While the term “MP3” was once synonymous with piracy and “digital music distribution” an implicitly underground activity, a bevy of pioneering digital music companies and increased record company flexibility have begun to reign in the digital Wild West, presenting appealing legal alternatives to the old ways. One company called Slacker, canned the old downloading model in favor of a new form of Internet radio, which allows nitpicking users to tune playlists to their liking without the monotony of handpicking songs – all for free. Following the release of the Slacker Portable, we sat down with seasoned digital music vet Jonathan Sasse, Slacker’s vice president of marketing and former CEO of iRiver America, to get his take on the future of digital music, record companies, piracy, and course, Slacker.
Digital Trends (DT): Do you think that, for digital music distribution to succeed in the future, piracy is going to have to be ultimately snuffed out? Or do you think there’s a niche there for legal music distribution to survive even if piracy is always an option to people?
Jonathan Sasse (JS): At the end of the day, everybody believes that if a legitimate service can be just as easy if not easier than stealing stuff, then people will do it… Today piracy is still obviously an option for a lot of people, but for most people it’s probably more effort than they care to put into getting digital content, even more so than some of these other legitimate services.
From our perspective, we’re offering a fantastic free service to people. The free service is pretty compelling, and we don’t think people who are getting a great free service will be terribly inspired to go out and do what it takes to get pirated content.
It will always be there. It will always be that other option. But I think for mainstream consumers, it’s already become a bigger hurdle than it’s worth. 
DT: With this transition to digital music distribution, do you think that traditional record companies will survive? Or do you think there will be some shift or transition?
JS: I think they’ll certainly survive. They have a tremendous amount of resources and while they may have been slowed down, especially early on, I think it’s clear to them that digital initiatives and content delivery are high on the list of things to solve and things to enable… The fact that we licensed all of our content from all the labels shows that they’re taking a step forward. You have to push, enable and support these types of services.
Things will change. We’ve already seen a decline in physical media. There are different types of measurements for album sales today than there were even a few years ago. I think that they’ll repurpose their efforts and focus on the ways that people want to get content. In many ways, they may be driving that, and coming up with different types of solutions. But in a lot of ways it’s up to companies like us to help them to find new use policies and new types of licensing and new types of applications for those licenses. To find models that consumers really like, that they’re willing to use and that they really enjoy listening to. And I think the labels are already coming around. Like I said, they tremendous resources and they have a lot of incentives to make it work at this point. They’ll certainly survive, but there will be a shift. We’re seeing the shift starting already.
DT: How receptive have record labels been to Slacker’s model of distribution?
JS: They’ve been great. We’ve been able to get deals that most Internet radio companies wouldn’t even try to get. They’ve been supportive, they’ve signed the deals. We’ve got good licenses in places with all the majors and most of the indies, and we’re working through the publishing deals… I spend a good portion of every week meeting with the companies and finding new ways to market, new ways to promote, and they’ve been very supportive of that.
DT: Do you see the future of music distribution moving away from on-demand models?
I think there’s always going to be an on-demand component. There’s always going to be people who want to hear a particular song, or a particular album. I believe that’s not going to be something that’s going to go away. But from an entertainment perspective, of listening to music and enjoying music content, and discovering new music, and listening to your favorites, the radio model fits very, very nicely. For the times when people want to be more forward and go get an album, or go get a song, or amass a library, that type of on-demand access to the songs they like – it’s still very important. People are going to want that. But I think that the model of just using on-demand to get access to music is something that’s going to change.
DT: If you aren’t competing with on-demand services, what about services such as Pandora that are also offering tailored radio?
JS: The big component of Internet radio that we offer differentiation over is “to go.” Most Internet radio services, if they have any portability component to their service, it’s a live stream. We don’t think that’s a great model, because most of the people on the go aren’t in a position where they can maintain a live Internet connection to listen to a radio station, the quality suffers, and other things. Whether you look at Pandora, or Rhapsody, or other Internet radio sites, the one piece that they don’t really offer is true portability. To really get the full experience, you need your PC.
When we look at the MP3 side, or music subscriptions and downloads, a lot of people who are in that model right now are generally frustrated with the experiences. There are a lot of people who love it, but there’s a growing population of people who find that that process is too much work. They’re not changing their playlists. They’re not downloading new content. They’re paying for their subscriptions, but they’re casually sort of grabbing songs here and there, and they’re kind of just dealing with the old content that’s on their MP3 players. It’s one of those things where people are somewhat vocal about it. It’s not uncommon at all to find someone who has an MP3 player, whether it’s an iPod or another device, who says “I loaded new music on my player four months ago, and it’s the same old stuff. I go on my trips and I’m listening to music from six months ago.” It’s because they’re not taking the time – they don’t want to take the time – to rebuild their playlists all the time.
