Q&A With Slacker Founder: The Demand for Free Online Music Just Won’t Quit

Two years ago, Dennis Mudd summoned his team of former Internet music executives and started Slacker, an online music service that offers personalized radio stations. The big idea was to mix the streaming music from Internet radio stations with personalized content according to listeners’ liking. When you want to listen to Led Zeppelin only, Slacker provides you a free stream that plays only Led Zeppelin and songs that Slacker has categorized as similar music.

dennis_muddMudd would seem to be the right guy for the job. In 1997, he started San Diego-based MusicMatch, a digital jukebox pioneer that helped people to handle and listen to music from their computers and to convert their CDs to MP3 files. Mudd pocketed $160 million when Yahoo bought his company seven years later, although Yahoo allowed the business to go fallow.

In creating Slacker, Mudd has updated MusicMatch by offering customers a personalized free music stream. He’s also been able to raise plenty of venture capital funding. Slacker has raised a total of $59.5 million. In a January 2007 Series A funding round Slacker raised $14.5 million from Austin Ventures, Austin, TX, Mission Ventures of San Diego, and Sevin Rosen Funds, Dallas, TX. In May 2007, Slacker got $40 million from a Series B round led by Centennial Ventures, Denver, CO, and Rho Ventures, New York, NY, plus existing investors Austin, Mission, and Sevin Rosen. In December 2008, Slacker got $5 million from Rho, Centennial, Mission, and Austin.

The company makes money from advertising, subscriptions, and selling Slacker music players. Slacker G2, a portable player that can store thousands of songs is sold for $200 or $250. For a subscription fee of $3.99 a month, users also can get Slacker Radio Plus, which provides unlimited song requests (and lyrics) with no commercial interruptions.

Dennis Mudd, 47, has been called an easygoing San Diegan surfer. But he’s no slacker. He is a former product manager at Verbatim and Hewlett-Packard. He has MBA from Wharton School of the University of Pennsylvania and B.S. degree in Business with Honors from University of California, Berkeley. Mudd recently agreed to a Q&A with Xconomy about Slacker.

X: How has the economic situation affected Slacker?
A: It has forced people to reassess their priorities. Luckily for us, free music is still a priority and likely will be for the foreseeable future.

X: Slacker introduced portable personalized online radio—how is it doing?
A: We now have over eight million Slacker listeners who are enjoying the service on the web, mobile phones, televisions and on the Slacker G2 portable player. From the outset we wanted to deliver Slacker every place people listen to music and we have made great strides in that regard.

X: Are you still looking for a broader user base?
A: We are always looking to attract more music lovers. Most recently we passed the one million download mark for our mobile app on BlackBerry smartphones. So that has been a big success for us. Slacker usage on the iPhone is up as well. We enable listeners to store their favorite stations on their memory card so they can listen whether they are connected to a wireless network or not. That’s a huge convenience and no one else can do that.

X: Are you looking to get more music to Slacker?
A: We add new music constantly. We already have four times as much music as the leading competitor and ours is high-fidelity audio. Since we have deals with all the major labels and thousands of indies we put all the latest music in rotation on the appropriate 100 expert-programmed Slacker stations and custom stations created by listeners. The music experience is as fresh as the listener wants it to be.

X: Are there any new products or contracts to be expected?
A: We are in advanced negotiations with a wide range of partners so you can expect Slacker to be even more ubiquitous than it already is in the months ahead.

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