Kevin Doyle Andrei Dorenbaum (left) and Jake Wyatt want to make sweet music for all by eliminating restrictions on consumer access to online content. Area entrepreneurs hear music, see dollars 8/28/00 By Steve Robblee Potomac region music lovers are not waiting to see how legal controversies over file-sharing services such as Napster and Gnutella will play out. Some of them are creating their own businesses using the Internet to improve music distribution. Freeman Networks Inc., a Washington, D.C., company, was created by two former employees of Baltimore-based AmericasDoctor.com who share a hobby of downloading MP3 files. The chief executive at Altavoz Inc. in Rockville, Md., held several entertainment industry jobs but took a “sabbatical” to learn about Internet data transmission technology so he could apply it to the music business. ETantrum Inc.’s founders wanted a way to keep track of all the music they didn’t have time to find themselves. So they developed technology to predict what they would like, and find it for them. File-sharing services such as Napster have been controversial because they allow users to download songs without paying royalties to the musicians or record labels that own the copyrights. Freeman, Altavoz and eTantrum are seeking ways to disseminate popular music without violating copyright laws. The property rights of Napster “is not a debate we want to engage in,” said Freeman Networks co-founder Andrei Dorenbaum. “What we want to do is eliminate restrictions to consumers’ access to the content.” Bruce Fries, a Silver Spring, Md.-based author of “The MP3 and Internet Audio Handbook” that was published in March, said big record companies are leaving the door open for smaller players to innovate in using the Internet as a music distribution source. “They are sort of arrogant and slow to adopt to change,” Fries said. “They’re worried if they start releasing catalogs in downloadable format that is going to increase piracy.” Freeman Networks founders Dorenbaum and Jake Wyatt are developing a portable MP3 player that would also play advertising between songs. The founders envision signing business partners who would distribute the players as giveaways or charge a nominal amount. The founders believe they could recoup the costs of the players and more through the advertising. Users would download the ads into their MP3 player at the same time they are downloading the music. Freeman Networks would also track the downloaded music to help advertisers better target their messages. The result would be similar to self-programmable radio — an advertising-supported music service, but one that did not depend on the whims of radio executives to decide a song play-list. The business model is similar to that of companies that gave away computers and Internet service for advertising. That service hasn’t been widely popular, but Dorenbaum said it’s much cheaper to give away an MP3 player. “In this case, the cost is well below $100 in terms of manufacturing cost,” he said. That means fewer commercials will be necessary — Wyatt estimates about 90 seconds’ worth for every 10 minutes of music. Both Wyatt and Dorenbaum are fans of downloadable digital music, and each has more than 1 gigabyte of music stored on his computer hard drive. They recognize that the advertising-supported MP3 player won’t be a hit with everyone, but it could lure many college students and others who can’t afford to buy an MP3 player. Altavoz and eTantrum both consider record labels as potential business partners. Altavoz is targeting relationships with independent labels to give them the same distribution clout as the industry giants. The company hosted its first Mars Day for “alien” — or non-mainstream bands — on Aug. 16, 1999, which was broadcast over the Internet. Chief Executive Nelson Jacobsen said he had the idea to broadcast concerts over the Internet about three years earlier. He took a job for a time at Allied Telecom Group LLC of Washington, D.C., to better understand data transmission. He expects the company to make available soon 4,500 songs from 310 record labels that visitors to the Altavoz Web site can listen to. The songs will be free for promotional purposes; however, unlike Napster, the music will not be available to download. But the marketing should help sell music, and demographic information about listeners should help the recording companies better target their audience, Jacobsen said. “We’re going to help record labels predict where these bands should tour,” he said. Altavoz made available the music of Soundgarden, Screaming Trees and Squirrel Nut Zippers before each of those groups achieved a national following, Jacobsen said. He said the company has signed 400 stores so far for another service that will allow music stores to download music and burn CDs on request for customers. That will cut out the need to ship inventory and will make alternative music more available, particularly to the smaller, independent record stores that Altavoz has focused on serving. Fries, the MP3 handbook author, cautioned that major labels could take a wait-and-see approach — allowing innovators to establish methods to distribute music over the Internet and then replicate the model. Companies that focus on creating proprietary technology have better odds of success, he said. Fries mentioned eTantrum of Herndon, Va., as one company with a patent pending technology that could become popular. ETantrum has developed a way to predict preferences for entertainment media by monitoring individuals’ past behavior and using software that — in the case of music files — analyzes and categorizes music with similar properties. “You might not realize they sound similar, but our software does,” said Chief Executive Officer Jonathon Perrelli. Perrelli, a former executive at UUNet, started developing eTantrum’s technology with some techie friends because he didn’t have time to sort through all the reggae music available on the Internet to find what he liked best. “Information overload caused us to say there’s just too much chaos,” Perrelli said. The company has raised $2.5 million so far in seed capital, including $1 million from the founders. Perrelli said he is on the hunt for $10 million more. The company was incorporated in July 1999 and now has 32 employees. ETantrum’s customers will be music providers who will use the company’s technology to better target potential customers. Fries said Napster’s popularity grew because people wanted free music and because people wanted a way to sample music before they purchased it. Perrelli, who was in the latter camp, believes digital music over the Internet can become a great marketing tool for record labels. “Personally I feel Napster has helped people,” Perrelli said. “I have purchased a lot of CDs because of Napster.”