with the mp3 news today, i find it important to remind myself why i have so much money tied up in liquid. i think the majority of investors don't understand liquid's role, and think of mp3 and liquid as direct competitors, when they're not(maybe not on the si board, but they're pretty confused on some other boards)
here's an important article that i don't think has been posted to this board:
April 01, 2000
Changing Channels
Liquid audio focuses on building a global distribution network
By Karen J. Bannan
The mp3 file format has made free music a de facto part of the renegade
Internet culture. Now, Liquid Audio's co-founder and chief executive officer,
Gerry Kearby, wants to take the free music paradigm mainstream. "We have
a problem with the MP3 lifestyle, but I think we can solve it by letting other
people pay for music," Kearby says. In other words: advertisers.
Liquid Audio is in discussions with record labels and advertisers to migrate
music from an end-user purchase model to a broadcast model, much like the
television and radio industries. Instead of paying for music, consumers could
watch an advertisement on the Liquid Audio Player and download files for
free. The negotiations are part of Liquid Audio's continuing evolution from
software provider to technology provider and go-between.
"It can be hard for people to understand our business model, because we're
really schizo about knowing if we're a brand or not. We're building a global
distribution network, and it's not clear if Liquid Audio as a brand will be
visible to consumers in the long run," he says. "We'll probably be like Dolby,
branded within other brands' technology."
Originally, the firm, which was formed in January 1996, was betting on its
end-user software technology, the Liquid Audio Player, and its distribution
technology to make the company a major player in end-user distribution. But
like competing player manufacturers Real Networks and Microsoft, Liquid
Audio was forced to change its focus when MP3 files came along, says
Malcolm Maclachlan, an analyst with International Data Corp.
Liquid Audio responded by striking deals with Microsoft and Real Networks
to make its technology interoperable with both of their players.
"In terms of our business model, we're not focused on the software as much
as we're focused on providing the services," says Rick Fleischman, Liquid
Audio's senior director of product marketing.
At least one analyst praises that team-up approach, saying it "creates an open
environment that's necessary if digital music is to continue its push into
mainstream culture. No one wants eight different players on their desktop,"
says Carrie A. Johnson, an associate analyst with Forrester Research's retail
group.
Today, Liquid Audio acts as an intermediary between the record companies
and both online and brick-and-mortar retailers. The company still sells its
Liquifier Pro, a digital mastering tool, and Liquid Server, which helps retailers
keep track of transactions, but its real focus over the past few months has
been promoting and expanding its hosting service. Liquid Audio encodes
music files, stores them, and keeps track of e-commerce transactions. Unlike
MP3 files, Liquid Audio's technology has a digital watermark to help thwart
music piracy. Today the company has deals with more than a thousand record
labels, including Atlantic, BMG, Capitol, EMI, RCA, Universal, Virgin, and
Warner Bros. On the e-commerce side, it's signed up more than 500 retailers.
Liquid Audio gets about 20 percent of each track's wholesale price, a
potential bonanza in a digital download market expected to reach $150 million
by 2003, according to Jupiter Communications.
In the traditional retail market, Liquid Audio announced in March the rollout of
music kiosks for retail placement. The kiosks, initially placed in clothing stores
in England and cybercafŠs in Korea, let consumers burn custom CDs from
digital files. Liquid Audio expects the kiosks to hit the States during the
second quarter of this year. But not everyone is convinced that retailers will
benefit from the kiosks.
"Kiosks will be a means to get more people into the interactive idea of
creating custom albums, but there's still an intrinsic conflict with retail," says
Maclachlan. "Retailers are used to getting paid by the record companies for
product placement."
But Kearby disagrees. "Very little music is sold on the Web. We've always
been of the opinion that the retailer is always going to be the retailer."
Date: 20000401
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