MP3.com looks to be next
MTV
By Jim Hu
Staff Writer, CNET News.com
March 8, 1999, 1:20 p.m. PT
NEW YORK--Will MP3.com be the next MTV?
It depends on who you ask. Michael Robertson, chief
executive of MP3.com, seems to think so--but some
analysts and other observers say the jury is still out.
Robertson told an audience of Web developers and aspiring
musicians at the New York Music and Internet Expo that
MP3.com will revolutionize the recording industry the way
MTV did in the 1980s--and the floodgates are just beginning
to open.
"MP3.com is the next MTV, only it's going to grow way
bigger than MTV," Robertson said during his keynote
address at the expo. "And it won't be too long before we
have millions of music lovers come to sites like MP3.com
every day."
Robertson added, "If you rewind the clock back to the early
days of MTV, how many people thought
MTV was going to make stars like A
Flock of Seagulls? Nobody. The record
industry pooh-poohed it and said, 'Ah,
you're crazy.'"
But Forrester Research senior analyst Mark Hardie pointed
out: "We are seeing a lot of rhetoric [about MP3 vs. the
music business], but the rhetoric is confusing because no
one's comparing apples to apples. [Web music companies]
are comparing apples to oranges and saying the oranges are
a better fruit.
"Ask any garage band right now, 'Would you trade a contract
with Sony for 50 percent of all downloads with MP3.com?'
They'd pick Sony," he added, noting that Internet companies
still can't match the recording industry's ability to market,
promote, and distribute an artist's work to a widespread
mainstream audience by putting a lot of funds up front. This
still remains its key advantage over companies like
MP3.com and GoodNoise, an online-only record company
that offers MP3 files of its artists for a fee.
Jupiter Communications analyst Mark Mooradian said the
Internet will be a great tool for unknown bands to make their
imprint. But the Internet cannot make a superstar--that is
still the domain of record companies.
"Can MP3 help you as a distribution tool? Yes. Is it a great
marketing device? Yes," Mooradian said. "[But] the format in
itself is not going to make a star. The quality has to be
there. There's a plethora of bad MP3 bands."
Robertson has emerged as one of the main torchbearers of
the MP3 format and the Net's growing grassroots music
business after MP3.com secured an $11 million investment
by venture firm Sequoia Capital and Idealab in January.
The MP3 (MPEG 1, Audio Layer 3) format essentially
compresses audio into compact files that can be stored on a
computer hard drive and played back. MP3's popularity with
early adopters--especially college students, who traditionally
are big music consumers--makes it the favorite so far among
download formats, but it faces competition from more secure
and technically sophisticated technologies such as AT&T
Labs' a2b Music and Liquid Audio. Still, many consider MP3
a de facto standard for audio compression and delivery
technology.
However, music industry lobbying group the Recording
Industry Association of America (RIAA) has taken legal
steps to curb the widespread dissemination of pirated music
files, which often are distributed in the MP3 format. In
October 1998, the RIAA filed a lawsuit against Diamond
Multimedia, maker of the Rio portable MP3 playback device.
RIAA attorneys said the device promotes the illegal
distribution of copyrighted songs and could prevent copyright
holders from collecting fees that are due them.
Ironically, Robertson's step into the limelight was helped
significantly by the RIAA lawsuit against Diamond, Hardie
said. Because of the lawsuit, MP3 gained widespread
exposure and caused the recording industry to move toward
developing a standard for secure delivery of music online.
"He galvanized the industry, but in tandem with the Diamond
lawsuit," Hardie said of Robertson.
Hardie added that the lawsuit was also a major boost
for MP3.com.
"Previous to the Diamond lawsuit, they had trickle
traffic," Hardie noted.
But for Robertson, the RIAA's actions are a mere
roadblock to gutting the legal, economic, and
commercial structure of the recording establishment.
"When you look at record labels, they were dropping
artists that were selling 200,000 CDs or less,"
Robertson told a crowd of aspiring musicians mixed
with Web developers at the expo. "That same artist
can move to the Internet, sell 25,000 CDs in a year,
make $5 a CD, and make 125 grand.
"The record label model today only works with the
multiplatinum and the platinum sellers," he added.
"And I think that's really the beauty of the Internet, is
that it has that potential to work" for artists who sell
fewer CDs.
While Hardie agreed that record labels are more
geared toward creating superstars instead of
supporting smaller acts, he warned that much of the
hype behind the Internet's benefits for artists should
be examined more closely.
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