A strange thing happened on the way to the latest digital music revolution.

Spotify Finally Launches in the U.S.

As U.S. consumers and recording industry executives wait to see if Spotify and Apple can usher in a new era of cloud-based music streaming, Turntable.fm has become the most buzzed-about digital music service in years.
The New York-based startup is at the forefront of a new wave of music sites that mix Internet radio and social media. Listening Room allows users to play songs for their friends in a casual "room"-like setting. Console.fm pulls dance music tracks from SoundCloud and organizes them by genre. All let visitors chat with one another while the music plays.

And while these services enable users to pick which songs they play for their listening audience, none of them have direct licensing deals with labels or music publishers. Instead, Turntable.fm and Listening Room are configured to operate as "noninteractive" webcasters under the U.S. Digital Millennium Copyright Act (DMCA) -- a legal distinction that has raised eyebrows in some quarters of the music business. (Console.fm only offers tracks that SoundCloud users post for public use.)

The undisputed leader of this emerging niche is Turntable.fm. The site has its origins in Stickybits, a startup that raised $1.9 million to create a mobile app that scans bar codes to get product information. Facing dim prospects on their original concept, co-founders Seth Goldstein and Billy Chasen decided to start over. They registered the domain name "Turntable.fm" in January and several months later launched their latest project.

The concept is simple: Turntable.fm users can create or join rooms where music is played. The site resembles a cartoon version of a loft party featuring five DJs, represented by their avatars, each manning a laptop computer. The room's guests, represented by their own avatars, are spread around the room and face the DJs so that only their backs are visible.

Although the site is still operating on an invite-only beta basis, Facebook users can join if they have a friend who's already registered. Navigating a seemingly endless list of rooms is made easy by Turntable.fm's integration with Facebook. When users enter the site they'll start at what's called the lobby. At the top of a list of rooms are the ones in which their Facebook friends can be found.

The site's hundreds of user-created, themed rooms, listed from most to least crowded, are dominated by a handful that cater to indie rock and electronic music fans. "Indie While You Work" regularly ranks at or near the top of the list. On a recent Sunday night, 108 listeners filled a room to hear DJs spin a mix of such acts as Midlake, the Black Keys, Crystal Castles, Destroyer and the Decemberists. "Ambient Chillout & Trip Hop" is a favorite electronic haunt, where nearly 200 people gathered on a recent weekday morning to hear laid-back songs by Massive Attack, Bonobo and Air.

But Turntable.fm is about more than passive listening, incorporating a mix of social networking, gaming and online chatting that's perfectly suited for music discovery. "I think it's fun," says Scott Lapatine, founder of music blog Stereogum. "It appeals to people who want to hear new music from people they trust."

Like other social networks, Turntable.fm enables listeners to follow other users and receive emails when they start DJ'ing. Like an online game, DJs on the site earn points when listeners approve of their songs and use the points to trade up to bigger or more outrageous avatars than the stock ones they're assigned upon signing up. And like an online chat room, the site provides a forum for listeners to talk about the song being played, crack jokes or commiserate over choices they don't like.

Turntable.fm currently has more than 371,000 monthly active users, up from about 50,000 a month ago, according to AppData, which tracks traffic at Facebook applications. The site's swift rise has created a modest media frenzy. Co-founders Goldstein and Chasen have responded to the attention -- and enhanced the site's mystique -- with near-complete media silence, opting instead to wait until the site is out of private beta, Chasen told Billboard in an email. Goldstein recently surfaced just long enough to deny a report that the company had closed a $7.5 million round of funding that would have valued the company at $37.5 million.

NEXT: Turntable.fm Complying With the Law?