“Music is all around us, al you have to do is listen” .
This quote from the movie August Rush pretty much sums up the music industry nowadays. The media through which we can listen to our favorite songs and newly released albums are ubiquitous. There’s the radio, television music channels, and digital services such as Spotify, iTunes store, and Youtube channels. In case these options do not satisfy the music listener there is always the cheaper option to download it, which happens to be illegal.
However, many services in the music industry seem to suffer from declining profitability. People do not listen to the radio anymore and even iTunes is experiencing falling sales because people prefer streaming services over ownership . Pirate bay has been banned. This means that people need to find other sources for satisfying their hunger for (new) music.
Luckily, there is 8tracks. This online music platform is growing rapidly since David Porter launched it in 2008 . It was featured as one of the best websites in 2011 by TIME  and is ranked number 32 globally in StartupRanking based on internal and external links, estimated audience factors and mentioning in social media . The graph below gives an indication of the speed with which 8track’s social influence is spreading.
What is it?
8tracks found a way to present different groups of users through music with an interactive marketing platform. It allows people to listen to music for free and create their own music profile; performers to connect with their fans; and brands to sponsor mix competitions as part of their promotional campaign .
Different from online music stores, which require a customer to pay a price for listening to music, and illegal downloading websites, 8tracks is an example of a new institutional arrangement (IA) in the music industry. This IA incorporates the formal regulations of the music industry by complying with licenses for webcasting (as established in the Digital Millennium Copyright Act of 1998). It also complies with rules set by you and me: listening to music without effort and, most importantly, for free! 
Does it work?
Yes, it does! One way how 8tracks ensures its success is through its pricing strategies. By carefully distinguishing its groups of users along the lines of a ‘subsidy side’ and a ‘money side’  the company can both attract large groups of music listeners looking for free music services and advertisers looking to market their products.
Second, they avoid envelopment by differentiating themselves from their competitor music platforms . In order not to get swallowed they target two types of ‘subsidized’ users, those of us who are looking for familiar and new music and those who like to share their mixes with their peers. Even more so, according to 8tracks’ CEO Porter 8track is already successfully poaching away other music servers’ listeners .
8tracks appears to be successful in allowing a firm and different consumers to interact in order to co-create value.
- Carson, S. J., Devinney, T. M., Dowling, G. R., & G. John (1999). Understanding institutional designs within marketing value systems. Journal of Marketing, 63.
- Eisenmann, T., Parker, G., & M. W. Van Alstyne (2006). Strategies for two-sided markets. Harvard Business School Publishing Corporation.