My.MP3.com -- it's a bombshell!
"We said this is going to send an explosion through the industry," recalled Michael Robertson, co-founder and CEO of the digital music startup.
It has. But it is Robertson's company that is showing powder burns at the moment.
For most of its meteoric two-year existence, MP3.com (mppp) has been known for helping little-known artists store and share computerized copies of their music.
By contrast, the radical new service announced seven weeks ago offers owners of popular CDs the equivalent of a digital storage locker to listen to their tunes from any device connected to the Web.
My.MP3.com, as the new offering is called, pushed the company's world far beyond fringe acts to big-name stars.
The service allows anyone with an account to log on from anywhere and listen to their music without having to lug around a bunch of CDs.
While other Web storage sites require people to take the time-consuming step of uploading their CDs, My.MP3.com can zap them along instantly because it already has a database with computerized copies of those recordings.
That trove has jumped to 80,000 CDs from 45,000 in January, Robertson said. And every day a team of workers near a loading dock here transfer -- or "rip," in computer parlance -- the contents of 1,500 disks to the company's servers.
The operation is dubbed "Da Bomb Factory."
Record companies, and some recording artists, call that reproduction process a flagrant violation of their copyrights.
It filed a countersuit in California state court in San Diego, accusing the Recording Industry Association of America of trying to interfere with its business and drive down its stock, a charge the association calls "ridiculous."
MP3.com's shares, which began trading last year and hit a peak of $105, have slid more than 40 percent since the suit was filed. The recent drop wiped out roughly $1 billion in market value for the company, and slashed the value of Robertson's stake to $425 million from $800 million.
A preppy-looking 32-year-old with a relentlessly upbeat style, Robertson has long used his company's Web site as a soapbox to rail against the recording establishment. But he acknowledges that the maverick company is facing its biggest test.
"There is a lot of pressure on our company, and on me personally," he said.
The copyright-infringement suit seeks damages from MP3.com based on each track on each CD, theoretically generating liabilities easily exceeding MP3.com's market value.
MP3.com also eventually hopes to charge subscription fees for My.MP3.com and sell data about consumers' music usage -- important revenue sources for a company that has been racking up big losses.
Both sides have larger principles at stake in the fight. Amid a wave of music piracy on the Net, the record labels are trying to maintain some semblance of control as they prepare to begin selling downloadable versions of their record catalogs later this year.
The battle over My.MP3.com, Robertson argued, will settle whether consumers have a legal right to play music they have purchased on whatever device they choose.
The recording industry says it would be a terrible precedent if MP3.com or others can compile such databases without paying royalties to the artists.
"If businesses are going to be making money off use of somebody else's property, then they should be licensing use of that property," said Hilary Rosen, president of the Recording Industry Association of America.
My.MP3.com is a "disservice to all of the legitimate Internet music businesses" that are getting licenses and paying for use of music, she said.
SAN DIEGO -- Among the sculpted, industrial-chic cubicles of MP3.com Inc., its once-secret music service that was unveiled Jan. 12 had a telling code name: Da Bomb.
"We said this is going to send an explosion through the industry," recalled Michael Robertson, co-founder and CEO of the digital music startup.
It has. But it is Robertson's company that is showing powder burns at the moment.
For most of its meteoric two-year existence, MP3.com (mppp) has been known for helping little-known artists store and share computerized copies of their music.
By contrast, the radical new service announced seven weeks ago offers owners of popular CDs the equivalent of a digital storage locker to listen to their tunes from any device connected to the Web.
My.MP3.com, as the new offering is called, pushed the company's world far beyond fringe acts to big-name stars.
The service allows anyone with an account to log on from anywhere and listen to their music without having to lug around a bunch of CDs.
While other Web storage sites require people to take the time-consuming step of uploading their CDs, My.MP3.com can zap them along instantly because it already has a database with computerized copies of those recordings.
That trove has jumped to 80,000 CDs from 45,000 in January, Robertson said. And every day a team of workers near a loading dock here transfer -- or "rip," in computer parlance -- the contents of 1,500 disks to the company's servers.
The operation is dubbed "Da Bomb Factory."
Record companies, and some recording artists, call that reproduction process a flagrant violation of their copyrights.
