AND THE HITS JUST KEEP ON DOWNLOADING Grant Robertson - Globe and Mail Like a disc jockey recalling the days of vinyl, Doug Ford remembers how it used to be at radio stations whenever new albums were released by the record labels.
Stacks of music would arrive in the mail, or by courier, week after week. He chuckles at how inefficient the system was. But as the technology of the recording industry has advanced, the distribution methods for music are evolving along with it.
"In radio, you see tons of CDs come through the mail all the time, whether it's through UPS or FedEx or whatever," said Mr. Ford, managing partner of HitPredictor, a music industry website in New York that's tied into the Billboard charts. "And you say to yourself: 'Boy, we could just download this stuff -- as long as it's secure.' "
Security has always been an issue for the industry. With the widespread availability of desktop-computer CD burners and the growth of on-line file sharing in recent years, preventing unreleased songs from leaking onto the Internet before they are officially made public has become a challenge.
And the need for studios to send out music fast, immediately after it is released, is key. The ability to distribute singles as close to the launch as possible helps keep the industry out in front of the black market while maximizing sales and promotion.
That is where Musicrypt Inc. comes in. The Richmond Hill, Ont.-based company has spent the past few years devising ways to encrypt songs so they can be sent securely over the Internet from record label to radio station at the click of a mouse.
"We are an electronic Brink's truck," Musicrypt chief executive officer John Heaven said. "We charge for each delivery."
This month, Musicrypt became a partner with HitPredictor in an effort to expand its business in the United States, a market the Canadian tech company entered in March. The two companies were introduced by Billboard, which has been marketing Musicrypt's business south of the border. HitPredictor, which allows radio stations to track the prospects for new releases, will now let stations download songs directly from its site.
U.S. expansion has been the logical step for Musicrypt, although it's a relatively small player in that market. The company has distribution deals with most of the major labels here, including Universal Music Canada, Warner Music Canada and BMG Canada.
In addition to being a cheaper form of distribution for the record labels, the Musicrypt encryption system offers accountability. It watermarks all music files with codes that make it possible for record labels to track who is responsible if music leaks to the Internet.
"We've made over 1.2 million deliveries without a single leak," Mr. Heaven said in an interview.
However, even though digital song distribution is being adopted by growing numbers of record labels and radio stations, Musicrypt is still wrestling with the same challenges most companies its size face: luring investors, keeping costs down and turning a profit.
In the first six months of 2005, Musicrypt lost $797,000, which was a 45-per-cent improvement on its $1.4-million loss in the first half of 2004. With revenue of just $150,126 in the first two quarters of this year, the company took steps to reduce costs, including scaling back its consulting fees and trimming salaries and benefits. Musicrypt also started booking its research and development expenses as an asset, on the grounds that its methods are "expected to yield future economic benefits."
But investors will need further convincing. Since peaking at $1.40 a share a few months after its 2003 initial public offering, the company's stock has slumped to between 20 and 30 cents a share on the TSX Venture Exchange.
However, Mr. Heaven is optimistic that the recent changes and partnership with HitPredictor will help it find its groove in the music industry.
"We're replacing a decades-old distribution system," he said. "Record labels need to get their music onto the radio into the ears of consumers . . . the market we're focusing on is very much in need of this." |