Startup Spotlight: Magex.com

The future is digital in the e-commerce world.

Digital content is now worth $300 billion, and with recent developments on the WAP and wireless front at the moment, this figure seems set to soar.

On the down side, digital piracy cost the music industry and estimated $11 billion world wide in 1999. This makes many publishers and content providers reluctant to offer their best content over the Web.

Magex.com is a digital commerce service, and was founded in July 1998 in order to create a secure environment for the trading of digital content on the Internet. It is their role to provide a world wide infrastructure for some of the world's greatest media businesses. The company was rather unconventionally set up by NatWest, and so has been able to build on the bank's experience at processing credit card transactions.

techTrader interviewed Peter Beverley, Chief Executive of Magex.com, about the future that he visualises for his company. "As a start-up story it's one out of the ordinary -- it is a bigger play than a dotcom business" (Peter Beverley).

You have quite an innovative business model -- could you describe it to me?

Magex is not a content business, it is an infrastructure business to serve dotcom businesses. The layer that we are providing will help dotcom businesses to supply software applications that will ensure copyright protection and secure payment for digital content.

Our business plan consists of two main targets. For our clients who are selling digital music, our role is to provide the application that will help them to securely distribute their equipment and music tracks. We use Intertrust technologies, whose approach to digital rights management has more of the answers in a very complex world.

In addition to copyright protection, we also enforce the various rules that can constitute business building. In the distribution of digital content you can package in a number of different options, such as to play it, to buy it, to have it for two weeks etc., which is a powerful way of changing dotcom businesses. Free or credit card payments prevent online businesses from using the flexibility of technology -- now that we have an effective payment mechanism, it is better to deal with loaning for example. Now that we have a secure and single place where the customer can put their credit card details, the buyer is given peace of mind, and frictionless commerce results.

Why do you feel that you can succeed at this? What do you foresee the future to be for digital commerce?

The power of the Intertrust model is that it is not a single vertical business solution. We have to find people from all industries. The market is out there: Forrester predicts that in three years time the downloadable content market will be worth 1.1 billion dollars, which I feel is much too low. In November of last year, J.P Morgan estimated digital content that is sellable over the Internet to be worth 275 billion dollars -- I think that somewhere between the two is probably the case. People are now beginning to realise the potential of digital content in WAP mobile phones for example. Suddenly all of the services that people want will be through mobiles or PalmV's, and this will grow.

We have big ambitions for the States. We already have an office in New York and have signed up a partner in the Far East. We are a global service for e-commerce businesses -- and it is interesting that the leading company is British.

What's your opinion on the current state of the investment community in the UK in relation to tech companies?

Maybe we have chosen our partners well, but they have a clear view on the value of digital commerce going forward. There are two main challenges that face investors -- they have to be brave enough to identify from a large number of business plans, those that have real monetary value; and they also have to recognise where the commerce is. Jack Welsh said that the one with the biggest cash flow wins. To have cash flow, you have to have commerce. You have to cut through the froth, i.e. that if it has dotcom, it must be good.

The second challenge is not trying to look at everything, and getting behind the business model in order to recognise its appeal.

Under what conditions and when would you plan a floatation?

We have huge plans for growth. Sources of money that we can get at are internal and IPO. This is about building a long term and enduring infrastructure. Two years ago, everyone was saying that the stock market was the wrong place for small businesses. Online companies are small businesses, but dealing with investors is not a trivial thing. I want to grow our organisation and market.

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