The Web holds huge potential for music sharing and music discovery, but figuring out how to make that potential work — and how to navigate copyright and licensing laws in the process - has been a major challenge. This week, the creators of the website Mixaloo promised to “bring mix tapes into the digital age.” Whether you buy into that concept or not, or their particular implementation, the site does demonstrate both some of the opportunities and legal hurdles in Web sharing. They also inherit the closed model supported by labels (no full streams, previews only, DRM), but already that’s changing (MP3, and the promise, hopefully, of full-length tracks soon). It’s like a microcosm of the whole business at the moment.

Mixaloo.com

I spoke to the founders shortly before launch, and they described how their approach differs from the online radio model, which is constrained in part by the law:

There’s the streaming radio camp … you have a minimum of forty tracks, you can’t have the same artist twice in a row, and then you get into the whole mess of royalties. Then there’s the way we’re going — user-generated albums. And we like that because it’s personalized.”

The basic model:

• 10 or more tracks on the “mix tape”
• Mix your album from 3.5 million + tracks.
• Majors and indie music — the founders say they have “deals with all the major labels” but also “a ton of independent aggregators like CD Baby, The Orchard, and Iota
• Embed players and market mixes on Blogger, MySpace, Facebook, Friendster, etc.
• Sell tracks via any of your players and earn a 50% commission
• For now, 30-second previews — but hopefully that will change? (more in a moment)