Plug.dj, a music-sharing service designed around the idea of building online communities of listeners with similar tastes, has attracted more than 2 million users from 190 countries since it launched two years ago. What the 16-employee Culver City company has not done is make money.

Now, fresh off a $1.25 million seed financing round in November from Javelin Venture Partners and the February hire of a senior business development executive, Plug.dj is laying the groundwork for what it expects will be a long road to sustainability.

“We’re definitely interested in monetizing,” said co-founder and Chief Executive Alex Reinlieb. But, he added, “we’re not in any major rush to do it.”

The service keeps its costs down by streaming music embedded on sites such as YouTube and SoundCloud, which have already cleared rights, into thousands of themed virtual “clubs.” The model allows Plug.dj to avoid paying royalty fees to rights holders – a costly expenditure that helped sink Turntable.fm, an earlier competitor that shut down late last year.

It has already generated some cash through promotional arrangements with Budweiser and BBC Radio One, which set up branded clubs as proofs of concept.

More such relationships could be on the way. But as Plug.dj seeks avenues to generate cash from the clubs in which the music is streamed, it must navigate the legal intricacies that come from trying to make money off of someone else’s intellectual property.

Dax Kimbrough, former director of brand partnerships at EMI Music, said Plug.dj’s idea of building a community centered on the sharing of free content is a viable one. But he believes the company will face challenges should it try to build revenue on the back of intellectual property it doesn’t own.

“They need to be mindful of the true legal implications of what they’re doing,” said Kimbrough, an adjunct professor at USC’s Thornton School of Music. “How they negotiate with all the rights holders probably will take a little bit of time,” he added, referring to the fractured world of music copyright ownership.

Alex Gurevich, a partner at Javelin in San Francisco, led the Plug.dj seed capital raise and has a seat on Plug.dj’s board.

He said that should any licensing issues arise down the road, the company could try to solve the issue by acquiring performance rights, which his legal advisers assured him are cheaper and less cumbersome to obtain than a standard licensing agreement.

“I’m not too concerned about it,” Gurevich said. “There are other ways for them to monetize,” pointing to the ability to sell virtual goods such as premium avatars, the characters representing users onscreen, and designs known as “skins.”

Reinlieb said Plug.dj plans to combat the rights issue by partnering with content owners whenever possible, noting the company’s first goal is to reach out to music labels.

“We’re not trying to steal or take advantage of anybody’s content,” he said. “We’re still learning quite a bit as we head into these exploratory conversations.”

Current partnerships

Reinlieb formed Plug.dj after moving to Los Angeles two years ago following a stint at Lehman Bros. A lifelong music lover who’s played in multiple bands, he tossed around the idea of working at a label in order to break into the music industry.

After a chance meeting with co-founder Steven Sacks, a working DJ who is the company’s president, Reinlieb said Plug.dj fell into place.

Plug.dj’s longest relationship with the music industry has been with Monster Cat, a Toronto electronic dance music label. The Canadian company’s chief executive, Mike Darlington, caught wind of the site while chatting with users on Turntable.fm, which shut down in November.

“I remember thinking that Turntable.fm felt all about the DJ,” Darlington said, “whereas Plug.dj felt all about the community.”

Minutes after someone suggested he check out Plug.dj as an alternative, Darlington created a Plug.dj account, started a virtual “party” on the site in a brand new club and sent a tweet telling his label’s fans to join him.

“There were thousands of people in the room right away,” Reinlieb said.

Roughly 300 people are active in the brightly colored Monster Cat room at any given time, represented by personalized avatars bobbing and gyrating at a virtual rooftop party in front of a stylized version of the Toronto skyline. The partnership has since expanded to include YouTube music network Tasty and the room now operates under the moniker “TastyCat.”

“Our average user ends up spending over an hour on the site per visit,” Reinlieb boasted from the company’s loft office, which it subleases from online marketing firm Steelhouse. That’s a pretty extraordinary number considering most websites gauge the same stat in hundreds of seconds.

Christian Jones, Plug.dj’s new vice president of business development, said this huge figure gives him a lot of options going forward, provided they can find brands that speak to the type of people that frequent the site.

“If you have users engaged for one-and-a-half hours, then you have time to tell a story,” he said.

Jones, who also DJs, has previous experience with brand development and copyright issues in the digital music space after serving as vice president of production and creative services for Burbank programming distributor Radio Express. He will be charged with creating more such partnerships, perhaps thinking beyond the realm of the music industry.

“We have the ability to bring in a wide array of partners and watch what the users do with it,” he said, citing a desire to eventually team up with film directors, festivals and multichannel YouTube networks in addition to its primary goal of partnering with record labels and artists.