For Michael Robertson, the popular ’70’s tune “Stayin’ Alive” seems fitting for his La Jolla-based MP3.com.
Despite pending lawsuits and speculation that the 3-year-old firm won’t last, Robertson said it’s business as usual for the company as it continues to stamp a deep digital print all over the Internet and in the music industry.
“The press has gone crazy saying, ‘MP3.com is not going to make it. But all of our growth rates are awesome,” said Robertson, MP3.com’s co-founder, chairman and CEO. “People might be saying we’re dead, but we’re not.”
Robertson’s rationale for his confidence ,MP3.com’s rising revenues, inefficiencies in the music industry and the growing demand for digital music technology.
MP3.com, which dubs itself as a music service provider, reported $17.5 million in revenues for the first quarter of fiscal 2000, up from $600,000 during the same time in 1999. While MP3.com lost $2 million during the first quarter of 2000, analysts predict profibility for the firm next year.
The company’s stock price, which once traded as high as $105 and as low as $6, rose 30 percent to $16 mid-last week after reports that the record labels and MP3.com were close to a settlement over a copyright infringement suit against MP3.com.
Artist Sells Stock
Last month, pop artist Alanis Morissette announced she planned to sell about $1 million worth of her MP3.com stock. Morissette owns the stock through a deal with MP3.com, which allowed her company Atlas/Third Rail Management, Inc. the right to buy about 685,653 shares of MP3.com stock for 33 cents a share.
Phil Leigh, Internet analyst for Raymond James Financial in St. Petersburg, Fla., said Morissette’s stock sell-off shouldn’t be used as an indicator MP3.com is headed for trouble.
“Morissette is a skilled and artistic performer but I don’t think she’s necessarily an example of a sophisticated Internet stock investor,” Leigh said. “She got the stock at a pretty low price. She can afford to sell the stock for any price and make some money. It just reflects the low cost of the stock.”
Leigh said MP3.com’s success has and will come from reinvention. Take a company like Amazon.com, he said. When Amazon.com came on to the scene, the company was an online book retailer.
“Now they’re selling electronic equipment and CDs,” Leigh said. “If they stayed a book retailer they wouldn’t be successful.”
Then there’s Yahoo!, which grew from a search engine into a Web portal, he said.
Evolution
“What MP3.com is doing is intelligent and that is recognizing it is necessary to mutate as the business itself changes,” Leigh said. “They also have three significant advantages , they have Michael Robertson running the company, who has proven to be an innovative leader; they have $380 million in cash; and they have intense focus.”
Analysts like Leigh say MP3.com will continue to dazzle the Internet and music industries with new technology services.
One such service is MP3.com’s Classical Music Channel, which Robertson compares to HBO. Users pay $10 a month for a classical music library that includes 400 albums. MP3.com partnered with nine record labels for the classical musical channel.
Robertson said MP3.com will add other music channels, such as children’s music and jazz music to its controversial My.MP3.com service.
“What we’re doing is building the network TV model, but for music,” Robertson said.
He said in the movie business, channels start at premium pay-per-view, then movies are shown on channels like HBO, then on mainstream TV.
“If you look at the music business all you see is CD sales,” Robertson said. “The way we make money is to wrap all these services together. We’re building the ABC’s, the NBC’s and the CBS’ of the music industry. Nobody is even close.
“This makes too much economic sense to be ignored.”
Revenues
Currently, 80 percent of MP3.com’s revenues come from online advertising. Other revenues come from services such as subscriptions. Robertson said another revenue stream will be created through syndicated radio services, which MP3.com introduced this month.
“Fiscally we’re a conservative company,” he said. “We don’t spend massive amounts of money on advertising. We think the whole key is to focus on the technology.”
Robertson said MP3.com also has a first-mover advantage.
“If you’re lucky enough to be a first-mover, then you’ll get that revenue,” he said. “We’re very fortunate to have that.”
Malcolm Machlachlan, media and E-commerce analyst for San Francisco-based IT market research and analysis firm International Data Corp., believes MP3.com has a first-mover disadvantage.
“They get all the attention and all the enemies,” he said.
New Services
Machlachlan did say, however, MP3.com has done a good job at predicting the market.
“They keep putting out new services that anticipate where the market is going and how people are going to listen to music,” he said. “They’re not making money off all these, but they’ve been very savvy at anticipating the market.”
Although the Internet has spawned several other music sites, Robertson contends his company will continue to lead the digital music pack.
“I don’t want to be one of 10 kinds of soaps on the shelf,” the 33-year-old said. “I want to be the only soap on the shelf. We’re the leader in the digital music space. That speaks volumes about our strategy.”
MP3.com now has 10 million registered users who can access more than 400,000 songs.
Robertson, who professed to know nothing about the music business when he launched MP3.com, said unlike other digital music firms, MP3.com is an infrastructure company.
In the beginning, most people saw MP3.com as just an online music company that allowed people to download free music, Robertson said. But it’s much more than that, he said.
Do people get it now?
“I think investors get it,” Robertson said. “At the end of the day the numbers will speak for themselves.”
Robertson said people are also beginning to realize the inefficiencies in the music business.
He pointed to MP3.com’s “Payback for Playback” program as an example of creating fairness and efficiency. The software program allows artists to be paid directly based on the number of listens they receive.
A portion of these funds have been set aside to be claimed by artists whose music is only heard through the My.MP3.com service, which allows users to store and playback their personal CD collection in a free online account.
“You’re going from an industry where it takes an artist two years to get a royalty statement to a system that you know on Friday how much money you made on Monday,” Robertson said about the payback program. “It’s about changing the rules and being accountable and honest.”
He added, with a grin, “We’re trying to change the world.”
