@LARGE
Sex and high tech

By Scott Kirsner
Globe Contributor, 02/05/2001

Lately, I have been mourning the death of sexiness.

It seems like the vast majority of tech ideas surviving, thriving, and getting funded these days involve pipes, plumbers, and septic tanks. The money and momentum are shifting to startups that deal with communications infrastructure - making bits flow faster and more efficiently down the wires (often called "pipes" by techies in the know). Or startups that deal with professional services - dispatching people who can solve complex technical problems or design new systems. Or startups that deal with storage.

Pipes, plumbers, and septic tanks aren't bad things - they're essential if you enjoy a bathtub that drains and a toilet that flushes. They're just... kind of unsexy. So I was thrilled beyond words to meet with Stephen Semeniw at Copley Place last week and get a demo of MusicTeller.

MusicTeller is sexy. MusicTeller is high-concept: it's an ATM for digital music. MusicTeller is cool-looking - it resembles a phone booth for Teletubbies.

Does sexiness live?

Semeniw and I visited the MusicTeller at the Copley Place Record Town on a Thursday morning. Traffic in the store was scarce. We stood in front of the rotund, gray-and-beige machine, which was playing a Susan Tedeschi music video. I clicked through a few screens and picked out six songs - among them singles by Aimee Mann, Ray Charles, and local faves The Red Telephone. I inserted a special MusicTeller card into the machine, easily connected a Rio portable MP3 player to it, and within a minute, the six songs I'd selected were transferred onto the Rio player.

ETC Music, the company that makes MusicTeller, is already testing the machine in two other Boston record stores, including the Strawberries in Downtown Crossing. If you buy an MP3 player, you get a MusicTeller card, and six free tracks. The plan, though, is to roll out MusicTellers everywhere - not just at record shops, but at Starbucks, electronics stores, airport terminals, and college campuses. "We've built something that can go anywhere and operate 24/7," says Mark Hardie, the company's founder, and a former music analyst at Forrester Research. "The whole point of MusicTeller is, sure, you can download music with your PC at home. But you're not at home a lot."

MusicTellers will initially offer promotional tunes that the record labels are happy to give away. But when you download a free Aimee Mann single, for example, you'll be enticed by messages that play on the screen during that minute of download time to buy her new album, or buy one of her old albums, or buy an album by an artist with a similar style.

And before long, MusicTeller will sell songs: insert a credit or debit card, and you can select a few singles by your favorite bands. Semeniw, the company's head of business development, says commercial transactions like that will be taking place by the middle of this year. The revenue would be split between the record company, the retailer, and ETC Music, just as the proceeds from a physical CD are split between the record company, the retailer, and the distributor.

MusicTeller users will be also able to visit the company's Web site to define their likes and dislikes. That way, when they show up at a teller, it won't bother to display country artists to someone who only likes hip-hop. And when you buy music from a MusicTeller, it will not only get downloaded to your MP3 player, but also "sideloaded" to your own personal online locker. Want to access the music you bought from your home PC? It's in your locker. If you delete a song and then decide you want it back, you can download it again for free from any MusicTeller anywhere.

Last week, Hardie was at Mount Snow in Vermont, demonstrating MusicTeller as part of ESPN's Winter X Games. Nike was a sponsor of the event, and since Nike now makes an MP3 player, the company had invited Hardie to show off MusicTeller. The partnership at X Games could be a prelude to a bigger deal that would put MusicTellers in Niketown stores across the country.

There are plenty of potential obstacles facing Hardie and ETC Music, of course, and the MusicTeller has some shortcomings. Shortcomings first. The MusicTeller currently doesn't let you hear sound clips of songs before you download them. That's OK if the music is free, but before people pay for songs, they'll certainly want to hear a snippet, if not the whole thing. Also, while MusicTeller is in promotional mode, giving songs away for free to buyers of MP3 players, I don't see why they don't let cardholders download an unlimited number of songs in order to build a core group of MusicTeller evangelists. The limit now is six, which must be downloaded at all once.

Then there's the fact that teens and college students love Napster, and getting music for free. This is the big crisis facing the music industry, and it's not going to go away once Napster moves to a subscription basis. "I'm certain that there will be other [Napster-like sites] that will allow people to trade digital music," Semeniw admits. So I have a hard time seeing young fans shelling out money at MusicTellers, and the vast majority of people who own MP3 players today are under 30.

But MusicTeller could be a big hit for the non-Napster crowd. MP3 players are a tremendous improvement over portable CD players - they're lighter, they don't skip, and they can hold more music. As the post-30 set starts buying them, MusicTeller could become their favored way to load their MP3 players with music. Using MusicTeller is much easier than downloading from the Web and then transferring the songs to an MP3 player, and most adults are comfortable with paying for music at a traditional record store. MusicTeller could make MP3 players more attractive for people who see Napster as too complex, or that tiny subset of people who believe stealing music is wrong.

Finally, record companies are still freaked out about digital distribution, and they're waiting to see how Napster's new subscription arrangement with Bertelsmann works out. That will likely make it difficult for ETC Music to cut deals quickly with the major labels. "They're definitely moving at a measured pace that's slower than the techies would like," Hardie concedes, "but we get positive responses, and we're at the table with three of the five majors."

Hardie acknowledges that building a change-the-world company in the current environment is an uphill slog, but he's willing to be patient. "I always expected that success would be for companies that were in it for the long haul," he says. "We built a company with a low burn rate so we could get through the period when the industry is thrashing about with digital delivery - and that's the period we're in now." Hardie raised $3 million from SonicBlue, the maker of the Rio MP3 player, last fall, but he'll have to gather more capital this year for the MusicTeller's roll-out.

My sense is that MusicTellers will find a role in the music industry. To record companies trying to sell their product in a digital format, it's a slick, user-friendly solution. To retailers, it's a way to sell digital product they can't currently sell, and even a way to sell it when their store is closed - Semeniw envisions a MusicTeller outside the Record Town at Copley, selling movie soundtracks to late night crowds leaving the movie theater.

It will take time, and ETC Music will need enough funding to wait out the record companies' ambivalence. But I'm hoping they succeed, and looking forward to using MusicTellers as often as I use ATMs. After all, we need some sexy ideas to root for, right?

Conferring MBAs

Harvard Business School students put on one of Boston's best technology conferences, the Cyberposium, this weekend. The challenge for those outside the HBS community is figuring out some way to obtain a ticket. (Though you can also watch the proceedings on the Web, at www.cyberposium.com.)

The event draws almost 2000 business school students from around the world to the HBS campus, to hear speakers like Yahoo CEO Tim Koogle, Napster CEO Hank Barry, Broadview chairman Paul Deninger, Palm CEO Carl Yankowski, and iMode founder Takeshi Natsuno. Sessions this year will focus not just on building successful businesses on the Web, but on broader topics like genomics, optical networking, and interactive television.

Scott Kirsner is a Boston freelance writer and a contributing editor at Wired and Fast Company magazines.