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Satan's little helper drinks Diet Coke

Former MP3 impresario Michael Robertson tells CNET News.com's Michael Kanellos why "free" need not be a dirty word.

Michael Robertson--founder of MP3.com, Linspire and SIPphone, which specializes in Internet telephony--has been embroiled in a lot of controversies.

The music format MP3, which MP3.com helped popularize, gave "the devil a name" for the record labels, musician Thomas Dolby Robertson once said. Others have said that MP3.com engaged in "shoddy" business practices. (Disclosure: My employer, CNET Networks, bought the name and other elements of MP3.com earlier this year from earlier acquirer Vivendi Universal.)

Desktop Linux maker Linspire has also met with controversy. The company earlier this year pulled its initial public offering, but only after revealing in Securities and Exchange Commission documents that it had culled $2 million in revenue and $4 million in losses in 2003. And a deal to put Linspire software on Dell desktop computers turned out to be far less revolutionary than the company's press release indicated.

Next, Robertson may try to popularize downloading movies and video--an idea that makes studio execs reach for their lawyers.

"I'm a big believer in the MPEG-4 format," Robertson said. "The only medium out there that has yet to be exploited is video."

The fireworks aside, Robertson does have a track record for ferreting out, and profiting from, emerging trends

With that kind of background, you'd expect Robertson to be a bit antagonistic, like Howard Dean with a Don King hairdo. Instead, he came across at an early morning meeting recently like a regional sales manager trying to keep his accounts happy. He even drinks Diet Coke in the morning--these days, it's the beverage of choice for many (such as Cisco CEO John Chambers) who spend several hours a day in meetings. He's not interested in trouble, he said. It just happens.

"When you're going to change an industry, you are going to make some enemies," is how Robertson summed up his career. Call it corporate combat casual.

The fireworks aside, Robertson does have a track record for ferreting out, and profiting from, emerging trends. Vivendi Universal bought MP3.com for $372 million. Sony meanwhile, has decided to adopt MP3, cementing the format's primacy. Linux and voice over Internet Protocol (VoIP) are climbing in popularity.

All of this lends credibility to Robertson's view of the business. In our meeting, he shared some of his thoughts.

The customer is always right, and usually surly
Consumer search patterns led to the creation of MP3.com. Back in 1996, Robertson was at Filez.com, a search engine company. One day, the term "MP3" began to appear in the list of top search terms, but no one at Filez.com knew what it meant. Robertson looked it up, downloaded a Dave Brubeck tune and decided to get into music.

"If people are searching for it, there must be an opportunity in it," he recalls thinking.

The Web address for MP3.com was owned at the time by an individual whose initials were M and P. "I bought it for 1,000 bucks," Robertson said. "We got 10,000 hits the first day."

Then the complaints began. The site was initially a news site about MP3s. It didn't offer songs for download. "Customers said, 'You suck because you're a music site and you don't have music,'" he recalled. Later, the company linked to band sites with downloads--usually obscure acts like Swedish jazz bands. Customers said the selection sucked. When they got enough artists, customers said the download times stunk. After downloads began running smoothly, artists and recording companies complained, Robertson said.

Don't be afraid of lawsuits
Once the company had created an avenue for people to download music, publishers and others filed suits against the business. MP3.com went 0 for 37 in the courts, by Robertson's estimation. Still, the company won financially in its sale to Vivendi.

Similarly, before it became Linspire, Lindows drew the wrath of Microsoft over the similarities between its product and Windows. After a few months of hearings and motions in a trademark dispute, Microsoft paid the company $20 million to surrender the name "Lindows."

Lawsuits, however, can be personally draining. Evidence that came up during one of MP3.com's lawsuits showed that recording companies had hired private detectives to follow Robertson around, he asserted.

Desktop Linux could take a while
Substituting Linux for Windows on desktops could shave about $100 of the cost of a PC. While the savings are attractive, it will take time to catch on because of training needs, habit and fears about compatibility.

"You will see a much steeper growth curve on VoIP than Linux," Robertson said. "With Linux, you need to get OEMs (original equipment manufacturers), retailers and customers on board."

Still, a movement toward desktop Linux has begun. About 350 local manufacturers and dealers now carry Linspire's software. Northgate, a tier-two manufacturer in Orange County, has begun to load the software on its PCs, as has Elektra, a large electronics retailer in Mexico.

Robertson expects Microsoft to aggressively campaign against it. "Microsoft is going to do everything in their power to stop this," he said. "Every day they delay desktop Linux, it is $30 million in profit."

Free may work
Robertson correctly asserts that the recording companies that have attacked music downloads aren't exactly saintly. "Artists were getting screwed before MP3.com," he said.

We've moved into an era where the public--or at least a good portion of it--seems to disregard, and even resent, paying for products based on intellectual property. VoIP is attractive simply because it drops the price of phone calls. The MP3 format became popular because it didn't come with digital rights management safeguards. Ditto for Linux.

Some say this will hurt inventors and artists. On the other hand, radio and broadcast TV shows are free, and those companies make money, so free downloads may just be the harbinger of a new, and ultimately profitable, era in entertainment.

"When you make things more accessible, people buy more," Robertson said. "If you put a taco stand in someone's house, chances are they will eat more tacos."