Q&A with David Goldberg, CEO of LAUNCH Media

Slowly but surely, LAUNCH (http://www.launch.com) has been positioningitself to become a major player in the Internet music market--and in thestreaming media market. Essentially, LAUNCH is a music site where userscan find information on artists, watch music videos and listen to music.This week LAUNCH is unveiling its Internet radio offering calledLAUNCHcast. But it's not just any net radio service. Users can createtheir own stations with artists that they want to hear. CEO DavidGoldberg says "it's the best radio you've ever heard" because LAUNCHcastlearns your musical tastes and plays songs you want to hear.

LAUNCHcast is a big endeavor because it's also a community site. Userscan become "DJs" and influence your station, plus you actually see theusernames of people that like the song you're currently listening to.You can even "instant message" them and chat with other users. Goldbergsays that his goal is to replace traditional radio. It's not justhyperbole, however. He is serious, although admits that it's a prettybig goal.

LAUNCH was co-founded in February of 1994 by David Goldberg andPresident Bob Roback. Prior to LAUNCH, Goldberg was director ofmarketing strategy and new business development at Capitol Records.

I spoke with Goldberg to discuss the official launch of LAUNCHcast. Butwe also talked about the fate of its LAUNCH CD-ROM magazine, the MP3.comcourt case and about the LAUNCH's fight with MTV over music videos.

Streaming Media Newsletter: So give me a rundown of LAUNCHcast and howyou envision it.

David Goldberg: LAUNCHcast is really the next generation of musicexperience on the Internet. At first people started off doing Internetradio people took the idea of radio stations as they exist on broadcastand translated it to the web. But we believe LAUNCHcast is what peoplewant on the Internet from a music experience--the best radio station you've ever heard because it learns your tastes over time. And so thebasic concept of LAUNCHcast is to sign on, tell us a little of what youlike, then LAUNCHcast starts playing music and you start rating themusic you hear. LAUNCHcast gets smarter and smarter so over time itreally plays music that you like.

Q: So it plays music that you rate?

A: Not only music that you've rated, though. It will play things thatwill surprise you. And that's the greatest feeling; that feeling ofserendipity. That feeling of "Wow, I don't know that song but I kind oflike it." That's a great feeling when listening to regular radio but it's a lot more likely to happen in LAUNCHcast. Plus you're going to hearsongs you like so that mixture of things makes it a great experience.

Q: And every now and then it plays a random song?

A: Right. And it's a good way to figure out ratings on new songs. Andyou want that random thing in there as well. So you never know, youmight catch a random song that you really like too. The other thingthat's very unique about LAUNCHcast are the community features. You canfind other users who like the same kind of music that you do. You cansee who's a fan of a song. And you can sign up other users and havethem help you build your station profile. Basically you can subscribeto them and make them your "DJs" so things they like will get played inyour station. That's a very cool feature as well because maybe you don't want to spend the time to build up a huge ratings profile, but if yousign up DJs, you can leverage off their experience.

Q: But having too many DJs might dilute the programming, a bit. Isthat why you have a limit of just 10 DJs per station?

A: Yeah.

Q: I call LAUNCHcast a music community site because it lets youcommunicate with other users.

A: And we're adding even more community features to the site over time.We also feature some of the top DJs. We've got some people that haveover 3,000 other users that subscribe to them.

Q: So tell me how many users you have now. I like to separate betweenregistered users, and active users, though.

A: We've got over 100,000 people who've set up stations at this point.You can actually go and see on the site how many people are listeningright now. We've streamed close to a million songs last week. And theaverage user spends over 45 minutes per session and that's growing overtime. And at peak we're hitting close to 500 simultaneous listeners. Idon't know how many of those 100,000 signed up and never come back; Idon't know that number.

Q: Is it the same people who have registered at Launch.com?

A: No, those are people that have specifically built LAUNCHcaststations. No, we have over 2.8 million registered users of Launch.com.

Q: In order to listen to a station, you have to sign up and register?

A: Yeah.

Q: That's a good little trick, get them to register and get them toenter some personal info to listen to stations.

