YC-Funded Earbits Brings A Twist To Music Startups: Online Radio That Lets Bands Pay For Playtime

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It’s no secret that online music startups are incredibly challenging. It’s tough to build an audience, and even when you do, the licensing fees associated with streaming premium content are often deadly. It’s so difficult that Y Combinator founder Paul Graham asked imeem (and picplz) founder Dalton Caldwell to give a talk on the subject at last year’s Startup School. Which is why today’s news is interesting: YC has invested in Earbits, an online radio startup with a twist.

From the consumer’s perspective, Earbits is an online radio service similar in some ways to Pandora. After arriving at the site, you’ll be asked to choose from one of over 40 radio stations (though unlike Pandora you don’t seed your playlist with a band or song title ). Click on a genre and the music will start playing — a small, attractive player will be nested at the top of the page, and the rest of the screen will fill up with a large photo of the artist, with their bio and other relevant information below. In general, the design is very well done.

Once the music starts playing you can thumbs up/down on songs, and you can skip to the next track if you don’t like the one that’s currently playing. In other words, it’s a lot like other online radio sites. But it comes with a big twist: Earbits will allow bands to pay to have their songs played more frequently (which is actually illegal on terrestrial radio stations, unless the station publicly declares that a song is sponsored). But CEO Joey Flores is confident that it’s a model that both bands and users will benefit from. Users, he explains, will be exposed to high quality music they haven’t heard yet, and bands obviously get the exposure they’re fighting so hard to find.

At this point the site is free for everyone, including bands. But eventually Earbits will allow artists to pay for airtime and to display additional relevant information alongside their songs — like banners promoting an upcoming concert, complete with links to purchase tickets. Flores says that Earbits wants to make this as easy as possible for artists, so the site will automatically pull in calendar dates from MySpace, ticket information, and other key content. The site is also doing some interesting things to help bands establish an online audience — for example, in order to share a song with friends, you have to ‘Like’ the artist’s Facebook Page.

Earbits isn’t dealing with the big labels (at least, not yet). Instead, it’s forging deals directly with smaller labels and artists, and is negotiating its own licensing terms. So far the site has signed deals with 1300 artists across 90 small labels and says more are on the way. Because Earbits is looking to provide new bands with a way to increase exposure, it’s also offering a self-serve signup form. Bands are asked to submit two songs initially, and after these are reviewed by the Earbits team for quality they are given the ability to upload as many songs as they’d like, which are then sorted by genre and inserted into Earbits’s radio rotation.

Earbits was founded in January 2010 and initially launched last September. It’s since undergone a full redesign, which launched last week.