At its high-profile public stock offering last year, the Internet music site MP3.com cast itself as the standard-bearer for a massive change in the music business -- a place where aspiring performers could build a fan base, expose their work, sell CDs and use the Internet to break what the company's founder, Michael Robertson, likes to refer to as "the strangle-hold" of major record companies.

Judging by the 40,000 performers who have placed their music online at MP3.com, Robertson's spiel struck a responsive chord with a lot of would-be rock stars. But is it just a cruel tease? As a starmaking machine, the site is a bust: Not a single act has gone on to fame or fortune. Today, despite 500,000 visitors a day, MP3.com has yet to prove that the Internet is a viable alternative to the major record companies -- or even an efficient way of attracting their attention. Indeed, MP3.com's recent decision to offer a controversial new service -- online storage for record collections -- suggests the company's future may be elsewhere.

In fact, MP3.com has created only one bona fide wealthy celebrity: Michael Robertson. The thirty-two-year-old Internet-savvy entrepreneur's rocket to riches via MP3.com's initial public stock offering is one of the Web's greatest success stories. But it is a success predicated not on any particular philosophy about music and how artists should be managed and marketed.

Before founding MP3.com, Robertson helmed a string of less-successful software and Internet firms that offered such services as search engines for files and domain names. It was while working at one such company that he observed the growing number of Web surfers searching for compressed music files and hit on the idea of registering the domain name MP3.com.

Launched in 1998 with a staff of eight, the San Diego-based MP3.com now has 250 employees and is perhaps the most visited music site on the Web. Whether that's a function of what the company offers or simply a continuing testimony to the soundness of Robertson's decision to hang onto a hot name is a subject of debate. And while there seems no end of new acts for the company to add to its site -- more than 5,000 in November alone, according to Robertson -- it's also increasingly difficult to envision MP3.com as an efficient tool for creating a new musical order.

Indeed, MP3.com no longer engages in the rhetoric of revolution. Today, it portrays its mission in the blandest brick-and-mortar terms possible."We don't care if you like band A or band B or band C," says Robertson. "We are a data company. People think of us as a record company -- we're not. We don't sign bands. We're in the highway business; you guys are the ones who build the cars."

Where that highway is going is anyone's guess. But its primary attraction has been bands -- lots and lots and lots of bands, in 270 different categories. And unless an artist is selected by MP3.com's staff as a "featured artist" -- tantamount to being highlighted as the act of the day in its genre -- it's virtually impossible to stand out in the site's flea-market presentation. That has led some in the record industry to wonder whether what MP3.com is really selling is a mirage. "Michael Robertson has been phenomenally successful doing something," says one veteran record producer. "But if MP3.com has proved anything, it's that democracy doesn't work when it comes to music. It gives people false hope."

Musicians may know that, but they also seem willing to live with it -- perhaps because they believe they'll be the exception to the rule. And some are also seeing results from using MP3.com.

"Sure, there's the unrealistic hope that some A&R guy will hear our song on the site," admits Steve McWilliams, bassist with the Washington, D.C., rock band the Toronados. But after a month on the site, he calls MP3.com "a godsend" and says that when one of the band's songs was recently spotlighted for a day, it was downloaded more than 800 times. While that was an insignificant fraction of the visitors to the MP3.com site that day, McWilliams views it as 800 listeners he wouldn't have had otherwise -- who now might come to a Toronados show or visit the band's Web site and buy one of its self-marketed albums. "This is the way you do it yourself," he says. "I'm doing everything I can to be as successful as I want to be. It's a good thing. Hey, Rolling Stone called me, right?"

But others have complained of uneven treatment: A story in the San Diego Reader alleged that an MP3.com employee repeatedly helped her boyfriend's band receive coveted "song of the week" spotlights, a charge Robertson doesn't deny but downplays.

Robertson says that one major label has signed an MP3.com act, Gunburner. But there's more than a little yeast in the claim: Robertson mistakenly identified the interested label as Capitol -- it's Columbia -- and as it turns out, the Florida rock group hasn't actually been signed to the label. Instead, it's working under a development deal, a common arrangement that allows a band to continue to record demos, with the record company reserving the right to sign the band if it hears anything it likes.

When asked whether MP3.com brought about the group's affiliation with Columbia, Gunburner leadman Billy Wells says, "It was touring, but [MP3.com] didn't hurt a bit." With Gunburner, MP3.com took the highly unusual step of setting up a tour for the band with the Goo Goo Dolls. "Getting that tour really made a lot of things happen," says Wells. Max Gold, a Columbia Records A&R rep, agrees that MP3.com added "fuel to the flame" with the tour but says the label first became aware of Gunburner "years ago" through a talent scout.