A: Yeah but the kind of information we're getting from people, it'svery anonymous information. We don't want your address or credit cardnumber--we don't want any of that stuff. It's more so that we can getsome aggregate information about demographics, and we have zip codesbasically to understand where people are, more than anything else. Butit's really just so we can tag somebody so we can help them built theirprofile.

Q: You have some audio ads, I've heard a couple of them. Is that partof the deal? To have targeted music and targeted ads?

A: Yeah. Essentially. We haven't had enough of the audio ads. We'retrying a new thing right now, which is when you start LAUNCHcast there'sa Flash animation that's a promo for Launch.com. But that's alsosomething that we're probably going to sell. The audio ads aresomething that if there isn't enough variety they get irritating. We'reworking on getting some more in there but we may wait until we've got amuch larger audience. Selling radio is a very different thing thanselling banner ads or TV spots--both of which we currently selleffectively. But radio ads tend to be very locally driven, so unlessyou've got enough of a local audience that you can target with the radioads, it's less effective to try to sell those on a national basis.

Q: So now you're just broadly doing the same ads for everyone?

A: Yeah exactly. We have the ability to target them, we just don'thave enough people that it makes sense to target them at the moment. It's something we're working on going forward, but I'd say the advertisingcomponent of LAUNCHcast is not at its full extension and it won't beuntil we get more users.

Q: What's your goal for number of users?

A: Millions. I think the potential of LAUNCHcast is really to replacethe radio experience for people, in the home and the office. And Ithink we're seeing people substituting LAUNCHcast for radio in thoselocations. Clearly we're not going to replace radio in the car orportable environment--today. Though we do believe that eventually therewill be wireless data access and we will be deliver LAUNCHcast viawireless. And at that point we really can replace radio. Why listen totraditional radio when you can listen to your LAUNCHcast station? Sothat's the goal. That's a pretty big goal, taking on the whole radiobusiness for music. And on the same side, we're waging a battle withMTV on the video side. We have a lot of challenges ahead of us. Theusers that we've had the longest, spend the most time on it. So it saysto us that it's really working for people. And now the trick is to getit out there to as many people's hands. I have what I'd like to see, butI don't say we expect to hit X number at such date. I'm ecstatic thatwe're over 100,000 during our beta period. That's fantastic. We'vedone literally no marketing for it.

Q: Will you start an ad campaign?

A: We're starting some things this week and then you'll see more stuffin March and we're going to--we were nervous before that the betarelease wouldn't handle the volume of users, but now we've pretty muchtested the usage and are very confident that we can handle large volumesof users.

Q: Do you know when your peak times are?

A: It's interesting, peak usage time for LAUNCHcast as well as for oursite is about 5:30 to 6:00 west coast time. Which is interestingbecause it's not what you would think of. I know Spinner and NetRadio,their peak times are more work-based times. People are using[LAUNCHcast] at home, as well as at work.

Q: What about breakdown between high and low bandwidth users?

A: Well we have three different data rates [High Speed, 56K and 28K]and we're seeing it split right now, it's about a one third, each. Oneof the issues is that people with 56K modems sometimes shouldn't listento it at the data rate, because they're not really getting a high enoughconnection. But clearly the broadband users have a fantasticexperience.

Q: Yes, I listen to it at broadband and it sounds very good.

A: It is essentially CD-quality, 64Kbps Windows Media which is reallythe equivalent of a 128Kbps MP3 file. Obviously LAUNCHcast is veryinnovative in lots of ways but one of them is taking advantage ofWindows Media and the quality of the audio codec, which is prettyincredible.

Q: I guess that why you didn't use MP3 because it takes up morebandwidth for CD-quality.

A: MP3 is not good at low data rates. But our biggest challenge isobviously to get as much music encoded as people want. We have over50,000 songs in the database right now, but clearly there's well over amillion songs that we should have in the database. We want to givepeople access to whatever kind of music people want.

Q: So what's missing? Do you need more deals with the major labels?

A: No it's not deals, it's just time to encode it. We have acompulsory license just like anyone else that's doing Internet radio, sowe can use whatever music we want, it's just a matter of getting it allencoded as soon as possible.

Q: Obviously you do the current hits first.

