Solitary geeks on the net are challenging entrenched institutions. Now
it's music. We have just experienced the impact on politics and
journalism from another net geek from southern California: matt Drudge
kelly
from the Los Angeles Times
Friday, December 4, 1998
Web Impresario Posing Threat to Music Industry
By CHUCK PHILIPS, Times Staff Writer
A year ago, Michael Robertson was a computer geek who knew nothing
about the music business.
Today, operating out of a tiny, nondescript office in a San Diego
aerospace complex far from the glitzy music capitals of Hollywood and
New York, the 31-year-old former software programmer is feared and
loathed by some of the most powerful forces in the $40-billion record
industry.
Robertson runs a controversial Web site called MP3.com that is
spreading the gospel of the MP3 technology--a new compression formula
that allows computer users to quickly download free CD-quality songs
from the Internet. In many cases at other sites, the technology is
used to make pirate copies of copyrighted works.
As the world's six top record conglomerates struggle to stamp out
digital piracy and retain their lock on global music distribution,
Robertson has emerged as a new kind of rock 'n' roll rebel: a
cyberspace capitalist itching for a showdown with the corporate
entertainment establishment.
His business also illustrates how quickly new technologies and
the Internet can shake the foundations of entrenched businesses.
"The rules of commerce are changing fast, and the record industry
needs to wake up and deal with it," Robertson said. "The Big Six run a
real risk in arrogantly thinking that they can bully the Internet into
doing what is best for the record labels. Fans are tired of paying $15
for a CD to get one good song. Artists are sick of signing their lives
away and ending up in debt.
"That tired, old business model that the companies have exploited
for decades is not going to work in cyberspace," he said. "If the
sleeping giants don't open their eyes pretty soon to the way things
work on the Web, they are going to lose a huge, multibillion-dollar
opportunity to upstarts like me."
Robertson denies ever posting illicit files on his site. But
visitors to the site can still learn the latest tips on how to
circumvent digital music security systems, connect to search engines
that lead to pirated music and download free software that enables
them to play legal or bootleg MP3 music files on their home computers.
The site also champions provocative new products such as Diamond
Multimedia's Rio MP3 player--a portable gadget that can download and
play back music pirated from the Internet.
Visitors to Robertson's site can also sample and purchase new
recordings by more than 400 independent artists signed to his Digital
Automatic Music label, which offers acts about twice the percentage of
royalties they would earn at a major record label but lacks the
marketing dollars or promotional muscle that big companies provide.
New tracks by Dionne Warwick, the Band and several other veteran acts
can also be found posted there. Visitors can click and listen or
download the tracks for free. Robertson says the site currently sells
20 to 50 CDs a day to Web fans.
In less than a year, MP3.com has become one of the leading music
sites on the Web--frequented by an estimated 150,000 visitors daily,
about half of whom Robertson says download a free song during each
visit. And his site is just the tip of the MP3 iceberg.
The technology has spawned a new breed of music fans who gather
daily in chat rooms and fly-by-night pirate sites on the Internet to
swap pilfered hits by artists such as Brandy, Celine Dion and Eric
Clapton. These Web-savvy bandits--mostly college students with access
to high-bandwidth Internet connections--apparently feel no guilt about
ripping off copyrighted recordings to build customized digital
jukeboxes on their personal computers.
Although it would seem that artists with a stake in copyright
protection would resist aligning themselves with the MP3 movement,
several top counterculture acts, including the Beastie Boys, have
begun releasing exclusive tracks in the MP3 format on their own Web
sites. Last week, Less Than Jake, a rock band on Capitol Records, and
Public Enemy, a rap group on Def Jam, released free tracks from their
latest albums on the Internet in the MP3 format against the wishes of
their own record companies.
Even if the music conglomerates can figure out how to curb
electronic theft, the industry must confront a more sweeping prospect:
a generation of music fans weaned on MP3 that cares only about
compiling collections of hit songs with little inclination to purchase
music in the album format. This attitude undermines the economic
foundation of the music business, whose profits are generated by
manufacturing and distributing albums that contain 12 or more songs
and sell them wholesale for about $10.
Robertson, whose site has turned into a pulpit for the MP3
movement, predicts that the established retail, manufacturing and
distribution systems will crumble as electronic transmission of music
through interactive computer services becomes readily accessible to
fans and independent artists.
Robertson's views haven't earned him many friends in the music
business. Critics regard him as a reckless self-promoter exploiting
the MP3 controversy to rustle up a buyer for his Web site.
"The problem with Michael Robertson is that he's got too big of
an investment in keeping up this David-versus-Goliath image to care
much about the bigger picture, particularly when it comes to
protecting artist rights," said Hilary Rosen, chairwoman of the
Recording Industry Assn. of America, the trade group that represents
the nation's six giant record conglomerates. "The whole point is that
a copyright owner should have control over their work."
The way Robertson sees it, the record industry has failed to keep
up with the rapid pace of technological change represented by the
Internet. Robertson says the industry wastes too much time trying to
stop fans from stealing music and not enough energy trying to induce
the 100 million consumers who frequent the Internet to purchase their
products.
Robertson predicts that MP3 will have as big an impact on the
record industry as the Xerox copying machine did on the publishing
business. Because it will be difficult to prevent fans from creating
and transmitting digital copies of a song, music companies will have
to revise their business models, perhaps learning to be content with
selling the initial release of a new recording to a bigger universe of
buyers on the Internet.
"Theft is a cost of doing business on the Internet," Robertson
said. "I know the giant companies have spent more than a year trying
to develop a universal encryption and watermark security system, but I
guarantee you the minute they unveil the thing, some hacker will
figure out a way to get around it. It is impossible to secure digital
music."
Robertson stumbled into the music business by chance. A native of
Redwood City, Calif., he graduated from UC San Diego in 1990 with a
degree in cognitive science and wrote software programs as a
consultant for several years.
In 1996, he invested about $20,000 of his own money to open Z
Co., which developed filez.com--a Web search engine. About a year
later, Robertson hooked up with Greg Flores, a former stockbroker from
Dallas, and, after a review of Internet traffic charts, decided to
launch MP3.com.
"We set the site up at 10 a.m., and before the day was over we
had 10,000 people visit and advertisers calling us cold," Robertson
said. "We looked at each other and said, 'This is amazing. What have
we stumbled onto here?' "
The company now employs nine people and rents a tiny office in an
industrial complex owned by a defense contractor that specializes in
nuclear research and space technology. Robertson said he himself is
stunned at how a company as small as his can make so large an impact
in so short a time in an industry with as much potential as the record
business. He says the site is already turning a profit from the
advertising it carries and the CDs it sells.
"The thing these giant corporations need to realize is that
finding an illegal music file is like playing a game: You look here.
You look there. The search is part of the thrill . . . ," Robertson
said.
"The industry needs to focus on how to make it easy for consumers
to give them money in one quick, instantaneous transaction," he said.
"The company that solves how to get a consumer from hearing a song on
the Net to clicking the mouse and owning it is the company that will
thrive. They will crush us like a bug. But if they don't figure out a
way soon to make it easier for fans to get music legally than
illegally, their days are numbered."
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