MP3.com operates the eponymous music news, download, and community site, as well as the Digital Automatic Music (DAM) record label. Michael Robertson, MP3.com's chief executive, in March announced the San Diego, California-based company's plans to go public.
The company is looking to raise up to $115 million, according to its filing. The underwriters are Credit Suisse First Boston, Hambrecht & Quist, BancBoston Robertson Stephens, and Charles Schwab.
The filing comes at a tumultuous time in the online music business. The MP3 (MPEG 1, Audio Layer 3) format has been enjoying tremendous grassroots support, making it the de facto standard for music downloads from the Internet. But its lack of copyright protections has mainstream record labels up in arms. In response to MP3's popularity, a number of major music and technology companies now are developing technologies to deliver music to consumers online while protecting copyrights.
IBM, Microsoft, Sony, and Universal Music Group are among a host of companies working on secure music download technology, along with firms such as Liquid Audio and AT&T Labs' a2b Music. All are hoping their technology will become the standard for Net music downloads.
MP3.com got a boost in January with an $11 million investment from Sequoia Capital and Idealab.
"We believe that large numbers of artists and consumers are drawn to MP3.com because they have historically been under-served by the traditional music industry," MP3.com stated in its filing. "We will continue to introduce new products and services designed to meet their entertainment, e-commerce, communications, and information needs."
Still, according to the filing, the company faces a number of challenges, including "a new and unproven business model." The firm also says in the filing, "We are competing in a new market."
Critics have said that the company may run into trouble in the future because its brand is being built on the name "MP3.com," and MP3 as a format eventually is expected to be replaced by more advanced, secure technology. In addition, many in the music industry have leveled barbs at Robertson because he lacks a music business background.
MP3.com acknowledges the dangers of being associated with MP3 in its filing: "We currently rely on MP3 technology for both brand identity and as a delivery method for the digital distribution of music?We do not own or control MP3 technology. The onset of competing industry standards for the electronic delivery of music could significantly affect the way we operate our business as well as the public's perception of MP3.com as a company."
Also, it says: "Although MP3.com is not tied exclusively to the use of MP3 technology or to any other specific standard for the electronic delivery of music, failure to achieve?brand recognition apart from the MP3 format could significantly harm our business."
But the company points to its success so far as an indicator of things to come. "We use the Internet and data compression technologies to enable a growing number of artists to broadly distribute and promote their music and to enable consumers to conveniently access this expanding music catalog," the filing states. "Our Web site contains over 56,000 songs from over 11,000 artists, representing one of the largest collections of digital music available on the Internet."
MP3.com will trade on the Nasdaq under the symbol "MPPP."
For the three months ended March 31, MP3.com posted a net loss of $1.4 million on revenue of $665,785, the filing said.
Robertson owns 25.6 million shares, or a 55 percent stake in the privately held company, the filing discloses. Among others, Gateway chief executive Ted Waitt, a director, owns 1.5 million shares, or a 3.24 percent stake, it said.