DT: Right now Slacker has just the Slacker Portable supporting bringing your music anywhere. Are there plans in the future to expand that capability to other, maybe more mainstream players?
JS: Absolutely. A big part of our initiative is to enable Slacker service in as many places as possible. Whether that’s other portable devices, or whether that’s in the mobile space, or whether that’s in an aftermarket or car environment, or other types of PC devices, we definitely are working to enable the Slacker service to work in lots of different devices… The delivery mechanism itself works very well in a few environments where music hasn’t really worked very well yet, and one of those places is certainly the mobile space. When you look at the market today, there are a lot of people tackling music delivery, but it’s a cumbersome and or expensive process to deal with on your mobile phone. To be able to assign a few stations to your phone, and have the phone go out and harvest content, when it was appropriate, and to be able to play it offline, gets you better quality, gets you better music, and it doesn’t require any effort on your part. So there are a lot of places we can enable the Slacker service where we can really step up the music experience in a number of different devices.
DT: Are there any devices specifically that are on the way, or is that just a general plan for the future?
JS: We actually have a number of devices in the works. There’s a lot of effort going on right now to insert Slacker service in a number of different touchpoints. Several of those things I think you’ll see in 2008, some of them maybe early next year. But regardless, there’s a lot of places you’ll see Slacker outside of our own portable device.
DT: I understand that most of Slacker’s preexisting stations are “professionally programmed.” What does that mean?
JS: What it means is we’ve got experts in the genre – these could be people who were music directors or program directors at top terrestrial stations or top markets, people who have strong expertise in those particular genres. We have over 60 music directors for those stations. Some directors program multiple stations, but for the most part we keep them very focused on what their specialty is. For example, we may have a music director for that particular station who worked in a terrestrial station, or a decade or more of specializing in a particular genre. They know the songs, they know the artist, they broke the artist. They’re top quality music directors for those stations, and they hand pick every song that plays on that station.
DT: So every song that comes up on a preexisting Slacker station has actually been handpicked? It’s not just a pool of songs being randomized?
JS: That’s right. Every single song in every station that’s in our station tree has been handpicked by an expert in that category… We program our stations very specifically. It’s not just a meandering kind of algorithm that kicks out songs every time a new track is needed. Every radio station, whether it’s a custom station or preprogrammed station, or artist station – the songs are played out a radio clock, which is based on an hour of listening. The songs that we pick are programmed to fit a particular rotation, whether they’re very popular songs, or hit rotation songs, or power tracks, or fringe tracks, or medium-rotation tracks, or classic songs that fit perfectly in that genre that will maybe play once in a while… It’s very smartly programmed, so that it’s not just a random pool of songs shuffled into a kind of playlist.
DT: In the future, do you see ads being added to Slacker, either graphics banner ads, or audio commercials that pop up every so often?
JS: Obviously we have a lot of work to do to roll that strategy out, but right now our plan is that… I mentioned our radio clock, right? Roughly you get about 18 songs of listening an hour of music, and what may happen, in the most extreme case, is that one of those song’s worth of time will be replaced by some sort of ad throughout the hour. It could be that a couple times throughout the hour you hear a 30-second spot, or it could be in the form of a DJ communicating some tips and tricks for Slacker, or a third-party ad. But for the most part, it will be in 15-to-30-second segments, and it will take up no more than one of your songs per hour.
DT: Is there anything you wanted to add that I haven’t touched on?
JS: One of the things that’s really cool about the service today, is the way that the Portable device harvests content. It’s very hands-off, in the sense that when you use the Wi-Fi or USB connection, once it gets onto a network, it just harvests songs. It looks at your listening preferences: Let’s say you listen to 90’s Alt more than all the other stations on your device. It’ll make 90’s Alt a lot deeper so that you can get a better experience there. It will fill 90’s Alt first before it fills the other stations. It’ll kick out the songs that you hated and grab more songs that you might like. It’s very efficient in the ways that it gets content. It’s very smart about it as well.
I think that the Wi-Fi piece is pretty compelling, because if you can find somewhere with open Wi-Fi or you happen to have the network key, you can just set it off to go, and it will start grabbing all the content that you need to keep your stations totally up to date with the latest content and the most appropriate content. Throughout your week, if you can hit a Wi-Fi network once or twice, whether it’s home or work or the coffee shop or whatever, you never have to connect to a computer at all.
