Bridging Two Worlds to Make Downloadable Music Profitable

September 13, 1999

Bridging Two Worlds to Make Downloadable Music Profitable

By JOHN MARKOFF

AN FRANCISCO -- An Internet startup company plans to introduce a new Web site on Monday that is designed to bridge the competing worlds of online digital music and the traditional recording industry.
Garageband.com will focus on the thousands of small and struggling musicians and groups in the United States. Many have found it impossible to sign with a major recording studio but have also discovered that they cannot make a profit by giving their music away over the Internet.

Peter DaSilva for The New York Times
Amanda Lathroum, Tom Zito (standing, right) and Jerry Harrison (seated, right) listen to a rock band in a California studio. They founded Garageband.com to link the emerging on-line digital music industry with traditonal recording companies.
Founded by two Silicon Valley entrepreneurs, Tom Zito and Amanda Lathroum, with Jerry Harrison, a music producer who was a member of the rock group Talking Heads, the San Francisco-based company says it hopes to entice undiscovered musical groups with the promise of recording contracts and distribution agreements.
At the same time, it plans the use digital audience polling as a way to improve the company's odds for releasing commercially successful CDs.
Garageband.com is taking a new approach to the Internet MP3 phenomenon, which has frightened the nation's $13.5 billion recording industry with the specter of mass distribution of pirated music over the Internet.
MP3 is an Internet standard for the digital distribution of music, and in the last two years it has spawned an explosion of Web sites, including MP3.com and Shoutcast.com, offering Web surfers access to music via their personal computers. But these sites do not offer pirated copies of commercial recordings.
Instead, they aggregate the works of musicians who produce their own recordings and offer their music for free to anyone who cares to download the MP3 files. And while some musicians use the sites to promote their CDs, the vast majority do not have contracts with record labels.
For all of the interest and controversy the MP3 standard has created, it has yet to generate a viable business model for sustaining small and innovative musical groups, said Zito, Garageband.com's chairman and chief executive.
"The MP3 advocates say record companies are toast," Zito said. "We believe record companies know a tremendous amount about marketing and promotion and getting music into the hands of consumers."
Moreover, he argued, the value of all music downloaded over the Internet last year was less than $1 million, suggesting that a viable Internet music economy is a long way off.
What is more, the exact shape of such an economy is still being determined as the recording industry and consumer electronics manufacturers struggle to agree on a format that will protect copyrighted music without alienating consumers.
"The Internet offers recording artists the ability to reach fans directly in a way that has never been possible," said Roger McNamee, a managing director of Integral Capital Partners in Menlo Park, Calif. "Garageband has an interesting spin if they can figure out a way to scale it without becoming just like the record companies."
The idea for the new company was formed last year when Zito visited Harrison's home and saw a large pile of demo recordings sitting on his floor. They had been sent by aspiring music groups hoping that he would help them produce a CD.
"He asked me, 'Is there anything good there?' Harrison recalled. "I responded, 'How would I ever know? I will never have time to listen to even a fraction of them."'
Zito approached Ms. Lathroum, who was then an executive and market researcher at the Netscape Communications Corp., and asked if it would be possible to use the Internet to create an effective audience rating system for music.
The resulting Web service will permit musicians to upload recordings that will be rated by music enthusiasts on the Web.

By next year, Garageband.com plans to begin awarding a recording contract for the most popular music each month.
"I would say that this is an Internet version of Dick Clark's "American Bandstand," but I'm pretty sure few people on the Net are old enough to remember American Bandstand," Zito said.

Garageband.com is hoping to attract listeners who are willing to sample unknown recording artists by offering prizes like backstage passes to concerts and visits to recording studios.
But the emphasis will be on the people who make the music.
"We're creating an online community by musicians for musicians," said Zito. "Obviously, we believe the fans will come where the musicians are, because that's where they'll hear the best music."
Currently, only about 600 of the 30,000 CDs published each year are profitable, Zito said. The promise of Garageband, he said is that by employing sound statistical techniques he hopes to get a reliable indicator of which recordings will be popular -- and profitable.

Related Sites
These sites are not part of The New York Times on the Web, and The Times has no control over their content or availability.

Garageband.com
MP3.com
Shoutcast.com

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