View from the eye of the Net music storm
By Beth Lipton
Staff Writer, CNET NEWS.COM
Michael Robertson looks for trends by scanning the bottom of
lists of most-searched-for terms.
That's where he found MP3, and its burgeoning popularity led him to launch
MP3.com 15 months ago. As can happen on the Net, during just that short period,
the site has become the hub for news, information, and authorized downloads
of music via MP3 (MPEG 1, Audio Layer 3), a format that is promising--or
threatening, to some--to help bring about a shift in the music business' balance of power.
Although more secure and technologically sophisticated formats by heavy
hitters such as AT&T Labs' a2b Music
and veteran Liquid Audio are out
there, they haven't caught on to the extent that MP3 has. The latter even
showed signs of jumping on the MP3 bandwagon last month, announcing plans to incorporate Diamond Multimedia's Diamond Media
Device Manager into its Liquid Music Player during the first half of 1999.
In a sense, MP3--which compresses audio files so they can be easily
downloaded onto a PC hard drive--is a throwback to the "old days" of the
Net (circa 1995), when information flowed freely and sharing was commonplace.
But "sharing" music files freely eventually became recognized for what it
was--piracy--and the music industry, led by its powerful trade group, the
Recording Industry Association of America, began to crack down hard on the
Many say MP3 got a bad rap--as the format of choice
among pirates, it
became the mortal enemy of the music business. But the format itself is
just a means to an end, and when it comes down to it, MP3's popularity has
given it a momentum not yet enjoyed by other technologies. Anyone uncertain
about the passion fans feel for MP3 and downloading music in general should
spend an hour or two--or five--perusing the buzzing message boards on MP3.com.
Foes of the format lately have begun changing their tune. The Harry Fox
Agency, the licensing arm of the National Music Publishers' Association,
recently issued the first Digital Phonorecord Delivery License for
delivering songs via MP3 to GoodNoise, an online record company, which also
entered a licensing agreement
with record label Rykodisc this
month. At the same time, attempts to foil or otherwise slow the format's
growth have continued.
Still, as the saying goes, all publicity is good, so as the debate
surrounding MP3 has heated up, it's no surprise that MP3.com is enjoying a
great deal of attention from all sides. Now the little renegade site that
could--flush with an $11 million
investment from high-profile venture firm Sequoia Capital and idealab--is
staffing up, having hired away Robin Richards, former managing director
of Tickets.com, to be MP3.com's president and chief operating officer; Doug
Reece from industry bible Billboard magazine to be the site's senior
editor; and copyright attorney Brad Biddle from Cooley Godward to be its
vice president of business development and general counsel.
Robertson discussed the state of Net music, the plight of MP3, and plans
for MP3.com in a recent interview with CNET News.com.
CNET News.com: When you first launched MP3.com, what did you think the
future held for it? What were your expectations?
Robertson: One of the things that I enjoy doing is looking at charts about what sites are getting the most traffic. Everyone always looks at the top of the chart--I always look at the bottom because the bottom is where the opportunity is. You're not going to compete with Yahoo and Netscape at the top--it's the bottom where the opportunity is.
And so we started spotting sites that had "MP3" in them, and I said at
the time, "Well, I don't know what MP3 is, but we should have a site about
it because it looks like it's a trend." And something that I learned from
Media Minds, which was a digital camera software company I founded that failed, was to listen for the customers and trends.
So we registered MP3.com and, at the time, we weren't really sure what we
were going to do with it, but once I downloaded a song, I said, "Wow, this is
impressive technology!" So at first we simply said, "Well, we'll create a new site. We'll aggregate news items related to MP3."
But unbeknownst to us there really wasn't much news on MP3 when we launched
about 15 months ago, because it simply wasn't on anyone's radar screen. So we kind of were forced to actually write news stories ourselves. And that was the genesis for our news section, which still has a reasonably large following today and has, over time, taken on a real role as sort of an industry watchdog.
We started off with news, but fairly early on it became apparent that
the content area was really where the opportunity was.
And although 15
months ago the majority of [MP3] activity was the unauthorized, illegal songs, we thought that there would be a large number of artists and record labels
that would really want to aggressively use MP3 to market and sell their
music. And so that's what we did. We created a content area where artists
and record labels could sign up to gain marketing and exposure and build
their fan bases.
And from there we moved on to CD manufacturing and distribution. So what we
learned was that a lot of artists wanted to sell CDs, but couldn't get over the
start-up of having to order 500 CDs and getting them mastered and stuff like that. So we decided, "Hey, what if we offered a service for artists where any artist in the world could manufacture and distribute CDs for us?" And that is our DAM record label. And what's unique about that is that there are no start-up fees to artists, there are no monthly fees to the artist, it's a nonexclusive arrangement and we don't take ownership of their master recordings--unlike a traditional record label. But we give them half of the money of the sale price of the CD right off the top for
every CD they sell. So it's a dramatically different program than an artist
would encounter if they signed with a traditional record label.
What are your plans for the $11 million investment you got last month
from Sequoia Capital and Idealab?
Well, first of all, we have enormous engineering challenges ahead of us.
The last couple of days, as a matter of fact, we were signing up about a hundred bands a day, which is just an incredible growth. And then we've never really even advertised, either. So just the fact that we're adding almost two gigabytes of songs every day is a very big engineering challenge. Clearly, a lot of the money will be
spent on the engineering infrastructure that we need to support that.
But the other piece is really helping artists in other areas, not just in the online world but helping artists in offline distribution as well. I mean, why shouldn't the
most popular online artists get retail distribution or publishing deals or
concert dates and things like that? We're going to be working hard on
expanding the services that we can offer an artist that signs up with us.
What do you think the investment that you got says about MP3 as a whole?
I think what it illustrates is that the movement has an incredible momentum and real worldwide support, and that it is generating the kind of numbers now that are basically undeniable. I mean, when you look at our Web site, we have about 200,000 people coming to our Web site every day looking for music. That's a really big population, and those 200,000 are really avid music hounds. They really seek out music and buy lots of CDs and things like that.
An example would be the Diamond Multimedia Rio portable player. We had a
chance to meet with one of the larger retailers for that product, and we
asked them, "Hey, do you know what people are buying when they come into
your store and they buy a Rio, what other things are in their shopping
cart?" They did a report and what they found out was that the average
person buying a Rio bought five CDs at the same time. That illustrates the point we're trying to make, which is that these people that are into digital music today--they're music nuts, they are the people that buy a lot of music and have a real passion for music. And I think that's one of the things about MP3.com--we've coalesced these people from all over the world that have a real affection for music.
NEXT: A different approach to the music industry