A: We did as much as the current popular stuff as we could, becausethat's what most people want. But people also request stuff, so thoseare the first things that get prioritized. It's sort of being driven byusers. We hope to have everything encoded by the end of the year. Butit's a pretty massive undertaking, no one's ever encoded this stuff.

Q: Are you doing it all yourself?

A: No, we're working with Sonic Foundry.

Q: Are you thinking of adding music downloads to LAUNCHcast?

A: Now that's something that's a more complicated thing. That requiresthe cooperation of the labels and I think it really depends on what thelabels decide to do with SDMI and how they want to sell them. We're notgoing to be in the business of selling the downloads per se--I think thelabels are going to sell it themselves. But we know what people like.So we've got a "Buy" button so people can buy CDs. If the labels enableus to direct people to them to download a song, we could do the samekind of thing. You want people to click on buy and get the CD, but evenbetter would be to download it. So we're just waiting for theinfrastructure to be in place on the label's side to work with them onit.

Q: What about the e-commerce? I honestly haven't had a need to buy anyof the songs I've been listening to on LAUNCHcast, but how does it work?

A: Well it hasn't really been hooked up. It's getting hooked up now.We did a deal with Checkout.com (http://www.checkout.com) two weeks agoand you will be able to click and buy the album that you're hearing thesong from. We think it's going to be quite popular for people.

Q: I think the big question for many in the streaming media space is,how can you handle all the streams? You mentioned a million songs lastweek. How do you handle the bandwidth, especially if you're looking toget more users?

A: Well bandwidth is there and the Windows Media architecture is prettybandwidth efficient. On the technical side, we're using iBEAM (http://www.ibeam.com) to stream the audio. We're serving the mostpopular songs from their edge servers. So that's the best way todeliver it: a) it improves the quality for the end user because itdoesn't have to travel over the backbone and b) it actually reduces thecost dramatically. The bandwidth costs have gone down and [iBEAM] tellsus today they're capable of serving a million simultaneous streams.

Q: Just for you or for all of iBEAM's customers?

A: No, iBEAM in general. So obviously we're not even close to tappingthat out and they're going to build more capacity. I think that there'sgoing to be a couple of people like iBEAM that are going to be verysuccessful in that space. It makes more sense to partner with themrather than try to build out that capacity ourselves.

Q: It seems that LAUNCH is turning more and more to streaming.

A: Yep, we're very bullish on streaming. It's where we see this stuffgoing. People want to download because they want it to be portable. Butif you can stream it, it's a lot more efficient for everybody and alsoit's safer for the copyright holders. It's a lot easier to track and toget paid. So eventually what will make streaming more successful thandownloading for music will be portability--wireless. And at that point,you just won't need to download it all, there'd be no point because youleave everything on the server. The same thing is true at home. Whydownload all this music and store it locally, when if you have abroadband connection you can just stream it off the server and have aLAUNCHcast experience or you could just stream your CDs or your CDcollection. I have 3,000 CDs at home and I can't find what I'm lookingfor. I don't know where anything is. I would love to have it all on aserver, and say "Yeah I want to hear that REM album and then that one".Over time, it's always proven true that the network based models make alot more sense for everybody than the local storage model.

Q: I too would love to have my CDs encoded and accessible on a server.MP3.com (http://www.mp3.com) is doing something like that.

A: Yeah, the only problem with MP3.com's model is that it probably isn'tlegal. But it's a good idea and we would love to do that too. Welooked into it and felt that it was not probably legal. But I'm veryinterested to see what happens. If they win, great. There'll be lotsof people doing it. If the court says it's not legal then they figuredit out. So I'm glad they're pursuing it. I think it is a value-addedservice for the consumer but it's just a question of being legal or not.

Q: But what makes it legal? Is it just that they don't own the musicthey're encoding?

A: Well the point is, you the consumer can record anything you own.But in this case you're not actually recording it. If you recorded itand stored it on MP3.com's server that would probably be legal but that's not actually what's happening.

Q: It looks like that's happening.

A: Well, but it's not, that's the problem. It recognizes your CD butdoesn't record it to the server—they've already recorded. So you'replaying the recording they've already made. So that's part of theproblem. You're not actually making a recording of it.

