Ben Kuo: What is MusicIP, and where do you fit in the world of music?
Matthew Dunn: Fundamentally, MusicIP provides technology that connects people back to digital music in a musical way. What I mean by that is we've managed to achieve the very difficult leap of understanding what a piece of music sounds like--what it's musical characteristics are. So, we can take a consumer, who knows what kind of thing they want to listen to, and make that kind of music available to them--whether that's from a personal collection, which we do from a desktop app, or from a catalog. Those technologies were built over a very, very long time--five years of hard nosed R&D, and run across the technology scale from embedded devices--MP3 players--on up to desktops, to multi-million dollar catalog stores.
Ben Kuo: Who is using your technology right now?
Matthew Dunn: Our client list is coming along nicely. AOL has been a customer and partner of ours for over a year. We've signed a deal with Beta Records, an up and coming digital music distributor--they are using our enterprise stuff. We've signed a number of customers for our music identification/acoustic fingerprint service. Siren Systems is one of those customers, as is Applian, who makes Replay music. We have a very well, well known brand, putting out an MP3 player with our technology, but it will be some number of months before I can say who that is.
Ben Kuo: What's the business model here, do you license that technology?
Matthew Dunn: Yes, fundamentally, we license technologies and services to customers. Our challenge and our opportunity is that our customer base is anyone who listens to, makes, or sells music, which is kind of a broad list. In the end, what actually drives revenue for the company is music-related enterprises that license these technologies.
Ben Kuo: Who is most interested in this technology--is it any segment of the industry, or is it still across the board?
Matthew Dunn: We are talking, perhaps too much, across the board. There are some segments that are waking up, as they see music is swinging wholeheartedly towards digital formats and digital transport. Surprisingly, the sector that has been fairly hot for us are the upstart businesses. Maybe they're the "labels of the future"--maybe that's not a fair moniker to hang on them--but we've talked to quite a number of these relatively small, 10- 50- 100-thousand catalog digital distributors and digital-only music labels, and a lot of them have quite a lot of appetite for innovation built into their business.
Ben Kuo: How much competition do you see in this business area?
Matthew Dunn: I think the music discovery space is really starting to heat up. We've noticed any number of one and two-man garage shops or university spinouts pop up on the radar screen, even in the last six months. It seems like every other week I find a company that is doing something relevant, something that is philosophically in the same space. It's a lot more than a year ago. A lot of them are starting out now, and I'm glad to see them in the space as it legitimizes what we're doing, but I know they have a hard road in front of them because it's a very messy and complex stack of things to deal with.
Ben Kuo: Let's talk a bit about your investment backing, who are your investors?
Matthew Dunn: The primary backer of the company is J.L. Albright Venture Partners, from Toronto, Canada. JLA got involved with the company when the company, under its former name Predixis, was still incubated within the parent company Parasoft. Parasoft is another Southern California company, headquartered in the Monrovia area. Parasoft incubated Predixis for years, letting the company do the hard core R&D that you don't get to do as a startup. JLA ran across Predixis at the Consumer Electronics Show two years ago, 2004, and revived the interest in CES '05, and invested in the spring of 2005. JLA has put in an advanced B round funding to help the company grow further and increase marketing and sales.
Ben Kuo: What's next for the company?
Matthew Dunn: What's next for the company, fundamentally, is finding customers for the services we've got, and enabling them to really see the success that is possible. Success is transformation of their business. Digital music has stumbled and started a couple of times. There was a stumble and start in the early days of the web with companies like MP3.com, where they had the vision as a digital and network media--but the bandwidth wasn't there, the formats weren't there, and the social aspects weren't there. That kind of imploded. I'd argue there was a second start at digital music in the last two or three years, and a lot of companies got excited about Apple's success and said "we can do that too". A lot of those have struggled to find their feet and to have a really successful business model. Consumers have been flocking to Apple and portables, but digital music hasn't really started to get pervasive yet. Can you play an MP3 in your car? Probably not--unless you've got a portable with you. Can you play an MP3 in your living room? Probably not, unless you perhaps have a PC hooked up--which is an early adopter's solution. Or, if you're an early adopter and a big wallet, maybe you have a digital home stereo. Those devices are finally starting to emerge, and from a multiplicity of vendors, and it looks to us like the digital music thing is finally becoming real. It's not just a PC thing, it's not just a portable thing, it's a pervasive thing.
Ben Kuo: Do you think it's finally crossing over to the consumer side?
Matthew Dunn: I think it's at the beginning of crossing over. I've got a bar chart I frequently use in presentations about MusicIP which shows statistics from the RIAA, the recording association. It has the depressing music CD sales are dropping, but as of 2005, finally, digital made up for CDs. Digital in 05 is finally visible on that bar chart, where before that it was just skin on the top. Recent analysis from PricewaterhouseCoopers puts the growth of digital music at 50 percent per annum rate for the next seven years.
Ben Kuo: Thanks!