Sonic Boom: Napster, P2P and the Battle for the Future of Music. John Alderman

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      By then the hype over the Internet had grown into a roar and was quickly becoming an American obsession. Whether walking the dog or watching TV, few Bay Area residents escaped the powerful buzz. Kearby was no exception, and with plenty of sound technology experience under his belt, he realized that he knew how to make “the kind of authoring tools that everyone on the Internet needed.” He had heard the streaming offered by Glaser’s RealAudio and thought it was “OK,” but realized that musicians and labels would soon want to sell songs and records on the Net and that this business—worth potentially billions of dollars—would require special tools. He believed that he could build those tools.

      Kearby quit walking his dog so much and recruited a friend, the software engineer Phil Wiser, also from Integrated Media Systems, and venture capitalist Robert Flynn. They began developing the Liquid software and went in search of the right venture company for financing. They believed Hummer Winblad to be that company—because of its reputation as a smart investor that took a hands-off approach after assembling the management team—but roping the company in would prove difficult. Kearby and Wiser originally thought that their system would need a hardware component, in addition to their software tools; something with added processing power to decrypt sound while retaining high quality. Hummer Winblad was a software-only firm and declined to even hear their pitch.

      When a self-imposed deadline for launching his company or finding another job was just a month away, Kearby read an ad in the paper announcing that venture capitalist Ann Winblad would soon make an appearance at San Jose’s nonprofit Center for Software Development (now known as the Software Development Forum). This was a fundraiser—casually called “The Gong Show”—at which developers paid a nominal fee to talk to a VC for ten minutes, with all proceeds benefiting the center. Kearby called the center the day before the event and was told that the event had been sold out for months. He asked if anyone might have canceled. Nope. Realizing that this was probably a needy group of developers, Kearby had the bright idea to inquire if anyone’s check had bounced. Sure enough, one had, and he was able to assume that place.

      His presentation went well, and on second meeting Winblad told him that although she liked his ideas, he was clearly “an audio guy” who “didn’t think like us Silicon Valley people.” He needed some help polishing his pitch. She suggested that he hook up with Steve Holtzman. A latter-day Renaissance man and a connected Silicon Valley player, Holtzman juggled careers as an avant-garde composer and digital theorist. An unimposing figure with sharp, darting eyes, Holtzman had held successive positions as VP of marketing at Wise and Radius, and he’d earned a lot through their successful IPOs.

      As one who’d often contemplated music’s place on the Net, Holtzman was immediately enticed. He called Kearby that day and met him the next. After lending a quick hand to polish Kearby’s plan, Holtzman ended up writing a check for $100,000 on the spot. Kearby phoned Winblad to relay the good news. “I said ‘Hey, Ann, your due diligence guy just wrote me a check. Let’s do this deal,’” Kearby remembered. Though she was obviously keen on the deal, Winblad put Kearby through an “Excalibur test” by seeing if he could strike an exclusive deal with Dolby labs. Through years of work, Kearby was very familiar with the key figures at Dolby and had good relationships there. But the company was known to refuse any exclusive deals, and so it came as a surprise that Kearby instantly snagged the exclusive Internet rights to use Dolby’s encoding technology. Hummer Winblad put together a $2 million deal that included $600,000 from Intel, and Liquid was launched in May 1996.

      By November, the company assembled a product that did not require any additional hardware and set out to show it to the world. Sammy Hagar, fresh out of Van Halen, a friend of Kearby’s, offered to put up a single from his first post – Van Halen album, Salvation on Sand Hill. Both Hagar and Liquid were happy with the consumer response. “The reaction was pretty immediate at the pro-media level,” Kearby said, claiming 100,000 downloads for the song. There was an added benefit of generating that same number of addresses for a Hagar e-mailing list. This list concept was key in strengthening artists’ abilities to market themselves and loosen the grip of the industry. “We saw the Internet as a way for musicians to be able to sell their music without having to get record contracts,” said Kearby.

      The Liquid system was threefold. There was the encoding software, called the Liquifier, which used the AAC compression, a stronger, better-sounding format than MP3. To send Liquid files over the Net, the Liquid Music Server was needed. In addition to standard file-server functions, the Server encrypted every music file and slapped a watermark in it for good measure. Only those listeners with a Liquid Music Player positively identified as the owner of a certain song were allowed to play it. If anyone else tried, they were redirected to a commerce site where they might purchase a copy for themselves.

      Once a song was downloaded, listeners were allowed to burn one copy to a CD, provided they had such a burner. Overall, what customers got was a process that left them with pretty much what they would get if they bought their music at a record store, minus a little sound quality and the CD booklet. Liquid Audio made retailers nervous, but was still familiar to the industry compared to much of the Net, inasmuch as it spoke a language that retailers were familiar with and changed the business in terms they understood. When Liquid launched, MP3 was still essentially underground.

      Despite tools such as e-mail registration that would help artists to control their own marketing, Liquid was very careful not to rock the boat within the establishment and worked hard to stay on friendly terms with everyone.

      “When I started the company I had a mantra that was: ‘empower those in power,’” said Kearby. “It just seemed like such a complex food chain that almost anybody could veto you. When we started, my partners Rob and Phil and I diagrammed the music food chain and made sure that the Internet provided a positive value proposition for everyone from the recording studio owner, through the distributor, through the collection agency through the retailer and then ultimately the consumer. We were often accused of doing too much, but when you’re inventing an industry.… It wasn’t like Henry Ford had any choice but to put four wheels on a car. You’ve got to do the whole thing.”

      Liquid Audio’s insistence on copy protection and other industry-friendly gestures still did not appease all quarters. The industry remained wary. Kearby presented a demo—a song produced by the legendary hit man Phil Ramone—at the offices of online music retailer N2K (later acquired by CDNow). Kearby took the group through all the steps: paying for the song, downloading and then burning it to disc, just as Liquid Audio hoped consumers would. Playing the CD back and comparing it to the original on “a very high-quality set of speakers” impressed everyone. Ramone himself, Kearby related, turned to him and said, “This is gonna piss a lot of people off!”

      The people that Liquid was most likely to disturb were the ones who had the most to lose from an Internet sales model: the brick-and-mortar retailers who weren’t set up to sell on the Web. In September 1997, their fears were stoked. Capitol records planned to release “Electric Barbarella,” a single from a new album by the ’80s new wave glamour boys Duran Duran. The company wanted not only to release the single in the Liquid format, but also, contrary to advice by Liquid, release it online—before it made it to retail. The retailers were immediately displeased. Phil Ramone was right: The Net has the capability of offending, or disintermediating, everybody. Capitol backed down after retailers threatened to boycott the CD, and the song was released on the Net and in stores simultaneously. Retailers needn’t have worried so much: few consumers were receptive to buying music through such an untested system, and nothing very sexy was there to lure them to experiment.

      Although Glaser’s RealNetworks and Kearby’s Liquid Audio achieved their own brand and degree of success, neither company was prepared for the tidal wave that MP3 rode in on. And while being tied so heavily to their own proprietary system may prove to be a long-term blessing, as the wealth of MP3-based innovation began to spring up around the Web, it was hard to see the format as anything but a curse, especially for Liquid, which was СКАЧАТЬ