Vitaminic: playing the big boy’s game?

With relatively little fanfare, the Italian company Vitaminic has emerged over the past few months as the kingpin of the European digital music market – and potentially a player on the global stage.

Not only has it been on a rampant acquisition trail – buying the US digital music veteran IUMA.com in March, then the French company Eurekan Mutimedia, which runs FranceMP3.com and MP3France.com, and, most recently, London-based Peoplesound – but it’s sitting on a pile of cash following its IPO in October 2000, and shares are still trading at about the issue price of Euro26 per share.

And all this has taken place while almost all of its rivals have struggled, and many have ceased operations or succumbed to takeover bids – Musicunsigned.com closed down in March, for example, while Popwire announced in June that it is to close its London, New York and Tokyo offices, and retreat to its Stockholm base. Additonally, Netbeat recently closed its UK office; iCrunch has been bought by Music Choice; and MP3.com and EMusic, the two big US pioneers in this area, have both been bought by Vivendi Universal.

So what’s the secret of Vitaminic’s success – what has it done that’s different from, or an improvement on, its rivals’ offerings? Vitaminic’s sites (nine in Europe and one in the US) carry music from unsigned artists, independent labels and the majors – and in fact the company says it has deals with more 1,000 labels, including all five majors. Visitors can stream music and download free tracks, or buy downloads and CDs. Content is syndicated to other companies and Vitaminic offers promotional and research services to the music industry. It has also launched a download subscription service, the Vitaminic Music Club, in which the majors are involved, and a music publishing business, Zipmind.

Revenues in Q1 2001 were Euro 1.3m and Vitaminic says that it is aiming to break even in 2002, with subscriptions and business services expected to account for the bulk of the growth in revenues.

Vitaminic’s chief executive, Gianluca Dettori, who attributes the company’s good fortune to vision, execution and ‘a bit of luck’, identifies the links forged with the music industry establishment, and the fact that Vitaminic has not infringed copyright, as key factors.

Dettori said: ‘The key decisions on which we built our business were definitely right. We never saw the music industry as enemies, but as partners or customers. Even two years ago we started signing deals with record labels when other companies saw the labels as a sort of enemy.

‘Similarly about music copyright – we always said that copyright infringement was not a good business decision.’

Although, when Napster was at its height, it seemed that the rules of the music industry might be rewritten, the decision to infringe copyright has ultimately cost MP3.com its business because of the subsequent lawsuits, said Dettori.

Some commentators see Vitaminic’s listing on Italy’s Nuovo Mercato as a significant factor. With fewer dot.coms listing there, investors have taken a more long-term view than in London and Nasdaq, they say. And Dettori conceded that there is a lot of luck in the Nuovo Mercato listing: ‘It’s a new market, it started late – there weren’t companies going out with huge valuations [and] there’s fewer companies so you get more attention.’

Perhaps the real test for Vitaminic will come with the launch of the majors’ own new digital music ventures, Duet and MusicNet. Once these are up and running there will surely be less call for the majors to come to a company like Vitaminic for download deals or market research services.

Nevertheless, it’s still early days, with the new ventures from the labels yet to launch, said Dettori: ‘[The market] will be very competitive [but] it will also be wide – wide enough for companies like Vitaminic to build a business. We never expected to own the market.’