win-win; I didn’t want the ability to search and stream any song at any given notice, and they were reluctant to offer it (for the price, anyway). Muxtape’s unusual limitations were its strength in more ways than one.

The first red flag came in August. Up until then all the discussion had been about numbers, but as we closed in on an agreement the talk shifted to things like guaranteed placement and “marketing opportunities.” I was denied the possibility of releasing a mobile version of Muxtape. My flexibility was being constricted. I had been worried about Muxtape getting a fair deal, but my biggest concern all along was maintaing the integrity and experience of the site (one of the reasons I wanted to license in the first place). Now it wasn’t so simple; I had agreed to a variety of encroachments into Muxtape’s financials because I wanted to play ball, but giving up any kind of editorial or creative control was something I had a much harder time swallowing.

Ah, mandated “marketing opportunities.” This, dear readers, is how you become unable to escape from the Pussycat Dolls.

I was wrestling with this when, on August 15th, I received notice from Amazon Web Services (the platform that hosts Muxtape’s servers and files) that they had received a complaint from the RIAA. Per Amazon’s terms, I had one business day to remove an incredibly long list of songs or face having my servers shut down and data deleted. This came as a big surprise to me, as I’d been thinking that I hadn’t heard from the RIAA in a long time because I had an understanding with the labels. I had a panicked exchange of emails with Amazon, trying to explain that I was in the middle of a licensing deal, that I suspected it was a clerical error, and that I was doing everything I could to get someone to vouch for me on a summer Friday afternoon. My one business day extended over the weekend, and on Monday when I wasn’t able to produce the documentation Amazon wanted (or even get someone from the RIAA on the phone), the servers were shut down and I was locked out of the account. I moved the domain name to a new server with a short message and the very real expectation that I could get it sorted out. I still thought it was all just a big mistake. I was wrong.

Over the next week I learned a little more, mainly that the RIAA moves quite autonomously from their label parents and that the understanding I had with them didn’t necessarily carry over. I also learned that none of the labels were especially interested in helping me out, and from their perspective it had no bearing on the negotiations. I disagreed. The deals were still weeks or months away (an eternity on the internet) meaning that at best, Muxtape was going to be down until the end of year. There was also still the matter of how to pay for it; getting investment is hard enough in this volatile space even with a wildly successful and growing web site, it became an entirely different proposition with no web site at all.

And so I made one of the hardest decisions I’ve ever faced: I walked away from the licensing deals. They had become too complex for a site founded on simplicity, too restrictive and hostile to continue to innovate the way I wanted to.

Walking away, to me, is something of a brave decision, and it’s one that will probably prove to be more personally rewarding for him (if not for the people who really, really miss his site) in the long run. A preview of sorts of the artist-centric Muxtape can be found here; it’s kind of like the antithesis of a MySpace page, with clean lines and–naturally–lots of Helvetica.

Muxtape [Official site]