There's also something disingenuous in Robertson's claim that his company is "not a record label." Part of the company's initial and continuing strategy has been to offer acts a nonexclusive CD option. Under that arrangement, visitors can buy made-to-order CDs, with MP3.com handling manufacturing and shipping, and splitting the profits with the act -- an arrangement it likes to trumpet as fairer than a major-label deal. But so far the results have been disappointing. In October, there were an estimated 14.5 million visitors to MP3.com; they bought just over 18,000 CDs. In other words, only around one in 800 visitors to the site buys a CD there -- an extraordinarily poor ratio -- and it's likely that a disproportionate number of those who do buy are friends or relatives of the performer.

While pointing out that CD-sales figures continue to climb each month, Robertson now de-emphasizes the CD option, portraying sales as a way for MP3.com to keep artists happy rather than to generate income for the company. He also points out that many acts use MP3.com to link to their own Web sites, where they may sell music. "The CD sales that you see reported are only the artists that we're authorized to sell CDs for," he says. "The Eagles signed up with us -- they're not selling CDs through us, we're driving CD sales for the Eagles. And that goes on at Amazon or CDnow, and we can't track it."

That seems to be the rub: MP3.com isn't selling the acts people want to buy, and the acts it does have people don't want to buy. Indeed, MP3.com's site looks like the music industry's version of Charles Foster Kane's basement at Xanadu: an indiscriminate and overwhelming junk-and-gems collection, the ultimate repository of every unsolicited demo tape ever Fed Ex'ed to a record company. When CD sales didn't become the keystone of MP3.com's profit strategy, traffic to the site did. In July, when MP3.com became a publicly traded company, its initial offering raised $344 million. But since few visitors to the site are actually purchasing music, MP3.com is instead focusing on selling advertising aimed at them.

The recent deal with the Eagles is a case in point. Though it didn't involve any exchange of cash, the Eagles got to plug a millennium-eve concert in Los Angeles, and MP3.com received a previously unreleased live version of "Tequila Sunrise" for its visitors to download and concert tickets to give away. "We benefit because we're increasing our visitor traffic and our ad banners and e-mail newsletters," says Robertson. "So it's a win-win." The site also co-sponsored a tour last summer featuring Alanis Morissette (an MP3 shareholder) and Tori Amos.

It's no surprise that established artists generate more hits than unknown artists. A track by Robby Krieger, the former guitarist with the Doors, recently generated 78,000 hits on MP3.com, according to Doors manager Danny Sugerman. Rock & Roll Hall of Famer Roger McGuinn says he has sold "nearly 1,000 copies" of his collections of traditional songs through MP3.com -- and that, while he didn't get an advance, it earned him more in royalties than he received from his last two major-label deals.

If MP3.com isn't the revolutionary tool for rewriting the rules of the record business that it once suggested it was, its ubiquity has at least spawned a second generation of sites that may prove more focused when it comes to helping potential rock stars. One major record company, Universal, has started its own MP3 site, Jimmy and Doug's Farm Club, to find and sign bands. The San Francisco-based Garageband.com uses a panel of professional producers to work with bands that the company thinks it can develop and then makes recording deals with some of them. "We think the whole problem with MP3 stuff in general is filtering," says former music journalist Tom Zito, who co-chairs the site with former Talking Head Jerry Harrison. "Just having the stuff out there doesn't cut it." (In the interest of full disclosure: RollingStone.com also offers downloads of selected MP3s from unsigned bands.)

The enormous traffic generated by MP3.com has also proved a catalyst for other music applications. David Pakman, the co-founder of Myplay.com, a new service that offers Web "lockers," in which one can store music files, says MP3.com demonstrated that there is a great appetite for music on the Web. "They've shown that people are willing to wade through a lot of stuff to find what they want," says Pakman.

Indeed, Robertson says his company is not standing still. Much like Myplay, MP3.com is rolling out a digital storage service -- in this case, My.MP3.com, which allows CD collections to be stored on the Web and recalled later through streaming. Currently offered on a free trial basis, it is expected to become a paid service. MP3.com has also made deals with several small Internet music retailers to automatically load any CD sold into My.MP3.com accounts for instant streaming. Says Robertson, "Up to now, we've focused on artists. This is focusing on the music fan."

Ironically, while MP3.com hasn't made any acts famous or helped them sell enough CDs to live on, it has made a few of its performers more financially secure -- through the stock market. Frank Messina, a New York poet and musician, estimates he gets at least 100 hits a day and has sold about twenty CDs through MP3.com, and that pleases him. "My music and poetry isn't mainstream," he says. "If my stuff is up there and people like it, great." But MP3.com really changed his life when it went public and offered acts a chance to buy 1.5 million shares at the initial public offering price of twenty-eight dollars. Messina bought 800 shares -- each of which he sold for around ninety-five dollars just twenty-two minutes after the stock opened on its first day of trading and zoomed to 105 (at press time, MP3.com was trading at about thirty). "It was the most insane twenty-two minutes of my life," says Messina. "Now I see why there are these crazy day traders." He is using the money to live on for a year while he records his next album.

FRED GOODMAN
(February 15, 2000)