Q: But you've done that too. You've pre-encoded all these files--

A: Right, but I'm doing it under the rules that were set up by theDMCA, that's why it's legal. But without those rules, it probablywouldn't be legal either.

Q: OK, well you distribute a LAUNCH CD-ROM magazine. Will you continueto do that?

A: No, actually we're also in the process in making that streamed. Andwe have it up at the site. It's called LAUNCHcity. It is only availablefor those with high bandwidth connections (300K streams) which is reallywhat CD-ROM is. We've adapted it to take advantage of other stuff onthe site, but it's going to be a front end to all the content in ourdatabase. It's a rich graphical interface that users really like, butit's really successful for consumers and advertisers. But we're goingto phase out the CD-ROM because we can now stream that content to peopleover high bandwidth connections. We get rid of the costs of physicallysending out the CDs to people. And we charge people $20 a year for theCD, but it's free on the web. It's still not an official launchedproduct (pardon the expression).

Q: You mentioned earlier about the MTV music video issue. Tell me moreabout what's going on with that and music videos.

A: What we're doing is trying to do for people what MTV was during the80s when they used to play music videos. A lot of people don't realizethat MTV doesn't play music videos anymore. They play half hour showslike "The Real World". That's worked really well for them. But thereason they did that was because people weren't sitting through to watcha half hour show of music videos. They were watching music videos likethey were listening to the radio which is changing the channel when avideo comes on that you don't like. As a result they don't play musicvideos anymore. But people still want to watch them. But they don'twant them in a linear program format. They want access to videos theywant, when they want it. So the Internet is a much better way todeliver the music video content to the consumer. So that's what we'vedone.

Q: You've made some deals with the labels, right?

A: We've struck deals with three of the five majors already (Sony,Warner, EMI) to get access to their entire music library. We're workingon deals with BMG and Universal as well. We've got the largestcollection of music videos. We also have original video like interviewsand live performances. And it's proven to be incredibly popular. InDecember, we've streamed over 2 million videos. And a lot of those areat low bandwidth. It's not as good as seeing it in high bandwidth butit's better than not seeing them at all.

Q: So people really want to watch videos they like, when they want to.

A: Exactly. You don't have to sit through something you don't like.We're very much about the consumer pulling the information they want.Our job is to help them to figure out what they like, but not to forcethem to listen to stuff they don't like. Which is very different fromtraditional radio and television programming which pushes and tells youyou should like this. And I think that's the power of the Internet formusic, is to give people a much better experience because its what theywant to hear.

Q: As I understand it--is there some litigation between you and MTV?

A: No there's no litigation. We view them as our major competitor. We're ahead of them on the video side on the Internet. But they will getthere and we expect them to do a good job of it. There is some issuethat the record labels have sought help from the Justice Departmentwhich is investigating MTV. Part of that investigation has to do withMTV trying to leverage its monopoly in the cable world to gain unfairadvantage in the Internet space.

Q: That's right. MTV owns many properties in the cable space.

A: Exactly. They control all of the music video content. With the CBSmerger [with Viacom] they'll also own the Country Music Channel. They're trying to leverage that monopoly control in getting better deal termsand eventually try to create a monopoly in the Internet space. Thelabels went to the Justice Department to complain about MTV'shigh-pressure tactics. So they're investigating. There's no word onwhat the outcome will be, but the labels want to make sure it's a levelplaying field. Then people like us have a chance to succeed and prosperand MTV doesn't win just because they have this cable channel.

Q: Are you guys involved in the investigation at all?

A: No, this was initiated by the record labels.

Q: It's good for the labels because they want broad distribution oftheir videos.

A: Right. MTV, even if they don't play many videos, are the only gamein town. So they can dictate to the labels, "Your artist must be hereby such and such date and maybe we'll play their video". They just getcomplete control of the situation, whereas if there were two majorplayers it's a lot better for everybody. For the consumer, labels, andadvertisers--I mean it's a much better situation when there'scompetition.

Q: So when will we see LaunchTV? [Laughing]

A: Oh, well. We'll see. [Laughs] No comment.

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