It filed a countersuit in California state court in San Diego, accusing the Recording Industry Association of America of trying to interfere with its business and drive down its stock, a charge the association calls "ridiculous."
MP3.com's shares, which began trading last year and hit a peak of $105, have slid more than 40 percent since the suit was filed. The recent drop wiped out roughly $1 billion in market value for the company, and slashed the value of Robertson's stake to $425 million from $800 million.
A preppy-looking 32-year-old with a relentlessly upbeat style, Robertson has long used his company's Web site as a soapbox to rail against the recording establishment. But he acknowledges that the maverick company is facing its biggest test.
"There is a lot of pressure on our company, and on me personally," he said.
The copyright-infringement suit seeks damages from MP3.com based on each track on each CD, theoretically generating liabilities easily exceeding MP3.com's market value.
MP3.com also eventually hopes to charge subscription fees for My.MP3.com and sell data about consumers' music usage -- important revenue sources for a company that has been racking up big losses.
Both sides have larger principles at stake in the fight. Amid a wave of music piracy on the Net, the record labels are trying to maintain some semblance of control as they prepare to begin selling downloadable versions of their record catalogs later this year.
The battle over My.MP3.com, Robertson argued, will settle whether consumers have a legal right to play music they have purchased on whatever device they choose.
The recording industry says it would be a terrible precedent if MP3.com or others can compile such databases without paying royalties to the artists.
"If businesses are going to be making money off use of somebody else's property, then they should be licensing use of that property," said Hilary Rosen, president of the Recording Industry Association of America.
My.MP3.com is a "disservice to all of the legitimate Internet music businesses" that are getting licenses and paying for use of music, she said.
Robertson, a specialist in computer-search technologies, admitted that he knew nothing about music when he paid $1,000 for the company's Web address based on heavy searches for MP3, the most popular music-storage format.
Casting around to exploit that name, the company incorporated in 1997 and began a kind of self-service music-distribution service. Artists fill out simple forms and upload their recordings and information about them.
Instead of mailing tapes to family and booking agents, bands can send a link to their music. MP3.com will also create CDs, stamping out small quantities of disks as they are ordered and splitting proceeds with the bands 50-50.
MP3.com's critics see too much mediocre music and not enough promotion to highlight promising bands. "It's doomed to fail," predicted David Benjamin, a music attorney and former CBS Records executive who is now vice chairman of Web-casting service ClickRadio.
Boondogs, a band from Little Rock, Ark., says it put two songs on the site last summer but received less than 100 downloads in six months.
It wound up shifting to Garageband.com, a San Francisco company that gave Boondogs a $250,000 record contract based on a system that asks users to rate bands. Jason Weinheimer, one of the singers, calls MP3.com "a mess."
If it wasn't great for artists, Robertson retorted, why would 50,000 have them put music on the site, up from 45,000 in December? Some earn a few thousand dollars a month by sharing in revenue based on the traffic to their pages and CD sales, he said. The company has 2.3 million unique visitors in January, according to Media Metrix Inc.
"We are not trying to be a record label," Robertson said. "We offer consumers a well-stocked lake and a fishing pole, and say 'good luck.'"
But the system doesn't prevent people from borrowing friends' CDs to stock their accounts. People could also pass around passwords, although MP3.com can block multiple people from using an account simultaneously.
The possibility of piracy worries Ron Stone, who manages more than a dozen artists including Tracy Chapman, Bonnie Raitt and Ziggy Marley. He said MP3.com's decision to assemble the music database without asking artists was "incredibly offensive."
Added Aaron Newton, founder of a San Francisco music site called Epitonic.com, "It is ridiculous to just put up the service and then call the record labels."
Some other people use the analogy of a copy shop. While consumers have a so-called "fair use" right to duplicate a book on the shop's machine, the shop could get in trouble for making the copy for the customer. Other music services that require consumers to upload their own CDs haven't attracted record label opposition.
Michael Rhodes, a lawyer for MP3.com, said the analogy is faulty. Consumers can merely listen to music that streams from the Web site. They don't receive a digital copy that they can easily pass around, he said.
Consulting with the record labels before launching the service, Rhodes added, would only have made it easier for them to block it in court.
