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What makes music so different from any other product? Why should new media start ups that do not go the extra mile to procure content legally be rewarded?
(Note, I do think the major labels need to make it less complicated to license content.)
As for alternatives it shocks me that people don't know that imeem has been doing everything muxtape does since 2004, they did get sued and they installed filters, but they also spent the next year getting deals with all the record labels so that users can legally build their Rolling Stones mixtape. This has helped imeem become one of the biggest music sites on the internet
Whether or not Mixwit or Favetape are completely legal is unclear, but Muxtape was blatantly illegal since they hosted copyrighted material.
both those sites have 100 times the users of muxtape.
Playlist.com uses the 'we don't host files argument'
imeem lets users upload but has filters to identify the content and make sure the artists get paid.