Internet Music by the Book

Emerging from the long shadow cast by headline grabbers such as Napster and MP3.com, Launch Media Inc. says its goal is to replace radio and MTV. But does the company have what it takes to pull it off and still play by the copyright rules?

The Internet music company is the brainchild of Dave Goldberg and his childhood friend Bob Roback. Back in 1994, before the explosion of the Internet, the two came up with a plan to offer music, videos, reviews and interviews on CD-ROMs, video game consoles, interactive television and commercial online services such as America Online and Prodigy. Today the company's Web site--Launch.com--is the primary platform.

In the 6-1/2 years since its inception, the company has been slowly but surely building a music library of more 120,000 songs, 6,000 music videos--viewing of videos accounts for 30 percent of Web site activity--and a user base of 4.3 million. And its been doing it the old-fashioned way, by obtaining licenses for songs and videos from music publishers and record labels. Launch also produces its own versions of songs and videos by recording artists performances in its own studios--much like many radio stations do--and sending crews on location to record performances at concerts and other venues.

All of that content has not come cheaply though. The company has spent "a couple of million dollars" so far for the original content and approximately $100,000 on licenses in the last fiscal quarter, paid for primarily with revenue generated by advertising and e-commerce transactions. And while Launch still has a way to go before it breaks even, analysts expect increased advertising revenue to carry the company to profitability by the end of next year.

"We think it's a great business model," said Goldberg. "Record labels by themselves and the artists by themselves can't aggregate enough music fans. We recognized early on that there is a strong need for a third party to help consumers figure out how to access the music they already know they want and help them learn about new music. That's our value proposition."

The key to the company's strategy is a customized radio service called LaunchCast. Using patent-pending software the company created internally, LaunchCast users rate the songs, albums and artists they listen to so that, over time, the service learns what to play for you. Said Goldberg, "There is even an 'X' button that you can push if you are listening to a song that you really don't like and you will never hear that song again. That's a real advantage over traditional radio. It gets smarter. And once you've rated a lot of things, we can start giving you valuable information back, like when your favorite artists are coming to town, or we can tell you when we will be having a chat with them or when a new album is coming out." And as the site builds its community, it is also locking in user loyalty.

Eventually, when the company is able to stream its customized radio service to people wirelessly--which it will be able to do in Japan and Europe next year--LaunchCast will really be able to give radio a run for its money.