Robertson said he was willing to discuss licensing the music after the service was announced. Record industry lawyers visited the company for a demonstration and he later flew to Washington to meet with Rosen.
During a 90-minute meeting, the RIAA proposed that MP3.com take the service off the Web for two weeks while the company talked with individual record labels about licensing, according to a person familiar with the proposal.
Talks with the record companies never materialized, and so they sued.
The blowup is somewhat ironic, Robertson said, because one of My.MP3.com's biggest selling points is the ability to listen instantly to any CD consumers purchase online, from participating retailers.
Ubrandit.com, a San Diego company that operates a music retailer called JungleJeff.com, said consumers are buying hundreds of CDs a day because of the My.MP3.com instant-listening feature.
"We've seen sales rise more than 100 percent (since the service began)," said Jeff Phillips, Ubrandit's CEO.
Robertson, a specialist in computer-search technologies, admitted that he knew nothing about music when he paid $1,000 for the company's Web address based on heavy searches for MP3, the most popular music-storage format.
Casting around to exploit that name, the company incorporated in 1997 and began a kind of self-service music-distribution service. Artists fill out simple forms and upload their recordings and information about them.
Instead of mailing tapes to family and booking agents, bands can send a link to their music. MP3.com will also create CDs, stamping out small quantities of disks as they are ordered and splitting proceeds with the bands 50-50.
MP3.com's critics see too much mediocre music and not enough promotion to highlight promising bands. "It's doomed to fail," predicted David Benjamin, a music attorney and former CBS Records executive who is now vice chairman of Web-casting service ClickRadio.
Boondogs, a band from Little Rock, Ark., says it put two songs on the site last summer but received less than 100 downloads in six months.
It wound up shifting to Garageband.com, a San Francisco company that gave Boondogs a $250,000 record contract based on a system that asks users to rate bands. Jason Weinheimer, one of the singers, calls MP3.com "a mess."
If it wasn't great for artists, Robertson retorted, why would 50,000 have them put music on the site, up from 45,000 in December? Some earn a few thousand dollars a month by sharing in revenue based on the traffic to their pages and CD sales, he said. The company has 2.3 million unique visitors in January, according to Media Metrix Inc.
"We are not trying to be a record label," Robertson said. "We offer consumers a well-stocked lake and a fishing pole, and say 'good luck.'"
But the system doesn't prevent people from borrowing friends' CDs to stock their accounts. People could also pass around passwords, although MP3.com can block multiple people from using an account simultaneously.
The possibility of piracy worries Ron Stone, who manages more than a dozen artists including Tracy Chapman, Bonnie Raitt and Ziggy Marley. He said MP3.com's decision to assemble the music database without asking artists was "incredibly offensive."
Added Aaron Newton, founder of a San Francisco music site called Epitonic.com, "It is ridiculous to just put up the service and then call the record labels."
Some other people use the analogy of a copy shop. While consumers have a so-called "fair use" right to duplicate a book on the shop's machine, the shop could get in trouble for making the copy for the customer. Other music services that require consumers to upload their own CDs haven't attracted record label opposition.
Michael Rhodes, a lawyer for MP3.com, said the analogy is faulty. Consumers can merely listen to music that streams from the Web site. They don't receive a digital copy that they can easily pass around, he said.
Consulting with the record labels before launching the service, Rhodes added, would only have made it easier for them to block it in court.
Robertson said he was willing to discuss licensing the music after the service was announced. Record industry lawyers visited the company for a demonstration and he later flew to Washington to meet with Rosen.
During a 90-minute meeting, the RIAA proposed that MP3.com take the service off the Web for two weeks while the company talked with individual record labels about licensing, according to a person familiar with the proposal.
Talks with the record companies never materialized, and so they sued.
The blowup is somewhat ironic, Robertson said, because one of My.MP3.com's biggest selling points is the ability to listen instantly to any CD consumers purchase online, from participating retailers.
Ubrandit.com, a San Diego company that operates a music retailer called JungleJeff.com, said consumers are buying hundreds of CDs a day because of the My.MP3.com instant-listening feature.
"We've seen sales rise more than 100 percent (since the service began)," said Jeff Phillips, Ubrandit's CEO.