The Newport Beach, Calif.-based company offers emerging artists the opportunity to load up to three MP3 tracks on its site. It then sifts through the music in an attempt to identify and develop new talent.
"We just don't want to give artists a place to start," said Loudenergy.com chief executive Ruben Lozano. "We also want to help take them to the next level."
Companies such as Loudenergy are trying to provide places for artists to share their work online, but they also need to create their own viable businesses. For both musicians and online start-ups, it can be a rocky road.
It became too difficult for music Web site Riffrage.com, which shut down its services early this month after it failed to find a buyer. The music site, which let artists post their music for free, had ambitious plans to become an online label with funding from giants such as Bertelsmann Ventures, Bertelsmann's BMG Entertainment and America Online.
For musicians, the Web may be providing new places to let people hear their work, but few are being discovered online and courted by labels, analysts say.
"It's such a new phenomenon that it's only just beginning to gain traction in terms of actually identifying bands that turn out to be successful," said Phil Leigh, a music industry analyst for Raymond James Financial. "But ultimately there is not a shadow of a doubt that it will be a major source of identifying new talent."
Jason Markey, vice president of A&R for Immortal Records, agreed: "It's definitely something I see in the future as a way of getting demos and finding artists because it seems successful, easier and quicker."
Loudenergy also sells music on the Web, paying artists 100 percent of profits from music sales on its site. For its revenues, the 10-member company draws from sources including advertising sales and sponsorships. With Transmatic, for example, Loudenergy will receive a cut from its Immortal Records releases sold offline.
Transmatic is not alone in using the Web to reach the labels. Early this year, pop singer Kathy Fisher signed a contract with online label Jimmy and Doug's Farmclub.com, becoming one of the first unsigned artists to win a major recording contract through online marketing. Farmclub was founded by Doug Morris, chairman of Universal Music Group, and Jimmy Iovine, co-chairman of Universal's Interscope Geffen A&M banner.