The digital music industry is fickle at best. Two years ago, most of the world had never heard of MP3, save the minority population of computer audio enthusiasts. But this is not at all unusual. For example, consider that some six years ago, the majority of America couldn't pronounce the word "latte," and now, people fall over themselves to buy three-dollar frappaccinos. Likewise, in recent months, investors couldn't help but throw money at upstart digital music web sites. While the times were hot, hundreds of digital music sites filled the Web, the terrain was rich, and people prospered. Some boasted mastery over specific music genres, and others claimed to be the ultimate music resource - they offered downloads, interviews, trivia, and more. But something is now amiss, and layoff rates are climbing like never before.
The once-exposed promise of fortune and fame has been engulfed by the shifting tides. It seems that the heyday of digital music is rapidly coming to an end, and the future of digital music web sites hangs in a delicate balance. On the one hand, you have companies like MP3.com, which are caught up in a horrible courtroom drama and praying to their codec gods that everything will be OK. And on the other, you have the less-established sites that have viable (and lawful) business plans, but only reluctant investors to court.
Easily one of the largest and most popular digital music web sites, MP3.com has proven itself again and again with its sheer breadth of (albeit questionable) content and its infamous Beam-It software. For those not familiar with the service, MP3.com allows users to amass a virtual music locker that they could then access from anywhere in the world. A great concept, but one that the Recording Industry of America (RIAA) came to dislike. After being sued by all five major record labels, MP3.com managed to settle with four; however, Universal has not budged on its compensation demands.
The judge in the case ruled that MP3.com owes $25,000 for every song that Universal claims MP3.com pirated with its Beam-It service. With 4,700 songs on the submission list, damages could easily hit $118 million. Despite this, MP3.com CEO Michael Robertson is still fighting for a settlement. Now the question remains: If MP3.com pays up (and if the charges amount to more than anticipated), will it fold like so many others? An MP3.com VP seems to think so. About a week ago, Joe Fleischer, the liaison between MP3.com and the RIAA, decided to leave the company.
During the interview after the judges ruling, Robertson stated, "We thought the industry would be excited about this because it encourages people to buy more CDs," he said. "I was really disappointed when the industry reacted the way it did." Indeed, MP3.com is walking the fine line between prosperity and martyrdom. Will MP3.com be the next company to slash its employment ranks? We'll have to wait and see.
And what if there is no recourse? What if the only answer is to downsize dramatically so that companies can either cut costs or sell themselves for a discount price? As apocalyptic as this might sound, it's happening all around us. Let's examine some of the most well-known delinquents.
Scour.com
The most recent offender was Scour. On its web site, Scour claims to be "your tool to search, download, and share multimedia files from the Web and our rapidly growing community of users." It seems innocuous enough, right? But behind those cheery words, Scour is a file-sharing web site that's currently being sued by a number of entertainment companies. Granted, Scour isn't the epitome of a digital music web site, but everyone knows that a good portion of Scour users request MP3s. Now, some speculate that they are hurting for cash support, and others believe they are readying for a serious lawsuit payout, but the bottom line is that the employees got the finger. Earlier this September, Scour.com canned 52 of 70 staff members to slim its yearly costs.
Riffage.com
Riffage is a digital music download site that offers free MP3s as well as information about bands and artists. Further, Riffage supports new bands by giving them their own page, chat room, and bulletin boards. And of recent note, Riffage purchased the Great American Music Hall in San Francisco with the intent of broadcasting live concerts on its web site. However, not all is sweet in the garden of candies and codecs.
In July, Riffage.com laid off a number of sales and marketing personnel to trim dead leaves off its employment tree. Pruning, no doubt, for a better tomorrow.
RadioSpy.com
RadioSpy has always been appreciated as one of the best online radio search engines. It offers a great application and genre search format so that you can easily find your favorite online stations. As well, RadioSpy facilitates the creation and broadcast of your own personal radio station. It essentially makes you the DJ and makes you use its service to promote your streams. Unfortunately, though, it too has felt the squeeze: Last August, RadioSpy was forced to focus less on editorial content and more on its streaming audio. Sadly, it floated its editorial team over the falls in a barrel.
Pop.com
Perhaps best described as the company that never was, Pop.com looked as though it had great potential to become the ubersite that bridged the Hollywood/online divide. At the helm were Spielberg, Geffen, Katzenberg (the infamous Dreamworks SKG trio), and other Hollywood elites. But all this firepower was to no avail, as the doomed site shot off its own foot a few days ago - hopes of establishing a new digital entertainment standard were dashed, employees were canned, the company was dissolved, and the site was never fully realized. I am saddened, though, that the company went down without launching; it would have been nice to sample the moguls' 60-million-dollar soup.
I, personally, was a bit shocked to read that so many employees were being laid off. Although, in looking at recent news, some nonmusic web sites are also experiencing severe cutbacks. For example, Altavista.com has just fired 225 employees (25 percent of its staff) with hopes to "streamline its operations" and turn a profit in 2001. Is this becoming the norm for the inflated Internet economy, or are digital music web sites simply more volatile? One should consider that most digital music sites are wading deeper and deeper into uncharted legal waters. The tides once swelled, though they have now withdrawn, and they have left some unlucky companies high and dry.
Perhaps the lesson to be learned here is companies with proven business models will usually outperform those that tend to violate copyright laws. But perhaps this is a gross overgeneralization of what is really beleaguering the digital music industry. The waters will clear significantly if MP3.com can avoid a huge settlement and, likewise, when the Napster debate is over and done with. Until then, speculation is our only mode of definition. But at any rate, employees are still being axed, and no one seems to lose any sleep over it. Until next week, keep your ear to the floor, your nose out of trouble, and listen for the lowdown (unless I receive a pink slip before then).