In an overnight transformation worthy of Cinderella, MP3 has undergone a makeover. What last year was an underground music format packed with indie cred but empty of industry backing has suddenly turned into one of the biggest money-drawing ventures of 1999. Just ask Michael Robertson of MP3.com, the default MP3 portal and music source, who has just signed up yet another princely investor.
On Wednesday, MP3.com reported a healthy $45 million investment from Cox Interactive Media — an investment that will give Cox a 10-percent stake in the company. That values MP3.com — still a relatively revenue-free company — at $450 million. And that’s before the IPO, which will take place in upcoming weeks. MP3.com received a hefty $11 million from Sequoia Capital and Idealab in January.
This news comes right on the heels of AOL’s purchase last week of Nullsoft, creators of the popular WinAmp MP3 player and Shoutcast streaming technology. In April, RealNetworks bought Xing Technologies, creators of MP3 compression technologies, and Thomson Multimedia took a 20 percent stake in MP3 software company MusicMatch.
With this kind of money at stake, it’s not surprising that the announcements about new MP3-related startups are flying fast and furious. And unlike the original founders of the MP3 movement — companies started by young idealists who still proclaim that it’s all about free and open music, not money — the new startups are populated by tech industry veterans following the scent of venture capital. To wit: Riffage.com, an MP3.com knockoff launched last week by Ken Wirt, former VP of Marketing at Diamond Multimedia (creators of the Rio). This clash between the movement’s utopian roots and lucrative future will likely be witnessed next week at the MP3 Summit in San Diego, where keynotes by Net libertarian John Perry Barlow and panels entitled “Music as a virus: Biological warfare” will be attended by, no doubt, a large contingent from Sand Hill Road.
And how, in turn, do these endorsements from the Net’s wallet-carriers bode for the Recording Industry Association of America’s SDMI project? While the MP3 startups announce their partnerships and investments, this coalition of recording and technology companies is still frantically working on a “secure” alternative to the easily-pirated MP3. Unfortunately for the SDMI, its incessant press releases about emerging specifications and compliant hardware products “by Christmas” are still vaporware compared to the real money being thrown at MP3. And as Net history shows, the technology with the early lead among users and the biggest buzz wins — for now.