A different approach to the music industry

You've been criticized by some because you don't have a music business background. How would you respond to your critics?
They're right--I don't have a music background, and, in fact, until very recently, we had no music background in our company. But that's actually one of the things that makes us unique--we're approaching this business of music from a very different point. For example, some of the gentlemen that run record labels have told me, "Michael, you don't understand music because music is about owning intellectual property, where the record label actually owns the artist's music forever after they sign a contract." And so our approach has been just dramatically different. We haven't had sort of the legacy or the mindset of a traditional music industry expert. So at one level, that might be seen as a negative, but we actually think it's something that makes us truly unique when you look at the companies that are in the digital music space.

Who do you see as MP3.com's biggest competitors?
The online music space is not overly populated at the moment, but you have to look from an engineering perspective, Liquid Audio has to be considered in the mix. They've been at this game for four years and they've got great engineering. The Ultimate Band List and the Internet Underground Music Archive, those are two of the grandfathers in this space, with some name-recognition. And GoodNoise is out there, too. I think those are probably the big ones.

But when you're talking about a multibillion-dollar opportunity, I think there's room for a lot of players. So we're actually thankful that we have Liquid Audio and GoodNoise and UBL and IUMA and others in the space, because it's a very big space and there's a lot of work and a lot of evangelizing that needs to be done.

How would you characterize MP3.com's relationship with the major record labels?
I would say it's a cordial relationship. At MP3.com we have some ideas about the future and how we believe it will evolve. I hope we illustrate and demonstrate from our news and our actions that we're very keen on moving digital music forward. And I think the major record labels recognize that. A few weeks ago we were at a meeting in New York with several of the majors, as well as the RIAA [Recording Industry Association of America], sort of sharing some of our viewpoints and some of our observations and seeing if there are ways we can work together.

So I think that surely we have critics, but I think even our harshest critics have some respect for us as playing a role in the future evolution of digital music.

Having met with the major labels and the RIAA recently, how would you say their approach to you has changed over the last six months or so?
I would say they've warmed to digital music as a concept--they've really recognized that it's going to evolve much faster than they had predicted. And I think that they are eager for information. I think that's such a real credit to the RIAA and to the record labels--they're eager for information and I think MP3.com does have an enormous amount of information and expertise to bring to the mix. So I would say they're interested in an information exchange.

What's your view of the Secure Digital Music Initiative? Do you think the parameters and time frame are realistic?
I don't think the time frame is realistic at all. Listen, it's a committee--with any committee you come out with your timelines and then you have to double or triple those to have a shot at making them, simply because committees have a lot of varied interests. So I think the timeline is untenable.

As for the initiative, I find it rather interesting that in the SDMI press conferences they talked about an open standards sort of approach. The thing I find very interesting is that when you're talking about open standards, there's only one when it comes to music, and that's MP3. There are no other open standards.

So I think it's a bit of a challenge for them to reconcile the fact that an open standard lets everybody compete on generally equal footing, no matter how big or small. And I'm not sure that the major record labels want that. I think they would be more interested in a system where they have some sort of innate advantage.

They want to have something decided by this holiday season. Even if they were to attain that--which I don't think they will--but even if they did, it's not going to have any products that revolve around it for another six to nine months at the very minimum. So now you're talking well into 2000. And I think that digital music is moving much too quickly to wait around for the majors to decide on some sort of global initiative.

MP3 in particular is growing at a truly astounding rate. So I think it's going to be a challenge for them to have any real, credible competition for MP3.

How do you envision MP3 and your site being affected by the Web's evolution, such as broadband access and the recent rush for offline media brands to buy online properties?
You know, I think one of the things that we see looking forward is that the music industry is going to dramatically change. It's going to move away from the $16.99 CD that everyone knows and is very comfortable with today. I think that's one of the things that the Web is definitely going to do, and I think that in between here and there is a lot of learning.

What I see MP3.com doing is being out there on the forefront of learning and picking up that expertise about how you compel people to buy music online. What other sorts of revenue can artists and record labels generate online? How do you create a superstar online? How is it different or the same than the traditional radio promotional world? So those are all lessons that I think we're learning right now ahead of everyone else.

When it comes to the offline brands, I know we're not alone in thinking that this whole move to the Internet is really inevitable and it's inevitable for music more than so many other things because music can be entirely digitized and transported and purchased and downloaded and things like that. So we really see the migration to the Internet as being inevitable. Looking at it from that perspective, the offline brand and the offline corporations will want to have a piece of this online world in the future as well, so I think you're going to see more partnerships, just like you've been seeing. I think MTV and Sony Music and some of the other well-known music brands will move online in a big way. I'm predicting it will happen in the future--the near future.

Is MP3.com for sale? And if so, what kind of buyer would you want?
Well, I think every business in the world is for sale. It's just a matter of, is the price right? I think it would have to be a partner who is really committed to continuing to push the envelope and to making [the music industry] a better place for artists and for consumers. I think the real power of digital music is that it is making music better for consumers. If they want to do a ten-hour play list or copy their music to the Rio, which has no moving parts, and go snowboarding or if they want to make their own CDs--all those things are just great for the consumer. And so I think it's really important to remember that the consumer and the artist are moving forward. So hopefully, if someone were to acquire us, they would keep that as a real focus of their business.