The business strategies of sites promoting MP3 are as varied as the range of music available on the format.
With new Web sites seemingly sprouting up every day to sell and promote music on MP3, the major labels are struggling to find an online strategy that will protect the record industry's tangled web of production, promotion, and distribution.
Meanwhile, looking to get a bigger piece of their artistic pie, many bonafide stars like Public Enemy's Chuck D and loads of indie bands have been quick to embrace MP3 tech in the last year.
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While sites like Liquid Audio and a2b music have been successful promoting secured delivery formats that prevent copying, others – http://www.mp3.com"MP3.com, for example – act more like a free clearinghouse for MP3 files and any would-be artist wanting to take a shot on its charts.
Amid this new and rapidly developing Net market, Epitonic and Audio Explosion think they have found beats of their own. The two San Francisco start-ups illustrate the wide range of new business paradigms that are taking shape right under the noses of the major-label music industry.
"We started with the idea to raise the standards of the MP3 world," said Aaron Newton, president and founder of Epitonic.
"I don't get the impression that most MP3 sites – MP3.com, GoodNoise – are trying to reach a specific audience. Our site is more editorial than that. We try to get music of high stature, that's cutting edge and engaging."
Besides being selective about who it promotes, Epitonic will employ a new payment technology developed by Cybergold, a company founded in 1995 that has made a business of paying consumers to check out online ads, services, and products. Cybergold's new micro-payment technology will allow people to charge Cybergold money on a credit card, then spend it as they wish. For example, customers can purchase single songs, with Epitonic charging either 25 cents or 75 cents per song. Newton said the company will also keep about 10 percent of the site devoted to free, promotional music.
Epitonic will initially offer about 60 different bands. The company has deals with indie labels including DeSoto Records, Divot Records, File 13 Records, GSL Records, Johann's Face Records, and Slowdime Records. Newton said Epitonic will split the profits with the artists or labels that sell from its site.
Unlike a2b and other sites that use encryption to protect their files from being passed around the Net, Epitonic will give its audience a straight MP3 file, with no copy protections to prevent them from sharing it. Newton said that Epitonic's primary goal is to promote and provide music to the indie music audience, and they are not overly concerned about piracy.
"It's not in conflict with our goals if that happens [people passing MP3 files to friends]. We think that if someone gets a really good song from a band, that they'll go out and find more of them to buy," he said.
By contrast, Audio Explosion will sell MP3 songs at its Mjuice site in a secured format that prevents unauthorized copying and includes a digital watermark to identify the songs wherever they travel.
Although the company has its own MP3 player, it plans to make its encrypted files available to a wide variety of players. Audio Explosion is already working with Nullsoft and Diamond Multimedia so Mjuice files can play on the Winamp and Rio portable players.
But in order to work on these devices, the manufacturers must support Audio Explosion's proprietary security format. Until then, once a song is downloaded onto a PC, it cannot be passed or played on any other device.
"It's really important to support all of these devices, because they will validate the market," said Duncan Kennedy, Audio Explosion's vice president of business development. "But we need to control how we pass the file over to the device.... It's a tricky balance between the needs of the fan and the needs of the label.
"We want to make it easy to get your music anywhere you want it. If the security system is preventing that, why would you want to use it?"
Kennedy said the company is focused on getting its software into the infrastructure of the Net and portable players. "We want to be the Inktomi of this space," he said, referring to the company that provides the backend caching technology to many of the Net's search engines, including Wired Digital's HotBot.
In the true spirit of Net start-ups, both companies are trying some innovative business strategies to promote their sites and artists' music. Epitonic plans to offer concert tickets, T-shirts, and other merchandise, while Mjuice has coupon cards to give away with Rio players, and live concerts. Consumers can redeem the coupons for free music at the Mjuice site.
Until any of these new online music business strategies is proven, MP3 sites will be trying to balance the peculiar interests of their artists, audience, and investors. Looming large in the background, of course, are the major labels, which are expected to start promoting their own secure format sometime this year.
"We work with the artists and labels both, and the indies are very excited about coming on board," said Kennedy. "The majors are concerned about what they are going to do in this space, but they have more resources to work with."
