Upstarts: MP3

MP3 technology is changing the way we listen to music. And as usual, where there's change, there's start-up opportunity. A look at several new companies that have begun to capitalize on the digital music revolution.

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A Little Net Music

The way we listen to music is about to change. Again. But as usual, where there's change, there's start-up opportunity.

Before 1997, MP3 was a little-known technology that computer geeks used to download compressed music files free off the Internet. But Internet time moves fast -- so fast that by 1998 large pockets of the general public and the mainstream media were talking about MP3, not to mention taking advantage of it.

At first the music moguls were afraid of MP3. Protecting copyrights was hard enough without easily accessible Web files enabling any old joes to access -- and copy -- their favorite music. But when the Recording Industry Association of America (RIAA) started filing lawsuits against the Web sites and technology companies responsible for providing that capability, it was clear the industry had started to take MP3 seriously. Music on the Web was going to be big.

Today on the Internet, only the word sex generates more searches than the term MP3 does. Musically inclined Web surfers can purchase their favorite CDs and listen to the radio online, download their favorite songs, and even custom design CDs. And wouldn't you know it, start-ups have begun springing up in a variety of niches to capitalize on the digital-music revolution.

Hey, kids -- what's that song?
During that rare block of commercial- and chat-free music on your favorite radio station, you hear that song. You know, that song, the one you hum all day during work. The one you just have to own. If only the DJ would stop the music long enough to tell you the name of that song. But alas, the music continues without interruption, and you're left with a void in your CD library, and the record company with a void in its sales.

That happened to Robert Goldman just often enough for him to identify a gap in the retail music market. Goldman, who has a degree in psychology, studied impulse buying -- specifically, what drives consumers to purchase CDs. His findings suggest that the radio generates 95% of the impulse for buying music. "You listen to the radio, and if you like what you hear, you're going to buy it," Goldman says. That is, of course, if you know what you're listening to. And that's where GetMedia Inc., Goldman's start-up, based in San Jose, Calif., comes in.

Noting the emergence of Internet music sites and the popularity of E-commerce, Goldman saw the Web as the perfect environment to track radio-station play lists in. In 1997 he gathered a development team to create technology that would help radio listeners follow what their favorite stations were playing in real time. Further, he embedded a commerce option in it so listeners could purchase music directly from their trusted radio stations, bringing the point of purchase directly to the point of impulse.

GetMedia launched its Web service in May 1999 and went live on a handful of stations, including Mix 93.3, the CBS/Infinity Broadcasting station in Kansas City, Mo., which started using the service in November. Now when Mix 93.3 FM broadcasts, say, "Learn to Fly," a popular single from the band Foo Fighters, listeners can tune their Internet browsers to www.Mix93.com, click on the "Now Playing" link, and find a list of recently played songs, with their album titles and the time Mix 93.3 played them. Play lists also feature "info" icons next to each listing, where, for instance, Foo Fighters fans can get in-depth information about the band's latest album, There Is Nothing Left to Lose. Site visitors can even sample songs from the CD.

Of course, the real key to this application is the "Buy" icon. After just a few clicks and a credit-card number, GetMedia will ship There Is Nothing Left to Lose to a Mix 93.3 listener, and the station will pick up some extra cash. "This lets the radio station make money on music they already play for free," Goldman says. GetMedia takes a percentage of each sale -- a revenue model similar to that of major credit-card companies. And unlike online music retailers, GetMedia taps into established radio-station audiences and doesn't need to spend millions on driving traffic to its own site.

So far, 35 radio stations throughout the country have gone live with the service. Some 2,200 stations are on GetMedia's waiting list, but Goldman doesn't have the resources to set them up as fast as he'd like. Last September, GetMedia got some help to the tune of $10 million in venture capital from IDG Ventures, Menlo Ventures, and the Rosewood Stone Group. Goldman plans to use that cash to beef up his 60-person staff and outfit those stations awaiting the service.

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