Back in May of 1998, the announcement sounded like a winner. Ed Bennett, former CEO of Prodigy, was launching a big site called MY-CD, which would offer users the ability to create their own CDs, selling for $16.95 from a huge catalog of 165,000 songs the startup had licensed. And the company had an air of inevitability about it, being backed by the Japanese powerhouse Bandai Co., Ltd., creators of the "Mighty Morphin Power Rangers."
But only a few months later, the whole pile of cards came crashing down. Bandai pulled its funding, 30 employees were dismissed, and chaos ensued. Denise Shapiro, MY-CD's chief marketing officer, told ZDNet News on Sept. 2 of last year that Bandai had decided to pull the plug, stymied by a lack of good product from the major labels.
A little over a year later, MY-CD is as much yesterday's news as the Power Rangers. Go to MY-CD now, and all you see is a forlorn-looking site that seems to be barely alive. So how to explain the recent announcement that a company called musicmaker.com is guaranteeing AOL some $20 million in a three-year distribution deal, to jointly offer, you guessed it, custom CDs and digital downloads to AOL's 18 million members?
What changed in a year? Plenty. It may be too late for MY-CD, but the rise of musicmaker.com, which didn't attract all that much attention at first, is a sign that the record industry is getting serious about custom CDs and digital downloads -- key components of the musicmaker.com business. That won't insure that musicmaker's high-level coterie of former biz "hit men" won't lose their shirts, but it is an indication that things have changed fast, in a fast-changing industry.
Musicmaker.com was founded by a trio of execs with serious experience in the record and software business, including Robert Bernardi, co-founder of PictureTel and TranSwitch, Raju Puthukarai, former President of RCA/BMG Music and Video Club and President of Warner Music Media and Irwin H. Steinberg, former chairman and CEO of PolyGram Records, USA. The management team includes William Crowley, former vice president for Warner Music Enterprises, and Larry Lieberman, who formerly ran the Comedy Central Web site and was in charge of licensing at MTV Networks. The third-largest music conglomerate, the British-based EMI, now owns 40 percent of musicmaker. If these guys think this is a good way to invest $20 million, you have to at least pay attention.
"MY-CD couldn't get access to the repertoire, and that's what led to their demise," notes musicmaker's Larry Lieberman. "This is a repertoire-driven business. Bandai saw the frustration in acquiring music, and they chose to fold rather than fight. As time has passed, we've been able to do business on terms that the record companies could accept. The worlds [of Internet and record companies] are coming closer. The music industry is eager to explore this area." Lieberman says that musicmaker is rapidly digitizing the EMI library, including the hot Latin and international repertoire, to eventually offer about half a million songs online, by far the largest group of established artists available for digital download or custom CD available anywhere.
But it's not only a matter of how many songs for compiling purposes, but the prominence of the artists involved. MY-CD had a bunch of smaller labels under contract, including jazz indie 32 Records, blues specialist Alligator Records, American Gramophone, Bar None, Clarity Records, Drive Entertainment, Lyra Productions, Nine Bar Records, Qbadisc, TKO-Magnum, and Warlock Records. None of these have regular chart records, unless we're talking about the jazz or blues charts. Users who tried to put CDs together with MY-CD were looking at a sea of unfamiliar names.
EMI is the third-largest label group, including such US giants as Capitol Records, and has Garth Brooks, Pink Floyd, The Rolling Stones and The Beatles on their roster. Musicmaker is also distributing music from Zomba Records, which has the Backstreet Boys and Britney Spears, and announced this week that it will also distribute digital downloads from David Bowie and Pete Townsend of the Who. The music is offered for CD compilation or as a $1 digital download.
You might note that all of this sounds vaguely familiar. A couple of years ago, N2K's Larry Rosen was boasting at industry confabs that he would take over the music industry by offering low-priced digital downloads by, yes, David Bowie and others. It was Rosen who was the impetus behind Bowie's move into digital distribution. DavidBowie.com was housed with other N2K properties, all of which were folded into CDNow, which itself was swallowed up by Columbia House. I recall Rosen crowing that over 300,000 people had downloaded a Bowie single in one day. That might have sounded impressive at the time, but N2K wasn't charging for that single, and all Rosen ended up demonstrating was that he was ahead of his time; admirable, but not something you can take to the bank.
By musicmaker's own reckoning, things are going a little slower than expected. Back in October 1997, when Musicmaker launched as a spinoff from something called The Music Connection, the claim was, in the company's own press release, that it would be offering "over 1 million tracks within the next two years." Obviously, things haven't quite worked out that way, in that musicmaker now has less than one-fifth that many available online now, two years later. But promises aside, the site is now claiming one million visitors per month, with about 80 percent of those being unique. They're not releasing data on the number of custom CDs and downloads from these visitors, although Lieberman does note, "One of our goals is to increase the ratio of visitors to orders."
I think musicmaker has a shot. $20 million is a lot to invest in a music deal with AOL. CDNow vets can tell you that their expensive portal deals are what drove the company into the insolvency that made them capitulate to Time Warner. But things are changing rapidly in this game of musical chairs, and it might very well be that the company in place when the music stops just might be in the strongest position. Let me know what you think about music on the Net in the talkback below.
