Do you ever get nostalgic for those jukebox days when you plopped a nickel in a slot and played the tune you really wanted to hear? If you had run into Brandon Magsamen, CEO of Durham-based CrowdTunes, 14 years ago as a waiter at a Johnny Rocket’s in Austin, Texas, he would have made change in nickels so you could do just that. Today, his startup company, which already has 150 restaurant customers and 25,000 restaurant patron users, is just a more sophisticated way to do the same thing.

Like all good startup ideas, CrowdTunes solves problems, in this case for restaurant owners who want to play music in their venues.

They may have to pay licensing fees to various industry players, for instance, from the powerful organizations that represent musicians and song writers who will track down every small bar and dance studio or other venues playing music in a commercial setting, to the major music labels who aren’t shy about suing those who use their product without authorization.

In fact, Magsamen says, many restaurant managers tell his company that if it provides the music and takes care of the licensing headaches, that alone justifies their paying from $40 to $75 a month for the service. But, on top of that, CrowdTunes shares revenue when patrons purchase songs they want to hear for about 50 cents or so.

“That’s one of our secret sauces,” Magsamen says. “One of the things we did early on was figure out the licensing maze. It took a lot of time and perseverance. We do it all legally and negotiate directly with major music labels. It paid off doing it that way.”

Connecting with a lawyer with experience in the field helped, he adds.

The revenue from patron song purchases is actually outpacing that from the monthly fees, Magsamen tells WRAL TechWire.

One of three startups selected for Silicon Valley program

CrowdTunes is one of three startups from the American Undergrund@Main in Durham selected to spend a week in Silicon Valley at the Galvanize Tech campus. Solicited via the Google for Entrepreneurs network of startup hubs, eleven startups were invited, with American Underground’s three the most from any one hub. The other local firms, which we’ll be profiling here the next several days, include ChopTix and MATI Energy.

We asked Magsamen, who is 30, what he hopes to get from the Silicon Valley excursion.

“My hopes are threefold,” he says. “The biggest one is to share experience with other startups facing the same challenges we are, to learn from them. Peer to peer learning is a great resource.”

He’s also looking for distribution partners CrowdTunes could work with to go from 150 restaurants now to 2,000 in the next 12 months – or 50,000 or millions.

Third, he says, “I want to understand with a the investment scene is like and whether or not you need to be in the Bay area to raise Silicon Valley money.”

It’s a different scene out there where “You can throw a rock and hit ten of me,” he says, meaning entrepreneurs with startups. “They have to fight each other for the good deals out there. It’s much cheaper to invest here. We would have to raise double or triple amounts to move to the Bay area.”

Magsamen says it’s interesting to see the music industry struggling with change. Spotify, Apple, “Lots of them with deep pockets are trying to figure it out,” he says. “We think we’re in a good position to take advantage of that.”

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